Business context and reporting period
Hyster-Yale Materials Handling, Inc. designs, manufactures, sells and services lift trucks and related parts, with additional businesses in attachments (Bolzoni) and hydrogen fuel-cell technology (Nuvera). This summary covers the unaudited quarter ended March 31, 2021, compared with the quarter ended March 31, 2020.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $732.2 million | $785.7 million |
| Gross profit / margin | $118.4 million / 16.2% | $136.7 million / 17.4% |
| Operating profit / margin | $3.1 million / 0.4% | $20.2 million / 2.6% |
| Net income attributable to stockholders | $5.6 million | $15.3 million |
| Diluted EPS | $0.33 | $0.91 |
| Operating cash flow | $(47.1) million | $(45.7) million |
- Revenue fell 6.8%; management attributed the decline mainly to lower lift-truck volumes, particularly in the Americas, and lower Bolzoni sales. Gross and operating margins also contracted.
- Americas revenue was $459.7 million, down 16.5%; EMEA was $170.7 million, up 12.2%; and JAPIC was $60.5 million, up 35.7%. Lift-truck business revenue declined 7.6% to $690.9 million and Bolzoni revenue declined 9.6% to $79.5 million. Nuvera reported no revenue versus $1.4 million a year earlier.
- Net income included a $4.6 million gain from selling preferred shares in OneH2. Lower operating profit was partly offset by that gain, favorable equity-investment valuation adjustments and lower interest expense.
- Cash and equivalents were $103.0 million at March 31, down from $151.4 million at year-end. Operating cash use was $47.1 million; investing activities provided $9.5 million, including $15.7 million of OneH2 sale proceeds. Capital expenditures were $7.7 million.
- Reported total debt was $285.4 million, versus $289.2 million at December 31, 2020; debt to total capitalization was 32%, versus 31%. The $240 million revolving facility had no borrowings and $235.5 million available; other revolving lines had $29.8 million available. The current ratio was approximately 1.44, calculated from reported current assets and liabilities.
- Quarterly dividends were $0.3175 per share. Accumulated other comprehensive loss increased to $171.7 million from $133.1 million, including currency-translation and hedging losses.
Material changes and operating trends
- Lift-truck unit shipments decreased 4.3% to 22,300, while bookings rose to 42,400 from 19,400. Backlog reached 60,700 units, with an approximate sales value of $1.52 billion, versus $960 million a year earlier; substantially all backlog was expected to ship within 12 months.
- Management said supply-chain and component shortages constrained production despite stronger markets and bookings. Material-cost inflation, higher freight costs and manufacturing inefficiencies pressured gross profit, while favorable currency movements provided some offset.
- Management reinstated pre-pandemic salaries, benefits and incentive compensation effective January 1, 2021, while retaining certain discretionary cost controls. Q1 included $9.0 million of incentive compensation.
Outlook, risks and contingencies
- Management expected Q2 2021 operating profit and net income to be significantly higher than the very low Q2 2020 and Q1 2021 levels, citing anticipated higher shipments and currency benefits, partly offset by inflation, freight costs and restored incentive compensation. This is not a full-year earnings forecast.
- Management expected full-year bookings to increase from 2020, but anticipated a Q2 bookings slowdown as price increases take effect. Production constraints were expected to remain significant in Q2 and Q3; management hoped production could rise above prior plans in the second half. Price-protected backlog may delay realization of price increases, creating margin pressure through 2021.
- Planned 2021 capital expenditures were approximately $68 million. The company expected to fund operating needs and commitments for the next 12 months using cash, credit availability and operating cash flows. Its main revolving facility expires in April 2022; the company reported compliance with facility and term-loan covenants at quarter-end.
- Key uncertainties include pandemic developments, supplier and logistics disruptions, component availability, commodity and freight inflation, tariffs, demand and customer acceptance of pricing. The company said these factors limit its ability to forecast bookings and shipments.
- Brazilian tax-recovery litigation has a gross estimated refund of approximately $17 million, but the company estimated net realizable value at only $1.4 million; timing and realization depend on approvals, eligible tax liabilities and legal or legislative developments.
- Guarantees included $120.6 million of customer recourse or repurchase obligations and $212.4 million of incremental exposure related to a guarantee of HYGFS debt to Wells Fargo. Management said anticipated losses were not significant and collateral was available, but future risk could change.
- The company anticipated about $1.1 million of additional restructuring charges in 2021 and estimated annual benefits of approximately $10.4 million beginning in 2022. Ordinary-course legal matters were disclosed; management did not expect costs materially above recorded accruals. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether supply constraints ease as expected and the large backlog converts into shipments, revenue and cash.
- How quickly announced price increases offset materials, freight and tariff costs, particularly on price-protected backlog.
- Cash use, inventory and working-capital needs, credit availability, covenant compliance and the April 2022 facility maturity.
- Realization and timing of the Brazilian tax credits, and potential exposure under customer and HYGFS guarantees.
- Progress on restructuring savings and strategic product initiatives, including Nuvera commercialization.