Good day, and thank you for standing by. Welcome to the Hyster-Yale Q4 2021 Earnings Conference Call. I would now like to hand the conference over to your first speaker today, Christina Kmetko, please go ahead.

Good morning, everyone, and thanks for joining us this morning. Welcome to our 2021 Fourth Quarter and full-year earnings call. I am Christina Kmetko, and I am responsible for Investor Relations at Hyster-Yale. Joining me on today's call are Alfred Rankin, Chairman and Chief Executive Officer, Rajiv Prasad, President, and Kenneth Schilling, our Senior Vice President and Chief Financial Officer. Yesterday evening, we published our 2021 fourth quarter and full-year results and filed our 10-K, both of which are available on our website. Today's call is being recorded and webcast. The webcast will be on our website later this afternoon and available for approximately 12 months. Our remarks that follow, including answers to your questions, contain forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today. These risks include, among others, matters that we have described in our earnings release issued last night and in our 10-K and other filings with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in our earnings release on our website. In a moment, I'll discuss our current quarter results. But first, let me turn the call over to our Chairman and CEO, Alfred Rankin for some opening remarks.

Good morning, everyone. The 2021 calendar year was very challenging, more so than the impact we saw in 2020. Our fourth quarter and full-year results reflect the impact of those challenges. As you saw from the release we achieved last night, our fourth quarter results, excluding some non-cash charges, were directionally in line with the outlook we provided last quarter, but still due to the non-cash charges which rose as a result of how this challenging environment has affected our near-term forecasts, we're lower than we anticipated. While Christina will discuss these specific charges in our financial results in detail in a moment, I will provide some high-level thoughts on our results. Lift Truck market demand remained strong during the fourth quarter and continued to grow over 2020 levels, but as we expected, it decreased from the third quarter of 2021 as markets continue to moderate from the peaks achieved in the first half of the year. This year-over-year market growth, as well as share gains, resulted in strong Lift Truck bookings for the fourth quarter, which contributed to a new record Lift Truck backlog level and exceeded the historically high level achieved in the third quarter. Given these factors and as a result of production changes made in the fourth quarter and despite the continuing supply chain challenges, exacerbated by several critical component shortages, our fourth quarter shipments were the strongest we've seen since the start of the pandemic. Last quarter, we indicated that we expected significant losses at the Lift Truck business in the fourth quarter of 2021 as a result of the anticipated continuing supply chain constraints and significantly rising material and logistics costs leading to margin contraction for trucks in our backlog. These challenges continued in the fourth quarter with only modest part shortages improving and inflation continuing to rise in the quarter but at a slightly lower rate of change. These factors, along with the non-cash charges, led to the substantial consolidating of the operating and net losses we reported for the consolidated company in the fourth quarter. Our teams continue to work diligently to obtain the components we need for production and to increase margins in our backlog and particularly for new orders. Further, given the record backlog levels, the opportunity for increased production and supply chain bottlenecks resolved is high, as evidenced by the substantial increase in shipments in the fourth quarter of 2021. After Christina reviews the financial results for the quarter, Rajiv will provide more detail on these supply chain challenges, as well as provide an update on our business operations and strategic projects. Kenneth will then discuss our outlook, which is very challenging, but we believe improving.

