UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________________________________________________________________________________________________________________________________________________________________________________________
FORM 10-Q
| | | | | | | | | | | |
(Mark One) | | | |
☑ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the quarterly period ended: | SeptemberJune 30, 20202021 |
OR
| | | | | | | | |
☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |
Commission file number 000-54799
| | | | | | | | | | | | | | |
| HYSTER-YALE MATERIALS HANDLING, INC. | |
| | (Exact name of registrant as specified in its charter) | | |
| Delaware | | 31-1637659 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| | | | |
| 5875 LANDERBROOK DRIVE, SUITE 300 | | | |
| CLEVELAND | (440) | | |
| OH | 449-9600 | 44124-4069 | |
| (Address of principal executive offices) | (Registrant's telephone number, including area code) | (Zip code) | |
| | N/A | | |
| | (Former name, former address and former fiscal year, if changed since last report) | | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock, $0.01 Par Value Per Share | HY | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | ☑☐ | Accelerated filer | ☐☑ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☑
Number of shares of Class A Common Stock outstanding at OctoberJuly 30, 2020: 12,953,4462021: 12,978,326
Number of shares of Class B Common Stock outstanding at OctoberJuly 30, 2020: 3,851,9912021: 3,842,535
HYSTER-YALE MATERIALS HANDLING, INC.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| SEPTEMBER 30 2020 | | DECEMBER 31 2019 |
| (In millions, except share data) |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 89.9 | | | $ | 64.6 | |
Accounts receivable, net | 398.1 | | | 468.3 | |
Inventories, net | 490.3 | | | 559.9 | |
Prepaid expenses and other | 53.1 | | | 63.0 | |
Total Current Assets | 1,031.4 | | | 1,155.8 | |
Property, Plant and Equipment, Net | 329.2 | | | 308.5 | |
Intangible Assets, Net | 57.0 | | | 60.1 | |
Goodwill | 109.9 | | | 106.7 | |
Deferred Income Taxes | 25.3 | | | 30.8 | |
Investment in Unconsolidated Affiliates | 75.8 | | | 80.0 | |
Other Non-current Assets | 105.3 | | | 105.3 | |
Total Assets | $ | 1,733.9 | | | $ | 1,847.2 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 361.8 | | | $ | 401.5 | |
Accounts payable, affiliates | 9.1 | | | 15.6 | |
Revolving credit facilities | 0.6 | | | 7.7 | |
Current maturities of long-term debt | 80.2 | | | 74.6 | |
Accrued payroll | 40.0 | | | 66.1 | |
| | | |
Deferred revenue | 39.7 | | | 49.1 | |
Other current liabilities | 146.4 | | | 202.4 | |
Total Current Liabilities | 677.8 | | | 817.0 | |
Long-term Debt | 216.9 | | | 204.7 | |
Self-insurance Liabilities | 30.8 | | | 31.4 | |
Pension Obligations | 12.7 | | | 13.5 | |
Deferred Income Taxes | 14.8 | | | 15.4 | |
Other Long-term Liabilities | 178.3 | | | 188.2 | |
Total Liabilities | 1,131.3 | | | 1,270.2 | |
Stockholders' Equity | | | |
Common stock: | | | |
Class A, par value $0.01 per share, 12,941,147 shares outstanding (2019 - 12,802,455 shares outstanding) | 0.1 | | | 0.1 | |
Class B, par value $0.01 per share, convertible into Class A on a one-for-one basis, 3,855,790 shares outstanding (2019 - 3,864,462 shares outstanding) | 0.1 | | | 0.1 | |
Capital in excess of par value | 312.7 | | | 321.3 | |
Treasury stock | (6.5) | | | (15.9) | |
Retained earnings | 435.4 | | | 427.4 | |
Accumulated other comprehensive loss | (172.4) | | | (188.7) | |
Total Stockholders' Equity | 569.4 | | | 544.3 | |
Noncontrolling Interests | 33.2 | | | 32.7 | |
Total Equity | 602.6 | | | 577.0 | |
Total Liabilities and Equity | $ | 1,733.9 | | | $ | 1,847.2 | |
| | | | | | | | | | | |
| JUNE 30 2021 | | DECEMBER 31 2020 |
| (In millions, except share data) |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 87.5 | | | $ | 151.4 | |
Accounts receivable, net | 470.4 | | | 412.1 | |
Inventories, net | 678.0 | | | 509.4 | |
Prepaid expenses and other | 54.1 | | | 56.8 | |
Total Current Assets | 1,290.0 | | | 1,129.7 | |
Property, Plant and Equipment, Net | 337.8 | | | 340.4 | |
Intangible Assets, Net | 54.5 | | | 58.5 | |
Goodwill | 113.7 | | | 114.7 | |
Deferred Income Taxes | 31.4 | | | 24.4 | |
Investment in Unconsolidated Affiliates | 66.9 | | | 80.2 | |
Other Non-current Assets | 96.9 | | | 111.6 | |
Total Assets | $ | 1,991.2 | | | $ | 1,859.5 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 486.8 | | | $ | 412.0 | |
Accounts payable, affiliates | 15.7 | | | 16.1 | |
Revolving credit facilities | 2.1 | | | 0.7 | |
Current maturities of long-term debt | 76.3 | | | 82.4 | |
Accrued payroll | 58.7 | | | 46.1 | |
| | | |
Deferred revenue | 45.0 | | | 41.7 | |
Other current liabilities | 178.5 | | | 156.9 | |
Total Current Liabilities | 863.1 | | | 755.9 | |
Long-term Debt | 267.3 | | | 206.1 | |
Self-insurance Liabilities | 33.5 | | | 30.2 | |
Pension Obligations | 12.8 | | | 19.8 | |
Deferred Income Taxes | 14.2 | | | 14.9 | |
Other Long-term Liabilities | 170.3 | | | 181.5 | |
Total Liabilities | 1,361.2 | | | 1,208.4 | |
Stockholders' Equity | | | |
Common stock: | | | |
Class A, par value $0.01 per share, 12,973,367 shares outstanding (2020 - 12,956,301 shares outstanding) | 0.1 | | | 0.1 | |
Class B, par value $0.01 per share, convertible into Class A on a one-for-one basis, 3,842,936 shares outstanding (2020 - 3,849,136 shares outstanding) | 0.1 | | | 0.1 | |
Capital in excess of par value | 315.5 | | | 312.6 | |
Treasury stock | (5.2) | | | (6.0) | |
Retained earnings | 440.0 | | | 443.2 | |
Accumulated other comprehensive loss | (155.3) | | | (133.1) | |
Total Stockholders' Equity | 595.2 | | | 616.9 | |
Noncontrolling Interests | 34.8 | | | 34.2 | |
Total Equity | 630.0 | | | 651.1 | |
Total Liabilities and Equity | $ | 1,991.2 | | | $ | 1,859.5 | |
See notes to unaudited condensed consolidated financial statements.
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | | THREE MONTHS ENDED | | NINE MONTHS ENDED | | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 | | JUNE 30 | | JUNE 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
| | (In millions, except per share data) | | (In millions, except per share data) |
Revenues | Revenues | $ | 652.4 | | | $ | 766.0 | | | $ | 2,092.5 | | | $ | 2,457.0 | | Revenues | $ | 765.6 | | | $ | 654.4 | | | $ | 1,497.8 | | | $ | 1,440.1 | |
Cost of sales | Cost of sales | 549.0 | | | 631.0 | | | 1,748.8 | | | 2,056.4 | | Cost of sales | 649.2 | | | 550.8 | | | 1,263.0 | | | 1,199.8 | |
Gross Profit | Gross Profit | 103.4 | | | 135.0 | | | 343.7 | | | 400.6 | | Gross Profit | 116.4 | | | 103.6 | | | 234.8 | | | 240.3 | |
Operating Expenses | Operating Expenses | | Operating Expenses | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 96.1 | | | 115.5 | | | 307.5 | | | 354.8 | | Selling, general and administrative expenses | 110.5 | | | 94.9 | | | 225.8 | | | 211.4 | |
| Operating Profit | Operating Profit | 7.3 | | | 19.5 | | | 36.2 | | | 45.8 | | Operating Profit | 5.9 | | | 8.7 | | | 9.0 | | | 28.9 | |
Other (income) expense | Other (income) expense | | | | Other (income) expense | | | |
Interest expense | Interest expense | 3.1 | | | 5.3 | | | 10.7 | | | 14.9 | | Interest expense | 3.8 | | | 3.3 | | | 6.6 | | | 7.6 | |
Income from unconsolidated affiliates | Income from unconsolidated affiliates | (1.6) | | | (2.1) | | | (4.0) | | | (7.9) | | Income from unconsolidated affiliates | (3.6) | | | (0.8) | | | (5.6) | | | (2.4) | |
Other, net | Other, net | (0.6) | | | (1.7) | | | 1.7 | | | (5.2) | | Other, net | 5.8 | | | 4.5 | | | (0.4) | | | 2.3 | |
| | 0.9 | | | 1.5 | | | 8.4 | | | 1.8 | | | 6.0 | | | 7.0 | | | 0.6 | | | 7.5 | |
Income Before Income Taxes | 6.4 | | | 18.0 | | | 27.8 | | | 44.0 | | |
Income tax provision | 0.7 | | | 4.9 | | | 2.5 | | | 10.8 | | |
Income (Loss) Before Income Taxes | | Income (Loss) Before Income Taxes | (0.1) | | | 1.7 | | | 8.4 | | | 21.4 | |
Income tax provision (benefit) | | Income tax provision (benefit) | (2.4) | | | (2.3) | | | 0 | | | 1.8 | |
Net Income | Net Income | 5.7 | | | 13.1 | | | 25.3 | | | 33.2 | | Net Income | 2.3 | | | 4.0 | | | 8.4 | | | 19.6 | |
Net (income) loss attributable to noncontrolling interests | (0.6) | | | (0.3) | | | (1.3) | | | (0.8) | | |
Net income attributable to noncontrolling interests | | Net income attributable to noncontrolling interests | (0.4) | | | (0.4) | | | (0.9) | | | (0.7) | |
Net Income Attributable to Stockholders | Net Income Attributable to Stockholders | $ | 5.1 | | | $ | 12.8 | | | $ | 24.0 | | | $ | 32.4 | | Net Income Attributable to Stockholders | $ | 1.9 | | | $ | 3.6 | | | $ | 7.5 | | | $ | 18.9 | |
| | | | | | | | | | | | | | | | |
Basic Earnings per Share | Basic Earnings per Share | $ | 0.30 | | | $ | 0.77 | | | $ | 1.43 | | | $ | 1.95 | | Basic Earnings per Share | $ | 0.11 | | | $ | 0.21 | | | $ | 0.45 | | | $ | 1.13 | |
Diluted Earnings per Share | Diluted Earnings per Share | $ | 0.30 | | | $ | 0.76 | | | $ | 1.43 | | | $ | 1.94 | | Diluted Earnings per Share | $ | 0.11 | | | $ | 0.21 | | | $ | 0.45 | | | $ | 1.13 | |
| Dividends per Share | Dividends per Share | $ | 0.3175 | | | $ | 0.3175 | | | $ | 0.9525 | | | $ | 0.9450 | | Dividends per Share | $ | 0.3175 | | | $ | 0.3175 | | | $ | 0.6350 | | | $ | 0.6350 | |
| | | | | | | | | | | | | | | | |
Basic Weighted Average Shares Outstanding | Basic Weighted Average Shares Outstanding | 16.795 | | | 16.660 | | | 16.766 | | | 16.638 | | Basic Weighted Average Shares Outstanding | 16.815 | | | 16.787 | | | 16.813 | | | 16.753 | |
Diluted Weighted Average Shares Outstanding | Diluted Weighted Average Shares Outstanding | 16.803 | | | 16.735 | | | 16.796 | | | 16.709 | | Diluted Weighted Average Shares Outstanding | 16.860 | | | 16.795 | | | 16.851 | | | 16.791 | |
See notes to unaudited condensed consolidated financial statements.
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| | | THREE MONTHS ENDED | | NINE MONTHS ENDED | | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 | | JUNE 30 | | JUNE 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
| | (In millions) | | (In millions) |
Net Income | Net Income | $ | 5.7 | | | $ | 13.1 | | | $ | 25.3 | | | $ | 33.2 | | Net Income | $ | 2.3 | | | $ | 4.0 | | | $ | 8.4 | | | $ | 19.6 | |
Other comprehensive income (loss) | Other comprehensive income (loss) | | | | | | | Other comprehensive income (loss) | | | | | |
Foreign currency translation adjustment | Foreign currency translation adjustment | 21.9 | | | (23.3) | | | 4.7 | | | (23.1) | | Foreign currency translation adjustment | 12.0 | | | 8.3 | | | (12.8) | | | (17.2) | |
Current period cash flow hedging activity | Current period cash flow hedging activity | 15.8 | | | (15.6) | | | 1.2 | | | (25.7) | | Current period cash flow hedging activity | 5.0 | | | 7.9 | | | (9.3) | | | (14.6) | |
Reclassification of hedging activities into earnings | Reclassification of hedging activities into earnings | 2.0 | | | 1.8 | | | 10.4 | | | 5.1 | | Reclassification of hedging activities into earnings | (1.7) | | | 5.4 | | | (2.3) | | | 8.4 | |
Current period pension adjustment | (2.8) | | | 0 | | | (2.8) | | | 0 | | |
| Reclassification of pension into earnings | Reclassification of pension into earnings | 1.0 | | | 0.8 | | | 2.8 | | | 2.4 | | Reclassification of pension into earnings | 1.1 | | | 0.9 | | | 2.2 | | | 1.8 | |
Comprehensive Income (Loss) | Comprehensive Income (Loss) | $ | 43.6 | | | $ | (23.2) | | | $ | 41.6 | | | $ | (8.1) | | Comprehensive Income (Loss) | $ | 18.7 | | | $ | 26.5 | | | $ | (13.8) | | | $ | (2.0) | |
Other comprehensive (income) loss attributable to noncontrolling interests | | | | | | | | |
Net (income) loss attributable to noncontrolling interests | (0.6) | | | (0.3) | | | (1.3) | | | (0.8) | | |
Other comprehensive income (loss) attributable to noncontrolling interests | | Other comprehensive income (loss) attributable to noncontrolling interests | | | | | | | |
Net income attributable to noncontrolling interests | | Net income attributable to noncontrolling interests | (0.4) | | | (0.4) | | | (0.9) | | | (0.7) | |
Foreign currency translation adjustment attributable to noncontrolling interests | Foreign currency translation adjustment attributable to noncontrolling interests | (0.4) | | | 0.3 | | | 0.5 | | | 0.3 | | Foreign currency translation adjustment attributable to noncontrolling interests | (0.9) | | | 0.2 | | | 0.1 | | | 0.9 | |
Comprehensive Income (Loss) Attributable to Stockholders | Comprehensive Income (Loss) Attributable to Stockholders | $ | 42.6 | | | $ | (23.2) | | | $ | 40.8 | | | $ | (8.6) | | Comprehensive Income (Loss) Attributable to Stockholders | $ | 17.4 | | | $ | 26.3 | | | $ | (14.6) | | | $ | (1.8) | |
See notes to unaudited condensed consolidated financial statements.
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | NINE MONTHS ENDED | | SIX MONTHS ENDED |
| | SEPTEMBER 30 | | JUNE 30 |
| | 2020 | | 2019 | | 2021 | | 2020 |
| | (In millions) | | (In millions) |
Operating Activities | Operating Activities | | Operating Activities | |
Net income | Net income | $ | 25.3 | | | $ | 33.2 | | Net income | $ | 8.4 | | | $ | 19.6 | |
Adjustments to reconcile net income to net cash used for operating activities: | Adjustments to reconcile net income to net cash used for operating activities: | | | Adjustments to reconcile net income to net cash used for operating activities: | | |
Depreciation and amortization | Depreciation and amortization | 31.8 | | | 32.3 | | Depreciation and amortization | 23.3 | | | 20.8 | |
Amortization of deferred financing fees | Amortization of deferred financing fees | 1.3 | | | 1.4 | | Amortization of deferred financing fees | 2.4 | | | 0.9 | |
Deferred income taxes | Deferred income taxes | (0.2) | | | (1.3) | | Deferred income taxes | (4.2) | | | 2.4 | |
| Gain on the sale of investment | | Gain on the sale of investment | (4.6) | | | — | |
Stock-based compensation | Stock-based compensation | 0.9 | | | 6.1 | | Stock-based compensation | 3.7 | | | 0.6 | |
Dividends from unconsolidated affiliates | Dividends from unconsolidated affiliates | 7.3 | | | 5.1 | | Dividends from unconsolidated affiliates | 5.5 | | | 7.3 | |
Other non-current liabilities | Other non-current liabilities | (11.9) | | | (3.7) | | Other non-current liabilities | (4.3) | | | (8.8) | |
Other | Other | 17.4 | | | 2.6 | | Other | (9.0) | | | 12.2 | |
Working capital changes: | Working capital changes: | | | Working capital changes: | | |
Accounts receivable | Accounts receivable | 60.2 | | | (3.5) | | Accounts receivable | (56.7) | | | 35.0 | |
Inventories | Inventories | 71.1 | | | (73.6) | | Inventories | (172.4) | | | 30.9 | |
Other current assets | Other current assets | (7.4) | | | (4.2) | | Other current assets | (12.8) | | | (9.6) | |
Accounts payable | Accounts payable | (44.7) | | | (18.3) | | Accounts payable | 78.9 | | | (58.2) | |
Other current liabilities | Other current liabilities | (75.0) | | | 6.6 | | Other current liabilities | 41.1 | | | (65.1) | |
Net cash provided by (used for) operating activities | 76.1 | | | (17.3) | | |
Net cash used for operating activities | | Net cash used for operating activities | (100.7) | | | (12.0) | |
Investing Activities | Investing Activities | | | | Investing Activities | | | |
Expenditures for property, plant and equipment | Expenditures for property, plant and equipment | (37.2) | | | (31.4) | | Expenditures for property, plant and equipment | (18.1) | | | (29.9) | |
Proceeds from the sale of assets | Proceeds from the sale of assets | 7.4 | | | 6.9 | | Proceeds from the sale of assets | 3.2 | | | 6.6 | |
Proceeds from the sale of investment | | Proceeds from the sale of investment | 15.7 | | | 0 | |
| Net cash used for investing activities | (29.8) | | | (24.5) | | |
Net cash provided by (used for) investing activities | | Net cash provided by (used for) investing activities | 0.8 | | | (23.3) | |
Financing Activities | Financing Activities | | | | Financing Activities | | | |
Additions to long-term debt | Additions to long-term debt | 70.0 | | | 52.1 | | Additions to long-term debt | 84.7 | | | 47.9 | |
Reductions of long-term debt | Reductions of long-term debt | (65.5) | | | (63.5) | | Reductions of long-term debt | (30.1) | | | (41.1) | |
Net change to revolving credit agreements | Net change to revolving credit agreements | (7.2) | | | 52.9 | | Net change to revolving credit agreements | 1.4 | | | 38.6 | |
Cash dividends paid | Cash dividends paid | (16.0) | | | (15.7) | | Cash dividends paid | (10.7) | | | (10.6) | |
Cash dividends paid to noncontrolling interest | Cash dividends paid to noncontrolling interest | (0.3) | | | (0.2) | | Cash dividends paid to noncontrolling interest | (0.2) | | | (0.3) | |
Financing fees paid | Financing fees paid | 0 | | | (0.4) | | Financing fees paid | (7.6) | | | 0 | |
Purchase of treasury stock | Purchase of treasury stock | (0.1) | | | (0.2) | | Purchase of treasury stock | 0 | | | (0.1) | |
| Net cash provided by (used for) financing activities | (19.1) | | | 25.0 | | |
Net cash provided by financing activities | | Net cash provided by financing activities | 37.5 | | | 34.4 | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | (1.9) | | | (4.1) | | Effect of exchange rate changes on cash | (1.5) | | | (3.2) | |
Cash and Cash Equivalents | Cash and Cash Equivalents | | | | Cash and Cash Equivalents | | | |
Increase (decrease) for the period | 25.3 | | | (20.9) | | |
Decrease for the period | | Decrease for the period | (63.9) | | | (4.1) | |
Balance at the beginning of the period | Balance at the beginning of the period | 64.6 | | | 83.7 | | Balance at the beginning of the period | 151.4 | | | 64.6 | |
Balance at the end of the period | Balance at the end of the period | $ | 89.9 | | | $ | 62.8 | | Balance at the end of the period | $ | 87.5 | | | $ | 60.5 | |
See notes to unaudited condensed consolidated financial statements.
