Hyster-Yale(HY) - 2022 Q4 - Annual Report

Part I Item 1. Business The company is a globally integrated manufacturer of lift trucks, attachments, and parts, segmented into Americas, EMEA, and JAPIC, also operating Bolzoni and Nuvera - The company is a globally integrated, full-line lift truck manufacturer with operations segmented into Americas, EMEA, and JAPIC, also operating Bolzoni (attachments) and Nuvera (hydrogen fuel cells)[11][12] Revenue Components by Year | Component | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Lift trucks | 73 % | 73 % | 76 % | | Parts | 15 % | 15 % | 14 % | | Service, rental and other | 7 % | 6 % | 5 % | | Bolzoni | 5 % | 6 % | 5 % | | Nuvera | less than 1% | less than 1% | less than 1% | - Sales of internal combustion engine lift trucks and electric lift trucks accounted for approximately 43% and 30% of annual revenues in 2022, respectively[13] Backlog of Unfilled Lift Truck Orders | Date | Units (in thousands) | Approx. Sales Value (in millions) | | :--- | :--- | :--- | | December 31, 2022 | 102.1 | $3,730 | | September 30, 2022 | 108.2 | $3,700 | | December 31, 2021 | 105.3 | $2,880 | - The company faces intense competition based on distribution strength, brand loyalty, customer service, price, and product performance, competing with global manufacturers and alternative materials handling methods[30] - As of January 31, 2023, the company had approximately 8,200 employees, with 6,700 in the Lift Truck division, 1,300 at Bolzoni, and 200 at Nuvera[37] Item 1A. Risk Factors The company faces operational risks from supplier dependence, raw material costs, global operations, cyclical demand, cybersecurity, and family control - The company depends on a limited number of suppliers for critical components like engines and counterweights, and has experienced shortages that negatively affected production levels[61] - Significant increases in raw material costs (steel, lead, copper, rubber) due to inflation and supply constraints could materially reduce profitability[63] - The lift truck business is historically cyclical, with demand tied to general economic activity, where economic downturns can lead to significant fluctuations in revenues and net income[70] - The company faces cybersecurity risks to its IT infrastructure, which could disrupt business operations or result in data breaches[82] - As of December 31, 2022, members of the company's extended founding family held approximately 87% of Class B common stock, representing 73% of the total voting power, which could allow them to control the outcome of director elections and other significant corporate actions[91] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - None[92] Item 2. Properties The company operates numerous owned and leased facilities globally for assembly, manufacturing, distribution, and offices across its segments - The company operates principal assembly, manufacturing, distribution, and office facilities globally, which are both owned and leased across its Lift Truck, Bolzoni, and Nuvera segments[93] Item 3. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business but is not a party to any material ones - The Company is not a party to any material legal proceeding[94] Item 4. Mine Safety Disclosures The company reports no mine safety disclosures - None[95] Item 4A. Information About Our Executive Officers This section provides information on the company's executive officers, including Alfred M. Rankin, Jr. as Chairman and CEO, and Rajiv K. Prasad as President - The report lists the names, ages, and positions of the company's executive officers, including Alfred M. Rankin, Jr. as Chairman and CEO, and Rajiv K. Prasad as President[97] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on the NYSE, with no public market for Class B stock, and no issuer purchases of equity securities have been made - Class A Common Stock is traded on the New York Stock Exchange (Symbol: HY), with no public trading market for Class B Common Stock[99] - As of December 31, 2022, there were approximately 813 Class A and 735 Class B common stockholders of record[100] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2022, revenues increased to $3.55 billion, operating loss narrowed to $(39.1) million, and net loss improved to $(74.1) million, with a positive outlook for 2023 driven by backlog and moderating costs Consolidated Financial Review For 2022, consolidated revenues rose 15.4% to $3.55 billion, operating loss decreased to $(39.1) million due to the absence of a goodwill impairment charge, and net loss improved to $(74.1) million Consolidated Results of Operations (2022 vs. 