Thank you, Alfred. I'll start with high-level comments about the quarter and then discuss the individual segments. As Alfred mentioned, due to market-level changes and share gains, we had a 16.5% increase in Lift Truck bookings over the fourth quarter of 2020. But our bookings of 33,200 units in the fourth quarter decreased 10.5% from the third quarter. We ended the fourth quarter with a historically high backlog of 105,300 units. Our fourth quarter unit shipments increased 24.2% driven by our Americas and EMEA segments and our revenues increased 15.3% over the prior-year fourth quarter. Higher unit shipments in parts volume in the Lift Truck business and at Bolzoni resulting from increased customer demand, along with the favorable effect of price increases in the Lift Truck business were the primary drivers for the increase in our 2021 fourth quarter consolidated revenues to $829.7 million from $719.6 million in the prior year. Despite the higher revenues, we reported an operating loss of $107 million compared with operating profit of $13.7 million in the prior year. We recorded a non-cash goodwill impairment charge of $55.6 million in our JAPIC segment because the continued disruption of supply chains and the resulting increased costs unfavorably affected our near-term forecast. The remaining operating loss was the result of several factors. A significant increase in material and freight costs of $68.6 million, net of price increases of $17.5 million. Higher unfavorable manufacturing variances of $13.3 million resulting from inefficiencies associated with component shortages. A shift in sales mix to lower-margin Lift Truck. An additional non-cash charge of $1.3 million to write down inventory at Nuvera and higher operating expenses primarily due to the reinstatement of pre-pandemic compensation and benefits. Higher unit volumes, as well as the absence of $4.4 million of restructuring charges taken in the fourth quarter of 2020, partly offset the unfavorable factors contributing to the operating loss. Overall, we reported a consolidated net loss of $103.3 million compared with net income of $13.1 million in the prior-year quarter due to the factors previously noted, as well as the $19.4 million non-cash charge to establish additional valuation allowances on certain U.S. and UK deferred tax assets, which Kenneth will discuss in more detail. Turning to the individual segment results, our Lift Truck business, excluding the goodwill impairment charge, reported an adjusted operating loss of $37.6 million compared to an operating profit of $24.4 million in the prior-year quarter. Primarily due to a significant decrease in gross profit and higher operating expenses in the Americas segment, both resulting from the specific factors I noted in the discussion of our consolidated results. Our Americas division felt by far the greatest impact of production delays and higher costs with EMEA experiencing the same difficulties but to a lesser extent. However, our JAPIC segment reported an adjusted operating loss of $4 million, which was an improvement from the prior year operating loss of $6.9 million. The improvement in JAPIC was due to lower operating expenses, partly offset by lower gross profit resulting from higher material and freight costs and additional manufacturing costs. Bolzoni's revenues for the fourth quarter increased 36.9% over the prior-year quarter. Despite these higher revenues and a 9.3% improvement in gross profit, Bolzoni reported an operating loss of $2.2 million compared with an operating loss of $1.3 million last year. The higher loss was due to an increase in operating expenses, primarily from the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020, and the absence of government subsidies received in 2020. Finally, Nuvera's revenue decreased to $200,000 in the fourth quarter from $1.1 million in the prior year due to fewer sales of fuel cell engines for Lift Truck battery box replacement. As a result of a $1.3 million unfavorable inventory charge, Nuvera's operating loss increased to $11 million compared to $9.7 million in 2020. That completes the update of our financial results for the quarter. Now let me turn to Rajiv, who will provide an overview of our operations and our strategic projects.

Thanks, Christina. As Alfred indicated, the global lift truck market remains strong this quarter, increasing more than 15% over the prior year quarter. However, growth was at a more moderate pace than in the first nine months of the year. Compared with the 2021 third quarter, the market increased only about 5% as a result of an increase in almost 19% in the EMEA market and modest growth in JAPIC, partly offset by a 12.5% decrease in the Americas markets. Our sales team continued to improve market share in this robust market environment, and the market improvements over the prior year's quarter combined with the share gain translates into an increase in the company's 2021 fourth quarter bookings and exceeded market growth. In 2022, we expect the global lift truck market to recede from the historical highs of 2021, but still be higher than pre-pandemic levels. As a result of this market outlook, the lift truck business is anticipating a substantial decrease in bookings in 2022 compared with 2021, with the rate of decrease expected to moderate in the fourth quarter. Many industries, including our own, are experiencing a significant increase in demand as markets recover, and this is causing significant stress on our global supply chain. Our supply chain group has continued to work diligently to address the challenges related to component shortages caused by supplier constraints and logistic challenges, which only modestly improved in the fourth quarter. These challenges arose due to the lack of shipping container availability from Asia, congestion at U.S. ports, and the shortage of trucks available to move the goods once they were received at U.S. ports. All these factors have limited our receipts of component parts when scheduled. We have put significant effort into securing component parts by using different shipping methods and vendors. However, limited availability of alternative shipping methods and the build-to-order highly configurable nature of our trucks has meant that alternative vendors that can provide the necessary component parts are very limited, resulting in making it very difficult to counteract these constraints successfully. Nonetheless, as a result of measures we put in place to counteract these challenges, our fourth quarter unit shipments increased to above pre-pandemic levels as we successfully slotted orders that were able to be fully built and shipped. Despite the increase in fourth quarter shipments, bookings net of shipments in the quarter added to an already historical high backlog level, and delivery lead times continued to increase. Our most significant issue right now is managing margins in our record backlog, especially on new orders. At our Lift Truck business, we have implemented price increases several times over the course of 2021 and again at the beginning of 2022 to address the impact of material and freight cost inflation. However, many of the orders in our backlog slotted for production in the first nine months of 2022 do not reflect the full effect of all the price increases. As a result, we expect 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. Importantly, the Lift Truck sales team is pricing new bookings at close to target margins based on expected future costs at the time of production. As a result, margins are expected to increase over the successive 2022 quarters, with much stronger margins in the fourth quarter when the higher-margin trucks already booked at improved margins and new trucks anticipated to be produced are expected to be completed. Now let me update you on our strategic initiatives which are laid out in more detail in our earnings release. At a high level, the Lift Truck business's primary focus continues to be on introducing new modular and scalable products and transforming our sales approach by using an industry-focused approach to meet our customers' needs. Bolzoni continues to work on streamlining and strengthening its operation while increasing its Americas business and expanding its sales, marketing, and product support capabilities. Nuvera continues to focus on ramping up demonstration, quotes, and bookings of its 45-kilowatt and 60-kilowatt engines. Overall, we continue to believe that we have the right strategies in place for long-term growth once we can achieve resolution of component shortages and relative stabilization of material and freight costs. I will now turn the call over to Kenneth for an update on future quarters and liquidity.

