Hyster-Yale Materials Handling, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company designs, manufactures, sells and services lift trucks and aftermarket products, alongside Bolzoni attachments and Nuvera hydrogen fuel-cell products. Figures are in U.S. dollars; financial-statement amounts are in millions unless noted.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1,001.2 | $840.1 | $3,091.1 | $2,563.1 |
| Gross profit | $203.6 | $86.9 | $575.9 | $287.2 |
| Operating profit (loss) | $58.6 | $(24.9) | $160.0 | $(58.9) |
| Net income (loss) attributable to stockholders | $35.8 | $(37.3) | $100.7 | $(81.7) |
| Diluted EPS | $2.06 | $(2.20) | $5.82 | $(4.84) |
| Operating cash flow | — | — | $105.1 | $34.3 |
- Revenue increased 19.2% in Q3 and 20.6% year to date. Lift-truck revenue growth was led by the Americas; higher pricing and increased unit and parts volumes were key contributors. JAPIC revenue declined.
- Gross margin was approximately 20.3% in Q3 versus 10.3% a year earlier, and 18.6% for the first nine months versus 11.2%. Operating margin was approximately 5.9% in Q3 and 5.2% year to date, compared with losses in both 2022 periods.
- Management attributed the profit recovery primarily to pricing, favorable material costs in the Americas, richer product mix, and higher volume. Higher employee-related, product-development, product-liability and marketing costs partly offset the improvement. Interest expense rose to $9.6 million in Q3 and $28.2 million year to date.
- Cash from operations rose to $105.1 million for the first nine months, but working capital included a $50.0 million cash use from accounts payable; inventory used $21.9 million. Capital expenditures were $18.9 million. Cash increased to $78.2 million from $59.0 million at year-end 2022.
- At September 30, total debt was $510.6 million, compared with $552.9 million at year-end 2022; debt to total capitalization decreased to 61% from 71%. Cash less total debt was approximately $(432.4) million. Current assets were $1,500.9 million and current liabilities $1,299.4 million.
- Revolving-facility availability was $223.1 million, with an additional $30.6 million available under other non-U.S. lines. The company reported compliance with facility and term-loan covenants and said available cash, credit and operating cash flow should meet needs over the next 12 months.
Material changes and operating trends
- Lift-truck operating profit improved to $65.1 million in Q3 from a $15.2 million loss; nine-month operating profit was $175.4 million versus a $37.6 million loss. Bolzoni also returned to Q3 operating profit. Nuvera remained loss-making, with a nine-month operating loss of $28.4 million versus $25.0 million.
- Q3 lift-truck shipments rose 4.9% overall year over year, with Americas shipments up and EMEA and JAPIC down. Q3 bookings were 18,200 units, down 12% from the prior year. Backlog was 85,300 units, valued at approximately $3.54 billion, versus 108,200 units and $3.70 billion a year earlier. Substantially all backlog was expected to ship within 12 months.
- Nine-month operating cash flow improved substantially year over year, primarily reflecting the earnings recovery. The company said lower accounts payable and customer deposits compared with 2022 partly offset this improvement.
Outlook, commentary and risks
- Management expected Q4 2023 operating profit and net income to improve significantly over Q4 2022, but remain below Q3 2023. For 2024, it expected operating profit and net income broadly similar to 2023.
- Management forecast 2024 global lift-truck market bookings broadly comparable to 2023, with a weaker first half and stronger second half. It expected company bookings, production and shipments to increase in 2024, while elevated backlog and lead times gradually move closer to normal. These projections depend on market share gains, supply-chain conditions and production capability.
- Management expected Lift Truck revenue to increase in 2024, with operating profit similar to 2023; it anticipated some gross-margin pressure from labor and overhead costs. Bolzoni expected 2024 revenue comparable to 2023 and higher operating profit. Nuvera expected higher sales but comparable operating results, while continuing product development and demonstrations.
- Full-year 2023 capital expenditures were projected at approximately $42 million. Management said inventory remained elevated versus pre-pandemic levels but was slowly declining, and emphasized working-capital discipline, cash generation and debt reduction.
- Risks highlighted include cyclical or weakening demand, geopolitical conflict, inflation and labor costs, component and supply-chain disruptions, tariffs, pricing acceptance, foreign-exchange and interest-rate movements, customer and dealer access to credit, product liability and warranty claims, and successful commercialization of Nuvera technology. The filing reported no material change to previously disclosed risk factors.
- The company had $138.7 million of customer-related recourse or repurchase obligations; estimated losses were not significant and collateral was estimated at $192.4 million. It also guarantees certain HYGFS debt: the filing states a contractual guarantee of $248.1 million and an incremental obligation of $225.9 million after specified receivables are excluded. These are contingent exposures, not reported debt balances.
- Q3 included a $1.2 million discrete tax benefit, primarily from expiration of the statute of limitations for uncertain tax positions. The reported Q3 tax rate was 30.8%; the nine-month rate was 26.5%. Management’s tax provision also reflects valuation-allowance estimates and U.S. tax treatment of research and development costs.
Key facts for investors to verify
- Whether bookings, backlog and shipment trends support the forecast recovery, especially in EMEA and JAPIC and as backlog converts to revenue.
- Whether pricing and product mix continue to offset labor, material, manufacturing and operating-cost pressures.
- Whether inventory reduction and working-capital actions translate into sustained operating cash flow and debt reduction.
- Facility availability, covenant headroom, floating-rate borrowing costs and the scheduled amortization of the $25 million FILO tranche beginning December 2023.
- The scale and performance of HYGFS-related guarantees and customer recourse obligations, and the assumptions behind their collateral and loss estimates.
- Nuvera’s ability to convert demonstrations and development programs into commercial sales while managing ongoing losses.