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | Accumulated Other Comprehensive Income (Loss) | | | Accumulated Other Comprehensive Income (Loss) | |
| | Class A Common Stock | Class B Common Stock | Treasury Stock | Capital in Excess of Par Value | Retained Earnings | Foreign Currency Translation Adjustment | Deferred Gain (Loss) on Cash Flow Hedging | Pension Adjustment | Total Stockholders' Equity | Noncontrolling Interests | Total Equity | | Class A Common Stock | Class B Common Stock | Treasury Stock | Capital in Excess of Par Value | Retained Earnings | Foreign Currency Translation Adjustment | Deferred Gain (Loss) on Cash Flow Hedging | Pension Adjustment | Total Stockholders' Equity | Noncontrolling Interests | Total Equity |
| | (In millions) | | (In millions) |
Balance, June 30, 2019 | $ | 0.1 | | $ | 0.1 | | $ | (16.7) | | $ | 318.7 | | $ | 421.8 | | | $ | (85.7) | | | $ | (21.4) | | | $ | (79.3) | | | $ | 537.6 | | | $ | 32.5 | | | $ | 570.1 | | |
Balance, March 31, 2020 | | Balance, March 31, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (7.6) | | $ | 313.2 | | $ | 437.4 | | | $ | (118.4) | | | $ | (38.0) | | | $ | (76.4) | | | $ | 510.4 | | | $ | 32.3 | | | $ | 542.7 | |
| Stock-based compensation | Stock-based compensation | — | | — | | — | | 1.3 | | — | | | — | | | — | | | — | | | 1.3 | | | — | | | 1.3 | | Stock-based compensation | — | | — | | — | | 0.3 | | — | | | — | | | — | | | — | | | 0.3 | | | — | | | 0.3 | |
Stock issued under stock compensation plans | Stock issued under stock compensation plans | — | | — | | 0.4 | | (0.4) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | | Stock issued under stock compensation plans | — | | — | | 0.4 | | (0.4) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | |
| Net income | Net income | — | | — | | — | | — | | 12.8 | | | — | | | — | | | — | | | 12.8 | | | 0.3 | | | 13.1 | | Net income | — | | — | | — | | — | | 3.6 | | | — | | | — | | | — | | | 3.6 | | | 0.4 | | | 4.0 | |
Cash dividends | Cash dividends | — | | — | | — | | — | | (5.3) | | | — | | | — | | | — | | | (5.3) | | | (0.1) | | | (5.4) | | Cash dividends | — | | — | | — | | — | | (5.3) | | | — | | | — | | | — | | | (5.3) | | | (0.3) | | | (5.6) | |
Current period other comprehensive income (loss) | — | | — | | — | | — | | — | | | (23.3) | | | (15.6) | | | 0 | | | (38.9) | | | — | | | (38.9) | | |
Current period other comprehensive income | | Current period other comprehensive income | — | | — | | — | | — | | — | | | 8.3 | | | 7.9 | | | 0 | | | 16.2 | | | — | | | 16.2 | |
Reclassification adjustment to net income | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | 1.8 | | | 0.8 | | | 2.6 | | | — | | | 2.6 | | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | 5.4 | | | 0.9 | | | 6.3 | | | — | | | 6.3 | |
| Foreign currency translation on noncontrolling interest | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | (0.3) | | | (0.3) | | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | (0.2) | | | (0.2) | |
Balance, September 30, 2019 | $ | 0.1 | | $ | 0.1 | | $ | (16.3) | | $ | 319.6 | | $ | 429.3 | | | $ | (109.0) | | | $ | (35.2) | | | $ | (78.5) | | | $ | 510.1 | | | $ | 32.4 | | | $ | 542.5 | | |
Balance, June 30, 2020 | | Balance, June 30, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (7.2) | | $ | 313.1 | | $ | 435.7 | | | $ | (110.1) | | | $ | (24.7) | | | $ | (75.5) | | | $ | 531.5 | | | $ | 32.2 | | | $ | 563.7 | |
| Balance, June 30, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (7.2) | | $ | 313.1 | | $ | 435.7 | | | $ | (110.1) | | | $ | (24.7) | | | $ | (75.5) | | | $ | 531.5 | | | $ | 32.2 | | | $ | 563.7 | | |
Balance, March 31, 2021 | | Balance, March 31, 2021 | $ | 0.1 | | $ | 0.1 | | $ | (5.5) | | $ | 315.6 | | $ | 443.5 | | | $ | (82.4) | | | $ | (2.4) | | | $ | (86.9) | | | $ | 582.1 | | | $ | 33.7 | | | $ | 615.8 | |
| Stock-based compensation | Stock-based compensation | — | | — | | — | | 0.3 | | — | | | — | | | — | | | — | | | 0.3 | | | — | | | 0.3 | | Stock-based compensation | — | | — | | — | | 0.2 | | — | | | — | | | — | | | — | | | 0.2 | | | — | | | 0.2 | |
Stock issued under stock compensation plans | Stock issued under stock compensation plans | — | | — | | 0.7 | | (0.7) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | | Stock issued under stock compensation plans | — | | — | | 0.3 | | (0.3) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | |
| Net income | Net income | — | | — | | — | | — | | 5.1 | | | — | | | — | | | — | | | 5.1 | | | 0.6 | | | 5.7 | | Net income | — | | — | | — | | — | | 1.9 | | | — | | | — | | | — | | | 1.9 | | | 0.4 | | | 2.3 | |
Cash dividends | Cash dividends | — | | — | | — | | — | | (5.4) | | | — | | | — | | | — | | | (5.4) | | | 0 | | | (5.4) | | Cash dividends | — | | — | | — | | — | | (5.4) | | | — | | | — | | | — | | | (5.4) | | | (0.2) | | | (5.6) | |
Current period other comprehensive income | Current period other comprehensive income | — | | — | | — | | — | | — | | | 21.9 | | | 15.8 | | | (2.8) | | | 34.9 | | | — | | | 34.9 | | Current period other comprehensive income | — | | — | | — | | — | | — | | | 12.0 | | | 5.0 | | | 0 | | | 17.0 | | | — | | | 17.0 | |
Reclassification adjustment to net income | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | 2.0 | | | 1.0 | | | 3.0 | | | — | | | 3.0 | | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | (1.7) | | | 1.1 | | | (0.6) | | | — | | | (0.6) | |
| Foreign currency translation on noncontrolling interest | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | 0.4 | | | 0.4 | | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | 0.9 | | | 0.9 | |
Balance, September 30, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (6.5) | | $ | 312.7 | | $ | 435.4 | | | $ | (88.2) | | | $ | (6.9) | | | $ | (77.3) | | | $ | 569.4 | | | $ | 33.2 | | | $ | 602.6 | | |
Balance, June 30, 2021 | | Balance, June 30, 2021 | $ | 0.1 | | $ | 0.1 | | $ | (5.2) | | $ | 315.5 | | $ | 440.0 | | | $ | (70.4) | | | $ | 0.9 | | | $ | (85.8) | | | $ | 595.2 | | | $ | 34.8 | | | $ | 630.0 | |
See notes to unaudited condensed consolidated financial statements.
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | Accumulated Other Comprehensive Income (Loss) | | | Accumulated Other Comprehensive Income (Loss) | |
| | Class A Common Stock | Class B Common Stock | Treasury Stock | Capital in Excess of Par Value | Retained Earnings | Foreign Currency Translation Adjustment | Deferred Gain (Loss) on Cash Flow Hedging | Pension Adjustment | Total Stockholders' Equity | Noncontrolling Interests | Total Equity | | Class A Common Stock | Class B Common Stock | Treasury Stock | Capital in Excess of Par Value | Retained Earnings | Foreign Currency Translation Adjustment | Deferred Gain (Loss) on Cash Flow Hedging | Pension Adjustment | Total Stockholders' Equity | Noncontrolling Interests | Total Equity |
| (In millions) | |
Balance, December 31, 2018 | $ | 0.1 | | $ | 0.1 | | $ | (24.1) | | $ | 321.5 | | $ | 407.3 | | | $ | (85.9) | | | $ | (15.5) | | | $ | (76.1) | | | $ | 527.4 | | | $ | 32.1 | | | $ | 559.5 | | |
Cumulative effect of change in accounting | — | | — | | — | | — | | 5.3 | | | — | | | 0.9 | | | (4.8) | | | 1.4 | | | — | | | 1.4 | | |
Stock-based compensation | — | | — | | — | | 6.1 | | — | | | — | | | — | | | — | | | 6.1 | | | — | | | 6.1 | | |
Stock issued under stock compensation plans | — | | — | | 8.0 | | (8.0) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | | |
Purchase of treasury stock | — | | — | | (0.2) | | — | | — | | | — | | | — | | | — | | | (0.2) | | | — | | | (0.2) | | |
Net income | — | | — | | — | | — | | 32.4 | | | — | | | — | | | — | | | 32.4 | | | 0.8 | | | 33.2 | | |
Cash dividends | — | | — | | — | | — | | (15.7) | | | — | | | — | | | — | | | (15.7) | | | (0.2) | | | (15.9) | | |
Current period other comprehensive income (loss) | — | | — | | — | | — | | — | | | (23.1) | | | (25.7) | | | 0 | | | (48.8) | | | — | | | (48.8) | | |
Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | 5.1 | | | 2.4 | | | 7.5 | | | — | | | 7.5 | | |
| Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | (0.3) | | | (0.3) | | |
Balance, September 30, 2019 | $ | 0.1 | | $ | 0.1 | | $ | (16.3) | | $ | 319.6 | | $ | 429.3 | | | $ | (109.0) | | | $ | (35.2) | | | $ | (78.5) | | | $ | 510.1 | | | $ | 32.4 | | | $ | 542.5 | | |
| | | | (In millions) |
Balance, December 31, 2019 | Balance, December 31, 2019 | $ | 0.1 | | $ | 0.1 | | $ | (15.9) | | $ | 321.3 | | $ | 427.4 | | | $ | (92.9) | | | $ | (18.5) | | | $ | (77.3) | | | $ | 544.3 | | | $ | 32.7 | | | $ | 577.0 | | Balance, December 31, 2019 | $ | 0.1 | | $ | 0.1 | | $ | (15.9) | | $ | 321.3 | | $ | 427.4 | | | $ | (92.9) | | | $ | (18.5) | | | $ | (77.3) | | | $ | 544.3 | | | $ | 32.7 | | | $ | 577.0 | |
| Stock-based compensation | Stock-based compensation | — | | — | | — | | 0.9 | | — | | | — | | | — | | | — | | | 0.9 | | | — | | | 0.9 | | Stock-based compensation | — | | — | | — | | 0.6 | | — | | | — | | | — | | | — | | | 0.6 | | | — | | | 0.6 | |
Stock issued under stock compensation plans | Stock issued under stock compensation plans | — | | — | | 9.5 | | (9.5) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | | Stock issued under stock compensation plans | — | | — | | 8.8 | | (8.8) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | |
Purchase of treasury stock | Purchase of treasury stock | — | | — | | (0.1) | | — | | — | | | — | | | — | | | — | | | (0.1) | | | — | | | (0.1) | | Purchase of treasury stock | — | | — | | (0.1) | | — | | — | | | — | | | — | | | — | | | (0.1) | | | — | | | (0.1) | |
Net income | Net income | — | | — | | — | | — | | 24.0 | | | — | | | — | | | — | | | 24.0 | | | 1.3 | | | 25.3 | | Net income | — | | — | | — | | — | | 18.9 | | | — | | | — | | | — | | | 18.9 | | | 0.7 | | | 19.6 | |
Cash dividends | Cash dividends | — | | — | | — | | — | | (16.0) | | | — | | | — | | | — | | | (16.0) | | | (0.3) | | | (16.3) | | Cash dividends | — | | — | | — | | — | | (10.6) | | | — | | | — | | | — | | | (10.6) | | | (0.3) | | | (10.9) | |
Current period other comprehensive loss | Current period other comprehensive loss | — | | — | | — | | — | | — | | | 4.7 | | | 1.2 | | | (2.8) | | | 3.1 | | | — | | | 3.1 | | Current period other comprehensive loss | — | | — | | — | | — | | — | | | (17.2) | | | (14.6) | | | 0 | | | (31.8) | | | — | | | (31.8) | |
Reclassification adjustment to net income | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | 10.4 | | | 2.8 | | | 13.2 | | | — | | | 13.2 | | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | 8.4 | | | 1.8 | | | 10.2 | | | — | | | 10.2 | |
| Foreign currency translation on noncontrolling interest | | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | (0.9) | | | (0.9) | |
Balance, June 30, 2020 | | Balance, June 30, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (7.2) | | $ | 313.1 | | $ | 435.7 | | | $ | (110.1) | | | $ | (24.7) | | | $ | (75.5) | | | $ | 531.5 | | | $ | 32.2 | | | $ | 563.7 | |
| Balance, December 31, 2020 | | Balance, December 31, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (6.0) | | $ | 312.6 | | $ | 443.2 | | | $ | (57.6) | | | $ | 12.5 | | | $ | (88.0) | | | $ | 616.9 | | | $ | 34.2 | | | $ | 651.1 | |
| Stock-based compensation | | Stock-based compensation | — | | — | | — | | 3.7 | | — | | | — | | | — | | | — | | | 3.7 | | | — | | | 3.7 | |
Stock issued under stock compensation plans | | Stock issued under stock compensation plans | — | | — | | 0.8 | | (0.8) | | — | | | — | | | — | | | — | | | 0 | | | — | | | 0 | |
| Net income | | Net income | — | | — | | — | | — | | 7.5 | | | — | | | — | | | — | | | 7.5 | | | 0.9 | | | 8.4 | |
Cash dividends | | Cash dividends | — | | — | | — | | — | | (10.7) | | | — | | | — | | | — | | | (10.7) | | | (0.2) | | | (10.9) | |
Current period other comprehensive loss | | Current period other comprehensive loss | — | | — | | — | | — | | — | | | (12.8) | | | (9.3) | | | 0 | | | (22.1) | | | — | | | (22.1) | |
Reclassification adjustment to net income | | Reclassification adjustment to net income | — | | — | | — | | — | | — | | | — | | | (2.3) | | | 2.2 | | | (0.1) | | | — | | | (0.1) | |
| | Foreign currency translation on noncontrolling interest | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | (0.5) | | | (0.5) | | Foreign currency translation on noncontrolling interest | — | | — | | — | | — | | — | | | — | | | — | | | — | | | — | | | (0.1) | | | (0.1) | |
Balance, September 30, 2020 | $ | 0.1 | | $ | 0.1 | | $ | (6.5) | | $ | 312.7 | | $ | 435.4 | | | $ | (88.2) | | | $ | (6.9) | | | $ | (77.3) | | | $ | 569.4 | | | $ | 33.2 | | | $ | 602.6 | | |
Balance, June 30, 2021 | | Balance, June 30, 2021 | $ | 0.1 | | $ | 0.1 | | $ | (5.2) | | $ | 315.5 | | $ | 440.0 | | | $ | (70.4) | | | $ | 0.9 | | | $ | (85.8) | | | $ | 595.2 | | | $ | 34.8 | | | $ | 630.0 | |
See notes to unaudited condensed consolidated financial statements.
HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBERJUNE 30, 20202021
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
Note 1—Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Hyster-Yale Materials Handling, Inc., a Delaware corporation, and the accounts of Hyster-Yale's wholly owned domestic and international subsidiaries and majority-owned joint ventures (collectively, "Hyster-Yale" or the "Company"). All intercompany accounts and transactions among the consolidated companies are eliminated in consolidation.
The Company, through its wholly owned operating subsidiary, Hyster-Yale Group, Inc. ("HYG"), designs, engineers, manufactures, sells and services a comprehensive line of lift trucks, attachments and aftermarket parts marketed globally primarily under the Hyster® and Yale® brand names, mainly to independent Hyster® and Yale® retail dealerships. Lift trucks and component parts are manufactured in the United States, China, Northern Ireland, Mexico, the Netherlands, the Philippines, Japan, Italy, Japan, VietnamBrazil and Brazil.Vietnam.
The Company operates Bolzoni S.p.A. ("Bolzoni"). Bolzoni is a leading worldwide producer and distributor of attachments, forks and lift tables marketed under the Bolzoni®, Auramo® and Meyer® brand names. Bolzoni products are manufactured in the United States, Italy, China, Germany and Finland. Through the design, production and distribution of a wide range of attachments, Bolzoni has a strong presence in the market niche of lift-trucklift truck attachments and industrial material handling.
The Company operates Nuvera Fuel Cells, LLC ("Nuvera"). Nuvera is an alternative-power technology company focused on the design, manufacture and sale of hydrogen fuel-cellfuel cell stacks and engines.
Investments in Sumitomo NACCO Forklift Co., Ltd. (“SN”), a 50%-owned joint venture, and HYG Financial Services, Inc. ("HYGFS"), a 20%-owned joint venture, are accounted for by the equity method. SN operates manufacturing facilities in Japan, the Philippines and Vietnam from which the Company purchases certain components, service parts and lift trucks. Sumitomo Heavy Industries, Ltd. ("Sumitomo") owns the remaining 50% interest in SN. Each stockholder of SN is entitled to appoint directors representing 50% of the vote of SN’s board of directors. All matters related to policies and programs of operation, manufacturing and sales activities require mutual agreement between the Company and Sumitomo prior to a vote of SN’s board of directors. HYGFS is a joint venture with Wells Fargo Financial Leasing, Inc. (“WF”), formed primarily for the purpose of providing financial services to independent Hyster® and Yale® lift truck dealers and National Account customers in the United States. National Account customers are large customers with centralized purchasing and geographically dispersed operations in multiple dealer territories. The Company’s percentage share of the net income or loss from these equity investments is reported on the line “Income from unconsolidated affiliates” in the “Other (income) expense” section of the unaudited condensed consolidated statements of operations.
During the first nine months of 2020, broad measures taken by governments, businesses and others across the globe to limit the spread of novel coronavirus ("COVID-19") adversely affected the Company. The resulting significant decline in economic activity also reduced the demand for the Company's products and limited the availability of components from certain suppliers. Production was significantly reduced or suspended at the Company's Chinese and European facilities for certain periods during the first and early second quarterquarters of 2020. The Company also initiated several cost reduction measures designed to ease liquidity pressure. These cost containment actions included spending and travel restrictions, significant reductions in temporary personnel, furloughs, suspension of incentive compensation and profit sharing, benefit reductions and salary reductions. Effective January 1, 2021, the Company reinstated pre-pandemic salaries, benefits and incentive compensation programs. The cost containment actions associated with hiring, use of contract and temporary workers, travel and meetings, as well as other discretionary spending are continuing. These measures are expected to remain in place until market and economic uncertainty dissipates and results improve. In addition, the Company adjusted production levels in 2020 at its manufacturing plants to align more closely with the reduced levels of demand, and worked closely with suppliers to help ensure current needs arewere met while also ensuringpromoting continuity as the market improves.improved. However, despite these efforts, during the second quarter and first six months of 2021, the Company experienced further pandemic-related and other global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs, as well as significant material cost inflation resulting from the accelerated pace of the market recovery, all of which have negatively impacted the Company.
These financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principlesGAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company as of SeptemberJune 30, 20202021 and the results of its operations and changes in equity for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, and the results of its cash flows for the ninesix months ended SeptemberJune 30, 20202021 and 20192020 have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
The accompanying unaudited condensed consolidated balance sheet at December 31, 20192020 has been derived from the audited financial statements at that date but does not include all of the information or notes required by U.S. generally accepted accounting principlesGAAP for complete financial statements.
Note 2—Recently Issued Accounting Standards
The following table provides a brief description of recent accounting standard updates ("ASU") adopted January 1, 2020. Unless otherwise noted, the2021. The adoption of these standards did not have a material effect on the Company's financial position, results of operations, cash flows or related disclosures.
| | | | | | | | |
Standard | | Description |
ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326)(Subsequent ASUs have been issued in 2018, 2019 and 2020 to update or clarify this guidance) | | The guidance eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The guidance also requires additional disclosures in certain circumstances. |
ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
| | The guidance provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. |
ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
| | The guidance clarifies the accounting for collaborative arrangements in conjunction with the adoption of "Revenue from Contracts with Customers (Topic 606)." |
ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment | | The guidance removes the second step of the two-step test for the measurement of goodwill impairment. |
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement | | The guidance removes, modifies and adds certain disclosures relating to fair value measurements. |
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract | | The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting agreement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. |
The following table provides a brief description of ASUs not yet adopted:
| | | | | | | | | | | | | | | | | | | | |
Standard | | Description | | Required Date of Adoption | | Effect on the financial statements or other significant matters |
ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes | | The guidance eliminates certain exceptions to the income tax guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. | | January 1, 2021 | | The Company is currently evaluating the guidance and the effect on its financial position, results of operations, cash flows and related disclosures. |
ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 | | The guidance clarifies certain interactions between the guidance to account for certain equity securities and investments under the equity method of accounting. |
The following table provides a brief description of ASUs not yet adopted: | | | | | | | | | | | | | | | | | | | | |
January 1, 2021Standard | | The Company is currently evaluatingDescription | | Required Date of Adoption | | Effect on the guidance and the effect on its financial position, results of operations, cash flows and related disclosures.statements or other significant matters |
ASU 2020-04, Reference Rate Reform (Topic 848) | | The guidance provides optional expedients and exceptions for applying generally accepted accounting principlesGAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. | | From the date of issuance through December 31, 2022 | | The Company is currently evaluating the guidance and the effect on its financial position, results of operations, cash flows and related disclosures. |
Note 3—Revenue
Revenue is recognized when obligations under the terms of a contract with the customer are satisfied, which occurs when control of the trucks, parts, or services are transferred to the customer. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. The satisfaction of performance obligations under the terms of a revenue contract generally gives rise for the right to payment from the customer. The Company's standard payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. Given the insignificant days between revenue recognition and receipt of payment, financing components do not exist between the Company and its customers. Taxes collected from customers are excluded from revenue. The estimated costs of product warranties are recognized as expense when the products are sold. See Note 11 for further information on product warranties.