Thanks, Rajiv. As you've heard from both Alfred and Rajiv, during 2021 we have experienced production and shipment levels, which are far lower than our objectives due to continued supply chain logistic constraints, component shortages, and we've also been faced with higher material and freight costs. The results stemming from these challenges contributed to our need to book in the fourth quarter an additional $19.4 million to a valuation allowance against our U.S. and UK deferred tax assets, which Christina mentioned in her remarks. In total for the 2021 year, we increased our valuation allowance by $58.6 million based upon a review of our recent operations, including cumulative U.S. and UK pre-tax losses, lack of available tax planning strategies, and declining near-term forecasts due to material and freight inflation along with supply and logistics constraints. Due to these factors, the required accounting evidence no longer supported realization for certain of our U.S. and UK deferred tax assets, and the accounting rules require the company to record additional valuation allowances in the fourth quarter. We expect to continue to experience supply chain logistic constraints into the beginning of the third quarter of 2022, but they are anticipated to begin to moderate during the first half of the year. Nonetheless, we are expecting the positive shipment momentum from the end of 2021 to continue and for shipments to increase significantly over the course of 2022, given our robust backlog and actions we put in place to mitigate the impact of the supply chain constraints and shortages. Significant material cost inflation and higher freight costs, as well as the non-renewal of U.S. Tariff exclusions, are expected to continue to affect the cost of components and freight negatively in 2022. More moderate cost increases are expected to continue in 2022, but some signs suggest material costs have peaked. We will continue to work aggressively to manage supply chain and logistics costs, component availability, and tariff exclusions, and will continue to adjust our prices for all new orders accordingly. As a result of these factors, the core strategies discussed by Rajiv and the increased shipment volume potential of the higher-priced lift trucks in our current backlog, as well as trucks still to be booked in 2022 as it progresses, we expect the lift truck business to have significant operating and net losses in the first quarter of 2022, moderate losses in the second quarter, profitability in the third quarter, and substantial operating profit and net income in the fourth quarter, with the improvements in the second half of the year expected at the lift truck business to more than offset the losses in the first half. Over this period, we are projecting relative stabilization of product and transportation costs and the continued expectation of improved component and logistics availability. We are also anticipating the continued introduction of additional modular and scalable product families and the continued implementation of cost-saving initiatives over this period in the longer term. As we bring costs, pricing, and production volumes in line over 2022, we expect our Lift Truck business to generate strong operating profit and net income in 2023. At Bolzoni, we expect the moderation of component shortages and the timing of pricing actions to permit improved returns, beginning with a moderate operating profit in the first quarter and continuing with improved operating profit in the remaining quarters of 2022. As a result, Bolzoni expects sizable operating profit and net income in 2022 compared with operating and net losses in 2021. Excluding the impact of inventory valuation and fixed asset impairment charges taken in 2021, we expect moderately reduced losses at Nuvera in 2022 as a result of enhanced fuel cell engine shipments. On a consolidated basis, given the continued extensive component shortages, significant material and freight cost inflation, as well as continued losses at Nuvera, we expect to have a large net loss in the first quarter, a substantially reduced yet still large net loss in the second quarter, approximately break-even results in the third quarter, and substantial net income in the fourth quarter of 2022, assuming reasonable resolution of component part shortages and relative stabilization of material and freight costs. I would note, however, that the consolidated fourth quarter net income is not expected to fully offset the consolidated losses generated in the first nine months. We are carefully managing our capital expenditures, operating expenses, and production plans for 2022 in a manner designed to protect liquidity. We have 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. Our ability to ship trucks was significantly constrained by part shortages of certain critical components, while the remaining components needed to build trucks were received and added to inventory, causing inventory levels to again increase substantially. We expect, based upon our recast of manufacturing production plans, to reduce inventory significantly by using current inventory to build trucks for which production has been significantly delayed due to critical part shortages. At December 31st, 2021, we had cash on hand of $65.5 million and debt of $518.5 million compared with cash on hand of $61.4 million and debt of $428 million at September 30th, and finally, cash on hand of $151.4 million and debt of $289 million at the end of 2020. As I've mentioned before, we were fortunate to be able to refinance our revolving credit facility and expand our term loan facility in May to finance our production growth and related working capital needs during this challenging period. As of December 31st, we had unused borrowing capacity of approximately $165 million under our revolving credit facilities, compared with $245.9 million at September 30th, and $266.4 million at December 31st, 2020. I'll now turn the call back over to Alfred.

