Hyster-Yale Materials Handling, Inc. — 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012, with fourth-quarter results also disclosed. The company designs, manufactures, sells and services Hyster- and Yale-branded lift trucks and aftermarket parts globally. NACCO spun off the company on September 28, 2012; reported comparative earnings per share were calculated using the share count adjusted for the spin-off.
Financial performance and liquidity
| Metric | 2012 | 2011 | Change |
|---|---|---|---|
| Revenue | $2,469.1 million | $2,540.8 million | Down 2.8% |
| Gross profit / margin | $403.2 million / 16.3% | $383.5 million / 15.1% | Margin improved |
| Operating profit / margin | $111.7 million / 4.5% | $110.0 million / 4.3% | Up 1.5% |
| Net income attributable to stockholders | $98.0 million | $82.6 million | Up 18.6% |
| Diluted earnings per share | $5.83 | $4.91 | Up 18.7% |
| Cash from operating activities | $128.7 million | $54.6 million | Up $74.1 million |
| Cash and cash equivalents | $151.3 million | $184.9 million | Down $33.6 million |
| Total debt | $142.2 million | $226.0 million | Down $83.8 million |
Capital expenditures were $19.8 million. The $200 million revolving facility had no borrowings outstanding, with $191.3 million available after letters of credit; an additional $28.8 million was available under other foreign revolving facilities. The company reported compliance with debt covenants. Total assets were $1,064.4 million and total equity was $342.2 million at year-end.
Fourth-quarter revenue was $652.0 million, versus $677.4 million in the prior-year quarter; operating profit was $29.0 million versus $28.0 million, and net income was $32.5 million versus $23.7 million. Fourth-quarter diluted EPS was $1.93 versus $1.40.
Changes versus prior year and notable items
- Revenue declined primarily because of unfavorable foreign exchange, lower unit volume and product mix, especially in Europe. Worldwide new lift-truck shipments fell to 76,917 from 79,671.
- Gross margin and operating profit improved on price increases and a more favorable sales mix, partly offset by higher manufacturing and material costs and increased selling, general and administrative expense.
- Net income benefited materially from a $10.7 million release of deferred-tax valuation allowances, as well as lower interest expense. The tax benefit is not expected to recur on the same basis.
- Operating cash flow increased substantially, with working-capital movements contributing to the year-over-year improvement. Financing cash outflows included debt repayment, $37.8 million of dividends—including a $2.00-per-share special dividend—and $2.2 million of share repurchases.
- Year-end backlog increased to approximately 27,300 units, or $696 million, from 24,700 units, or $629 million; substantially all was expected to be sold during 2013, although orders may generally be canceled before sale.
Outlook, risks and contingencies
- Management expected moderate global market growth in 2013, with shipment and parts-volume increases across markets, led by the Americas; Europe was expected to continue declining.
- Management forecast a moderate decline in 2013 operating profit and a decline in net income. Higher operating expenses, standalone public-company costs and the absence of the 2012 tax-allowance release were expected to outweigh increased gross profit. Cash flow before financing was expected to decline moderately as capital spending increased.
- Planned 2013 capital expenditures were $60.2 million, principally for a new Brazil facility, manufacturing improvements, information technology and product development. Management said expected liquidity sources should be sufficient for operating needs and commitments.
- Key exposures include cyclical demand, intense competition, foreign-exchange movements, volatile commodity costs, reliance on certain critical suppliers and independent dealers, and pension funding sensitivity. The company also faces product-liability, environmental and other ordinary-course claims; management did not identify a material pending legal proceeding.
- Customer and dealer financing recourse or repurchase obligations totaled $146.5 million at year-end, with estimated collateral fair value of $165.7 million; anticipated losses were not significant. Separately, the company guaranteed 20% of certain NFS debt: the filing states an incremental exposure of $84.6 million after excluding specified guaranteed receivables.
- The U.S. financing joint venture and related international financing agreement with GE Capital were scheduled to expire December 31, 2013. The spin-off tax agreement also restricts certain significant equity and asset transactions during the post-spin period unless specified conditions are met.
Important facts for investors to verify
- How much of 2012 earnings growth reflected recurring operating performance versus the $10.7 million tax valuation-allowance release, and what tax rate applies in 2013.
- Whether 2013 shipment growth, pricing and cost actions offset the forecast decline in operating profit, particularly in Europe.
- The use and funding of the planned $60.2 million capital program, and its effect on cash flow and liquidity.
- Developments in the GE Capital/NFS financing arrangements, including the company’s recourse obligations, guarantee exposure and scheduled 2013 agreement expirations.
- The filing reports effective management disclosure controls and internal control over financial reporting; the independent auditor gave an unqualified opinion on the financial statements but did not audit internal control effectiveness.