Hyster-Yale Materials Handling, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Hyster-Yale designs, manufactures, sells and services lift trucks and related products under Hyster and Yale, and operates Bolzoni (attachments) and Nuvera (hydrogen fuel cells). Figures below are in millions of dollars except per-share data and where noted.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $827.6 | $732.2; up 13.0% |
| Gross profit / margin | $101.2 / 12.2% | $118.4 / 16.2% |
| Operating income (loss) / margin | $(18.3) / (2.2)% | $3.1 / 0.4% |
| Net income (loss) attributable to stockholders | $(25.0) | $5.6 |
| Basic and diluted EPS | $(1.48) | $0.33 |
| Cash from operating activities | $59.1 | $(47.1) |
| Capital expenditures | $9.7 | $7.7 |
| Cash and total debt at quarter-end | $65.1 / $479.0 | Year-end 2021: $65.5 / $518.5 |
- Revenue growth reflected higher pricing, lift-truck unit and parts volumes, and Bolzoni growth, partly offset by foreign-exchange effects. Lift-truck shipments increased 7.2% to 23,900 units.
- Operating performance deteriorated primarily because material and freight inflation and supply-chain-related manufacturing inefficiencies totaled $68.6, outweighing $43.9 of favorable pricing. Higher SG&A also contributed.
- Operating cash flow improved by $106.2 year over year, mainly due to working-capital movements, including customer order deposits and lower inventory purchases. Inventory was $826.4, up from $781.0 at year-end; deferred revenue was $154.6, up from $76.2.
- At March 31, revolving-credit availability was $194.5 under the main facility and $23.4 under other non-U.S. lines. The company reported approximately $218 of unused borrowing capacity and stated it was in compliance with debt covenants.
- Debt to total capitalization was 58%, unchanged from December 31, 2021. Interest expense rose to $5.1 from $2.8. The quarterly dividend was $0.3225 per share.
Material changes and unusual items
- The lift-truck business moved from $12.2 operating profit to a $10.7 operating loss. Americas operating profit fell to $4.4 from $14.6; EMEA recorded an $11.4 operating loss versus $0.1 profit; JAPIC’s operating loss widened to $3.7 from $2.5.
- Bolzoni operating profit improved to $2.1 from $0.8. Nuvera’s operating loss narrowed to $8.1 from $9.8, although the company continued to expect losses at Nuvera.
- EMEA recorded $2.5 of charges related to Russian orders no longer expected to be fulfilled or collected; Bolzoni recorded $0.7 of Russian-related receivable and closure reserves. The company removed 3,200 Russian and Ukrainian dealer orders from backlog.
- Q1 2021 included a $4.6 gain on the sale of OneH2 preferred shares; no comparable gain occurred in Q1 2022. Management also cited higher interest expense, unfavorable mark-to-market effects on an equity investment, and lower pension income as contributors to the year-over-year net-income decline.
- The income-tax provision was $2.9 despite a pretax loss, reflecting valuation allowances and losses for which no tax benefit was recognized.
Outlook, risks and contingencies
- Management expected a larger consolidated net loss in Q2 than in Q1, a lower but still substantial loss in Q3, and substantial net income in Q4; it did not expect Q4 profit to offset losses in the first nine months. Management said the remaining-2022 outlook was generally weaker than its prior outlook, mainly due to the Russia/Ukraine conflict.
- For lift trucks, management anticipated lower margins in Q2 from the lag between price increases and shipment of backlog orders, followed by improving margins and substantial operating profit in Q4. It expected 2022 shipments to increase significantly from 2021, but bookings to decline during the remainder of 2022. These expectations depend on component availability, cost stabilization, and production and logistics improvements.
- The company identified ongoing component shortages, material and freight inflation, Russia/Ukraine impacts, and China COVID-related lockdowns as key uncertainties. Other risks include demand cyclicality, pricing acceptance, foreign-exchange and interest-rate movements, credit access, tariffs, litigation and warranty claims, and commercialization of Nuvera technology.
- Planned 2022 capital expenditures were approximately $28.9. Management said it was controlling operating expenses and production plans to protect liquidity and expected cash, available credit and operating cash flows to meet needs over the next twelve months.
- Guarantee exposure was reported at $310.4, including $199.8 of incremental obligation related to a guarantee of HYGFS debt. Management said anticipated losses on recourse and repurchase obligations were not significant and that collateral and secured assets supported the exposures. It reported no material expected excess legal costs beyond recorded accruals.
Important facts for investors to verify
- Whether supply-chain constraints and inflation ease as assumed, and whether pricing catches up with costs as backlog trucks ship.
- Whether the Q2-to-Q4 improvement forecast is achieved, particularly the projected Q4 profit and full-year loss recovery pattern.
- Whether inventory converts into production and cash, and whether customer deposits and other working-capital movements are sustainable sources of liquidity.
- Available credit, borrowing costs and covenant headroom if operating losses persist; the company’s debt includes floating-rate borrowings.
- Potential further Russia/Ukraine or China-related disruption, including changes in backlog, receivable collectability, costs and regional demand.
- The size and realization of guarantee exposures, and Nuvera’s ability to increase shipments and reduce losses.