The majority of the Company's sales contracts contain performance obligations satisfied at a point in time when title and risks and rewards of ownership have transferred to the customer. Revenues for service contracts are recognized as the services are provided.
The Company also records variable consideration in the form of estimated reductions to revenues for customer programs and incentive offerings, including special pricing agreements, promotions and other volume-based incentives. Lift truck sales revenue is recorded net of estimated discounts. The estimated discount amount is based upon historical experience and trend analysis for each lift truck model. In addition to standard discounts, dealers can also request additional discounts that allow them to offer price concessions to customers. From time to time, the Company offers special incentives to increase market share or dealer stock and offers certain customers volume rebates if a specified cumulative level of purchases is obtained.
For contracts with customers that include multiple performance obligations, judgment is required to determine whether performance obligations specified in these contracts are distinct and should be accounted for as separate revenue transactions for recognition purposes. For such arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are generally determined based on the prices charged to customers or using expected cost plus margin. Impairment losses recognized on receivables or contract assets were not significant for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are reported on the line “Selling, general and administrative expenses” in the unaudited condensed consolidated statements of operations.
The Company pays for shipping and handling activities regardless of when control is transferred and has elected to account for shipping and handling as activities to fulfill the promise to transfer the good, rather than a promised service. These costs are reported on the line “Cost of sales” in the unaudited condensed consolidated statements of operations.
The following table disaggregates revenue by category:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED |
| SEPTEMBER 30, 2020 |
| Lift truck business | | | | | | | | |
| Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | $ | 189.2 | | | $ | 115.6 | | | $ | 40.0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 344.8 | |
Direct customer sales | 113.3 | | | 0.4 | | | 0 | | | 0 | | | 0 | | | 0 | | | 113.7 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Aftermarket sales | 96.5 | | | 23.0 | | | 7.9 | | | 0 | | | 0 | | | 0 | | | 127.4 | |
Other | 27.9 | | | 4.8 | | | 0.1 | | | 63.3 | | | 0.7 | | | (30.3) | | | 66.5 | |
Total Revenues | $ | 426.9 | | | $ | 143.8 | | | $ | 48.0 | | | $ | 63.3 | | | $ | 0.7 | | | $ | (30.3) | | | $ | 652.4 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED |
| JUNE 30, 2021 |
| Lift truck business | | | | | | | | |
| Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | $ | 218.0 | | | $ | 140.4 | | | $ | 56.6 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 415.0 | |
Direct customer sales | 115.8 | | | 1.5 | | | 0 | | | 0 | | | 0 | | | 0 | | | 117.3 | |
Aftermarket sales | 114.3 | | | 26.8 | | | 8.1 | | | 0 | | | 0 | | | 0 | | | 149.2 | |
Other | 31.0 | | | 6.4 | | | 0.3 | | | 84.8 | | | 0.3 | | | (38.7) | | | 84.1 | |
Total Revenues | $ | 479.1 | | | $ | 175.1 | | | $ | 65.0 | | | $ | 84.8 | | | $ | 0.3 | | | $ | (38.7) | | | $ | 765.6 | |
| THREE MONTHS ENDED |
| JUNE 30, 2020 |
| Lift truck business | | | | | | | | |
| Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | $ | 210.4 | | | $ | 96.5 | | | $ | 40.0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 346.9 | |
Direct customer sales | 121.0 | | | 2.3 | | | 0 | | | 0 | | | 0 | | | 0 | | | 123.3 | |
Aftermarket sales | 93.3 | | | 17.6 | | | 7.3 | | | 0 | | | 0 | | | 0 | | | 118.2 | |
Other | 30.1 | | | 3.7 | | | 0.7 | | | 64.2 | | | 0.7 | | | (33.4) | | | 66.0 | |
Total Revenues | $ | 454.8 | | | $ | 120.1 | | | $ | 48.0 | | | $ | 64.2 | | | $ | 0.7 | | | $ | (33.4) | | | $ | 654.4 | |
| SIX MONTHS ENDED |
| JUNE 30, 2021 |
| Lift truck business | | | | | | | | |
| Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | $ | 438.7 | | | $ | 277.2 | | | $ | 109.2 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 825.1 | |
Direct customer sales | 218.2 | | | 3.4 | | | 0 | | | 0 | | | 0 | | | 0 | | | 221.6 | |
Aftermarket sales | 223.1 | | | 53.7 | | | 15.9 | | | 0 | | | 0 | | | 0 | | | 292.7 | |
Other | 58.8 | | | 11.5 | | | 0.4 | | | 164.3 | | | 0.3 | | | (76.9) | | | 158.4 | |
Total Revenues | $ | 938.8 | | | $ | 345.8 | | | $ | 125.5 | | | $ | 164.3 | | | $ | 0.3 | | | $ | (76.9) | | | $ | 1,497.8 | |
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| THREE MONTHS ENDED |
| SEPTEMBER 30, 2019 |
| Lift truck business | | | | | | | | |
| Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | $ | 256.4 | | | $ | 130.3 | | | $ | 47.9 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 434.6 | |
Direct customer sales | 114.1 | | | 2.5 | | | 0 | | | 0 | | | 0 | | | 0 | | | 116.6 | |
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Aftermarket sales | 100.0 | | | 23.3 | | | 9.5 | | | 0 | | | 0 | | | 0 | | | 132.8 | |
Other | 35.3 | | | 5.6 | | | 0.4 | | | 75.8 | | | 2.4 | | | (37.5) | | | 82.0 | |
Total Revenues | $ | 505.8 | | | $ | 161.7 | | | $ | 57.8 | | | $ | 75.8 | | | $ | 2.4 | | | $ | (37.5) | | | $ | 766.0 | |
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| NINE MONTHS ENDED |
| SEPTEMBER 30, 2020 |
| Lift truck business | | | | | | | | |
| Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | $ | 686.9 | | | $ | 332.7 | | | $ | 117.2 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,136.8 | |
Direct customer sales | 369.0 | | | 6.4 | | | 0 | | | 0 | | | 0 | | | 0 | | | 375.4 | |
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Aftermarket sales | 294.9 | | | 64.0 | | | 22.3 | | | 0 | | | 0 | | | 0 | | | 381.2 | |
Other | 81.6 | | | 12.9 | | | 1.1 | | | 215.4 | | | 2.8 | | | (114.7) | | | 199.1 | |
Total Revenues | $ | 1,432.4 | | | $ | 416.0 | | | $ | 140.6 | | | $ | 215.4 | | | $ | 2.8 | | | $ | (114.7) | | | $ | 2,092.5 | |
| | | | NINE MONTHS ENDED | | SIX MONTHS ENDED |
| | SEPTEMBER 30, 2019 | | JUNE 30, 2020 |
| | Lift truck business | | | Lift truck business | |
| | Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total | | Americas | | EMEA | | JAPIC | | Bolzoni | | Nuvera | | Elims | | Total |
Dealer sales | Dealer sales | $ | 787.1 | | | $ | 454.3 | | | $ | 167.0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,408.4 | | Dealer sales | $ | 497.7 | | | $ | 217.1 | | | $ | 77.2 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 792.0 | |
Direct customer sales | Direct customer sales | 392.5 | | | 10.3 | | | — | | | 0 | | | 0 | | | 0 | | | 402.8 | | Direct customer sales | 255.7 | | | 6.0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 261.7 | |
| Aftermarket sales | Aftermarket sales | 298.9 | | | 72.5 | | | 26.1 | | | 0 | | | 0 | | | 0 | | | 397.5 | | Aftermarket sales | 198.4 | | | 41.0 | | | 14.4 | | | 0 | | | 0 | | | 0 | | | 253.8 | |
Other | Other | 99.5 | | | 16.8 | | | 1.0 | | | 258.4 | | | 9.1 | | | (136.5) | | | 248.3 | | Other | 53.7 | | | 8.1 | | | 1.0 | | | 152.1 | | | 2.1 | | | (84.4) | | | 132.6 | |
Total Revenues | Total Revenues | $ | 1,578.0 | | | $ | 553.9 | | | $ | 194.1 | | | $ | 258.4 | | | $ | 9.1 | | | $ | (136.5) | | | $ | 2,457.0 | | Total Revenues | $ | 1,005.5 | | | $ | 272.2 | | | $ | 92.6 | | | $ | 152.1 | | | $ | 2.1 | | | $ | (84.4) | | | $ | 1,440.1 | |
Dealer sales are recognized when the Company transfers control based on the shipping terms of the contract, which is generally when the truck is shipped from the manufacturing facility to the dealer. The majority of direct customer sales are to National Account customers. In these transactions, the Company transfers control and recognizes revenue when it delivers the product to the customer according to the terms of the contract. Aftermarket sales represent parts sales, extended warranty and maintenance services. For the sale of aftermarket parts, the Company transfers control and recognizes revenue when parts are shipped to the customer. When customers are given the right to return eligible parts and accessories, the Company estimates the expected returns based on an analysis of historical experience. The Company adjusts estimated revenues at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes fixed. The Company recognizes revenue for extended warranty and maintenance agreements based on the standalone selling price over the life of the contract, which reflects the costs to perform under these contracts and corresponds with, and thereby depicts, the transfer of control to the customer. Bolzoni revenue from external customers is primarily the sale of attachments to customers. In these transactions, the Company transfers control and recognizes revenue according to the shipping terms of the contract. In the United States, Bolzoni also has revenue for sales of lift truck components to HYGLift Truck plants. Nuvera's revenues include development funding from third-party development agreements and the sale of battery box replacement units, fuel cell stacks and engines to third parties and to HYG.Lift Truck. In all revenue transactions, the Company receives cash equal to the invoice price and amount of consideration received and the revenue recognized may vary with changes in marketing incentives. Intercompany revenues between Bolzoni, Nuvera and the lift truck business have been eliminated.
Deferred Revenue: The Company defers revenue for transactions that have not met the criteria for recognition at the time payment is collected, including extended warranties and maintenance contracts. In addition, for certain products, services and customer types, the Company collects payment prior to the transfer of control to the customer.
| | | | | |
| Deferred Revenue |
Balance, December 31, 20192020 | $ | 73.370.5 | |
Customer deposits and billings | 21.023.8 | |
Revenue recognized | (26.0)(23.1) | |
Foreign currency effect | (0.1) | |
Balance, SeptemberJune 30, 20202021 | $ | 68.371.1 | |
Note 4—Business Segments
The Company’s reportable segments for the lift truck business include the following three management units: the Americas, EMEA and JAPIC. Americas includes operations in the United States, Canada, Mexico, Brazil, Latin America and its corporate headquarters. EMEA includes operations in Europe, the Middle East and Africa. JAPIC includes operations in the Asia and Pacific regions, including China, as well as the equity earnings of SN operations. Certain amounts are allocated to these geographic management units and are included in the segment results presented below, including product development costs, corporate headquarter's expenses and certain information technology infrastructure costs. These allocations among geographic management units are determined by senior management and not directly incurred by the geographic operations. In addition, other costs are incurred directly by these geographic management units based upon the location of the manufacturing plant or sales units, including manufacturing variances, product liability, warranty and sales discounts, which may not be associated with the geographic management unit of the ultimate end user sales location where revenues and margins are reported. Therefore, the reported results of each segment for the lift truck business cannot be considered stand-alone entities as all segments are inter-related and integrate into a single global lift truck business.
The Company reports the results of both Bolzoni and Nuvera as separate segments. Intercompany sales between Nuvera, Bolzoni and the lift truck business have been eliminated.
Financial information for each reportable segment is presented in the following table:
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| SEPTEMBER 30 | | SEPTEMBER 30 |
| 2020 | | 2019 | | 2020 | | 2019 |
Revenues from external customers | | | | | | | |
Americas | $ | 426.9 | | | $ | 505.8 | | | $ | 1,432.4 | | | $ | 1,578.0 | |
EMEA | 143.8 | | | 161.7 | | | 416.0 | | | 553.9 | |
JAPIC | 48.0 | | | 57.8 | | | 140.6 | | | 194.1 | |
Lift truck business | 618.7 | | | 725.3 | | | 1,989.0 | | | 2,326.0 | |
Bolzoni | 63.3 | | | 75.8 | | | 215.4 | | | 258.4 | |
Nuvera | 0.7 | | | 2.4 | | | 2.8 | | | 9.1 | |
Eliminations | (30.3) | | | (37.5) | | | (114.7) | | | (136.5) | |
Total | $ | 652.4 | | | $ | 766.0 | | | $ | 2,092.5 | | | $ | 2,457.0 | |
Gross profit (loss) | | | | | | | |
Americas | $ | 65.7 | | | $ | 90.3 | | | $ | 240.3 | | | $ | 261.8 | |
EMEA | 22.4 | | | 26.1 | | | 57.4 | | | 79.6 | |
JAPIC | 6.2 | | | 8.6 | | | 14.9 | | | 23.1 | |
Lift truck business | 94.3 | | | 125.0 | | | 312.6 | | | 364.5 | |
Bolzoni | 12.1 | | | 13.0 | | | 40.5 | | | 44.1 | |
Nuvera | (2.7) | | | (3.1) | | | (8.5) | | | (7.6) | |
Eliminations | (0.3) | | | 0.1 | | | (0.9) | | | (0.4) | |
Total | $ | 103.4 | | | $ | 135.0 | | | $ | 343.7 | | | $ | 400.6 | |
| | | | | | | |
| | | THREE MONTHS ENDED | | NINE MONTHS ENDED | | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 | | JUNE 30 | | JUNE 30 |
| | | 2021 | | 2020 | | 2021 | | 2020 |
Revenues from external customers | | Revenues from external customers | | | | | | | |
Americas | | Americas | $ | 479.1 | | | $ | 454.8 | | | $ | 938.8 | | | $ | 1,005.5 | |
EMEA | | EMEA | 175.1 | | | 120.1 | | | 345.8 | | | 272.2 | |
JAPIC | | JAPIC | 65.0 | | | 48.0 | | | 125.5 | | | 92.6 | |
Lift truck business | | Lift truck business | 719.2 | | | 622.9 | | | 1,410.1 | | | 1,370.3 | |
Bolzoni | | Bolzoni | 84.8 | | | 64.2 | | | 164.3 | | | 152.1 | |
Nuvera | | Nuvera | 0.3 | | | 0.7 | | | 0.3 | | | 2.1 | |
Eliminations | | Eliminations | (38.7) | | | (33.4) | | | (76.9) | | | (84.4) | |
Total | | Total | $ | 765.6 | | | $ | 654.4 | | | $ | 1,497.8 | | | $ | 1,440.1 | |
Gross profit (loss) | | Gross profit (loss) | | | | | | | |
Americas | | Americas | $ | 70.4 | | | $ | 74.9 | | | $ | 145.7 | | | $ | 174.6 | |
EMEA | | EMEA | 26.6 | | | 15.7 | | | 50.1 | | | 35.0 | |
JAPIC | | JAPIC | 6.2 | | | 4.2 | | | 12.8 | | | 8.7 | |
Lift truck business | | Lift truck business | 103.2 | | | 94.8 | | | 208.6 | | | 218.3 | |
Bolzoni | | Bolzoni | 15.8 | | | 11.5 | | | 32.2 | | | 28.4 | |
Nuvera | | Nuvera | (2.5) | | | (3.2) | | | (5.8) | | | (5.8) | |
Eliminations | | Eliminations | (0.1) | | | 0.5 | | | (0.2) | | | (0.6) | |
Total | | Total | $ | 116.4 | | | $ | 103.6 | | | $ | 234.8 | | | $ | 240.3 | |
| | 2020 | | 2019 | | 2020 | | 2019 | | | | | | | | |
Operating profit (loss) | Operating profit (loss) | | | | | Operating profit (loss) | | | | |
Americas | Americas | $ | 16.1 | | | $ | 29.5 | | | $ | 77.9 | | | $ | 71.0 | | Americas | $ | 13.6 | | | $ | 23.3 | | | $ | 28.2 | | | $ | 61.8 | |
EMEA | EMEA | 3.3 | | | 1.0 | | | (4.0) | | | 5.7 | | EMEA | 3.7 | | | (2.8) | | | 3.8 | | | (7.3) | |
JAPIC | JAPIC | (3.2) | | | (2.5) | | | (12.7) | | | (8.8) | | JAPIC | (1.9) | | | (3.5) | | | (4.4) | | | (9.5) | |
Lift truck business | Lift truck business | 16.2 | | | 28.0 | | | 61.2 | | | 67.9 | | Lift truck business | 15.4 | | | 17.0 | | | 27.6 | | | 45.0 | |
Bolzoni | Bolzoni | 0.1 | | | 0.7 | | | 2.3 | | | 4.2 | | Bolzoni | (0.4) | | | (0.5) | | | 0.4 | | | 2.2 | |
Nuvera | Nuvera | (8.7) | | | (9.3) | | | (26.4) | | | (25.9) | | Nuvera | (9.0) | | | (8.3) | | | (18.8) | | | (17.7) | |
Eliminations | Eliminations | (0.3) | | | 0.1 | | | (0.9) | | | (0.4) | | Eliminations | (0.1) | | | 0.5 | | | (0.2) | | | (0.6) | |
Total | Total | $ | 7.3 | | | $ | 19.5 | | | $ | 36.2 | | | $ | 45.8 | | Total | $ | 5.9 | | | $ | 8.7 | | | $ | 9.0 | | | $ | 28.9 | |
Net income (loss) attributable to stockholders | Net income (loss) attributable to stockholders | | | | | | | | Net income (loss) attributable to stockholders | | | | | | | |
Americas | Americas | $ | 10.7 | | | $ | 20.8 | | | $ | 52.0 | | | $ | 50.6 | | Americas | $ | 5.0 | | | $ | 13.5 | | | $ | 14.5 | | | $ | 41.3 | |
EMEA | EMEA | 3.7 | | | 1.0 | | | (0.9) | | | 5.0 | | EMEA | 3.9 | | | (1.5) | | | 4.8 | | | (4.6) | |
JAPIC | JAPIC | (2.8) | | | (2.3) | | | (8.5) | | | (6.2) | | JAPIC | 0.4 | | | (1.1) | | | (1.8) | | | (5.7) | |
Lift truck business | Lift truck business | 11.6 | | | 19.5 | | | 42.6 | | | 49.4 | | Lift truck business | 9.3 | | | 10.9 | | | 17.5 | | | 31.0 | |
Bolzoni | Bolzoni | 0.1 | | | 0.7 | | | 2.2 | | | 2.6 | | Bolzoni | (0.6) | | | (0.6) | | | 0 | | | 2.1 | |
Nuvera | Nuvera | (6.1) | | | (5.8) | | | (18.6) | | | (17.9) | | Nuvera | (6.6) | | | (5.8) | | | (10.4) | | | (12.5) | |
Eliminations | Eliminations | (0.5) | | | (1.6) | | | (2.2) | | | (1.7) | | Eliminations | (0.2) | | | (0.9) | | | 0.4 | | | (1.7) | |
Total | Total | $ | 5.1 | | | $ | 12.8 | | | $ | 24.0 | | | $ | 32.4 | | Total | $ | 1.9 | | | $ | 3.6 | | | $ | 7.5 | | | $ | 18.9 | |
Note 5—Income Taxes
The income tax provision includes U.S. federal, state and local, and foreign income taxes and is generally based on the application of a forecasted annual income tax rate applied to the current quarter's year-to-date pre-tax income or loss. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company's annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the Company's ability to use tax credits and net operating loss carryforwards and capital loss carryforwards, and available
tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates and certain circumstances with respect to valuation allowances or the tax effect of other unusual or nonrecurring transactions or adjustments are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the estimated annual effective income tax rate. Additionally, the Company's interim effective income tax rate is computed and applied without regard to pre-tax losses where such losses are not expected to generate a current-year tax benefit.
The Tax Cuts and Jobs Act ("Tax Reform Act") includes anti-deferral and anti-base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions require the Company to include non-U.S. earnings in excess of an allowable return on the Company’s non-U.S. subsidiary’ssubsidiaries' tangible assets in its U.S. income tax return. The Company has elected to account for GILTI tax in the period in which it is incurred. The BEAT provisions in the Tax Reform Act created a minimum tax where a lower tax rate is applied to pre-taxtaxable income determined without the benefit of certain base-erosion payments made to related non-U.S. corporations. The Company is taxed under this regime if such minimum tax exceeds the regular U.S. corporate income tax. The GILTI and BEAT provisions, when applicable, are included in permanent adjustments in the table below.