As we look to 2022, we are continuing to be focused on managing effectively in this very challenging environment. We continue to execute our mid-term and long-term strategies. Our strategy for the long-term is clear and it is transformative. Our key projects as well as the explicit objectives for the Lift Truck, Bolzoni, and Nuvera businesses support this long-term strategy. Further, expected improvement in near-term prospects quarter-by-quarter over 2022 with substantial profit in the fourth quarter and in 2023 suggest significantly improving results despite continuing logistics challenges, as well as expected improving adoption rates for key fuel cell market segments. End markets are strong. We have a record Lift Truck backlog, a strong current booking environment, and we are working diligently to manage the supply chain headwinds. We're continuing to invest in innovative products and our key strategic projects to meet increased customer demand. Once these challenges are behind us, we believe we will deliver solid sales and earnings performance. We'll now turn to any questions you may have.

Please stand by while we compile the Q&A roster. Your first question comes from the line of Steve Ferazani from SIDOTI & Company. Your line is open.

First question has to be a modeling question. I'm trying to think about, you provided a pretty good outlook over the next few quarters. But specifically, I'm trying to think about lift truck gross margin in Q1 and Q2, the trends. Because what we don't know is, what's sitting in backlog and how that rolls through and how it hits on, in terms of gross margin. Because obviously, we saw weaker this quarter sequentially. Given we're two months into the quarter, can you give us a sense on trends with lift truck gross margins?

I recommend taking some time to thoroughly review the earnings release, as it outlines the process clearly, including the quarterly progression. In the near term, production has the lowest prices relative to inflation, which is typically in the first quarter. Following that, margins improve due to numerous price increases, a moderation in inflation, and a gradual improvement in our position. New bookings will have a significant effect in the fourth quarter, aligning with our target margins. This narrative is fundamentally about the margins. To clarify, my comments focus on the adjusted standard margin from an accounting perspective. Additionally, as our production increases and supply chain issues lessen their impact on our factories, our manufacturing variances improve. When you consider these factors together, it confirms that our margin progression is as detailed in the release.

Okay. Fair enough. Thank you. On deliveries, I was surprised how much they improved in Q4, given it's typically, you can run into at least some holidays. And I know some companies, and it sounds like you weren't impacted by the Omicron variant. I'm trying to think about how much more you can pick up on the deliveries and why it improved so much in Q4.

I'd like to ask Rajiv to answer that, and I'd simply note that it depends enormously on the efforts that our supply chain people have made to reduce the impact of shortages.

I believe the impact persisted, but to a lesser degree as the Omicron variant was not as severe as previous variants. We encountered issues in the fourth quarter related to delivery through the port and internal logistics, particularly with worsening logistics concerning trucks and somewhat with rails, which have continued into the current quarter. The primary advantage was our substantial backlog of trucks and significant working capital and inventory. The team performed admirably in assembling trucks with the available inventory while concentrating on sourcing the necessary materials. We anticipate this situation will carry on into the first two quarters of 2022, with gradual easing as the quarter progresses. Our current strategy aims to maintain a stable production rate while improving efficiencies, allowing us to increase production in the second half of the year when we expect most supply chain restrictions to be largely resolved.

