Hyster-Yale Materials Handling, Inc. — FY2013 Form 10-K
Business and period: The company designs, manufactures, sells and services Hyster- and Yale-branded lift trucks and aftermarket parts. This annual report covers the year ended December 31, 2013; the filing also provides unaudited fourth-quarter results. The company operates in the Americas, Europe, and Asia-Pacific. Because NACCO spun off the company in September 2012, the 2012 comparison includes a period before the spin-off.
Financial performance
| Metric | FY2013 | FY2012 | Change |
|---|---|---|---|
| Revenue | $2,666.3 million | $2,469.1 million | +8.0% |
| Gross profit / margin | $461.0 million / 17.3% | $403.2 million / 16.3% | Margin +1.0 percentage point |
| Operating profit / margin | $134.3 million / 5.0% | $111.7 million / 4.5% | +20.2%; margin +0.5 point |
| Net income attributable to stockholders | $110.0 million | $98.0 million | +12.2% |
| Diluted EPS | $6.54 | $5.83 | +12.2% |
| Operating cash flow | $152.9 million | $128.7 million | +$24.2 million |
Revenue and shipments grew principally on higher Americas volumes; worldwide unit shipments rose 11.2% to 85,494. Price increases and better volume and mix lifted gross profit, while higher selling and administrative costs and adverse currency movements partly offset the benefit. Americas operating profit increased to $107.8 million from $75.6 million; Europe fell to $23.8 million from $31.6 million, and Asia-Pacific to $2.7 million from $4.5 million.
Fourth quarter: Revenue was $717.9 million versus $652.0 million in Q4 2012; operating profit was $35.0 million versus $29.0 million. Net income attributable to stockholders was $25.7 million versus $32.4 million, and diluted EPS was $1.53 versus $1.93. Thus, operating results improved while quarterly net income and EPS declined.
Cash, debt and liquidity
- Cash and cash equivalents were $175.7 million at year-end, up from $151.3 million. Total debt was $69.5 million, down from $142.2 million; debt to total capitalization declined to 13% from 29%.
- The company generated $152.9 million of operating cash flow, used $26.1 million in investing activities and used $104.4 million in financing activities. Capital expenditures were $36.5 million, compared with $19.8 million in 2012.
- A new $220 million secured revolving facility runs through December 2018. Year-end borrowings under it were $34.5 million; reported excess availability was $178.1 million, after letters of credit. The company also reported $32.5 million of availability under other foreign credit lines and was covenant-compliant.
- Management said cash, credit facilities and operating cash flows should cover operating needs and commitments for the next 12 months. Planned 2014 capital expenditures were $61.6 million, largely for a new Brazil facility.
Outlook, risks and unusual items
- Management expected modest growth in the global lift-truck market in 2014, higher shipments and parts volumes, and moderate revenue growth. It forecast higher operating profit, excluding an anticipated gain on the Brazil facility sale, with first-half weakness more than offset by second-half improvement. Net income was expected to improve moderately after excluding that gain and the 2013 tax valuation-allowance release. These are forecasts, not guarantees.
- The 2013 effective tax rate was 13.5%, versus 6.7% in 2012. A $12.8 million UK deferred-tax valuation-allowance release benefited 2013; management expected a higher effective tax rate in 2014. A $2.8 million charge reflected write-off of deferred financing fees after repayment of the prior term loan.
- The Brazil property sale was expected to yield approximately $19.0 million, with completion anticipated in July 2014, subject to conditions and environmental remediation. The company had received a $9.9 million deposit; the gain was to be recognized upon completion. Construction of the replacement facility was expected to finish by year-end 2014.
- Key risks include cyclical demand, intense competition, foreign-exchange and commodity-cost volatility, reliance on certain critical suppliers and independent dealers, and execution of strategic initiatives. The company is also exposed to product-liability, environmental, pension and international-operation risks.
- Customer financing arrangements carried $149.2 million of recourse or repurchase obligations at year-end, compared with $146.5 million a year earlier; estimated collateral value was $165.4 million. Separately, the company’s incremental exposure under its guarantee of NFS debt was disclosed as $126.2 million. Management said anticipated losses on recourse obligations were not significant, but actual losses could exceed reserves.
- The company reported no material legal proceeding and stated that management and its auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Whether 2014 shipment, parts-volume and operating-profit improvements materialized, particularly the expected second-half recovery and segment differences.
- Completion, proceeds and gain from the Brazil facility sale, and cost, timing and execution of the replacement plant.
- Trends in margins, commodity costs, foreign exchange, incentive compensation and the expected higher tax rate.
- Actual utilization and covenant headroom under the revolving facility, alongside capital spending and working-capital needs.
- Developments in customer-financing guarantees, NFS credit exposure, product claims, environmental matters and pension funding.