Hyster-Yale Materials Handling, Inc. — FY 2015 Form 10-K
Reporting period: Year ended December 31, 2015. The filing also reports unaudited fourth-quarter results. The company designs, manufactures, sells and services Hyster- and Yale-branded lift trucks and aftermarket parts, with Americas, EMEA, JAPIC and Nuvera reportable segments. Nuvera, acquired in December 2014, develops fuel-cell and hydrogen systems.
Financial performance
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $2,578.1 million | $2,767.2 million |
| Gross profit / margin | $430.8 million / 16.7% | $447.7 million / 16.2% |
| Operating profit / margin | $103.5 million / 4.0% | $148.8 million / 5.4% |
| Net income attributable to stockholders | $74.7 million | $109.8 million |
| Diluted EPS | $4.57 | $6.58 |
| Cash from operating activities | $89.4 million | $100.0 million |
- Revenue fell 6.8%, primarily from $159.9 million of unfavorable currency translation and $53.2 million from unit volume and mix. Total lift-truck shipments declined 0.8% to 86,900 units.
- Operating profit declined 30.4%. The 2014 comparison included a $17.7 million gain on the sale of a Brazilian facility and $3.1 million of Nuvera acquisition costs. In 2015, lift-truck gross profit was pressured by currency, manufacturing variances and lower volumes; material-cost deflation and price increases partly offset these effects.
- Nuvera recorded a $24.6 million operating loss in 2015, compared with a $2.2 million loss in its partial 2014 period. Americas operating profit was $116.9 million; EMEA was $13.0 million; JAPIC recorded a $1.8 million loss.
- Fourth-quarter 2015 revenue was $645.0 million, operating profit $26.2 million, net income $17.3 million and diluted EPS $1.05. In fourth-quarter 2014, these were $710.7 million, $33.2 million, $26.6 million and $1.61, respectively.
Cash, debt and liquidity
- Year-end cash was $155.1 million, versus $111.4 million in 2014. Current assets were $818.9 million and current liabilities $505.2 million.
- Total debt, including capital lease obligations, was $53.1 million, compared with $31.5 million in 2014; debt to total capitalization was 10%, up from 6%. No borrowings were outstanding on the $220 million revolving facility; reported availability was $213.3 million after letters of credit. The company also reported $29.1 million of availability under other non-U.S. facilities.
- Cash flow before financing activities was $58.1 million, versus $55.6 million in 2014. Capital expenditures were $46.6 million. Planned 2016 capital expenditures were $61.4 million.
- The company said cash on hand, credit facilities and operating cash flow should cover operating needs and commitments for the next 12 months. It was in compliance with credit-facility covenants at year-end.
Outlook, risks and unusual items
- For 2016, management expected revenue, shipments and parts sales to increase, but operating profit and net income to decline from 2015, reflecting higher expenses and a shift toward lower-margin products. Cash flow before financing activities was expected to remain positive but decrease.
- Management expected EMEA operating profit to fall substantially, while JAPIC operating results were expected to improve. Americas operating profit was expected to be slightly lower. Management anticipated weaker first-half results and improvement in the second half.
- Nuvera began early production of PowerEdge fuel-cell units in late 2015 and expected initial customer shipments in the first half of 2016. Management forecast a Nuvera operating loss of approximately $23–$26 million in 2016 and targeted quarterly break-even by the end of 2017 or early 2018, conditional on production volumes and target margins.
- Material risks include the cyclical lift-truck market; foreign-exchange exposure; dealer, supplier and customer financing availability; volatile raw-material costs; competition; and execution and commercialization risks for Nuvera. GECC’s announced financial-services asset sales could affect the U.S. dealer/customer financing joint venture. The company’s maximum disclosed guarantee exposure was $267.6 million, including recourse and repurchase obligations and its incremental GECC guarantee; management reported that anticipated losses were not significant and collateral supported the arrangements.
- On February 14, 2016, the company agreed to acquire Penta Holding for approximately €53.5 million, including its 50.4% stake in Bolzoni. Closing was expected in the second quarter of 2016, subject to conditions; the company planned to fund the transaction with cash and its credit facility and then launch a mandatory tender offer for remaining Bolzoni shares.
- Other notable items: the effective tax rate rose to 28.1% from 26.6%; 2015 included Brazilian deferred-tax valuation allowances and release of part of an Australian allowance. The company reported no material legal proceeding. Ernst & Young issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether 2016 volume and new-account wins offset lower pricing, unfavorable product mix and foreign-exchange effects, particularly in EMEA and Brazil.
- Nuvera’s production ramp, customer shipments, unit economics and progress toward its stated break-even objective.
- Completion, financing and integration of the Penta/Bolzoni acquisition, including the tender-offer outcome.
- The actual cost and availability of dealer financing following GECC’s planned divestitures, and changes in the company’s guarantee exposure or losses.
- Liquidity, covenant headroom, working-capital needs and delivery of the planned capital expenditure program.