Hyster-Yale Materials Handling, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The company designs, manufactures, sells and services lift trucks and aftermarket parts, with attachments business Bolzoni and hydrogen fuel-cell business Nuvera. Results were materially affected by COVID-19 disruptions to customer demand, production and suppliers.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $2,812.1 million | $3,291.8 million |
| Gross profit / margin | $465.4 million / 16.5% | $541.8 million / 16.5% |
| Operating profit / margin | $49.9 million / 1.8% | $53.9 million / 1.6% |
| Net income attributable to stockholders | $37.1 million | $35.8 million |
| Diluted EPS | $2.21 | $2.14 |
| Net cash from operating activities | $166.9 million | $76.7 million |
| Capital expenditures | $51.7 million | $49.7 million |
| Cash and cash equivalents | $151.4 million | $64.6 million |
| Total debt | $289.2 million | $287.0 million |
- Lift truck business revenue fell 14.4% to $2,672.9 million; Bolzoni revenue declined 17.9% to $283.7 million. Nuvera revenue was $3.9 million. Lift truck shipments declined 14.8% to 85,500 units.
- Operating cash flow rose $90.2 million, primarily reflecting working-capital movements, including reductions in receivables and inventory as the company adjusted to lower demand. Cash flow before financing activities was $123.2 million.
- At year-end, unused borrowing capacity was approximately $266.4 million, including $234.3 million under the main revolving facility. The company reported compliance with debt covenants. Net debt was approximately $137.8 million.
- Current assets were $1,129.7 million and current liabilities $755.9 million. Debt to total capitalization was 31%, compared with 33% in 2019.
Changes versus the prior year
- Revenue decreased 14.6%, mainly from lower lift truck and parts volumes across regions and lower Bolzoni sales, primarily due to the pandemic and reduced economic activity. Higher pricing partly offset the decline.
- Operating profit decreased 7.4%. Lower volumes and gross profit were partly offset by reduced selling, general and administrative expenses, $7.8 million of EMEA COVID-related government subsidies, lower self-insurance provisions and favorable pricing. 2019 had included $11.8 million of favorable retroactive tariff-exclusion adjustments.
- Net income attributable to stockholders increased 3.6%, supported by lower interest expense and favorable tax adjustments, despite lower operating profit and equity earnings. The reported tax rate fell to 8.8% from 23.6%, including a $5.8 million benefit from tax controversy resolution; $4.3 million of that benefit related to prior acquisitions and was offset by a pretax reduction in the related indemnity receivable.
- Backlog at year-end was 40,600 units, approximately $1.07 billion, nearly unchanged in value from 2019. Fourth-quarter bookings improved substantially; substantially all year-end backlog was expected to be sold in 2021.
- Fourth-quarter 2020 revenue was $719.6 million, operating profit $13.7 million and net income attributable to stockholders $13.1 million, versus $834.8 million, $8.1 million and $3.4 million, respectively, in fourth-quarter 2019.
Outlook, risks and unusual items
- Management expected bookings to increase in 2021 as markets improved, but said pandemic uncertainty limited visibility beyond the first quarter. It expected first-quarter 2021 operating profit and net income, excluding the gain from the OneH2 investment sale, to be moderately below fourth-quarter 2020 and below first-quarter 2020.
- Management cited supply-chain constraints, component shortages, shipping-container availability, higher freight costs and material-cost inflation as significant 2021 headwinds. Incentive compensation and pre-pandemic salaries and benefits were reinstated effective January 1, 2021, reducing some prior cost savings.
- Planned 2021 capital expenditures were approximately $71.3 million. A 2020 restructuring charge of $4.4 million, primarily severance, is expected to be followed by about $1.4 million of additional charges in 2021; estimated annual benefits are approximately $10.4 million beginning in 2022.
- In January 2021, the company sold its OneH2 preferred shares for $15.7 million, including accrued dividends, and recognized a $4.6 million gain; it expected to sell its remaining common-share investment in the first quarter of 2021.
- Key risks include COVID-19 and cyclical demand, supplier concentration and input costs, tariffs and currency movements, dealer performance, competition, commercialization of Nuvera technology, cybersecurity, product liability and environmental exposures. No material legal proceeding was reported; management said ordinary-course claims were not expected to materially exceed accrued amounts.
- Guarantees merit attention: recourse and repurchase obligations totaled $119.7 million. Separately, the company disclosed total exposure related to guarantees of $330.8 million, including an incremental $222.0 million obligation associated with HYG Financial Services (HYGFS) financing. Management considered anticipated losses on recourse and repurchase obligations not significant and cited collateral, but future losses are uncertain.
- The company recorded no goodwill or indefinite-lived intangible-asset impairment in 2020. Goodwill valuation depended on forecasts, discount rates and other significant assumptions; the auditor identified goodwill valuation as a critical audit matter. The company also estimated the net realizable value of a Brazilian tax-credit recovery at about $1.5 million, versus an estimated gross claim of approximately $19 million, with realization dependent on approvals, tax liabilities and legal or legislative developments.
Most important facts for investors to verify
- Whether 2021 bookings convert into shipments and revenue, and whether pandemic-related supplier and logistics constraints limit production.
- How material inflation, freight and tariffs affect margins, and whether pricing offsets those costs.
- Whether operating cash flow remains strong after the 2020 working-capital release and as the company invests in growth.
- Debt maturities, covenant headroom and liquidity, particularly the April 2022 expiration of the $240 million revolving facility and the May 2023 term-loan maturity.
- Actual guarantee losses and collateral values, HYGFS credit performance, and the outcome and timing of the Brazilian tax-credit recovery.
- Execution of restructuring and strategic product launches, including whether expected cost savings and future returns materialize.
The filing reports an unqualified audit opinion on the consolidated financial statements and effective internal control over financial reporting as of December 31, 2020.