Hyster-Yale(HY) - 2019 Q3 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements This section presents Hyster-Yale Materials Handling, Inc.'s unaudited condensed consolidated financial statements for the periods ended September 30, 2019, along with detailed notes on accounting policies Unaudited Condensed Consolidated Balance Sheets Total assets increased to $1,838.2 million by September 30, 2019, primarily due to higher inventories, while total liabilities also rose to $1,295.7 million Condensed Consolidated Balance Sheets (in millions) | | SEPTEMBER 30, 2019 | DECEMBER 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $1,158.1 | $1,131.6 | | Total Assets | $1,838.2 | $1,742.1 | | Total Current Liabilities | $838.7 | $776.2 | | Total Liabilities | $1,295.7 | $1,182.6 | | Total Stockholders' Equity | $510.1 | $527.4 | | Total Liabilities and Equity | $1,838.2 | $1,742.1 | Unaudited Condensed Consolidated Statements of Operations Q3 2019 revenues slightly decreased to $766.0 million, but operating profit increased to $19.5 million, while net income attributable to stockholders declined to $12.8 million due to a prior-year tax benefit Statements of Operations Highlights (in millions, except per share data) | | THREE MONTHS ENDED SEP 30, 2019 | THREE MONTHS ENDED SEP 30, 2018 | NINE MONTHS ENDED SEP 30, 2019 | NINE MONTHS ENDED SEP 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $766.0 | $783.9 | $2,457.0 | $2,338.3 | | Gross Profit | $135.0 | $117.7 | $400.6 | $375.1 | | Operating Profit | $19.5 | $12.2 | $45.8 | $42.2 | | Net Income Attributable to Stockholders | $12.8 | $15.4 | $32.4 | $35.9 | | Diluted Earnings per Share | $0.76 | $0.93 | $1.94 | $2.16 | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a comprehensive loss of $23.2 million in Q3 2019, primarily due to a significant negative foreign currency translation adjustment, contrasting with a $4.3 million income in Q3 2018 Comprehensive Income (Loss) (in millions) | | THREE MONTHS ENDED SEP 30, 2019 | THREE MONTHS ENDED SEP 30, 2018 | NINE MONTHS ENDED SEP 30, 2019 | NINE MONTHS ENDED SEP 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $13.1 | $14.9 | $33.2 | $35.5 | | Other comprehensive income (loss) | ($36.3) | ($10.6) | ($40.9) | ($31.6) | | Comprehensive Income (Loss) | ($23.2) | $4.3 | ($8.1) | $3.9 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used for operating activities was $17.3 million for the nine months ended September 30, 2019, a significant decrease from the prior year, primarily due to unfavorable working capital changes Cash Flow Summary (in millions) | | NINE MONTHS ENDED SEP 30, 2019 | NINE MONTHS ENDED SEP 30, 2018 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | ($17.3) | $92.3 | | Net cash used for investing activities | ($24.5) | ($97.3) | | Net cash provided by (used for) financing activities | $25.0 | ($88.3) | | Decrease in Cash and Cash Equivalents | ($20.9) | ($98.2) | | Cash and Cash Equivalents, end of period | $62.8 | $121.9 | Unaudited Condensed Consolidated Statements of Changes in Equity Total equity decreased to $542.5 million by September 30, 2019, primarily due to an increase in accumulated other comprehensive loss from foreign currency translation and hedging activities - Total equity decreased by $17.0 million in the first nine months of 2019, from $559.5 million to $542.5 million[12] - The decrease was driven by an increase in Accumulated Other Comprehensive Loss, which grew from ($177.5) million to ($222.7) million, mainly due to foreign currency translation adjustments and hedging activities[11][12] Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies, financial results, and significant contingencies, including the adoption of new lease accounting standards - The company's business includes designing, manufacturing, and selling lift trucks under the Hyster® and Yale® brands through its subsidiary HYG, producing attachments via Bolzoni, and developing hydrogen fuel-cell technology through Nuvera[14][16][18] - On January 1, 2019, the company adopted the new lease accounting standard (ASC 842), resulting in the recognition of right-of-use (ROU) assets of $82.7 million and lease liabilities of $80.8 million[44] - The company recognized tariff recoveries of $8.7 million in Q3 2019 and $11.8 million in the first nine months of 2019, related to exclusions on duties for goods imported from China[101] - A favorable court decision in Brazil granted the company the right to recover overpaid