A reconciliation of the consolidated federal statutory rate to the reported income tax rate is as follows:
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| | THREE MONTHS ENDED | | NINE MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 |
| | 2020 | | 2019 | | 2020 | | 2019 |
Income before income taxes | | $ | 6.4 | | | $ | 18.0 | | | $ | 27.8 | | | $ | 44.0 | |
Statutory taxes (21%) | | $ | 1.3 | | | $ | 3.8 | | | $ | 5.8 | | | $ | 9.2 | |
Interim adjustment | | 3.4 | | | (0.6) | | | 0.8 | | | (0.2) | |
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Permanent adjustments | | (3.1) | | | 1.6 | | | 2.2 | | | 1.3 | |
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Discrete items | | (0.9) | | | 0.1 | | | (6.3) | | | 0.5 | |
Income tax provision | | $ | 0.7 | | | $ | 4.9 | | | $ | 2.5 | | | $ | 10.8 | |
Reported income tax rate | | 10.9 | % | | 27.2 | % | | 9.0 | % | | 24.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | JUNE 30 | | JUNE 30 |
| | 2021 | | 2020 | | 2021 | | 2020 |
Income (loss) before income taxes | | $ | (0.1) | | | $ | 1.7 | | | $ | 8.4 | | | $ | 21.4 | |
Statutory taxes (21%) | | $ | 0 | | | $ | 0.4 | | | $ | 1.8 | | | $ | 4.5 | |
Interim adjustment | | 0.2 | | | (2.6) | | | 0.5 | | | (2.6) | |
Permanent adjustments: | | | | | | | | |
Federal income tax credits | | (0.3) | | | (3.5) | | | (0.6) | | | (4.1) | |
Non-U.S. rate differences | | (0.8) | | | 0.4 | | | (0.7) | | | 0.1 | |
Equity interest earnings | | (0.2) | | | (1.0) | | | (0.3) | | | (1.3) | |
State income taxes | | (0.3) | | | (0.6) | | | (0.3) | | | 0 | |
Valuation allowance | | 0.4 | | | 2.9 | | | 0.5 | | | 3.8 | |
Global intangible low-taxed income | | 0.5 | | | 2.6 | | | 0.9 | | | 2.7 | |
Base-erosion and anti-abuse tax | | 0.2 | | | 4.7 | | | 0.2 | | | 5.3 | |
Other | | 0 | | | (1.3) | | | 0.2 | | | (1.2) | |
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Discrete items | | (2.1) | | | (4.3) | | | (2.2) | | | (5.4) | |
Income tax provision (benefit) | | $ | (2.4) | | | $ | (2.3) | | | $ | 0 | | | $ | 1.8 | |
Reported income tax rate | | n.m. | | n.m. | | n.m. | | 8.4 | % |
n.m. - not meaningful | | | | | | | | |
During the thirdsecond quarter of 2021 and 2020, the Company recognized a discrete tax benefit of $1.0$3.3 million related to domestic provision-to-return items, which was primarily related to BEAT.
During the second quarter of 2020, the Company recognized a discrete tax benefit ofand $4.3 million, respectively, related to the expiration of the statute of limitations for uncertain tax positions related to acquisitions for which an offsetting pre-tax indemnity receivable was also recorded. The expense for the release of the indemnity receivable was recorded in pre-tax earnings on the line “Other, net” in the unaudited condensed consolidated statements of operations.
During the thirdsecond quarter of 2019,2021, the Company recognized a discrete tax charge of $0.8$1.4 million related to foreign law changes and settlements includingfor the tax impact of the pretax Brazilian court settlement contingency.favorable adjustment for social contribution taxes previously imposed on material purchases in Brazil. See Note 12 for additional information. This was mostly offset by discrete tax benefits recognized of $0.3 million and $0.4 million related to tax contingencies and return to provision items, respectively.
Note 6—Reclassifications from OCI
The following table summarizes reclassifications out of Accumulated Other Comprehensive Income ("OCI") as recorded in the unaudited condensed consolidated statements of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Details about OCI Components | | Amount Reclassified from OCI | | Affected Line Item in the Statement Where Net Income Is Presented |
| | THREE MONTHS ENDED | | NINE MONTHS ENDED | | |
| | SEPTEMBER 30 | | SEPTEMBER 30 | | |
| | 2020 | | 2019 | | 2020 | | 2019 | | |
Gain (loss) on cash flow hedges: | | | | | | | | | | |
Interest rate contracts | | $ | 0.7 | | | $ | 0 | | | $ | 1.3 | | | $ | (0.3) | | | Interest expense |
| | | | | | | | | | |
Foreign exchange contracts | | (3.5) | | | (2.3) | | | (15.4) | | | (6.7) | | | Cost of sales |
Total before tax | | (2.8) | | | (2.3) | | | (14.1) | | | (7.0) | | | Income before income taxes |
Tax benefit | | 0.8 | | | 0.5 | | | 3.7 | | | 1.9 | | | Income tax provision |
Net of tax | | $ | (2.0) | | | $ | (1.8) | | | $ | (10.4) | | | $ | (5.1) | | | Net income |
Amortization of defined benefit pension items: | | | | | | | | | | |
Actuarial loss | | $ | (1.1) | | | $ | (0.9) | | | $ | (3.4) | | | $ | (2.9) | | | Other, net |
| | | | | | | | | | |
| | | | | | | | | | |
Total before tax | | (1.1) | | | (0.9) | | | (3.4) | | | (2.9) | | | Income before income taxes |
Tax benefit | | 0.1 | | | 0.1 | | | 0.6 | | | 0.5 | | | Income tax provision |
Net of tax | | $ | (1.0) | | | $ | (0.8) | | | $ | (2.8) | | | $ | (2.4) | | | Net income |
Total reclassifications for the period | | $ | (3.0) | | | $ | (2.6) | | | $ | (13.2) | | | $ | (7.5) | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Details about OCI Components | | Amount Reclassified from OCI | | Affected Line Item in the Statement Where Net Income Is Presented |
| | THREE MONTHS ENDED | | SIX MONTHS ENDED | | |
| | JUNE 30 | | JUNE 30 | | |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
Gain (loss) on cash flow hedges: | | | | | | | | | | |
Interest rate contracts | | $ | 0.7 | | | $ | 0.5 | | | $ | 1.3 | | | $ | 0.6 | | | Interest expense |
| | | | | | | | | | |
Foreign exchange contracts | | 1.4 | | | (7.8) | | | 1.5 | | | (11.9) | | | Cost of sales |
Total before tax | | 2.1 | | | (7.3) | | | 2.8 | | | (11.3) | | | Income before income taxes |
Tax (expense) benefit | | (0.4) | | | 1.9 | | | (0.5) | | | 2.9 | | | Income tax provision |
Net of tax | | $ | 1.7 | | | $ | (5.4) | | | $ | 2.3 | | | $ | (8.4) | | | Net income |
Amortization of defined benefit pension items: | | | | | | | | | | |
Actuarial loss | | $ | (1.4) | | | $ | (1.2) | | | $ | (2.8) | | | $ | (2.3) | | | Other, net |
| | | | | | | | | | |
| | | | | | | | | | |
Total before tax | | (1.4) | | | (1.2) | | | (2.8) | | | (2.3) | | | Income before income taxes |
Tax benefit | | 0.3 | | | 0.3 | | | 0.6 | | | 0.5 | | | Income tax provision |
Net of tax | | $ | (1.1) | | | $ | (0.9) | | | $ | (2.2) | | | $ | (1.8) | | | Net income |
Total reclassifications for the period | | $ | 0.6 | | | $ | (6.3) | | | $ | 0.1 | | | $ | (10.2) | | | |
Note 7—Current and Long-Term Financing
On May 28, 2021, the Company entered into an agreement for a $225.0 million term loan (the “Term Loan”) which expires on May 28, 2028 (the "Maturity Date"). The Term Loan replaced the Company’s previous term loan facility, which was set to mature on May 30, 2023.
The Term Loan requires quarterly principal payments on the last day of each March, June, September and December commencing September 30, 2021 in an amount equal to $562,500 and the final principal repayment is due in May 2028. The Term Loan Borrower may also be required to make mandatory prepayments, in certain circumstances, as provided in the Term Loan.
The obligations under the Term Loan are generally secured by a first priority lien on the present and future shares of capital stock, material real property, fixtures and general intangibles consisting of intellectual property and a second priority lien on working capital assets of the Company, which includes, but is not limited to cash and cash equivalents, accounts receivable and inventory.
Borrowings under the Term Loan bear interest at a floating rate, which can be a base rate or Eurodollar rate, as defined in the Term Loan, plus an applicable margin. The applicable margin is 2.50% for base rate loans and 3.50% for Eurodollar loans. In addition, the Term Loan includes a Eurodollar rate floor of 0.50%.
In addition, the Term Loan includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Term Loan. The Term Loan limits the payment of dividends and other restricted payments the Company, including its subsidiaries may make up to $50.0 million in any fiscal year. Additional dividends may be paid if the consolidated total net leverage ratio, as defined in the Term Loan, does not exceed 2.50 to 1.00 at the time of the payment. The Term Loan also contains a provision requiring a premium to be paid in the event of a repricing of the borrowings under the Term Loan, whether by amendment or entry into new loans, within the six-month period following entry into the Term Loan.
At the time of execution of the Term Loan, approximately $1.5 million of deferred financing fees relating to the old term loan were expensed, which was recorded on the line "Other, net" in the unaudited condensed consolidated statements of operations. In addition, approximately $5.8 million of additional deferred financing fees were incurred in connection with the Term Loan.
On June 24, 2021, the Company entered into an amended and restated agreement for a $300.0 million secured floating-rate revolving credit facility (as amended, the "Facility"). The Facility consists of a domestic revolving credit facility in the initial amount of $210.0 million and a foreign revolving credit facility in the initial amount of $90.0 million. The facility expires June 24, 2026. The Facility replaced the Company's previous revolving credit facility, which was to expire April 28, 2022. The Facility can be increased to up to $400.0 million over the term of the Facility in minimum increments of $10.0 million, subject to approval by the lenders.
The obligations under the Facility are generally secured by a first priority lien on working capital assets of the Company, which includes but is not limited to cash and cash equivalents, accounts receivable and inventory, and a second priority lien on the present and future shares of capital stock, fixtures and general intangibles consisting of intellectual property.
Borrowings under the Facility bear interest at a floating rate, which can be a base rate, LIBOR or EURIBOR, as defined in the Facility, plus an applicable margin. The applicable margins are based on the total excess availability, as defined in the Facility, and range from 0.25% to 0.75% for U.S. base rate loans and 1.25% to 1.75% for LIBOR, EURIBOR and foreign base rate loans. For the period prior to June 30, 2021, the applicable margins under the Facility are 0.25% for U.S. base rate loans and 1.25% for LIBOR, EURIBOR and foreign base rate loans. In addition, the Facility requires the payment of a fee of 0.25% per annum on the unused commitment based on the average daily outstanding balance during the preceding month.
The Facility includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company and its subsidiaries subject to certain thresholds, as provided in the Facility. The Facility limits the payment of dividends and other restricted payments the Company, including its subsidiaries, may make unless certain total excess availability and/or fixed charge coverage ratio thresholds, each as set forth in the Facility, are satisfied. The Facility also requires the Company, including its subsidiaries to achieve a minimum fixed charge coverage ratio in which total excess availability is less than the greater of 10% of the total borrowing base, as defined in the Facility, and $20.0 million.
The Company incurred approximately $1.8 million of additional deferred financing fees in connection with the Facility.
Note 7—8—Financial Instruments and Derivative Financial Instruments
Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The fair values of revolving credit agreements and long-term debt, excluding capital leases, were determined using current rates offered for similar obligations taking into account company credit risk. This valuation methodology is Level 2 as defined in the fair value hierarchy. At SeptemberJune 30, 2021, the fair value and carrying value of revolving credit agreements and long-term debt, excluding finance leases, was $318.5 million and $319.6 million, respectively. At December 31, 2020, the fair value and carrying value of revolving credit agreements and long-term debt, excluding finance leases, was $264.2$257.2 million and $268.8 million, respectively. At December 31, 2019, the fair value and carrying value of revolving credit agreements and long-term debt, excluding finance leases, was $265.1 million and $266.0$260.5 million, respectively.
Derivative Financial Instruments
The Company uses forward foreign currency exchange contracts to partially reduce risks related to transactions denominated in foreign currencies. These contracts hedge firm commitments and forecasted transactions relating to cash flows associated with sales and purchases denominated in non-functional currencies. The Company offsets fair value amounts related to foreign currency exchange contracts executed with the same counterparty. Changes in the fair value of forward foreign currency exchange contracts that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in cost of sales.
The Company periodically enters into foreign currency exchange contracts that do not meet the criteria for hedge accounting. These derivatives are used to reduce the Company's exposure to foreign currency risk related to forecasted purchase or sales transactions or forecasted intercompany cash payments or settlements. Gains and losses on these derivatives are generally recognized in cost of sales.
The Company periodically enters into forward foreign currency contracts that are designated as net investment hedges of the Company's net investment in its foreign subsidiaries. For derivative instruments that are designated and qualified as a hedge of a net investment in foreign currency, the gain or loss is reported in other comprehensive income as part of the cumulative translation adjustment to the extent it is effective. The Company utilizes the forward-rate method of assessing hedge effectiveness.
The Company periodically enters into cross-currency swaps, which hedge the variability
The Company uses interest rate swap agreements to partially reduce risks related to floating rate financing agreements that are subject to changes in the market rate of interest. Terms of the interest rate swap agreements require the Company to receive a variable interest rate and pay a fixed interest rate. The Company's interest rate swap agreements and the associated variable rate financings are predominately based upon the one monthone-month LIBOR. Changes in the fair value of interest rate swap agreements that are effective as hedges are recorded in OCI. Deferred gains or losses are reclassified from OCI to the unaudited condensed consolidated statements of operations in the same period as the gains or losses from the underlying transactions are recorded and are generally recognized in interest expense.
Cash flows from hedging activities are reported in the unaudited condensed consolidated statements of cash flows with the same classification as the hedged item, generally as a component of cash flows from operations.
The Company measures its derivatives at fair value on a recurring basis using significant observable inputs. This valuation methodology is Level 2 as defined in the fair value hierarchy. The Company uses a present value technique that incorporates yield curves and foreign currency spot rates to value its derivatives and also incorporates the effect of the Company's and its counterparties' credit risk into the valuation.
The Company does not currently hold any nonderivative instruments designated as hedges or any derivatives designated as fair value hedges.
Foreign Currency Derivatives: The Company held forward foreign currency exchange contracts with total notional amounts of $870.7 million$1.0 billion at SeptemberJune 30, 2020,2021, primarily denominated in euros, Japanese yen, U.S. dollars, Japanese yen, Chinese renminbi, Mexican pesos, Swedish kroner, British pounds Swedish kroner and Australian dollars. The Company held forward foreign currency exchange contracts with total notional amounts of $960.9$840.5 million at December 31, 2019,2020, primarily denominated in euros, U.S. dollars, Japanese yen, British pounds, Chinese renminbi, Mexican pesos, Australian dollars, Swedish kroner Brazilian real and Chinese renminbi.Australian dollars. The fair value of these contracts approximated a net liabilityasset of $3.3$2.3 million and $19.8$23.5 million at SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively.
Forward foreign currency exchange contracts that qualify for hedge accounting are generally used to hedge transactions expected to occur within the next 36 months. The mark-to-market effect of forward foreign currency exchange contracts that are considered effective as hedges has been included in OCI. Based on market valuations at SeptemberJune 30, 2020, $4.12021, $3.7 million of the amount of net deferred lossgain included in OCI at SeptemberJune 30, 20202021 is expected to be reclassified as expenseincome into the unaudited condensed consolidated statementstatements of operations over the next twelve months, as the transactions occur.
Interest Rate Derivatives: The Company holds certain contracts that hedge interest payments on its $200.0$225.0 million Term Loan borrowings. In the second quarter of 2021, the Company entered into new interest rate swaps with a six-year term loan (the "Term Loan") borrowings. and $180.0 million notional amount. The previous interest rate swaps were amended and included in the new interest rate swaps. The fair value of the previous interest rate swaps will be amortized over the remaining original term. In addition, the Company holds certain contracts that hedge interest payments on Bolzoni's debt.
The following table summarizes the notional amounts, related rates, excluding spreads, and remaining terms of interest rate swap agreements at SeptemberJune 30, 20202021 and December 31, 2019:2020:
| Notional Amount | Notional Amount | | Average Fixed Rate | | Notional Amount | | Average Fixed Rate | |
September 30 | | December 31 | | September 30 | | December 31 | | |
2020 | | 2019 | | 2020 | | 2019 | | Term at September 30, 2020 | |
JUNE 30 | | JUNE 30 | | DECEMBER 31 | | JUNE 30 | | DECEMBER 31 | |
2021 | | 2021 | | 2020 | | 2021 | | 2020 | | Term at June 30, 2021 |
$ | 56.5 | | | $ | 56.5 | | | 1.94 | % | | 1.94 | % | | Extending to November 2022 | 180.0 | | | $ | 0 | | | 1.68 | % | | 0 | % | | Extending to May 2027 |
$ | 67.9 | | | $ | 74.6 | | | 2.20 | % | | 2.20 | % | | Extending to May 2023 | 16.0 | | | $ | 19.0 | | | (0.14) | % | | (0.10) | % | | Extending to September 2025 |
$ | | 0 | | | $ | 56.5 | | | 0 | % | | 1.94 | % | | Terminated May 2021 |
$ | | 0 | | | $ | 65.7 | | | 0 | % | | 2.20 | % | | Terminated May 2021 |
The fair value of all interest rate swap agreements was a net liability of $5.5 million and $2.1$4.9 million at SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. The mark-to-market effect of interest rate swap agreements that are considered effective as hedges has been included in OCI. Based on market valuations at SeptemberJune 30, 2020, $1.82021, $2.7 million of the amount included in OCI as net deferred loss is expected to be reclassified as expense in the unaudited condensed consolidated statementstatements of operations over the next twelve months, as cash flow payments are made in accordance with the interest rate swap agreements.