Great, thanks for that.

It's partly, as Rajiv suggested, the supply chain constraints that we've been facing. But we've also been working very closely with our suppliers to increase the capacity so that we can produce at the levels that we want to produce. So there are really two parallel processes going on.

Great, thanks for that. If I can squeeze one last one in. Rajiv, you mentioned that the higher level of working capital, just trying to think about trends and how quickly you think that can come down. How quickly that can be a positive to cash flow? And then, putting $165 million in the unused revolver would seem based on your guidance or outlook that's more than ample liquidity, would you agree with that?

I believe we are in a strong position regarding liquidity and feel confident about our current status. We anticipate that inventory will decrease, particularly when measured in days, as we navigate through this transition. As I mentioned, we will maintain flat production rates initially this year before ramping up. Our primary focus is on managing working capital days, which are currently higher than usual because we increased inventory to produce more trucks, reduce our backlog, and improve lead times. As we've indicated in our release, lead times present challenges for our sales team at this time. We aim to ramp up production as swiftly as possible, but our planning indicates that we will see flat performance initially, followed by an increase in the second half of the year.

One thing to bear in mind is that we do have quite a bit of inventory that is on hand that is paid for. Because it came in advance of our ability to assemble and build the product. So the shortages prevented us from using the inventory in the way that we had anticipated. So as we move through the first quarter and into the early part of the second quarter, we'll also get a bump in payables to help finance our working capital, that we've depleted for the moment. So it's kind of a double-barreled effect. One is on the inventory levels as Rajiv described, and the other is related to the payables, the financing of some of that.

Yes. Thanks, Alfred. And I think what I'd add to that is that in my section that we just covered, we have strict operating controls in place to enhance cash during the period. We also have reduced capital expenditures and you'll notice that when you review the K and the earnings release, in terms of we took capital expenditures down for the period and the investment in strategic programs. But we left those critical programs in place and are continuing to fund those. We have programs in working capital that we have as well, and we expect those to supplement that $165 million of availability in the revolvers that we have today. And then finally, Steve, I'd point out that we have commented for about a year or so that our production capacity globally is about 140,000 units. We sold 26,000 in the fourth quarter. So you can see that there is an ability in our plants to ramp once our supply base can fill the parts that we need to be able to build that level of trucks. We do need to produce more; we need to get the backlog more in line in concert with the comments that Alfred and Rajiv made about the levels of the backlog and the lead times that we faced.

Great, I appreciate all the color, folks. Thank you.

Your next question comes from the line of Chip Moore from EF Hutton. Your line is open.

Hi, good morning. Thank you for taking the questions. I wanted to stay on this topic and was going to ask you about the focus on liquidity and some of the working capital dynamics. Could you expand a bit on where some of the delays and strategic investments are? It sounds like they might not be among the higher profile programs, but perhaps you can provide a bit more detail.

Well, they're frustrating, I will say that. We would much prefer not to be doing this because the programs are clear; we'd like to execute them, but we want to be very prudent during this period and Rajiv, why don't you comment on the particularities of that.

We have maintained our significant investments in operational and manufacturing capabilities, while also focusing on enhancing our fuel cell capabilities. We have made some reductions in various areas but have prioritized the most critical products. Our product strategy centers around three main areas: scalable modular platforms, which will continue to launch throughout 2022 and 2023; electrification, where we have introduced new large electric trucks and will keep expanding this offering in the same time frame; and advanced technologies like telemetry and operator-assisted automation, which we plan to continue, although at a reduced pace compared to our initial plans. Regarding our manufacturing footprint, we aim to optimize the entire operation. While we have postponed this program by several months, it remains fully intact, with a deferral of about nine months to better manage our liquidity needs.

The best way to consider this situation is not just about the deferrals but also about when they will return. Looking at our forecast, we hope and expect that by the fourth quarter, our forklift truck business and Bolzoni will be operating at a very profitable rate, and we will have made progress in bookings and shipments at Nuvera. By the fourth quarter, we aim to resume the programs that had been slowed down in the first three quarters. We will make those decisions as we progress through the year, ensuring that everything happens as we anticipate, because this year and last year have been uncertain with many issues still to be resolved. However, we have a fairly clear outlook as we move forward in this regard.