taxes, estimated at a gross value of $25 million; the company has recorded a net realizable value of $2 million for these credits[86][87] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q3 and the first nine months of 2019, detailing liquidity, capital resources, and strategic outlook, including forecasted profit improvements Financial Review Q3 2019 revenues decreased to $766.0 million, while operating profit increased to $19.5 million due to improved lift truck gross profit, though net income declined to $12.8 million Q3 2019 vs Q3 2018 Performance | Metric | Q3 2019 | Q3 2018 | Change | | :--- | :--- | :--- | :--- | | Revenues | $766.0M | $783.9M | -2.3% | | Operating Profit | $19.5M | $12.2M | +59.8% | | Net Income (to Stockholders) | $12.8M | $15.4M | -16.9% | | Diluted EPS | $0.76 | $0.93 | -18.3% | - The increase in Q3 operating profit was mainly due to improved gross profit in the lift truck business, which benefited from price increases and $8.7 million in favorable retroactive tariff exclusion adjustments[119][120] - Lift truck unit shipments decreased by 8.2% in Q3 2019 compared to Q3 2018, while the unit backlog remained relatively stable at 43,400 units[109][112] Liquidity and Capital Resources Net cash used for operating activities was $17.3 million for the first nine months of 2019 due to unfavorable working capital, leading to increased borrowings and a rise in debt to capitalization Cash Flow and Capital Structure | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | ($17.3M) | $92.3M | | Capital Expenditures | $31.4M | $24.7M | | Cash Flow Before Financing | ($41.8M) | ($5.0M) | - The company has a $240.0 million revolving credit facility expiring in April 2022 and a $200.0 million term loan maturing in May 2023[140][143] - Debt to total capitalization increased from 35% at the end of 2018 to 39% at September 30, 2019[150] Investor Perspective and Outlook The company is executing strategic programs to drive competitiveness and economic performance, forecasting significant operating profit improvements in Q4 2019 and 2020, with specific margin targets for its segments - The company is focused on six strategic initiatives: lowest cost of ownership, industry-focused solutions, independent distribution leadership, emerging market growth, attachment business leadership, and fuel cell leadership[153] - Management forecasts significant increases in consolidated operating profit and net income for Q4 2019 and full-year 2020 compared to prior periods[154] - Key goals include achieving a 7% operating profit margin for the Lift Truck business, a 7% margin for Bolzoni, and reaching break-even for Nuvera in Q4 2020[154] - Supplier shortages are expected to be resolved by the end of 2019, and margins are expected to recover from material cost inflation and discounted deals by the end of Q4 2019[163][165] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's market risk exposures since December 31, 2018, with further details available in its 2018 Annual Report on Form 10-K - There have been no material changes in the Company's market risk exposures since December 31, 2018[173] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes in internal control over financial reporting during Q3 2019 - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[175] - No changes in the Company's internal control over financial reporting occurred during Q3 2019 that materially affected, or are reasonably likely to materially affect, these controls[176] Part II. OTHER INFORMATION Legal Proceedings The company reported no material legal proceedings during the period - None[178] Risk Factors There have been no material changes from the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - No material changes from risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018[178] Exhibits This section lists the exhibits filed as part of the quarterly report, including officer certifications and Inline XBRL data files - The report includes certifications from the CEO and CFO as required by the Sarbanes-Oxley Act[180] - Inline XBRL (iXBRL) data files are included as exhibits, embedding financial data directly within the report[180] Signatures Signatures The report was duly signed on behalf of Hyster-Yale Materials Handling, Inc. by Kenneth C. Schilling, Senior Vice President and Chief Financial Officer, on October 29, 2019 - The report was signed on October 29, 2019, by Kenneth C. Schilling, Senior Vice President and Chief Financial Officer[184]