The following table summarizes the fair value of derivative instruments reflected on a gross basis by contract as recorded in the unaudited condensed consolidated balance sheets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset Derivatives | | Liability Derivatives |
| Balance Sheet Location | | SEPTEMBER 30 2020 | | DECEMBER 31 2019 | | Balance Sheet Location | | SEPTEMBER 30 2020 | | DECEMBER 31 2019 |
Derivatives designated as hedging instruments | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | |
Interest rate swap agreements | | | | | | | | | | |
| | | | | | | | | | | |
Current | Other current liabilities | | $ | 0 | | | $ | 0 | | | Other current liabilities | | $ | 2.5 | | | $ | 0.7 | |
| | | | | | | | | | | |
Long-term | Other long-term liabilities | | 0 | | | 0 | | | Other long-term liabilities | | 3.0 | | | 1.4 | |
| | | | | | | | | | | |
Foreign currency exchange contracts | | | | | | | | | | |
Current | Prepaid expenses and other | | 3.7 | | | 3.1 | | | Prepaid expenses and other | | 1.5 | | | 1.5 | |
| Other current liabilities | | 3.4 | | | 1.7 | | | Other current liabilities | | 8.7 | | | 17.1 | |
Long-term | Other non-current assets | | 4.7 | | | 0 | | | Other non-current assets | | 1.7 | | | 0 | |
| Other long-term liabilities | | 0 | | | 3.5 | | | Other long-term liabilities | | 1.8 | | | 9.6 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
Total derivatives designated as hedging instruments | | $ | 11.8 | | | $ | 8.3 | | | | | $ | 19.2 | | | $ | 30.3 | |
Derivatives not designated as hedging instruments | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Foreign currency exchange contracts | | | | | | | | | | |
Current | Prepaid expenses and other | | 1.5 | | | 0.4 | | | Prepaid expenses and other | | 1.9 | | | 0.2 | |
| Other current liabilities | | 0.4 | | | 2.3 | | | Other current liabilities | | 1.4 | | | 2.4 | |
| | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
Total derivatives not designated as hedging instruments | | $ | 1.9 | | | $ | 2.7 | | | | | $ | 3.3 | | | $ | 2.6 | |
Total derivatives | | $ | 13.7 | | | $ | 11.0 | | | | | $ | 22.5 | | | $ | 32.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Asset Derivatives | | Liability Derivatives |
| Balance Sheet Location | | JUNE 30 2021 | | DECEMBER 31 2020 | | Balance Sheet Location | | JUNE 30 2021 | | DECEMBER 31 2020 |
Derivatives designated as hedging instruments | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | |
Interest rate swap agreements | | | | | | | | | | |
| | | | | | | | | | | |
Current | Other current liabilities | | $ | 0.7 | | | $ | 0 | | | Other current liabilities | | $ | 2.8 | | | $ | 2.5 | |
| | | | | | | | | | | |
Long-term | Other long-term liabilities | | 1.4 | | | 0 | | | Other long-term liabilities | | 4.8 | | | 2.4 | |
| | | | | | | | | | | |
Foreign currency exchange contracts | | | | | | | | | | |
Current | Prepaid expenses and other | | 6.7 | | | 15.7 | | | Prepaid expenses and other | | 2.6 | | | 2.9 | |
| Other current liabilities | | 3.1 | | | 1.0 | | | Other current liabilities | | 3.2 | | | 3.6 | |
Long-term | Other non-current assets | | 2.8 | | | 11.3 | | | Other non-current assets | | 0.5 | | | 0.1 | |
| Other long-term liabilities | | 1.2 | | | 0 | | | Other long-term liabilities | | 2.0 | | | 0 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
Total derivatives designated as hedging instruments | | $ | 15.9 | | | $ | 28.0 | | | | | $ | 15.9 | | | $ | 11.5 | |
Derivatives not designated as hedging instruments | | | | | | | | | | |
Cash Flow Hedges | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Foreign currency exchange contracts | | | | | | | | | | |
Current | Prepaid expenses and other | | 0.3 | | | 2.8 | | | Prepaid expenses and other | | 1.4 | | | 0.9 | |
| Other current liabilities | | 0.9 | | | 0.7 | | | Other current liabilities | | 3.0 | | | 0.5 | |
| | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | |
Total derivatives not designated as hedging instruments | | $ | 1.2 | | | $ | 3.5 | | | | | $ | 4.4 | | | $ | 1.4 | |
Total derivatives | | $ | 17.1 | | | $ | 31.5 | | | | | $ | 20.3 | | | $ | 12.9 | |
The following table summarizes the offsetting of the fair value of derivative instruments on a gross basis by counterparty as recorded in the unaudited condensed consolidated balance sheets:
| | | Derivative Assets as of September 30, 2020 | | Derivative Liabilities as of September 30, 2020 | | Derivative Assets as of June 30, 2021 | | Derivative Liabilities as of June 30, 2021 |
| | Gross Amounts of Recognized Assets | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Assets | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount |
Cash Flow Hedges | Cash Flow Hedges | | | | | | | | | | | | | | | | | Cash Flow Hedges | | | | | | | | | | | | | | | | |
Interest rate swap agreements | Interest rate swap agreements | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 5.5 | | | $ | 0 | | | $ | 5.5 | | | $ | 5.5 | | Interest rate swap agreements | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 5.5 | | | $ | 0 | | | $ | 5.5 | | | $ | 5.5 | |
Foreign currency exchange contracts | Foreign currency exchange contracts | | 4.8 | | | (4.8) | | | 0 | | | 0 | | | 8.1 | | | (4.8) | | | 3.3 | | | 3.3 | | Foreign currency exchange contracts | | 5.3 | | | (3.0) | | | 2.3 | | | 2.3 | | | 3.0 | | | (3.0) | | | 0 | | | 0 | |
Total derivatives | Total derivatives | | $ | 4.8 | | | $ | (4.8) | | | $ | 0 | | | $ | 0 | | | $ | 13.6 | | | $ | (4.8) | | | $ | 8.8 | | | $ | 8.8 | | Total derivatives | | $ | 5.3 | | | $ | (3.0) | | | $ | 2.3 | | | $ | 2.3 | | | $ | 8.5 | | | $ | (3.0) | | | $ | 5.5 | | | $ | 5.5 | |
| | | Derivative Assets as of December 31, 2019 | | Derivative Liabilities as of December 31, 2019 | | Derivative Assets as of December 31, 2020 | | Derivative Liabilities as of December 31, 2020 |
| | Gross Amounts of Recognized Assets | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Assets | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset | | Net Amounts Presented | | Net Amount |
Cash Flow Hedges | Cash Flow Hedges | | | | | | | | | | | | | | | | | Cash Flow Hedges | | | | | | | | | | | | | | | | |
Interest rate swap agreements | Interest rate swap agreements | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2.1 | | | $ | 0 | | | $ | 2.1 | | | $ | 2.1 | | Interest rate swap agreements | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 4.9 | | | $ | 0 | | | $ | 4.9 | | | $ | 4.9 | |
Foreign currency exchange contracts | Foreign currency exchange contracts | | 1.8 | | | (1.8) | | | 0 | | | 0 | | | 21.6 | | | (1.8) | | | 19.8 | | | 19.8 | | Foreign currency exchange contracts | | 25.9 | | | (2.4) | | | 23.5 | | | 23.5 | | | 2.4 | | | (2.4) | | | 0 | | | 0 | |
Total derivatives | Total derivatives | | $ | 1.8 | | | $ | (1.8) | | | $ | 0 | | | $ | 0 | | | $ | 23.7 | | | $ | (1.8) | | | $ | 21.9 | | | $ | 21.9 | | Total derivatives | | $ | 25.9 | | | $ | (2.4) | | | $ | 23.5 | | | $ | 23.5 | | | $ | 7.3 | | | $ | (2.4) | | | $ | 4.9 | | | $ | 4.9 | |
The following table summarizes the pre-tax impact of derivative instruments as recorded in the unaudited condensed consolidated statements of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) | | Location of Gain or (Loss) Reclassified from OCI into Income (Effective Portion) | | Amount of Gain or (Loss) Reclassified from OCI into Income (Effective Portion) |
| | THREE MONTHS ENDED | | NINE MONTHS ENDED | | | | THREE MONTHS ENDED | | NINE MONTHS ENDED |
| | SEPTEMBER 30 | | | | SEPTEMBER 30 |
Derivatives Designated as Hedging Instruments | | 2020 | | 2019 | | 2020 | | 2019 | | | | 2020 | | 2019 | | 2020 | | 2019 |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | | $ | 1.2 | | | $ | (0.7) | | | $ | (2.2) | | | $ | (4.7) | | | Interest expense | | $ | 0.7 | | | $ | 0 | | | $ | 1.3 | | | $ | (0.3) | |
Foreign currency exchange contracts | | 20.1 | | | (19.7) | | | 4.2 | | | (29.6) | | | Cost of sales | | (3.5) | | | (2.3) | | | (15.4) | | | (6.7) | |
Total | | $ | 21.3 | | | $ | (20.4) | | | $ | 2.0 | | | $ | (34.3) | | | | | $ | (2.8) | | | $ | (2.3) | | | $ | (14.1) | | | $ | (7.0) | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Derivatives Not Designated as Hedging Instruments | | | | | | | | | | Location of Gain or (Loss) Recognized in Income on Derivative | | 2020 | | 2019 | | 2020 | | 2019 |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Foreign currency exchange contracts | | | | | | | | | | Cost of sales | | $ | (5.6) | | | $ | (1.9) | | | $ | (4.3) | | | $ | (4.3) | |
Total | | | | | | | | | | | | $ | (5.6) | | | $ | (1.9) | | | $ | (4.3) | | | $ | (4.3) | |
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) | | Location of Gain or (Loss) Reclassified from OCI into Income (Effective Portion) | | Amount of Gain or (Loss) Reclassified from OCI into Income (Effective Portion) |
| | THREE MONTHS ENDED | | SIX MONTHS ENDED | | | | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | JUNE 30 | | | | JUNE 30 |
Derivatives Designated as Hedging Instruments | | 2021 | | 2020 | | 2021 | | 2020 | | | | 2021 | | 2020 | | 2021 | | 2020 |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | |
Interest rate swap agreements | | $ | (0.6) | | | $ | 0.4 | | | $ | 0.7 | | | $ | (3.4) | | | Interest expense | | $ | 0.7 | | | $ | 0.5 | | | $ | 1.3 | | | $ | 0.6 | |
Foreign currency exchange contracts | | 7.0 | | | 10.4 | | | (14.3) | | | (15.9) | | | Cost of sales | | 1.4 | | | (7.8) | | | 1.5 | | | (11.9) | |
Total | | $ | 6.4 | | | $ | 10.8 | | | $ | (13.6) | | | $ | (19.3) | | | | | $ | 2.1 | | | $ | (7.3) | | | $ | 2.8 | | | $ | (11.3) | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Derivatives Not Designated as Hedging Instruments | | | | | | | | | | Location of Gain or (Loss) Recognized in Income on Derivative | | 2021 | | 2020 | | 2021 | | 2020 |
Cash Flow Hedges | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Foreign currency exchange contracts | | | | | | | | | | Cost of sales | | $ | (1.9) | | | $ | 2.8 | | | $ | (6.2) | | | $ | 1.3 | |
Total | | | | | | | | | | | | $ | (1.9) | | | $ | 2.8 | | | $ | (6.2) | | | $ | 1.3 | |
|
|
|
Note 8—9—Retirement Benefit Plans
The Company maintains various defined benefit pension plans that provide benefits based on years of service and average compensation during certain periods. The Company's policy is to make contributions to fund these plans within the range allowed by applicable regulations. Plan assets consist primarily of publicly traded stocks and government and corporate bonds.
Pension benefits for employees covered under the Company's U.S. and U.K. plans are frozen. Only certain grandfathered employees in the Netherlands still earn retirement benefits under a defined benefit pension plan. All other eligible employees of the Company, including employees whose pension benefits are frozen, receive retirement benefits under defined contribution retirement plans.
During the third quarter of 2020, the Company recognized a settlement loss of $1.2 million resulting from lump-sum distributions exceeding the total projected interest cost for the plan year for one of its U.S. pension plans. The Company remeasured the plan as of September 30, 2020 using a discount rate of 2.27%, compared to the December 31, 2019 discount
rate of 3.02%. As a result of the remeasurement, the funded status of the plan decreased by $2.7 million and accumulated other comprehensive income increased by $3.6 million ($2.8 million net of tax).
The Company presents the components of net benefit cost, other than service cost, in other (income) expense in the unaudited condensed consolidated statements of operations for its pension plans. Service cost for the Company's pension plans is reported in operating profit. The components of pension (income) expense are set forth below:
| | | THREE MONTHS ENDED | | NINE MONTHS ENDED | | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 | | JUNE 30 | | JUNE 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
U.S. Pension | U.S. Pension | | | | | | | | U.S. Pension | | | | | | | |
Interest cost | Interest cost | $ | 0.5 | | | $ | 0.6 | | | $ | 1.5 | | | $ | 1.9 | | Interest cost | $ | 0.3 | | | $ | 0.5 | | | $ | 0.7 | | | $ | 1.0 | |
Expected return on plan assets | Expected return on plan assets | (1.3) | | | (1.1) | | | (3.6) | | | (3.4) | | Expected return on plan assets | (1.1) | | | (1.1) | | | (2.3) | | | (2.3) | |
Settlement loss | 1.2 | | | 0 | | | 1.2 | | | 0 | | |
| Amortization of actuarial loss | Amortization of actuarial loss | 0.5 | | | 0.5 | | | 1.5 | | | 1.5 | | Amortization of actuarial loss | 0.5 | | | 0.5 | | | 1.0 | | | 1.0 | |
| Total | Total | $ | 0.9 | | | $ | 0 | | | $ | 0.6 | | | $ | 0 | | Total | $ | (0.3) | | | $ | (0.1) | | | $ | (0.6) | | | $ | (0.3) | |
Non-U.S. Pension | Non-U.S. Pension | | | | | | | | Non-U.S. Pension | | | | | | | |
Service cost | Service cost | $ | 0.1 | | | $ | 0 | | | $ | 0.1 | | | $ | 0.1 | | Service cost | $ | 0.1 | | | $ | 0 | | | $ | 0.1 | | | $ | 0 | |
Interest cost | Interest cost | 0.8 | | | 1.1 | | | 2.3 | | | 3.1 | | Interest cost | 0.7 | | | 0.7 | | | 1.3 | | | 1.5 | |
Expected return on plan assets | Expected return on plan assets | (2.7) | | | (2.5) | | | (8.1) | | | (7.7) | | Expected return on plan assets | (2.7) | | | (2.7) | | | (5.3) | | | (5.4) | |
Amortization of actuarial loss | Amortization of actuarial loss | 0.6 | | | 0.4 | | | 1.9 | | | 1.4 | | Amortization of actuarial loss | 0.9 | | | 0.7 | | | 1.8 | | | 1.3 | |
Total | Total | $ | (1.2) | | | $ | (1.0) | | | $ | (3.8) | | | $ | (3.1) | | Total | $ | (1.0) | | | $ | (1.3) | | | $ | (2.1) | | | $ | (2.6) | |
Note 9—10—Inventories
Inventories are summarized as follows:
| | | | | | | | | | | |
| SEPTEMBER 30 2020 | | DECEMBER 31 2019 |
Finished goods and service parts | $ | 268.6 | | | $ | 276.2 | |
Work in process | 23.3 | | | 22.1 | |
Raw materials | 248.3 | | | 310.5 | |
Total manufactured inventories | 540.2 | | | 608.8 | |
LIFO reserve | (49.9) | | | (48.9) | |
Total inventory | $ | 490.3 | | | $ | 559.9 | |
| | | | | | | | | | | |
| JUNE 30 2021 | | DECEMBER 31 2020 |
Finished goods and service parts | $ | 318.8 | | | $ | 269.0 | |
Work in process | 27.6 | | | 21.0 | |
Raw materials | 389.7 | | | 269.4 | |
Total manufactured inventories | 736.1 | | | 559.4 | |
LIFO reserve | (58.1) | | | (50.0) | |
Total inventory | $ | 678.0 | | | $ | 509.4 | |
Inventories are stated at the lower of cost or market for last-in, first-out (“LIFO”) inventory or lower of cost or net realizable value for first-in, first-out (“FIFO”) inventory. At SeptemberJune 30, 20202021 and December 31, 2019, 43%2020, 48% and 53%42%, respectively, of total inventories were determined using the LIFO method, which consists primarily of manufactured inventories, including service parts, for the lift truck business in the United States. The FIFO method is used with respect to all other inventories. An actual valuation of inventory under the LIFO method can be made only at the end of the year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management's estimates of expected year-end inventory levels and costs. Because these estimates are subject to change and may be different than the actual inventory levels and costs at the end of the year, interim results are subject to the final year-end LIFO inventory valuation.
Note 10—Goodwill and Intangible Assets
During the first nine months of 2020, broad measures taken by governments, businesses and others across the globe to limit the spread of COVID-19 adversely affected the Company. Production was significantly reduced or suspended at the Company's Chinese and European facilities for certain periods during the first and early second quarter of 2020. The significant decline in economic activity also reduced the demand for the Company's products from customers and limited the availability of components from suppliers. In addition, the Company’s stock price was volatile and declined significantly during the first quarter of 2020, consistent with broad trends in the global financial markets. These items, among others, were indicators of impairment and therefore, the Company performed interim goodwill and indefinite-lived intangible asset impairment tests as of March 31, 2020. The interim impairment analysis for goodwill and indefinite-lived intangible assets indicated the values of
these assets were not impaired as of March 31, 2020. In addition, the Company performed an impairment analysis of its tangible, right-of-use and other intangible assets that indicated the values of these assets were not impaired as of March 31, 2020. During the second quarter of 2020, the annual testing of goodwill for impairment was conducted as of May 1, 2020. The fair value of each reporting unit was in excess of its carrying value and thus no impairment existed. There were no further indicators of impairment during the third quarter of 2020.
Note 11—Product Warranties
The Company provides a standard warranty on its lift trucks, generally for twelve months or 1,000 to 2,000 hours. For certain series of lift trucks, the Company provides a standard warranty of one to two years or 2,000 or 4,000 hours. For certain components in some series of lift trucks, the Company provides a standard warranty of two to three years or 4,000 to 6,000 hours. The Company estimates the costs which may be incurred under its standard warranty programs and records a liability for such costs at the time product revenue is recognized.
In addition, the Company sells separately priced, extended warranty agreements for its lift trucks, which generally provide a warranty for an additional two to five years or up to 2,400 to 10,000 hours. The specific terms and conditions of those warranties vary depending upon the product sold and the country in which the Company does business. Revenue received for the sale of extended warranty contracts is deferred and recognized in the same manner as the costs incurred to perform under the warranty contracts.
The Company also maintains a quality enhancement program under which it provides for specifically identified field product improvements in its warranty obligation. Accruals under this program are determined based on estimates of the potential number of claims and the cost of those claims based on historical and anticipated costs.
The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Factors that affect the warranty liability include the number of units sold, historical and anticipated rates of warranty claims and the cost per claim.
Changes in the Company's current and long-term warranty obligations, including deferred revenue on extended warranty contracts, are as follows:
| | | | | |
| 20202021 |
Balance at December 31, 20192020 | $ | 65.264.7 | |
Current year warranty expense | 21.918.8 | |
Change in estimate related to pre-existing warranties | 0.9(0.4) | |
Payments made | (24.9)(13.9) | |
Foreign currency effect | 0.2(0.5) | |
Balance at SeptemberJune 30, 20202021 | $ | 63.368.7 | |
Note 12—Contingencies
Various legal and regulatory proceedings and claims have been or may be asserted against the Company relating to the conduct of its businesses, including product liability, environmental and other claims. These proceedings and claims are incidental to the ordinary course of business. Management believes that it has meritorious defenses and will vigorously defend the Company in these actions. Any costs that management estimates will be paid as a result of these claims are accrued when the liability is considered probable and the amount can be reasonably estimated. Although the ultimate disposition of these proceedings is not presently determinable, management believes, after consultation with its legal counsel, that the likelihood is remote that costs will be incurred materially in excess of accruals already recognized.
The Company previously filed legal actionslawsuits in Brazil to recover certain social integration and social contribution taxes paid overon gross sales, including the ICMS, receipts, which is a form of state value added tax. During the course of the lawsuit, many other taxpayers filed lawsuits with the same objective. Due to the increasing number of lawsuits filed, the Federal Supreme Court ("STF") declared that all ongoing legal cases should have their decision suspended until the STF decides on the matter, a decision that was expected to apply to all cases on this topic.
In 2019, the Company’s BrazilCompany's legal advisors in Brazil notified the Company that they received judicial notification that the Superior Judicial Court renderedSTF had issued a favorable decision onin the case granting the Company the right to recover, through offset ofby offsetting federal tax liabilities, amounts of overpayments collected by the government from 1999 to the present date. The judicial court decision is final and not subject to appeals. Based on analysis performed to date, theThe current estimate of the refund calculated on a gross basis is approximately 100110 million Brazilian reais, or approximately $18$22 million as of SeptemberJune 30, 2020.2021.
19Despite the favorable decision of the STF, the Brazilian tax authorities sought clarification in the same main lawsuit on certain issues, including the value of these credits (i.e., the gross rate or the net credit value), and certain other issues that could affect the Brazilian taxpayers' rights with respect to these credits, all of which could materially impact the realization of the credits. During the second quarter of 2021, the STF ruled in favor of taxpayers that the refund should be calculated on a gross basis.
The amount and ultimate timing of realization of these recoveries is dependent upon administrative approvals, generation of federal tax liabilities in Brazil eligible for offset and potential impacts of future legislative actions within Brazil, all of which are uncertain. Based upon a probability weighted analysis, including a reviewThe Company is in the process of historical earnings and trends, forecasted earnings,negotiating the relevant expirationsale of carryforwards and the potential of selling thethese credits at a significant discount the Company determinedand has revised the net realizable value of the credits isto approximately 829 million Brazilian reais, or $1.4$5.8 million as of SeptemberJune 30, 2020.2021. In addition, the Company has generated additional tax credits since the favorable decision in 2019 of approximately 12 million Brazilian reais, or approximately $2.4 million. The Company currently expectsrecorded approximately $6.3 million of income related to realize this amount within the next one to five years. Future legislative changes in Brazil, changes in the Company’s forecasted earnings or resolution of other uncertainties could impact therevised estimate of the amountnet realizable for these tax credits.
The Brazilian tax authorities have sought clarification before the Brazilian Supreme Court of certain matters, including the amountvalue of these credits (i.e.,in the gross rate or net credit amount), and certain other matters that could affectsecond quarter of 2021 in “Cost of Sales” in the rightsunaudited condensed consolidated statements of Brazilian taxpayers regarding these credits, all of which would materially impact the realization of the credits. Based on the opinions of our tax and legal advisors, we have not accrued any amounts related to potential future litigation regarding these credits.operations.
