Hyster-Yale(HY) - 2023 Q4 - Annual Report

Part I Business Hyster-Yale manufactures lift trucks, attachments, and fuel cell products globally, with lift trucks comprising 74% of 2023 revenue and a $3.3 billion backlog - The company operates through three main business units: the core lift truck business (HYG), attachments (Bolzoni), and alternative-power technology (Nuvera)[11][12] Revenue Components (2021-2023) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Lift trucks | 74 % | 73 % | 73 % | | Parts | 15 % | 15 % | 15 % | | Service, rental and other | 6 % | 7 % | 6 % | | Bolzoni | 5 % | 5 % | 6 % | | Nuvera | less than 1% | less than 1% | less than 1% | Lift Truck Backlog (as of Dec 31) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Units (in thousands) | 78.4 | 102.1 | | Approx. Sales Value (in millions) | $3,330 | $3,730 | - As of January 31, 2024, the company had approximately 8,600 employees, with the majority (7,200) in the Lift Truck division[36] Risk Factors The company faces global operational, supply chain, raw material, industry cyclicality, competition, technology commercialization, cybersecurity, and governance risks - The company is exposed to risks from its global operations, including tariffs, trade barriers, and currency fluctuations[69][70] - Dependence on a limited number of suppliers for critical components like engines and counterweights has previously caused and may continue to cause production-level disruptions[76] - The business is historically cyclical, with demand for lift trucks fluctuating with general economic activity, where downturns can lead to significant decreases in revenue and profitability[82] - Cybersecurity threats to information systems and products pose a significant risk, potentially leading to operational disruptions, data breaches, and reputational harm[91][95] - Certain members of the company's extended founding family hold approximately 77% of the total voting power, enabling them to control the outcome of director elections and other significant corporate actions[104] Cybersecurity Cybersecurity risk oversight is managed by the Board's Audit Review Committee and a management-level Cybersecurity Committee, with daily operations handled by the CISO's office - Oversight of cybersecurity risk is delegated to the Audit Review Committee (ARC) of the Board of Directors, which reviews mitigation plans and incident responses[106] - A Cybersecurity Committee (CSC), including senior management from operations, finance, and legal, oversees the risk management processes and reports to the ARC quarterly[107][108] Properties The company operates a global network of owned and leased manufacturing, R&D, and administrative facilities across its Lift Truck, Bolzoni, and Nuvera segments - The company operates a global network of owned and leased facilities for manufacturing, assembly, R&D, and administration across its Lift Truck, Bolzoni, and Nuvera segments[112] Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially impact its financial condition or operations - Ongoing legal proceedings are considered part of the ordinary course of business and are not expected to have a material financial impact[114] Information About Our Executive Officers This section details the names, ages, positions, and occupations of the company's executive officers, including the Executive Chairman and President/CEO - Lists the names, ages, and roles of the company's executive officers, such as Alfred M. Rankin, Jr., Executive Chairman, and Rajiv K. Prasad, President and CEO[117] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Class A common stock trades on the NYSE under "HY," Class B has no public market, and the company made no equity repurchases - Class A Common Stock is traded on the NYSE under the symbol "HY", with no public trading market for the Class B Common Stock[119] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, the company achieved a significant turnaround to $208.7 million operating profit, driven by pricing and volume, improving liquidity and debt ratios, with 2024 expecting increased operating profit and cash flow Consolidated Financial Review Consolidated revenues grew 16.1% to $4.1 billion in 2023, yielding a $208.7 million operating profit and $125.9 million net income, driven by improved Lift Truck gross profit Consolidated Performance Summary (2023 vs 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $4,118.3M | $3,548.3M | | Gross Profit | $785.6M | $433.9M | | Operating Profit (Loss) | $208.7M | $(39.1)M | | Net Income (Loss) Attributable to Stockholders | $125.9M | $(74.1)M | | Diluted EPS | $7.24 | $(4.38) | Change in Operating Profit by Segment (2022 to 2023) | Segment | Change in Operating Profit (in millions) | | :--- | :--- | | Americas | $186.3 | | EMEA | $58.7 | | JAPIC | $(5.0) | | Lift truck business | $240.0 | | Bolzoni | $9.1 | | Nuvera | $(2.1) | - The increase in operating profit was primarily driven by improved gross profit from higher pricing ($270.6 million), a shift to higher-margin trucks, and lower material costs, particularly in the Americas, partially offset by higher SG&A expenses due to increased employee-related and marketing costs[141] Liquidity and Capital Resources Liquidity improved in 2023 with $150.7 million cash from operations, debt reduced to $494.0 million, and the debt-to-capitalization ratio improving to 55%, with $87.0 million planned capital expenditures for 2024 - Net cash provided by operating activities increased by $110.1 million to $150.7 million in 2023, primarily due to improved net income, partially offset by unfavorable working capital changes like a decrease in accounts payable[147] - The company reduced total debt by $58.9 million year-over-year, leading to an improvement