I do want to reiterate that we've reduced the capital expenditure, still at a significant rate. So it's not as if we have eliminated things; we've just prioritized.

I would say that's a really important point, that the programs that have been slowed or the strategic programs ensure you're talking about a big long-term impact but moderating for a few months.

Yes.

And we're not really doing anything from a near-term operational point of view that is damaging.

Got it. Now that's extremely helpful and makes a lot of sense. And then you do call out an expectation for strong results for the Lift Truck business anyways. In 2023, maybe you can expand on that a bit in terms of some of your thoughts and some of the key variables. And how things set up there.

We have clearly outlined the situation, and it’s important for our investors to understand that we are not facing fundamental difficulties. Instead, we are dealing with short-term issues related to material costs, which are now starting to moderate. We have also implemented programs to address any unexpected future cost increases that exceed our forecasts. After navigating this challenging period, we have established additional pricing provisions to safeguard our position. It has been a long time since inflation has compelled us to take these measures, but we are reverting to strategies used in the past during similar circumstances. As we have described, we have a backlog, shipments are increasing, and our supply chain capabilities are supporting this ramp-up, which will lead to improved margins.

Got it. Okay. And maybe if you could provide one last point, I think you mentioned expectations for increased shipments at Nuvera, could you update us on the potential for quoting activity and bookings? Additionally, could you connect this to some of the newer solutions for the Lift Truck business related to electrification?

Sure. The whole program is being built around our Nuvera electrification strategy, and that's to essentially launch a set of port equipment trucks with fuel cells in them in 2023. Now, as the technology has been developed for those trucks, we've felt that there are other segments outside the Lift Truck industry that those same solutions can help, particularly on the commercial trucking side. And so what the team at Nuvera has done, working with the Hyster-Yale Group, is identified segments where those would be a good fit and also segments where fuel cells are really the only answer because battery-powered trucks couldn't do it. And as you can imagine, they're the higher load trucks, trucks that have ancillary loads built into them; a good example could be a refuge truck, for instance. And so the team's done a great job of mapping those out both in those segments out and who the key players are in each of those segments. And then we're reaching out to working with each of those segments, initially to put together demonstration vehicles, and then assuming success, then move on to productionizing it. So that's been the main part for driving it; centered around what we're doing on the Lift Truck business, but then building that capability around the other adjacent segments that we still could benefit from the same solution.

Got it. Sorry, I need to think I could speak one last one in, just given what's going on overseas in Europe, when we cognitive any risks there and how you're managing those things?

We have assembled a team to assess the entire situation and ensure we're managing it effectively. The primary challenge for us is making sure we comply with all the rapidly changing laws and regulations. Significant care must be taken in sourcing and shipments in light of the current circumstances. Financially, we likely have more down payments and trucks for Russia than payments owed to us for trucks already shipped. From a financial standpoint, we aren't facing a burdensome period, and naturally, we won't be shipping. It's important to note that this situation allows us to redirect additional trucks to other customers that we previously would have shipped to Russia. Generally, in this environment, we anticipate receiving better prices and higher margins on those trucks compared to ones that have been sitting in backlog meant for Russia. We're managing this situation very carefully, particularly with our European team, and also considering our operations in China and production facilities in other regions. This provides a broad overview of the situation.

Okay. That's very helpful. Appreciate it. Thanks.

Your next question is from Brett Kearney from Gabelli Funds. Your line is open.

Hi, guys. Good morning, and thanks for taking my question.

Good morning.

Morning.

I was wondering about the current status of the supply chain and the main component constraints you are experiencing. In previous quarters, you've mentioned issues with tires, motors, and electronics, particularly microcontrollers. Could you clarify the key challenges at this moment and how you see those trends evolving recently?