Note 13—Guarantees
Under various financing arrangements for certain customers, including independent retail dealerships, the Company provides recourse or repurchase obligations such that it would be obligated in the event of default by the customer. Terms of the third-party financing arrangements for which the Company is providing recourse or repurchase obligations generally range from one to five years. Total amounts subject to recourse or repurchase obligations at SeptemberJune 30, 20202021 and December 31, 20192020 were $147.0$121.7 million and $179.7$119.7 million, respectively. As of SeptemberJune 30, 2020,2021, losses anticipated under the terms of the recourse or repurchase obligations were not significant and reserves have been provided for such losses based on historical experience in the accompanying unaudited condensed consolidated financial statements. The Company generally retains a security interest in the related assets financed such that, in the event the Company would become obligated under the terms of the recourse or repurchase obligations, the Company would take title to the assets financed. The fair value of collateral held at SeptemberJune 30, 20202021 was approximately $208.8$185.4 million based on Company estimates. The Company estimates the fair value of the collateral using information regarding the original sales price, the current age of the equipment and general market conditions that influence the value of both new and used lift trucks. The Company also regularly monitors the external credit ratings of the entities for which it has provided recourse or repurchase obligations. As of SeptemberJune 30, 2020,2021, the Company did not believe there was a significant risk of non-payment or non-performance of the obligations by these entities; however, there can be no assurance that the risk may not increase in the future. In addition, the Company has an agreement with WF to limit its exposure to losses at certain eligible dealers. Under this agreement, losses related to $33.5$22.3 million of recourse or repurchase obligations for these certain eligible dealers are limited to 7.5% of their original loan balance, or $11.9$11.4 million as of SeptemberJune 30, 2020.2021. The $33.5$22.3 million is included in the $147.0$121.7 million of total amounts subject to recourse or repurchase obligations at SeptemberJune 30, 2020.2021.
Generally, the Company sells lift trucks through its independent dealer network or directly to customers. These dealers and customers may enter into a financing transaction with HYGFS or other unrelated third parties. HYGFS provides debt and lease financing to both dealers and customers. On occasion, the credit quality of a customer or credit concentration issues within WF
may require the Company to provide recourse or repurchase obligations of the lift trucks purchased by customers and financed through HYGFS. At SeptemberJune 30, 2020,2021, approximately $121.9$95.7 million of the Company's total recourse or repurchase obligations of $147.0$121.7 million related to transactions with HYGFS. In connection with the joint venture agreement, the Company also provides a guarantee to WF for 20% of HYGFS’ debt with WF, such that the Company would become liable under the terms of HYGFS’ debt agreements with WF in the case of default by HYGFS. At SeptemberJune 30, 2020,2021, loans from WF to HYGFS totaled $1.2$1.1 billion. Although the Company’s contractual guarantee was $242.9$225.6 million, the loans by WF to HYGFS are secured by HYGFS’ customer receivables, of which the Company guarantees $121.9$95.7 million. Excluding the HYGFS receivables guaranteed by the Company from HYGFS’ loans to WF, the Company’s incremental obligation as a result of this guarantee to WF is $222.9$208.6 million, which is secured by 20% of HYGFS' customer receivables and other secured assets of $296.3$278.1 million. HYGFS has not defaulted under the terms of this debt financing in the past, and although there can be no assurances, the Company is not aware of any circumstances that would cause HYGFS to default in future periods.
The following table includes the exposure amounts related to the Company's guarantees at SeptemberJune 30, 2020:
| | | | | | | | | | | | | | |
| | HYGFS | | Total |
Total recourse or repurchase obligations | | $ | 121.9 | | | $ | 147.0 | |
Less: exposure limited for certain dealers | | 33.5 | | | 33.5 | |
Plus: 7.5% of original loan balance | | 11.9 | | | 11.9 | |
| | 100.3 | | | 125.4 | |
Incremental obligation related to guarantee to WF | | 222.9 | | | 222.9 | |
Total exposure related to guarantees | | $ | 323.2 | | | $ | 348.3 | |
2021: | | | | | | | | | | | | | | |
| | HYGFS | | Total |
Total recourse or repurchase obligations | | $ | 95.7 | | | $ | 121.7 | |
Less: exposure limited for certain dealers | | 22.3 | | | 22.3 | |
Plus: 7.5% of original loan balance | | 11.4 | | | 11.4 | |
| | 84.8 | | | 110.8 | |
Incremental obligation related to guarantee to WF | | 208.6 | | | 208.6 | |
Total exposure related to guarantees | | $ | 293.4 | | | $ | 319.4 | |
Note 14—Equity and Debt Investments
The Company maintains an interest in one variable interest entity, HYGFS. HYGFS is a joint venture with WF formed primarily for the purpose of providing financial services to independent Hyster® and Yale® lift truck dealers and National Account customers in the United States and is included in the Americas segment. The Company does not have a controlling financial interest or have the power to direct the activities that most significantly affect the economic performance of HYGFS. Therefore, the Company is not the primary beneficiary and uses the equity method to account for its 20% interest in HYGFS. The Company does not consider its variable interest in HYGFS to be significant.
The Company has a 50% ownership interest in SN, a limited liability company which was formed primarily to manufacture and distribute Sumitomo-branded lift trucks in Japan and export Hyster®- and Yale®-branded lift trucks and related components and service parts outside of Japan. The Company purchases products from SN under agreed-upon terms. The Company's ownership in SN is also accounted for using the equity method of accounting and is included in the JAPIC segment.
The Company's percentage share of the net income or loss from its equity investments in HYGFS and SN is reported on the line “Income from unconsolidated affiliates” in the “Other (income) expense” section of the unaudited condensed consolidated statements of operations. The Company's equity investments are included on the line “Investment in Unconsolidated Affiliates” in the unaudited condensed consolidated balance sheets.
The Company's equity investments in unconsolidated affiliates recorded on the unaudited condensed consolidated balance sheets are as follows:
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| | | |
HYGFS | $ | 19.8 | | | $ | 22.8 | |
SN | 42.5 | | | 43.9 | |
Bolzoni | 0.4 | | | 0.3 | |
Dividends received from unconsolidated affiliates are summarized below:
| | | | | | | | | | | |
| NINE MONTHS ENDED |
| SEPTEMBER 30 |
| 2020 | | 2019 |
| | | |
HYGFS | $ | 6.4 | | | $ | 4.1 | |
SN | 0.9 | | | 1.0 | |
| $ | 7.3 | | | $ | 5.1 | |
Summarized financial information for HYGFS and SN is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| SEPTEMBER 30 | | SEPTEMBER 30 |
| 2020 | | 2019 | | 2020 | | 2019 |
Revenues | $ | 93.8 | | | $ | 103.8 | | | $ | 290.8 | | | $ | 323.8 | |
Gross profit | $ | 34.1 | | | $ | 35.0 | | | $ | 98.0 | | | $ | 109.9 | |
Income from continuing operations | $ | 12.3 | | | $ | 8.3 | | | $ | 23.2 | | | $ | 30.1 | |
Net income | $ | 12.3 | | | $ | 8.3 | | | $ | 23.2 | | | $ | 30.1 | |
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| | | |
HYGFS | $ | 20.0 | | | $ | 21.4 | |
SN | 43.8 | | | 44.6 | |
Bolzoni | 0.3 | | | 0.2 | |
Dividends received from unconsolidated affiliates are summarized below: | | | | | | | | | | | |
| SIX MONTHS ENDED |
| JUNE 30 |
| 2021 | | 2020 |
| | | |
HYGFS | $ | 5.1 | | | $ | 6.4 | |
SN | 0.4 | | | 0.9 | |
| $ | 5.5 | | | $ | 7.3 | |
Summarized financial information for HYGFS and SN is as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | SIX MONTHS ENDED |
| JUNE 30 | | JUNE 30 |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenues | $ | 106.7 | | | $ | 95.2 | | | $ | 209.9 | | | $ | 197.0 | |
Gross profit | $ | 40.3 | | | $ | 49.0 | | | $ | 78.1 | | | $ | 63.9 | |
Income from continuing operations | $ | 13.9 | | | $ | 4.5 | | | $ | 22.1 | | | $ | 10.9 | |
Net income | $ | 13.9 | | | $ | 4.5 | | | $ | 22.1 | | | $ | 10.9 | |
The Company has an equity investment in a third party valued using a quoted market price in an active market, or Level 1 in the fair value hierarchy. The Company's investment as of SeptemberJune 30, 20202021 and December 31, 20192020 was $1.5$2.0 million and $2.4$2.1 million, respectively. Any gain or loss on the investment is included on the line "Other" in the "Other (income) expense" section of the unaudited condensed consolidated statements of operations as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| SEPTEMBER 30 | | SEPTEMBER 30 |
| 2020 | | 2019 | | 2020 | | 2019 |
Gain (loss) on equity investment | $ | 0.2 | | | $ | (0.7) | | | $ | (1.0) | | | $ | (1.1) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | SIX MONTHS ENDED |
| JUNE 30 | | JUNE 30 |
| 2021 | | 2020 | | 2021 | | 2020 |
Gain (loss) on equity investment | $ | 1.1 | | | $ | (0.1) | | | $ | 0 | | | $ | (1.2) | |
TheDuring the first quarter of 2021, the Company has an approximately 19% ownership interest through common and redeemablesold its investment in preferred shares in a third party,of OneH2, Inc. for $15.7 million, including accrued dividends, and recognized a gain of $4.6 million. The gain on the sale of the investment is included on the line "Other, net" in the "Other (income) expense" section of the unaudited condensed consolidated statements of operations. The Company's investment was $11.6$0.8 million and $10.6$11.9 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively.
Note 15—Restructuring
During 2020, the Company performed an in-depth global review to help establish a more sustainable long-term cost structure. As a result, the Company plans to restructure its operations to optimize global commercial operations. The Company recognized a charge of approximately $4.4 million during the year ended December 31, 2020. These charges primarily related to severance, which was recorded on the line "Selling, general and administrative expenses" in the unaudited condensed consolidated statements of operations. During the second quarter of 2021, the Company recorded a provision of $0.1 million for additional severance. During the first six months of 2021, the Company recorded a benefit of $0.3 million as a result of changes in estimates of severance accruals. In addition, approximately $0.7 million and $1.3 million of severance payments were paid in the three and six-months ended June 30, 2021, respectively. The remaining severance payments are expected to be paid in 2021. In addition to the restructuring charge recorded during 2020, the Company anticipates it will incur subsequent charges, which were not eligible for accrual at June 30, 2021, of approximately $0.8 million for additional costs related to the restructuring, which the Company expects to incur during 2021.
Following is the detail of the cash charges incurred by reporting segment: | | | | | | | | | | | | | | | | | |
| Total charges incurred | | Total charges incurred through December 31, 2020 | | Total benefits recorded in the six months ended June 30, 2021 |
Americas | $ | 0.8 | | | $ | 1.0 | | | $ | (0.2) | |
EMEA | 2.0 | | | 2.0 | | | 0 | |
JAPIC | 1.3 | | | 1.4 | | | (0.1) | |
| $ | 4.1 | | | $ | 4.4 | | | $ | (0.3) | |
Following is an analysis of the activity related to the liability: | | | | | | | | | | | | | | | | | | | | | | | |
| Americas | | EMEA | ` | JAPIC | | Total |
Balance at January 1, 2021 | $ | 1.0 | | | $ | 2.0 | | | $ | 1.4 | | | $ | 4.4 | |
Provision | 0.1 | | | 0 | | | 0 | | | 0.1 | |
Changes in estimate | (0.3) | | | 0 | | | (0.1) | | | (0.4) | |
Payments | (0.7) | | | (0.5) | | | (0.1) | | | (1.3) | |
| | | | | | | |
Balance at June 30, 2021 | $ | 0.1 | | | $ | 1.5 | | | $ | 1.2 | | | $ | 2.8 | |
Note 16—Other
On May 26, 2021, the Company signed an Equity Transfer Agreement (the “ETA”) with Y-C Hongkong Holding Co., Limited (“HK Holding Co”), pursuant to which the Company will purchase 15% of the equity interest of Hyster-Yale Maximal from HK Holding Co for an aggregate purchase price of $25.2 million. After the closing under the ETA, which is anticipated to occur on June 1, 2022 (the “Closing Date"), 10% and 90% of the equity interest of Hyster-Yale Maximal will be owned by HK Holding Co and the Company, respectively.
Under the terms of the ETA, on the Closing Date and prior to each of June 1, 2023 and June 1, 2024, the Company will pay $8.4 million to HK Holding Co. The closing of the transaction is subject to customary closing conditions and required regulatory approvals. There is no guarantee the closing will occur either as provided in the ETA or at all. After the closing, the Company will have an option to purchase HK Holding Co's remaining interest in Hyster-Yale Maximal at any time prior to June 8, 2056 for $16.8 million. If this option is exercised, the Company will own 100% of the equity interest of Hyster-Yale Maximal.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Per Share and Percentage Data)
Hyster-Yale Materials Handling, Inc. ("Hyster-Yale" or the "Company") and its subsidiaries, including its operating company Hyster-Yale Group, Inc. ("HYG"), is a leading, globally integrated, full-line lift truck manufacturer. The Company offers a broad array of solutions aimed at meeting the specific materials handling needs of its customers, including attachments and hydrogen fuel cell power products, telematics, automation and fleet management services, as well as a variety of other power options for its lift trucks. The Company, through HYG, designs, engineers, manufactures, sells and services a comprehensive line of lift trucks, attachments and aftermarket parts marketed globally primarily under the Hyster® and Yale® brand names, mainly to independent Hyster® and Yale® retail dealerships. The materials handling business historically has been cyclical because the rate of orders for lift trucks fluctuates depending on the general level of economic activity in the various industries and countries its customers serve. Lift trucks and component parts are manufactured in the United States, China, Northern Ireland, Mexico, the Netherlands, the Philippines, Japan, Italy, Japan, VietnamBrazil and Brazil.Vietnam.
The Company operates Bolzoni S.p.A. ("Bolzoni"). Bolzoni is a leading worldwide producer and distributor of attachments, forks and lift tables marketed under the Bolzoni®, Auramo® and Meyer® brand names. Bolzoni products are manufactured in the United States, Italy, China, Germany and Finland. Through the design, production and distribution of a wide range of attachments, Bolzoni has a strong presence in the market niche of lift-trucklift truck attachments and industrial material handling.
The Company operates Nuvera Fuel Cells, LLC ("Nuvera"). Nuvera is an alternative-power technology company focused on the design, manufacture and sale of hydrogen fuel cell stacks and engines.
During the first nine months of 2020, broad measures taken by governments, businesses and others across the globe to limit the spread of novel coronavirus ("COVID-19") adversely affected the Company. The resulting significant decline in economic activity also reduced the demand for the Company's products and limited the availability of components from certain suppliers. Production was significantly reduced or suspended at the Company's Chinese and European facilities for certain periods during the first and early second quarterquarters of 2020. The Company also initiated several cost reduction measures designed to ease liquidity pressure. These cost containment actions included spending and travel restrictions, significant reductions in temporary personnel, furloughs, suspension of incentive compensation and profit sharing, benefit reductions and salary reductions. Effective January 1, 2021, the Company reinstated pre-pandemic salaries, benefits and incentive compensation programs. The cost containment actions associated with hiring, use of contract and temporary workers, travel and meetings, as well as other discretionary spending are continuing. These measures are expected to remain in place until market and economic uncertainty dissipates and results improve. In addition, the Company adjusted production levels in 2020 at its manufacturing plants to align more closely with the reduced levels of demand, and worked closely with suppliers to help ensure current needs arewere met while also ensuringpromoting continuity as the market improves.improved. However, despite these efforts, during the second quarter and first six months of 2021, the Company experienced further pandemic-related and other global supply chain constraints, component shortages, shipping container availability constraints and higher freight costs, as well as significant material cost inflation resulting from the accelerated pace of the market recovery, all of which have negatively impacted the Company.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Please refer to the discussion of Critical Accounting Policies and Estimates as disclosed on pages 1415 through 1617 in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.2020. Critical Accounting Policies and Estimates have not materially changed since December 31, 2019.2020. See Note 2 to the unaudited condensed consolidated financial statements for a discussion of the new accounting pronouncements adopted on January 1, 2020.2021.