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Revenues | $3,548.3 M | $3,075.7 M | | Gross Profit | $433.9 M | $363.4 M | | Operating Profit (Loss) | $(39.1) M | $(152.3) M | | Net Loss Attributable to Stockholders | $(74.1) M | $(173.0) M | | Diluted Loss per Share | $(4.38) | $(10.29) | - The reduction in operating loss in 2022 was mainly due to the absence of a $55.6 million non-cash goodwill impairment charge taken in JAPIC in 2021, increased gross profit in the lift truck business, and a lower operating loss at Nuvera[134] Lift Truck Unit Data | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Unit Shipments (thousands) | 100.8 | 94.9 | | Unit Bookings (thousands) | 97.6 | 159.6 | | Unit Backlog, end of period (thousands) | 102.1 | 105.3 | Operating Profit (Loss) by Segment (2022 vs. 2021) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Americas | $46.8 M | $(19.7) M | | EMEA | $(46.6) M | $0.3 M | | JAPIC | $(10.6) M | $(67.5) M | | Bolzoni | $6.2 M | $(1.8) M | | Nuvera | $(34.3) M | $(62.3) M | Liquidity and Capital Resources Liquidity improved in 2022 with $40.6 million in operating cash flow, supported by a $300 million revolving credit facility and a $225 million term loan, while total debt reached $552.9 million - Net cash provided by operating activities was $40.6 million in 2022, a significant improvement from the $253.5 million used in 2021, primarily due to a smaller increase in inventory compared to the prior year[142] - The company has a $300.0 million secured revolving credit facility expiring in June 2026 and a $225.0 million term loan maturing in May 2028[145] Capital Structure Summary | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $59.0 M | $65.5 M | | Total debt | $552.9 M | $518.5 M | | Total temporary and permanent equity | $225.1 M | $382.9 M | | Debt to total capitalization | 71 % | 58 % | Capital Expenditures | Year | Amount (in millions) | | :--- | :--- | | Planned 2023 | $65.2 | | Actual 2022 | $28.8 | | Actual 2021 | $44.3 | Perspective and Outlook Despite an expected decline in the global lift truck market for 2023, the company anticipates a significant increase in revenues and a return to substantial operating profit, driven by higher-margin backlog and strategic initiatives - The global lift truck market is expected to decline in 2023 compared to 2022, but remain above pre-pandemic levels in most regions[166] - For 2023, the company expects a significant increase in revenues and a substantial operating profit, driven by shipping higher-margin backlog and abating cost inflation[172][178] - Strategic initiatives include launching new modular, scalable lift trucks and testing a hydrogen fuel cell-powered container handler at the Port of Los Angeles[174] - Nuvera will continue to focus on placing its 45kW and 60kW fuel cell engines in heavy-duty vehicle applications, with a 2023 loss expected to be comparable to 2022[177] - Capital expenditures are expected to be approximately $65 million for 2023, a significant increase from 2022 levels, to maintain facilities and invest for long-term growth[179] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk with swaps and foreign currency risk with forward contracts, which had a net liability fair value of $43.5 million at year-end 2022 - The company is exposed to interest rate risk due to floating-rate financing arrangements and uses interest rate swap agreements to mitigate this exposure[185] - The company is subject to foreign currency exchange rate risk from international operations and uses forward foreign currency exchange contracts to partially reduce these risks, with a net liability fair value of $43.5 million at December 31, 2022[187] Item 8. Financial Statements and Supplementary Data This item incorporates by reference the Financial Statements and Supplementary Data, which are detailed in Part IV of the Annual Report on Form 10-K - The required financial statements and supplementary data are set forth in Part IV of the report, beginning on page F-1[189] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on accounting and financial disclosure for the three-year period ending December 31, 2022 - There were no disagreements with accountants on accounting and financial disclosure for the three-year period ended December 31, 2022[190] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, a conclusion audited and supported by Ernst & Young, LLP - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[191] - Management concluded that the Company's internal control over financial reporting was effective as of December 31, 2022, a conclusion audited and supported by Ernst & Young, LLP[192] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance will be provided in the 2023 Proxy Statement and is incorporated by reference - Required information for this item will be