I think if I look at the most recent issues we are having, the electronics bill continues to be a concern. Really just moving outside of microprocessors, we've had issues with the drivers; the ones we use in our controllers. We're starting to see some issues with capacitors and resistors. They're starting to affect some of the ancillary components that are required to make these modules. We think we have a good handle on it but it's a scenario of concern. The biggest immediate impact is coming from the other part of the electrical system, which is the wiring system. We're starting to see constraints with connectors, terminals, and in fact, even some types of wires. Again, a huge amount of work is going on working with the suppliers of wiring to improve the situation. But those are there. And then there are some COVID-related supplier infrastructure disruption issues around hoses and the things that you wouldn't normally expect to be impacted. But really that's been a different impact because these are generally manual labors needed to assemble these systems and they have been impacted by COVID. I think those are the big ones at the moment where I think I would say that we are handling a handful of suppliers or so, whereas in mid-last year we were handling hundreds, and late last year we were in the 20 to 30 range; so things have improved, but there are still constraints in the system. I would add to that only that our efforts are not just aimed at relieving some of those shortages. They're also aimed at engineering design changes that are designed to allow us to use more readily available components or materials. It takes a little bit of time to do that, but we have made some significant inroads as a result of that. Some are less specialized components, and our engineering team has been able to rethink how to meet those needs with some more readily available components than the ones we were sourcing. So that's an ongoing effort. It's all hands looking at these issues and trying to be as creative as possible in addressing them.

That's very helpful. I have a follow-up question about Nuvera. It seems that product demonstrations are moving along well, and the team is introducing the next generation of new products and engines. Considering how dynamic this space is, I’m curious about your thoughts on potential partnerships, especially with respect to hydrogen and other new energy applications. Are you open to involving a strategic partner, possibly as a minority stakeholder in Nuvera, to help accelerate the growth opportunities you've identified?

You've highlighted a crucial element regarding the sales opportunities for our engines in the specialized segments we've discussed in previous materials. It's also essential to note that partnership can take many forms. Some partnerships are simply cooperative efforts involving various players who contribute components, assembly, or customer applications for vehicles. That's one end of the partnership spectrum. However, we are open to considering other types of partnerships at the right time that might align with our goals. Our primary objective is to enhance our long-term value in the business. I want to stress that the partners we collaborate with are typically sophisticated and capable, representing the kind of entities we have traditionally worked with. These are not the kind of venture-type activities you might imagine. We believe there's significant value to be realized in the fuel cell sector by leveraging the structure of a traditional, established business to drive applications in areas that Rajiv mentioned earlier that require a fuel cell to accomplish their tasks. Rajiv, would you like to provide more detail on that?

Sure. In terms of partnership, we believe that collaboration will be crucial for the hydrogen business moving forward. It's not just about the fuel cell; a powertrain solution is necessary, along with the appropriate fuel system. While hydrogen will be a key component, there are various methods to produce it, and we need to ensure we choose the right approach for our customers. There's considerable effort being put into collaborating with a broader array of companies. Some of these partnerships may lead to formal associations, and we are definitely open to that.

Great, that's very helpful. Thanks so much, Rajiv and Alfred.

In the earnings release, we continue to emphasize our focus on a small number of segments where fuel cells are essential to complete the task. Batteries alone do not provide the necessary solutions that customers require and expect. Different industries will adopt these technologies at varying rates. For instance, the automobile sector will differ from the garbage truck industry or other niche markets. A prime example of our strong presence is in ports. Rajiv, could you elaborate on the range of products and capabilities that necessitate fuel cells to meet the needs of ports?

Sure. As I said earlier, I think we have a plan to launch our laden container handler, empty container handlers. As we have stated, we have a partnership with a producer of terminal tractors that will also have a fuel cell solution. On this group of products, we will be released in 2023 to support really strong input we're getting from port desires to go green. And so that's why we've prioritized this as a focus item for us.

That's a good example of collaboration or what you might call partnership. And that's the thing we expect to do in other segments of the market, as well as in the port area where I suppose, Rajiv, you'd say it's most fully developed at this point?

Yeah.

Great. Thank you so much for all the insight.

Thank you.

Your next question is from Richard Dreamy from Longport Partners. Your line is open.

Good morning. In your goal of a 140,000 units produced in 7% operating margin, what kind of results from Nuvera does that goal anticipate from Nuvera?

The goal for the forklift truck business is similar to that of Bolzoni, but it does not apply to Nuvera. We believe that the three businesses should be evaluated differently. Two of the businesses, the Lift Truck business and Bolzoni, are mature and are targeting a 7% utilization of capacity, which is related to forklift performance. We anticipate significant progress towards these targets in the fourth quarter and in 2023. In contrast, Nuvera's focus is on creating value by increasing bookings and enhancing the segments we have discussed, while also establishing a record of quality and reliability, particularly with our 45 kW and 60 kW engines. This approach is less about achieving a 7% operating profit and more about building overall value. That's the best summary I can provide.

Okay. Thank you.