FINANCIAL REVIEW
The results of operations for the Company were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | Favorable / (Unfavorable) | | NINE MONTHS ENDED | | Favorable / (Unfavorable) |
| SEPTEMBER 30 | | | SEPTEMBER 30 | |
| 2020 | | 2019 | | % Change | | 2020 | | 2019 | | % Change |
Lift truck unit shipments (in thousands) | | | | | | | | | | | |
Americas | 12.0 | | | 14.6 | | | (17.8) | % | | 41.1 | | | 44.3 | | | (7.2) | % |
EMEA | 5.4 | | | 5.9 | | | (8.5) | % | | 15.1 | | | 21.5 | | | (29.8) | % |
JAPIC | 3.2 | | | 3.0 | | | 6.7 | % | | 7.8 | | | 9.7 | | | (19.6) | % |
| 20.6 | | | 23.5 | | | (12.3) | % | | 64.0 | | | 75.5 | | | (15.2) | % |
Revenues | | | | | | | | | | | |
Americas | $ | 426.9 | | | $ | 505.8 | | | (15.6) | % | | $ | 1,432.4 | | | $ | 1,578.0 | | | (9.2) | % |
EMEA | 143.8 | | | 161.7 | | | (11.1) | % | | 416.0 | | | 553.9 | | | (24.9) | % |
JAPIC | 48.0 | | | 57.8 | | | (17.0) | % | | 140.6 | | | 194.1 | | | (27.6) | % |
Lift truck business | 618.7 | | | 725.3 | | | (14.7) | % | | 1,989.0 | | | 2,326.0 | | | (14.5) | % |
Bolzoni | 63.3 | | | 75.8 | | | (16.5) | % | | 215.4 | | | 258.4 | | | (16.6) | % |
Nuvera | 0.7 | | | 2.4 | | | (70.8) | % | | 2.8 | | | 9.1 | | | (69.2) | % |
Eliminations | (30.3) | | | (37.5) | | | (19.2) | % | | (114.7) | | | (136.5) | | | (16.0) | % |
| $ | 652.4 | | | $ | 766.0 | | | (14.8) | % | | $ | 2,092.5 | | | $ | 2,457.0 | | | (14.8) | % |
Gross profit (loss) | | | | | | | | | | | |
Americas | $ | 65.7 | | | $ | 90.3 | | | (27.2) | % | | $ | 240.3 | | | $ | 261.8 | | | (8.2) | % |
EMEA | 22.4 | | | 26.1 | | | (14.2) | % | | 57.4 | | | 79.6 | | | (27.9) | % |
JAPIC | 6.2 | | | 8.6 | | | (27.9) | % | | 14.9 | | | 23.1 | | | (35.5) | % |
Lift truck business | 94.3 | | | 125.0 | | | (24.6) | % | | 312.6 | | | 364.5 | | | (14.2) | % |
Bolzoni | 12.1 | | | 13.0 | | | (6.9) | % | | 40.5 | | | 44.1 | | | (8.2) | % |
Nuvera | (2.7) | | | (3.1) | | | (12.9) | % | | (8.5) | | | (7.6) | | | 11.8 | % |
Eliminations | (0.3) | | | 0.1 | | | n.m. | | (0.9) | | | (0.4) | | | n.m. |
| $ | 103.4 | | | $ | 135.0 | | | (23.4) | % | | $ | 343.7 | | | $ | 400.6 | | | (14.2) | % |
Selling, general and administrative expenses | | | | | | | | | | | |
Americas | $ | 49.6 | | | $ | 60.8 | | | 18.4 | % | | $ | 162.4 | | | $ | 190.8 | | | 14.9 | % |
EMEA | 19.1 | | | 25.1 | | | 23.9 | % | | 61.4 | | | 73.9 | | | 16.9 | % |
JAPIC | 9.4 | | | 11.1 | | | 15.3 | % | | 27.6 | | | 31.9 | | | 13.5 | % |
Lift truck business | 78.1 | | | 97.0 | | | 19.5 | % | | 251.4 | | | 296.6 | | | 15.2 | % |
Bolzoni | 12.0 | | | 12.3 | | | 2.4 | % | | 38.2 | | | 39.9 | | | 4.3 | % |
Nuvera | 6.0 | | | 6.2 | | | 3.2 | % | | 17.9 | | | 18.3 | | | 2.2 | % |
| | | | | | | | | | | |
| $ | 96.1 | | | $ | 115.5 | | | 16.8 | % | | $ | 307.5 | | | $ | 354.8 | | | 13.3 | % |
Operating profit (loss) | | | | | | | | | | | |
Americas | $ | 16.1 | | | $ | 29.5 | | | (45.4) | % | | $ | 77.9 | | | $ | 71.0 | | | 9.7 | % |
EMEA | 3.3 | | | 1.0 | | | 230.0 | % | | (4.0) | | | 5.7 | | | (170.2) | % |
JAPIC | (3.2) | | | (2.5) | | | (28.0) | % | | (12.7) | | | (8.8) | | | (44.3) | % |
Lift truck business | 16.2 | | | 28.0 | | | (42.1) | % | | 61.2 | | | 67.9 | | | (9.9) | % |
Bolzoni | 0.1 | | | 0.7 | | | (85.7) | % | | 2.3 | | | 4.2 | | | (45.2) | % |
Nuvera | (8.7) | | | (9.3) | | | 6.5 | % | | (26.4) | | | (25.9) | | | (1.9) | % |
Eliminations | (0.3) | | | 0.1 | | | n.m. | | (0.9) | | | (0.4) | | | n.m. |
| $ | 7.3 | | | $ | 19.5 | | | (62.6) | % | | $ | 36.2 | | | $ | 45.8 | | | (21.0) | % |
Interest expense | $ | 3.1 | | | $ | 5.3 | | | 41.5 | % | | $ | 10.7 | | | $ | 14.9 | | | 28.2 | % |
Other income | $ | (2.2) | | | $ | (3.8) | | | n.m. | | $ | (2.3) | | | $ | (13.1) | | | (82.4) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | Favorable / (Unfavorable) | | SIX MONTHS ENDED | | Favorable / (Unfavorable) |
| JUNE 30 | | | JUNE 30 | |
| 2021 | | 2020 | | % Change | | 2021 | | 2020 | | % Change |
Lift truck unit shipments (in thousands) | | | | | | | | | | | |
Americas | 13.0 | | | 13.1 | | | (0.8) | % | | 25.3 | | | 29.1 | | | (13.1) | % |
EMEA | 5.9 | | | 4.4 | | | 34.1 | % | | 12.4 | | | 9.7 | | | 27.8 | % |
JAPIC | 3.8 | | | 2.6 | | | 46.2 | % | | 7.3 | | | 4.6 | | | 58.7 | % |
| 22.7 | | | 20.1 | | | 12.9 | % | | 45.0 | | | 43.4 | | | 3.7 | % |
Revenues | | | | | | | | | | | |
Americas | $ | 479.1 | | | $ | 454.8 | | | 5.3 | % | | $ | 938.8 | | | $ | 1,005.5 | | | (6.6) | % |
EMEA | 175.1 | | | 120.1 | | | 45.8 | % | | 345.8 | | | 272.2 | | | 27.0 | % |
JAPIC | 65.0 | | | 48.0 | | | 35.4 | % | | 125.5 | | | 92.6 | | | 35.5 | % |
Lift truck business | 719.2 | | | 622.9 | | | 15.5 | % | | 1,410.1 | | | 1,370.3 | | | 2.9 | % |
Bolzoni | 84.8 | | | 64.2 | | | 32.1 | % | | 164.3 | | | 152.1 | | | 8.0 | % |
Nuvera | 0.3 | | | 0.7 | | | (57.1) | % | | 0.3 | | | 2.1 | | | (85.7) | % |
Eliminations | (38.7) | | | (33.4) | | | 15.9 | % | | (76.9) | | | (84.4) | | | (8.9) | % |
| $ | 765.6 | | | $ | 654.4 | | | 17.0 | % | | $ | 1,497.8 | | | $ | 1,440.1 | | | 4.0 | % |
Gross profit (loss) | | | | | | | | | | | |
Americas | $ | 70.4 | | | $ | 74.9 | | | (6.0) | % | | $ | 145.7 | | | $ | 174.6 | | | (16.6) | % |
EMEA | 26.6 | | | 15.7 | | | 69.4 | % | | 50.1 | | | 35.0 | | | 43.1 | % |
JAPIC | 6.2 | | | 4.2 | | | 47.6 | % | | 12.8 | | | 8.7 | | | 47.1 | % |
Lift truck business | 103.2 | | | 94.8 | | | 8.9 | % | | 208.6 | | | 218.3 | | | (4.4) | % |
Bolzoni | 15.8 | | | 11.5 | | | 37.4 | % | | 32.2 | | | 28.4 | | | 13.4 | % |
Nuvera | (2.5) | | | (3.2) | | | 21.9 | % | | (5.8) | | | (5.8) | | | — | % |
Eliminations | (0.1) | | | 0.5 | | | n.m. | | (0.2) | | | (0.6) | | | n.m. |
| $ | 116.4 | | | $ | 103.6 | | | 12.4 | % | | $ | 234.8 | | | $ | 240.3 | | | (2.3) | % |
Selling, general and administrative expenses | | | | | | | | | | | |
Americas | $ | 56.8 | | | $ | 51.6 | | | (10.1) | % | | $ | 117.5 | | | $ | 112.8 | | | (4.2) | % |
EMEA | 22.9 | | | 18.5 | | | (23.8) | % | | 46.3 | | | 42.3 | | | (9.5) | % |
JAPIC | 8.1 | | | 7.7 | | | (5.2) | % | | 17.2 | | | 18.2 | | | 5.5 | % |
Lift truck business | 87.8 | | | 77.8 | | | (12.9) | % | | 181.0 | | | 173.3 | | | (4.4) | % |
Bolzoni | 16.2 | | | 12.0 | | | (35.0) | % | | 31.8 | | | 26.2 | | | (21.4) | % |
Nuvera | 6.5 | | | 5.1 | | | (27.5) | % | | 13.0 | | | 11.9 | | | (9.2) | % |
| | | | | | | | | | | |
| $ | 110.5 | | | $ | 94.9 | | | (16.4) | % | | $ | 225.8 | | | $ | 211.4 | | | (6.8) | % |
Operating profit (loss) | | | | | | | | | | | |
Americas | $ | 13.6 | | | $ | 23.3 | | | (41.6) | % | | $ | 28.2 | | | $ | 61.8 | | | (54.4) | % |
EMEA | 3.7 | | | (2.8) | | | n.m. | | 3.8 | | | (7.3) | | | (152.1) | % |
JAPIC | (1.9) | | | (3.5) | | | 45.7 | % | | (4.4) | | | (9.5) | | | 53.7 | % |
Lift truck business | 15.4 | | | 17.0 | | | (9.4) | % | | 27.6 | | | 45.0 | | | (38.7) | % |
Bolzoni | (0.4) | | | (0.5) | | | (20.0) | % | | 0.4 | | | 2.2 | | | (81.8) | % |
Nuvera | (9.0) | | | (8.3) | | | (8.4) | % | | (18.8) | | | (17.7) | | | (6.2) | % |
Eliminations | (0.1) | | | 0.5 | | | n.m. | | (0.2) | | | (0.6) | | | n.m. |
| $ | 5.9 | | | $ | 8.7 | | | (32.2) | % | | $ | 9.0 | | | $ | 28.9 | | | (68.9) | % |
Interest expense | $ | 3.8 | | | $ | 3.3 | | | (15.2) | % | | $ | 6.6 | | | $ | 7.6 | | | 13.2 | % |
Other (income) expense | $ | 2.2 | | | $ | 3.7 | | | (40.5) | % | | $ | (6.0) | | | $ | (0.1) | | | n.m. |
| | | THREE MONTHS ENDED | | Favorable / (Unfavorable) | | NINE MONTHS ENDED | | Favorable / (Unfavorable) | | THREE MONTHS ENDED | | Favorable / (Unfavorable) | | SIX MONTHS ENDED | | Favorable / (Unfavorable) |
| | SEPTEMBER 30 | | SEPTEMBER 30 | | | JUNE 30 | | JUNE 30 | |
| | 2020 | | 2019 | | % Change | | 2020 | | 2019 | | % Change | | 2021 | | 2020 | | % Change | | 2021 | | 2020 | | % Change |
Net income (loss) attributable to stockholders | Net income (loss) attributable to stockholders | | Net income (loss) attributable to stockholders | |
Americas | Americas | $ | 10.7 | | | $ | 20.8 | | | (48.6) | % | | $ | 52.0 | | | $ | 50.6 | | | 2.8 | % | Americas | $ | 5.0 | | | $ | 13.5 | | | (63.0) | % | | $ | 14.5 | | | $ | 41.3 | | | (64.9) | % |
EMEA | EMEA | 3.7 | | | 1.0 | | | 270.0 | % | | (0.9) | | | 5.0 | | | (118.0) | % | EMEA | 3.9 | | | (1.5) | | | n.m. | | 4.8 | | | (4.6) | | | 204.3 | % |
JAPIC | JAPIC | (2.8) | | | (2.3) | | | (21.7) | % | | (8.5) | | | (6.2) | | | (37.1) | % | JAPIC | 0.4 | | | (1.1) | | | 136.4 | % | | (1.8) | | | (5.7) | | | 68.4 | % |
Lift truck business | Lift truck business | 11.6 | | | 19.5 | | | (40.5) | % | | 42.6 | | | 49.4 | | | (13.8) | % | Lift truck business | 9.3 | | | 10.9 | | | (14.7) | % | | 17.5 | | | 31.0 | | | (43.5) | % |
Bolzoni | Bolzoni | 0.1 | | | 0.7 | | | n.m. | | 2.2 | | | 2.6 | | | (15.4) | % | Bolzoni | (0.6) | | | (0.6) | | | — | % | | — | | | 2.1 | | | (100.0) | % |
Nuvera | Nuvera | (6.1) | | | (5.8) | | | (5.2) | % | | (18.6) | | | (17.9) | | | (3.9) | % | Nuvera | (6.6) | | | (5.8) | | | (13.8) | % | | (10.4) | | | (12.5) | | | 16.8 | % |
Eliminations | Eliminations | (0.5) | | | (1.6) | | | n.m. | | (2.2) | | | (1.7) | | | n.m. | Eliminations | (0.2) | | | (0.9) | | | n.m. | | 0.4 | | | (1.7) | | | n.m. |
| | $ | 5.1 | | | $ | 12.8 | | | (60.2) | % | | $ | 24.0 | | | $ | 32.4 | | | (25.9) | % | | $ | 1.9 | | | $ | 3.6 | | | (47.2) | % | | $ | 7.5 | | | $ | 18.9 | | | (60.3) | % |
Diluted earnings per share | Diluted earnings per share | $ | 0.30 | | | $ | 0.76 | | | (60.5) | % | | $ | 1.43 | | | $ | 1.94 | | | (26.3) | % | Diluted earnings per share | $ | 0.11 | | | $ | 0.21 | | | (47.6) | % | | $ | 0.45 | | | $ | 1.13 | | | (60.2) | % |
Reported income tax rate | Reported income tax rate | 10.9 | % | | 27.2 | % | | 9.0 | % | | 24.5 | % | | Reported income tax rate | n.m. | | n.m. | | n.m. | | 8.4 | % | |
n.m. - not meaningful | n.m. - not meaningful | | n.m. - not meaningful | |
| |
Following is the detail of the Company's unit shipments, bookings and backlog of unfilled orders placed with its manufacturing and assembly operations for new lift trucks, reflected in thousands of units. As of SeptemberJune 30, 2020,2021, substantially all of the Company's backlog is expected to be sold within the next twelve months. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | JUNE 30 | | JUNE 30 |
| | 2021 | | 2020 | | 2021 | | 2020 |
Unit backlog, beginning of period | | 60.7 | | | 37.3 | | | 40.6 | | | 41.2 | |
Unit shipments | | (22.7) | | | (20.1) | | | (45.0) | | | (43.4) | |
Unit bookings | | 46.9 | | | 14.3 | | | 89.3 | | | 33.7 | |
Unit backlog, end of period | | 84.9 | | | 31.5 | | | 84.9 | | | 31.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | NINE MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 |
| | 2020 | | 2019 | | 2020 | | 2019 |
Unit backlog, beginning of period | | 31.5 | | | 44.1 | | | 41.2 | | | 43.9 | |
Unit shipments | | (20.6) | | | (23.5) | | | (64.0) | | | (75.5) | |
Unit bookings | | 22.7 | | | 22.8 | | | 56.4 | | | 75.0 | |
Unit backlog, end of period | | 33.6 | | | 43.4 | | | 33.6 | | | 43.4 | |
The following is the detail of the approximate sales value of the Company's lift truck unit bookings and backlog, reflected in millions of dollars. The dollar value of bookings and backlog is calculated using the current unit bookings and backlog and the forecasted average sales price per unit.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | NINE MONTHS ENDED |
| | SEPTEMBER 30 | | SEPTEMBER 30 |
| | 2020 | | 2019 | | 2020 | | 2019 |
Bookings, approximate sales value | | $ | 545 | | | $ | 540 | | | $ | 1,360 | | | $ | 1,690 | |
Backlog, approximate sales value | | $ | 910 | | | $ | 1,130 | | | $ | 910 | | | $ | 1,130 | |
Third Quarter of 2020 Compared with Third Quarter of 2019
The following table identifies the components of change in revenues for the third quarter of 2020 compared with the third quarter of 2019:
| | | | | |
| Revenues |
2019 | $ | 766.0 | |
Increase (decrease) in 2020 from: | |
Unit volume and product mix | (98.6) | |
Bolzoni revenues | (12.5) | |
Parts | (7.1) | |
| |
Nuvera revenues | (1.7) | |
| |
Price | 4.5 | |
Foreign currency | 1.5 | |
Other (including eliminations) | 0.3 | |
| |
| |
| |
| |
2020 | $ | 652.4 | |
Revenues decreased 14.8% to $652.4 million in the third quarter of 2020 from $766.0 million in the third quarter of 2019, mainly due to lower unit and parts volumes in all geographic segments of the lift truck business and Bolzoni, primarily due to the COVID-19 pandemic and the resulting significant decline in economic activity. The decrease in revenue was partially offset by improved pricing in the Americas and EMEA.
Nuvera's revenues decreased primarily due to reduced third-party fuel cell development services in the third quarter of 2020 compared to the third quarter of 2019.
The following table identifies the components of change in operating profit for the third quarter of 2020 compared with the third quarter of 2019:
| | | | | |
| Operating Profit |
2019 | $ | 19.5 | |
| |
| |
Increase (decrease) in 2020 from: | |
Lift truck gross profit | (31.1) | |
| |
Bolzoni operations | (0.6) | |
Nuvera operations | 0.6 | |
Lift truck selling, general and administrative expenses | 18.9 | |
2020 | $ | 7.3 | |
The Company recognized operating profit of $7.3 million in the third quarter of 2020 compared with $19.5 million in the third quarter of 2019. The decrease in operating profit was mainly due to lower gross profit, primarily from lower unit and parts volume due to the COVID-19 pandemic and the resulting significant decline in economic activity in all geographic lift truck segments and Bolzoni. The third quarter of 2019 also included $8.7 million of favorable retroactive tariff exclusion adjustments from suppliers for certain components imported from China. These items were partially offset by favorable pricing in all geographic lift truck segments. The decline in gross profit was somewhat offset by lower selling, general and administrative expenses at all locations as the Company implemented cost containment actions to mitigate the impact of the COVID-19 pandemic as well as $1.6 million of government subsidies in EMEA.
Nuvera's operating loss decreased modestly as a result of smaller inventory adjustments recognized in the third quarter of 2020 compared to the third quarter of 2019, as well as the favorable effect of cost containment actions.
The Company recognized net income attributable to stockholders of $5.1 million in the third quarter of 2020 compared with $12.8 million in the third quarter of 2019. The decrease was primarily the result of lower operating profit and lower equity earnings of unconsolidated subsidiaries. In addition, the Company recognized a settlement loss of $1.2 million in the third quarter of 2020 for its U.S. pension plan. These items were partially offset by lower interest expense, favorable mark-to-market adjustments on an equity investment in a third-party and a lower reported income tax rate. See Note 5 for further discussion of the Company's income tax provision.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | SIX MONTHS ENDED |
| | JUNE 30 | | JUNE 30 |
| | 2021 | | 2020 | | 2021 | | 2020 |
Bookings, approximate sales value | | $ | 1,070 | | | $ | 315 | | | $ | 2,040 | | | $ | 815 | |
Backlog, approximate sales value | | $ | 2,070 | | | $ | 810 | | | $ | 2,070 | | | $ | 810 | |
Second Quarter of 2021 Compared with Second Quarter of 2020
The following table identifies the components of change in revenues for the second quarter of 2021 compared with the second quarter of 2020: | | | | | |
| Revenues |
2020 | $ | 654.4 | |
Increase (decrease) in 2021 from: | |
Unit volume and product mix | 39.1 | |
Parts | 25.3 | |
Bolzoni revenues | 20.6 | |
Foreign currency | 20.3 | |
Price | 5.9 | |
Other | 5.7 | |
Eliminations | (5.3) | |
Nuvera revenues | (0.4) | |
2021 | $ | 765.6 | |
Revenues increased 17.0% to $765.6 million in the second quarter of 2021 from $654.4 million in the second quarter of 2020. The increase was primarily due to higher unit and parts volume in the lift truck business and Bolzoni, in addition to favorable currency movements from the translation of sales into U.S. dollars. Customer demand increased in the second quarter of 2021, resulting in higher unit shipments, mainly in EMEA and JAPIC, as well as higher parts sales in the lift truck business.
Revenues in the Americas increased in the second quarter of 2021 compared with the second quarter of 2020, primarily from favorable parts sales driven by an increase in customer demand and dealers ordering safety stock due to supply chain constraints, as well as an increase in fleet management services and the favorable effect of price increases put in place to mitigate the impact of material cost inflation.
EMEA's revenues increased mainly due to higher unit and parts volume and favorable foreign currency movements of $15.5 million from the translation of sales into U.S. dollars.
JAPIC's revenues increased primarily as a result of improved unit volumes and favorable foreign currency movements of $5.2 million.
The increase in Bolzoni's revenues was mainly due to higher unit volume and favorable foreign currency movements of $1.9 million.
The following table identifies the components of change in operating profit for the second quarter of 2021 compared with the second quarter of 2020: | | | | | |
| Operating Profit |
2020 | $ | 8.7 | |
| |
| |
Increase (decrease) in 2021 from: | |
Lift truck gross profit | 7.8 | |
| |
Bolzoni operations | 0.1 | |
Nuvera operations | (0.7) | |
Lift truck selling, general and administrative expenses | (10.0) | |
2021 | $ | 5.9 | |
The Company recognized operating profit of $5.9 million in the second quarter of 2021 compared with $8.7 million in the second quarter of 2020. The decrease in operating profit was mainly due to higher selling, general and administrative expenses in the lift truck business primarily due to the reinstatement of pre-pandemic employee-related salaries and benefits. In addition, the second quarter of 2020 included $8.3 million of government support incentives received at EMEA and Bolzoni. The increase in selling, general and administrative expenses was somewhat offset by higher gross profit, primarily from higher unit and part volume and a favorable $6.3 million adjustment for tax credits in Brazil. The increase in gross profit was somewhat
offset by significant material and freight cost inflation due to supply chain and logistics constraints, mainly in the Americas. See Note 12 for further discussion of the Brazilian tax credits.
Operating profit in the Americas significantly decreased to $13.6 million in the second quarter of 2021 compared with $23.3 million the second quarter of 2020 due to an increase in operating expenses mainly resulting from the reinstatement of pre-pandemic salaries and benefits that were suspended in 2020 and a decrease in gross profit. Gross profit declined primarily due to material cost inflation and increased freight costs of $11.6 million, net of price increases of $4.2 million, a shift in sales mix to lower-margin lift trucks and higher manufacturing costs of $3.7 million resulting from inefficiencies associated with component shortages. The decrease in gross profit was partly offset by the realization of higher margins on parts sales and a $6.3 million favorable adjustment for social contribution taxes previously imposed on material purchases in Brazil.
Despite the absence of $4.7 million of government support incentives received in the prior year, EMEA's operating profit increased to $3.7 million in the second quarter of 2021 from an operating loss of $2.8 million in the second quarter of 2020. The increase was primarily the result of a substantial improvement in gross profit partially offset by higher operating expenses mainly resulting from the reinstatement of pre-pandemic salaries and employee benefits. Gross profit improved mainly due to an increase in unit and parts volumes, the favorable effect of currency exchange rates and higher prices implemented to partially offset increases in material and freight costs.
JAPIC's operating loss improved to $1.9 million in the second quarter of 2021 from $3.5 million in the second quarter of 2020 primarily due to improved gross profit from higher unit volume and favorable foreign currency movements.
Bolzoni recognized an operating loss of $0.4 million in the second quarter of 2021 compared with $0.5 million in the second quarter of 2020. The improvements in gross profit from higher unit volumes of higher margin products and lower manufacturing costs from improved operating efficiencies were offset by material cost and freight cost inflation and the absence of government subsidies of $3.6 million recorded in the second quarter of 2020.
Nuvera's operating loss increased to $9.0 million in the second quarter of 2021 compared with $8.3 million in the second quarter of 2020 as result of the reinstatement of pre-pandemic salaries and benefits and the absence of $0.6 million of a gain on the sale of assets recognized in the second quarter of 2020.
The Company recognized net income attributable to stockholders of $1.9 million in the second quarter of 2021 compared with $3.6 million in the second quarter of 2020. The decrease was primarily the result of lower operating profit and the write-off of deferred financing fees from the refinancing of the Term Loan (as defined below) in the second quarter of 2021. These items were partially offset by higher equity earnings in unconsolidated subsidiaries. See Note 7 for further discussion of the refinancing of the Term Loan.