included in the 2023 Proxy Statement and is incorporated by reference[198] Item 11. Executive Compensation Information regarding executive compensation will be included in the company's 2023 Proxy Statement and is incorporated by reference - Required information for this item will be included in the 2023 Proxy Statement and is incorporated by reference[200] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership will be provided in the 2023 Proxy Statement, with 936,515 Class A shares remaining available for future issuance under equity compensation plans as of December 31, 2022 - Required information for this item will be included in the 2023 Proxy Statement and is incorporated by reference[201] Equity Compensation Plan Information (as of Dec 31, 2022) | 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 | 936,515 | | Class B Shares: | | | | | Equity compensation plans approved by security holders | — | N/A | — | Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence will be included in the company's 2023 Proxy Statement and is incorporated by reference - Required information for this item will be included in the 2023 Proxy Statement and is incorporated by reference[203] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services will be included in the company's 2023 Proxy Statement and is incorporated by reference - Required information for this item will be included in the 2023 Proxy Statement and is incorporated by reference[204] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including articles of incorporation, material contracts, and required certifications - This item provides an index of all exhibits filed with the Form 10-K, including articles of incorporation, material contracts, and required certifications[206][207][208] Item 16. Form 10-K Summary The company reports no Form 10-K summary - None[215] Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on Hyster-Yale's consolidated financial statements and internal control over financial reporting, identifying goodwill valuation for Bolzoni as a critical audit matter - Ernst & Young LLP provided an unqualified opinion, stating the financial statements are fairly presented in accordance with U.S. GAAP[227] - The auditors also expressed an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022[228][236] - A critical audit matter was identified concerning the valuation of goodwill for the Bolzoni reporting unit, due to the complex and subjective judgments involved in estimating its fair value[231][232] Consolidated Financial Statements The consolidated financial statements show 2022 revenues of $3.55 billion, a net loss of $74.1 million, total assets of $2.03 billion, and positive operating cash flow of $40.6 million Consolidated Statements of Operations Highlights (in millions) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $3,548.3 | $3,075.7 | $2,812.1 | | Gross Profit | $433.9 | $363.4 | $465.4 | | Operating Profit (Loss) | $(39.1) | $(152.3) | $49.9 | | Net Loss Attributable to Stockholders | $(74.1) | $(173.0) | $37.1 | Consolidated Balance Sheets Highlights (in millions) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $1,458.7 | $1,350.0 | | Total Assets | $2,026.2 | $1,970.1 | | Total Current Liabilities | $1,342.9 | $1,104.6 | | Total Liabilities | $1,801.1 | $1,587.2 | | Total Permanent Equity | $210.9 | $382.9 | Consolidated Statements of Cash Flows Highlights (in millions) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $40.6 | $(253.5) | $166.9 | | Net cash used for investing activities | $(35.4) | $(24.5) | $(43.7) | | Net cash provided by (used for) financing activities | $(10.9) | $193.6 | $(40.6) | Notes to Consolidated Financial Statements The notes detail accounting policies and financial data, including a $55.6 million goodwill impairment in JAPIC and a $10.0 million fixed asset impairment in Nuvera in 2021, and $133.2 million in recourse obligations as of December 31, 2022 - In June 2022, the company purchased an additional 15% equity interest in Hyster-Yale Maximal, bringing its ownership to 90%, with an option to purchase the remaining 10% interest[259] - In 2021, the company recognized a $55.6 million goodwill impairment charge for the JAPIC reporting unit and a $10.0 million impairment charge for Nuvera's fixed assets[347][343] - As of December 31, 2022, the company had total recourse or repurchase obligations of $133.2 million, primarily to support financing for its customers and dealers, with $116.5 million of this related to its joint venture, HYGFS[373][374] - The company has a valuation allowance of $121.7 million against its deferred tax assets of $139.2 million as of December 31, 2022, indicating uncertainty about the realization of these assets[296]