This is the last question from Jeffrey Farkas from Marathon Asset Management. Your line is open.

Hi, thank you. Firstly, could you elaborate on the firmness of your backlog? There seems to be some concern among equity analysts about over-ordering. Could you explain if customers are required to make a nonrefundable deposit when placing an order? Also, at what stage do they have commitment to their order?

There is a deposit program focused mainly on our dealer business. We haven't observed significant pre-buying or ordering because the backlogs are lengthy, although there may be some instances of that. This situation allows us to continue through 2022, and in some cases, we are already booking into 2023. We don't see any immediate issues related to your concerns. There may be specific situations with certain customers where we need to negotiate due to the long lead times. In some of these cases, considering the margins, if they are not satisfied, we have plenty of other customers who offer better margins. Therefore, it's challenging to categorize this as either a problem or an opportunity.

We haven't experienced any significant cancellations so far, and we maintained a solid backlog throughout last year. We don't anticipate any material cancellations in the future, but it's challenging to predict. Customers do provide us with firm purchase orders, which is standard practice in our industry.

That's why I say it's kind of negotiation. Because it's firm on our part; we have to deliver the price that was set in most cases, and firm on their part to buy, as a practical matter, you're always trying to work with your customers and you sit down and you talk.

I would like to emphasize that most of our trucks are ordered by customers for specific applications and are tailored accordingly. This makes it challenging for those customers to switch to a different supplier, as it’s not a straightforward commodity purchase. Additionally, our industry is experiencing long backlogs, which means there are limited alternatives available to fulfill their needs immediately if they decide to change. These trucks are designated for particular applications in specific locations. Many of our customers in North America have leasing contracts for their trucks, creating a need to update those trucks as they approach the end of the lease term. This gives us significant confidence in the strength of our backlog. Historically, we have not experienced significant fluctuations or cancellations in our backlog over the past 10 to 20 years.

Yeah. I mean, the other thing we're noticing is the average age of the fleet in the field is increasing. So that goes along with what Kenneth is saying.

Great. Regarding pricing, could you provide an update on the number of times you increased prices last year? Specifically, what is the extent of the price increases? It appears that your contracts are now influenced by the inflationary environment. Can you adjust pricing in your backlog to account for any future cost changes? If that is the case, when did this change take effect?

Well, I think the most important way to think about it is that all the evidence at the moment is that costs are moderating at these high levels. We're seeing some start to come down, but we're not going to forecast that. So we're looking forward really through the end of this year at what we think the costs are going to be. Our hope is that they're going to come in lower, but we are booking our trucks to the costs that we see through our forecasting models. What happened last year, of course, as you well know from many companies' experience, is that when demand exceeded supply, the prices went up a lot and we didn't forecast prices going up that much. So what we don't see is prices coming way back down. We think there's enough tightness in the marketplace to sustain these higher prices for the time being, or at least that's our assumption for the moment. So that's the dynamic of the situation both as to the past and as to the future. Now, what we have done is to provide some protection for ourselves going forward so that if trucks are booked way out in the future and inflation indexes exceed certain expected levels, there are some opportunities to make some adjustments if they get way out of whack. So that's not a capability that we had before; as we indicated, the prices are an obligation on the part of both the buyer and the seller. So that's in large measure how it works for us at the moment.

But that's been a recent implementation, so.

And that's very recent implementation. And frankly, we'll have to see how long we need to keep that in place. It's a critical protective mechanism. It's not a desirable mechanism from our point of view. And there are certain kinds of bookings that have more flexibility to be re-priced in a difficult environment than others. So it depends to a degree on who the customer is and especially whether the end, this customer has been really involved in setting the price.

Great. I'll follow up my other questions, but thank you very much.

I will now turn the call back over to Alfred Rankin for closing remarks.

I believe we had a productive set of questions, and we provided detailed information in our earnings release to ensure that the marketplace understands two important changes we're experiencing. First, we're making progress on margins in both the Forklift Truck business and Bolzoni throughout 2022 and into 2023. Second, we are working to return our working capital to more typical levels by aligning our incoming resources with our actual needs according to a revised production schedule that considers how quickly our suppliers can support our production ramp-up in 2022. These efforts should help us align our working capital and debt with the appropriate levels needed for the business moving forward. Those are my final thoughts, and I appreciate everyone for participating.

This concludes today's conference call. Thank you for participating. You may now disconnect.