Hyster-Yale Materials Handling, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The company designs, manufactures, sells and services lift trucks and aftermarket parts under Hyster and Yale, and operates Bolzoni (attachments) and Nuvera (hydrogen fuel-cell products). Figures are in U.S. dollars; financial statement amounts are in millions except per-share data.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $765.6 | $654.4 | $1,497.8 | $1,440.1 |
| Gross profit | $116.4 | $103.6 | $234.8 | $240.3 |
| Gross margin | 15.2% | 15.8% | 15.7% | 16.7% |
| Operating profit | $5.9 | $8.7 | $9.0 | $28.9 |
| Net income attributable to stockholders | $1.9 | $3.6 | $7.5 | $18.9 |
| Diluted EPS | $0.11 | $0.21 | $0.45 | $1.13 |
Q2 revenue rose 17.0% year over year, mainly on higher lift-truck and parts volumes, Bolzoni sales and favorable currency translation. Operating profit fell despite higher sales: SG&A increased as pre-pandemic salaries and benefits returned, while material, freight and manufacturing costs pressured margins. For the first half, revenue increased 4.0%, but operating profit fell 68.9% and stockholder net income fell 60.3%. Americas lift-truck sales and profitability were particularly affected by supply constraints and cost inflation. The prior-year comparison also included government support incentives that did not recur.
Cash flow, debt and liquidity
- Cash from operating activities was a use of $100.7 in the first half, versus a use of $12.0 in 2020. Working capital consumed cash, notably the $172.4 inventory increase and $56.7 increase in receivables.
- Investing activities provided $0.8, including $15.7 proceeds from sale of the OneH2 investment; capital expenditures were $18.1. Financing activities provided $37.5. Cash declined $63.9 to $87.5.
- At June 30, total debt was $345.7 and equity was $630.0; debt to total capitalization was 35%, up from 31% at year-end 2020. Cash less debt implies net debt of approximately $258.2.
- The new $225.0 term loan matures in May 2028; the reported interest rate was 4.00% at quarter-end. The amended $300.0 revolving facility matures in June 2026, had no borrowings outstanding and had $285.4 availability. The company also reported $28.5 availability on other non-U.S. lines and stated total unused revolving capacity of approximately $313.9. It reported compliance with debt covenants.
- The quarterly dividend was $0.3175 per share. Planned 2021 capital expenditures were $68.0, including $49.9 planned for the remainder of the year.
Outlook, risks and unusual items
- Lift-truck bookings surged: backlog reached 84,900 units, with an estimated sales value of $2.07 billion; substantially all backlog was expected to sell within 12 months. Management expects second-half bookings to decline substantially from the first half, while remaining above the second half of 2020.
- Management expected supply-chain disruption to continue in Q3, with possible easing in Q4. Component shortages, shipping constraints, elevated material and freight costs, tariffs and price-protected backlog were expected to continue pressuring margins. Price increases were being implemented, but timing limited their near-term benefit.
- The company expected substantially lower consolidated operating profit and net income in the second half versus the second half of 2020, including anticipated operating and net losses in Q3, partly due to seasonal plant shutdowns. Bolzoni was expected to improve in the second half. These are management expectations, not guarantees.
- COVID-19 and variants, supplier and logistics disruption, inflation, tariffs, demand and pricing, currency movements, dealer/customer credit access, product commercialization and litigation/warranty exposure remain significant risks. Management said market and shipment forecasts beyond Q3 were limited by uncertainty.
- Unusual items included a $6.3 favorable adjustment for Brazilian social-contribution-tax credits recorded in cost of sales; a $4.6 gain on sale of OneH2 preferred shares; and approximately $1.5 of old term-loan financing fees written off following refinancing. The Brazil credit recovery’s timing and realization remain uncertain, and the company was negotiating a sale of credits at a discount.
- The company signed an agreement to buy an additional 15% of Hyster-Yale Maximal for $25.2, with closing anticipated June 2022 subject to conditions and regulatory approvals. Restructuring costs of approximately $0.8 were anticipated for the remainder of 2021; estimated annual benefits of about $9 were expected from 2022.
Most important facts for investors to verify
- Whether production constraints ease as expected and whether backlog converts into shipments and revenue on schedule.
- Whether price increases offset materials, freight, tariff and labor costs, particularly on orders already in backlog.
- Cash conversion and working-capital needs, especially inventory growth, alongside planned capital spending and dividend payments.
- Debt, borrowing availability and covenant compliance; confirm the reported $313.9 total unused capacity across facilities.
- Realization, timing and accounting impact of the Brazilian tax credits, and completion and terms of the Maximal equity purchase.
- Progress toward the second-half outlook, including the anticipated Q3 losses and expected Bolzoni improvement.