in the debt-to-total capitalization ratio from 71% at the end of 2022 to 55% at the end of 2023[169] Capital Expenditures (Actual vs. Planned) | | Planned 2024 | Actual 2023 | Actual 2022 | | :--- | :--- | :--- | :--- | | Total | $87.0M | $35.4M | $28.8M | - As of December 31, 2023, the company had $236.0 million in availability under its main revolving credit facility and was in compliance with all debt covenants[154][156][159] Perspective and Outlook The company forecasts comparable 2024 lift truck market, increased operating profit but stable net income due to taxes, and significant cash flow growth, focusing on backlog reduction and long-term profitability goals - The company expects 2024 operating profit to increase compared to 2023, but net income to be comparable due to a higher projected income tax rate from the full utilization of U.S. net operating losses in 2023[192] - A significant increase in cash flow from operations is expected in 2024, driven by a focus on reducing elevated inventory levels[194] - The Lift Truck business expects to increase production and shipment rates in 2024, which should help reduce its extended backlog (valued at $3.3 billion) and lead times closer to pre-pandemic levels[177][178][179] - Nuvera is focused on increasing customer product demonstrations for its fuel cell engines in 2024, with higher sales expected to be offset by increased development costs, leading to comparable year-over-year operating results[191] Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate and foreign currency risks using derivative instruments, such as interest rate swaps and forward contracts, without engaging in trading - The company uses interest rate swap agreements to reduce exposure to floating interest rates on its financing arrangements[198] - Forward foreign currency exchange contracts are used to partially hedge risks from transactions denominated in currencies such as the euro, yen, and British pound[200] Financial Statements and Supplementary Data This section incorporates the company's audited consolidated financial statements and supplementary data by reference from Part IV of the Form 10-K - This item refers to the full financial statements and supplementary data which are included later in the report[202] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that the company's disclosure controls and procedures, as well as its internal control over financial reporting, were effective as of December 31, 2023[204][205] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement, with a Code of Corporate Conduct in place - Required information is incorporated by reference from the 2024 Proxy Statement[210] Executive Compensation Executive compensation information is incorporated by reference from the company's 2024 Proxy Statement - Required information is incorporated by reference from the 2024 Proxy Statement[212] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related matters are incorporated by reference from the 2024 Proxy Statement, with 889,400 Class A shares available for future equity compensation - Required information is incorporated by reference from the 2024 Proxy Statement[213] Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Securities to Be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Class A Shares: | | | | | Equity compensation plans approved by security holders | — | N/A | 889,400 | Part IV Exhibits and Financial Statement Schedules This section presents the company's consolidated financial statements, supplementary data, and exhibits, including the independent auditor's report and detailed notes Consolidated Financial Statements The consolidated financial statements for 2023 show $4.1 billion in revenues, $128.1 million net income, and $2.1 billion total assets, marking a significant turnaround from 2022 Consolidated Statements of Operations Highlights | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $4,118.3M | $3,548.3M | $3,075.7M | | Operating Profit (Loss) | $208.7M | $(39.1)M | $(152.3)M | | Net Income (Loss) | $128.1M | $(71.6)M | $(183.2)M | | Diluted EPS | $7.24 | $(4.38) | $(10.29) | Consolidated Balance Sheets Highlights (as of Dec 31) | | 2023 | 2022 | | :--- | :--- | :--- | | Total Assets | $2,079.1M | $2,026.2M | | Total Liabilities | $1,672.3M | $1,801.1M | | Total Stockholders' Equity | $389.9M | $204.4M | Consolidated Statements of Cash Flows Highlights | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $150.7M | $40.6M | $(253.5)M | | Net cash used for investing activities | $(34.5)M | $(35.4)M | $(24.5)M | | Net cash (used for) from financing activities | $(100.5)M | $(10.9)M | $193.6M | Notes to Consolidated Financial Statements These notes detail accounting policies, segment performance, income taxes, debt, and contingent obligations, highlighting Americas' profitability and $494.0 million total debt Segment Operating Profit (Loss) | Segment | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Americas | $233.1M | $46.8M | $(19.7)M | | EMEA | $12.1M | $(46.6)M | $0.3M | | JAPIC | $(15.6)M | $(10.6)M | $(67.5)M | | Bolzoni | $15.3M | $6.2M | $(1.8)M | | Nuvera | $(36.4)M | $(34.3)M | $(62.3)M | - The company's reported income tax rate was 29.2% in 2023, compared to (14.7)% in 2022, with the change significantly impacted by a valuation allowance of $12.1 million in 2023 versus $27.5 million in 2022[310] - As of December 31, 2023, the company had total debt outstanding of $494.0 million, comprised of revolving credit, a term loan, other debt, and finance leases[364] - The company has recourse or repurchase obligations with a maximum potential liability of $162.4 million at year-end 2023, primarily to support financing for its customers and dealers through its joint venture, HYGFS[390]