First NineSix Months of 20202021 Compared with First NineSix Months of 20192020
The following table identifies the components of change in revenues for the first ninesix months of 20202021 compared with the first ninesix months of 2019:
| | | | | | | | |
| | Revenues |
2019 | | $ | 2,457.0 | |
Increase (decrease) in 2019 from: | | |
| | |
Unit volume and product mix | | (310.5) | |
Bolzoni revenues | | (43.0) | |
Parts | | (21.8) | |
| | |
Foreign currency | | (12.8) | |
Nuvera revenues | | (6.3) | |
Price | | 24.0 | |
| | |
Other (including eliminations) | | 5.9 | |
| | |
| | |
| | |
2020 | | $ | 2,092.5 | |
2020: | | | | | | | | |
| | Revenues |
2020 | | $ | 1,440.1 | |
Increase (decrease) in 2021 from: | | |
Foreign currency | | 36.4 | |
Parts | | 25.1 | |
Other | | 16.1 | |
Bolzoni revenues | | 12.2 | |
Eliminations | | 7.5 | |
Price | | 4.7 | |
Unit volume and product mix | | (42.5) | |
| | |
| | |
Nuvera revenues | | (1.8) | |
| | |
| | |
| | |
| | |
| | |
| | |
2021 | | $ | 1,497.8 | |
Revenues decreased 14.8%increased 4.0% to $2,092.5$1,497.8 million in the first ninesix months of 20202021 from $2,457.0$1,440.1 million in the first ninesix months of 2019.2020. The decreaseincrease was mainly due to lower unit andfavorable currency movements from the translation of sales into U.S. dollars, primarily in
EMEA, higher parts volumes in all geographic segments of the lift truck business and higher volume at Bolzoni, primarily due to increased customer demand due to post-pandemic recovery. The increase in revenue was partially offset by lower unit volumes in the COVID-19 pandemicAmericas, primarily due to global supply chain constraints and component shortages.
Revenues in the resulting significant declineAmericas decreased in economic activity. In addition, unfavorablethe first six months of 2021 compared with the first six months of 2020, primarily from lower unit volumes in all classes of lift trucks due to global supply chain constraints and component shortages. The decrease was partially offset by favorable parts sales driven by an increase in customer demand.
EMEA's revenues increased mainly due to favorable foreign currency movements of $32.8 million from the translation of sales into U.S. dollars was $10.3and higher unit and parts volume resulting from increased customer demand.
JAPIC's revenues increased primarily as a result of improved unit volumes and favorable foreign currency movements of $8.0 million, in the Americas, $2.0 million in JAPIC, $0.5 million in EMEA and $0.4 million at Bolzoni. The decrease in revenue was partially offset by higher pricesa shift in allsales to lower-priced lift truck geographic segments implemented during 2019 to offset material cost increases and tariffs.trucks.
Nuvera'sThe increase in Bolzoni's revenues decreased primarilywas mainly due to reduced third-party fuel cell development services in the first nine monthshigher unit volume and favorable foreign currency movements of 2020 compared to the first nine months of 2019.$5.1 million.
The following table identifies the components of change in operating profit for the first ninesix months of 20202021 compared with the first ninesix months of 2019:
| | | | | |
| Operating Profit |
2019 | $ | 45.8 | |
| |
| |
Increase (decrease) in 2020 from: | |
Lift truck selling, general and administrative expenses | (52.4) | |
Bolzoni operations | (1.9) | |
Nuvera operations | (0.5) | |
Lift truck gross profit | 45.2 | |
| |
2020 | $ | 36.2 | |
2020: | | | | | |
| Operating Profit |
2020 | $ | 28.9 | |
| |
| |
Increase (decrease) in 2021 from: | |
| |
Lift truck gross profit | (9.3) | |
Lift truck selling, general and administrative expenses | (7.7) | |
Bolzoni operations | (1.8) | |
Nuvera operations | (1.1) | |
| |
| |
2021 | $ | 9.0 | |
The Company recognized operating profit of $36.2$9.0 million in the first ninesix months of 20202021 compared with $45.8$28.9 million in the first ninesix months of 2019.2020. The decrease in operating profit was mainlyprimarily due to lower gross profit primarily fromand unfavorable selling, general and administrative expenses. Gross profit declined mainly due to lower unit volumes, material cost inflation and increased freight costs, as well as higher manufacturing costs resulting from inefficiencies associated with component shortages. The decrease in gross profit was partially offset by favorable parts volume and manufacturing inefficiencies due to the COVID-19 pandemic and the resulting significant decline in economic activity in all geographic lift truck segments, favorable foreign currency movements of $12.1 million and Bolzoni.a favorable $6.3 million adjustment for tax credits in Brazil. Selling, general and administrative expenses increased as pre-pandemic salaries and benefits were reinstated, including $12.1 million of incentive compensation. In addition, the absencefirst six months of $11.82020 included $9.6 million of favorable retroactive tariff exclusion adjustments recognizedgovernment subsidies at EMEA and Bolzoni.
Operating profit in 2019 and unfavorable currency movements of $5.4 million in EMEA, $3.4 million in JAPIC and $2.3the Americas decreased to $28.2 million in the Americasfirst six months of 2021 compared with $61.8 million in the first six months of 2020 due to a decrease in gross profit and higher operating expenses. Gross profit declined mainly due to lower volume, a shift in mix to lower-margin products, material cost inflation and increased freight costs of $12.7 million, as well as higher manufacturing costs resulting from inefficiencies associated with component shortages of $8.0 million. These items were partially offset by favorable pricingparts sales and a favorable $6.3 million favorable adjustment for social contribution taxes previously imposed on material purchases in all geographic lift truck segments.Brazil. The declineincrease in operating expenses primarily resulted from the reinstatement of pre-pandemic salaries and benefits, including $8.8 million of incentive compensation.
EMEA recognized operating profit of $3.8 million in the first six months of 2021 compared with an operating loss of $7.3 million in the first six months of 2020 mainly as a result of improved gross profit was somewhatfrom favorable foreign currency movements of $6.6 million, improved unit and parts volume and improved pricing, partially offset by lower selling, general and administrative expenses at all locations as the Company implemented cost containment actions to mitigate the impactabsence of the COVID-19 pandemic as well as $6.6$5.0 million of government subsidies received in EMEA.the first six months of 2020.
JAPIC's operating loss decreased to $4.4 million in the first six months of 2021 from $9.5 million in the first six months of 2020 primarily due to improved gross profit from higher unit volume and favorable foreign currency movements of $4.3 million partially offset by a shift in mix to lower-margin products.
Operating profit at Bolzoni decreased to $0.4 million in the first six months of 2021 compared with $2.2 million in the first six months of 2020 mainly from material cost inflation, including freight, which offset the improved volumes. Operating profit was
also unfavorably affected by the absence of government subsidies of $4.6 million and the reinstatement of pre-pandemic salaries and employee benefits, including $1.7 million of incentive compensation.
Nuvera's operating loss increased as result of the reinstatement of pre-pandemic salaries and employee benefits and the absence of $0.6 million of a gain on the sale of assets recognized in the first six months of 2020.
The Company recognized net income attributable to stockholders of $24.0$7.5 million in the first ninesix months of 20202021 compared with $32.4$18.9 million in the first ninesix months of 2019.2020. The decrease was primarily the result of lower operating profit and lower equity earningsthe write-off of unconsolidated subsidiaries, partially offset by lower interest expense. In addition, duringdeferred financing fees from the refinancing of the Term Loan in the second quarter of 2020, the Company recognized2021. These items were partially offset by a discrete tax benefit of $4.3$4.6 million gain related to the expirationsale of the statuteCompany's preferred shares of limitations for uncertain tax positions related to acquisitions for which an offsetting pre-tax indemnity receivable was also recorded. The
expense for the release of the indemnity receivable was recorded on the line “Other, net”OneH2 in the unaudited condensed consolidated statementsfirst six months of operations.2021 and higher equity earnings in unconsolidated subsidiaries. See Note 57 for further discussion of the Company's income tax provision.refinancing of the Term Loan.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following tables detail the changes in cash flow for the ninesix months ended SeptemberJune 30: | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Change |
Operating activities: | | | | | |
Net income | $ | 8.4 | | | $ | 19.6 | | | $ | (11.2) | |
Depreciation and amortization | 23.3 | | | 20.8 | | | 2.5 | |
| | | | | |
Dividends from unconsolidated affiliates | 5.5 | | | 7.3 | | | (1.8) | |
Working capital changes | (121.9) | | | (67.0) | | | (54.9) | |
Other | (16.0) | | | 7.3 | | | (23.3) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Net cash used for operating activities | (100.7) | | | (12.0) | | | (88.7) | |
Investing activities: | | | | | |
Expenditures for property, plant and equipment | (18.1) | | | (29.9) | | | 11.8 | |
Proceeds from the sale of assets | 18.9 | | | 6.6 | | | 12.3 | |
| | | | | |
| | | | | |
Net cash provided by (used for) investing activities | 0.8 | | | (23.3) | | | 24.1 | |
| | | | | |
Cash flow before financing activities | $ | (99.9) | | | $ | (35.3) | | | $ | (64.6) | |
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | Change |
Operating activities: | | | | | |
Net income | $ | 25.3 | | | $ | 33.2 | | | $ | (7.9) | |
Depreciation and amortization | 31.8 | | | 32.3 | | | (0.5) | |
| | | | | |
Dividends from unconsolidated affiliates | 7.3 | | | 5.1 | | | 2.2 | |
Working capital changes | 4.2 | | | (93.0) | | | 97.2 | |
Other | 7.5 | | | 5.1 | | | 2.4 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Net cash provided by (used for) operating activities | 76.1 | | | (17.3) | | | 93.4 | |
Investing activities: | | | | | |
Expenditures for property, plant and equipment | (37.2) | | | (31.4) | | | (5.8) | |
Proceeds from the sale of assets | 7.4 | | | 6.9 | | | 0.5 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Net cash used for investing activities | (29.8) | | | (24.5) | | | (5.3) | |
| | | | | |
Cash flow before financing activities | $ | 46.3 | | | $ | (41.8) | | | $ | 88.1 | |
Net cash used for operating activities increased $88.7 million in the first six months of 2021 compared with the first six months of 2020, primarily as a result of changes in working capital items and the impact of currency translation included in "Other". The change in working capital was mainly due to higher inventory levels in the first six months of 2021 resulting from global supply chain constraints and component shortages. This was partially offset by significantly lower payments of employee-related compensation in the first six months of 2021 compared with the first six months of 2020 due to the Company's cost containment actions in 2020.
The change in net cash provided by (used for) investing activities during the first six months of 2021 compared with the first six months of 2020 is due to the proceeds from the sale of preferred shares of OneH2 for $15.7 million and lower capital expenditures in 2021. | | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Change |
Financing activities: | | | | | |
Net increase of long-term debt and revolving credit agreements | $ | 56.0 | | | $ | 45.4 | | | $ | 10.6 | |
Cash dividends paid | (10.7) | | | (10.6) | | | (0.1) | |
Financing fees paid | (7.6) | | | — | | | (7.6) | |
Other | (0.2) | | | (0.4) | | | 0.2 | |
Net cash provided by financing activities | $ | 37.5 | | | $ | 34.4 | | | $ | 3.1 | |
Net cash provided by (used for) operatingfinancing activities increased $93.4$3.1 million in the first ninesix months of 20202021 compared with the first ninesix months of 2019, primarily as a result of the change in working capital items. During the first nine months of 2020, working capital was significantly affected by the COVID-19 pandemic and the resulting significant decline in economic activity. Accounts receivable, inventory and the related accounts payable were all significantly reduced compared with the first nine months of 2019 as the Company adjusted to the reduced demand. In addition, other liabilities decreased during the first nine months of 2020 compared with the first nine months of 2019 mainly as a result of lower deferred revenue and higher payments of employee-related compensation.
2020. The change in net cash used for investing activities during the first nine months of 2020 compared with the first nine months of 2019 is due to higher capital expenditures in 2020, primarily for new product development and improvements to the Company's information technology infrastructure. This was partially offset by proceeds from the sale of assets in the first nine months of 2020.
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | Change |
Financing activities: | | | | | |
Net increase (decrease) of long-term debt and revolving credit agreements | $ | (2.7) | | | $ | 41.5 | | | $ | (44.2) | |
Cash dividends paid | (16.0) | | | (15.7) | | | (0.3) | |
| | | | | |
Other | (0.4) | | | (0.8) | | | 0.4 | |
Net cash provided by (used for) financing activities | $ | (19.1) | | | $ | 25.0 | | | $ | (44.1) | |
Net cash provided by (used for) financing activities decreased $44.1 million in the first nine months of 2020 compared with the first nine months of 2019. The decreaseincrease was primarily related to loweradditional borrowings from refinancing the Term Loan (as defined below) in the first six months of 2021 compared to higher borrowings on the Facility (as defined below) induring the first ninesix months of 2020 comparedwhich were primarily used to fund working capital needs. The increase was partially offset by financing fees paid in connection with the first nine monthsFacility and Term Loan (both defined below).
Financing Activities
The Company has a $240.0$300.0 million secured, floating-rate revolving credit facility (the "Facility”) that expires in April 2022.June 2026. There were no borrowings outstanding under the Facility at SeptemberJune 30, 2020.2021. The availability under the Facility at SeptemberJune 30, 20202021 was $235.6$285.4 million, which reflects reductions of $4.4$14.6 million for letters of credit and other restrictions. As of SeptemberJune 30, 2020,2021, the Facility consisted of a U.S. revolving credit facility of $150.0$210.0 million and a non-U.S. revolving credit facility of $90.0 million. The obligations under the Facility are generally secured by a first lien on the working capital assets of the borrowers in the Facility, which include but are not limited to, cash and cash equivalents, accounts receivable and
inventory (the "Facility Collateral") and a second lien on the Term Loan Collateral (defined below). The approximate book value of assets held as collateral under the Facility was $850$960 million as of SeptemberJune 30, 2020.2021.
Borrowings under the Facility bear interest at a floating rate, based onwhich can be a base rate, LIBOR or LIBOR,EURIBOR, as defined in the Facility, plus an applicable margin. The applicable margins are based on the total excess availability, as defined in the Facility, and range from 0.25% to 0.75% for U.S. base rate loans and 1.25% to 1.75% for LIBOR, EURIBOR and foreign base rate loans. The applicable margins, as of SeptemberJune 30, 2020,2021, for U.S. base rate loans and LIBOR loans were 0.25% and 1.25%, respectively. The applicable margin, as of SeptemberJune 30, 2020,2021, for non-U.S. base rate loans and LIBOR loans was 1.25%. The Facility also required the payment of a fee of 0.25% per annum on the unused commitments as of SeptemberJune 30, 2020.2021.
The Facility includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company and its subsidiaries subject to certain thresholds, as provided in the Facility. The Facility limits the payment of dividends and other restricted payments the Company, including its subsidiaries, may make unless certain total excess availability and/or fixed charge coverage ratio thresholds, each as set forth in the Facility, and limits the payment of dividends. If average availability for both total and U.S. revolving credit facilities, on a pro forma basis, is greater than 15% and less than or equal to 20%, the Company may pay dividends subject to achieving a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00, as defined in the Facility. If the average availability is greater than 20% for both total and U.S. revolving credit facilities, on a pro forma basis, the Company may pay dividends without any minimum Fixed Charge Coverage Ratio requirement.are satisfied. The Facility also requires the Company, including its subsidiaries to achieve a minimum Fixed Charge Coverage Ratio in certain circumstancesfixed charge coverage ratio in which total excess availability is less than the greater of 10% of the total commitments under the Facility or excess availability under the U.S. revolving credit facility is less than 10% of the U.S. revolver commitments,borrowing base, as defined in the Facility.Facility, and $20.0 million. At SeptemberJune 30, 2020,2021, the Company was in compliance with the covenants in the Facility.
The Company also has a $200.0$225.0 million term loan (the "Term Loan"), which matures in May 2023.2028. The Term Loan requires quarterly principal payments on the last business day of each March, June, September and December commencing September 30, 2021 in an amount equal to $2.5 million. The$562,500 and the final principal repayment is due onin May 30, 2023.2028. The Company may also be required to make mandatory prepayments, in certain circumstances, as provided in the Term Loan. At SeptemberJune 30, 2020,2021, there was $167.5$225.0 million of principal outstanding under the Term Loan which has been reduced in the unaudited condensed consolidated balance sheet by $2.1$5.7 million for discounts and unamortized deferred financing fees.
The obligations under the Term Loan are generally secured by a first priority lien on the present and future shares of capital stock, material real property, fixtures and general intangibles consisting of intellectual property (collectively, the "Term Loan Collateral") and a second priority lien on the Facility Collateral. The approximate book value of assets held as collateral under the Term Loan was $570$650 million as of SeptemberJune 30, 2020.2021.
Borrowings under the Term Loan bear interest at a floating rate, which can be a base rate or Eurodollar rate, as defined in the Term Loan, plus an applicable margin. The applicable margin, as provided in the Term Loan, is 2.25%2.50% for base rate loans and 3.25%3.50% for Eurodollar loans. The interest rate on the amount outstanding under the Term Loan at SeptemberJune 30, 20202021 was 3.40%4.00%. In addition, the Term Loan includes restrictive covenants, which, among other things, limit additional borrowings and investments of the Company subject to certain thresholds, as provided in the Term Loan. The Term Loan limits the payment of regularly scheduled dividends and other restricted payments the Company, including its subsidiaries, may make up to $50.0 million in any fiscal year, unless the consolidated total net leverage ratio, as defined in the Term Loan, does not exceed 1.752.50 to 1.00 at the time of the payment. The Term Loan also contains a provision requiring a premium to be paid in the event of a repricing of the borrowings under the Term Loan, whether by amendment or entry into new loans, within the six-month period following entry into the Term Loan. At SeptemberJune 30, 2020,2021, the Company was in compliance with the covenants in the Term Loan.
The Company incurred fees and expenses of $7.6 million in 2021 related to the amendment of the Facility and the
Term Loan. These fees were deferred and are being amortized as interest expense over the term of the applicable debt
agreements. Fees related to the Term Loan are presented as a direct deduction of the corresponding debt.
The Company had other debt outstanding, excluding finance leases, of approximately $103.4$100.3 million at SeptemberJune 30, 2020.2021. In addition to the excess availability under the Facility of $235.6$285.4 million, the Company had remaining availability of $31.1$28.5 million related to other non-U.S. revolving credit agreements.
The Company believes funds available from cash on hand, the Facility, other available lines of credit and operating cash flows will provide sufficient liquidity to meet its operating needs and commitments during the next twelve months and until the expiration of the Facility in April 2022.2028.
Contractual Obligations, Contingent Liabilities and Commitments
On May 28, 2021, the Company entered into an agreement providing for the Amendment and Restatement of the Term Loan, which is described above. Since December 31, 2019,2020, there have been no other significant changes in the total amount of the Company's contractual obligations or commercial commitments, or the timing of cash flows in accordance with those obligations, as reported on pages 2723 and 2824 in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Capital Expenditures
The following table summarizes actual and planned capital expenditures:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2020 | | Planned for Remainder of 2020 | | Planned 2020 Total | | Actual 2019 | | |
Lift truck business | | $ | 32.2 | | | $ | 19.7 | | | $ | 51.9 | | | $ | 37.8 | | | |
Bolzoni | | 2.6 | | | 0.8 | | | 3.4 | | | 5.6 | | | |
Nuvera | | 2.4 | | | 3.6 | | | 6.0 | | | 6.3 | | | |
| | $ | 37.2 | | | $ | 24.1 | | | $ | 61.3 | | | $ | 49.7 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 | | Planned for Remainder of 2021 | | Planned 2021 Total | | Actual 2020 | | |
Lift truck business | | $ | 13.1 | | | $ | 39.2 | | | $ | 52.3 | | | $ | 44.2 | | | |
Bolzoni | | 4.1 | | | 6.6 | | | 10.7 | | | 5.3 | | | |
Nuvera | | 0.9 | | | 4.1 | | | 5.0 | | | 2.2 | | | |
| | $ | 18.1 | | | $ | 49.9 | | | $ | 68.0 | | | $ | 51.7 | | | |
Planned expenditures for the remainder of 20202021 are primarily for product development, improvements to information technology infrastructure, improvements at manufacturing locations and manufacturing equipment. The principal sources of financing for these capital expenditures are expected to be internally generated funds and bank financing.
Capital Structure
The Company's capital structure is presented below:
| | | | | | | | | | | | | | | | | |
| SEPTEMBER 30 2020 | | DECEMBER 31 2019 | | Change |
Cash and cash equivalents | $ | 89.9 | | | $ | 64.6 | | | $ | 25.3 | |
Other net tangible assets | 643.5 | | | 632.6 | | | 10.9 | |
Intangible assets | 57.0 | | | 60.1 | | | (3.1) | |
Goodwill | 109.9 | | | 106.7 | | | 3.2 | |
Net assets | 900.3 | | | 864.0 | | | 36.3 | |
Total debt | (297.7) | | | (287.0) | | | (10.7) | |
Total equity | $ | 602.6 | | | $ | 577.0 | | | $ | 25.6 | |
Debt to total capitalization | 33 | % | | 33 | % | | — | % |
| | | | | | | | | | | | | | | | | |
| JUNE 30 2021 | | DECEMBER 31 2020 | | Change |
Cash and cash equivalents | $ | 87.5 | | | $ | 151.4 | | | $ | (63.9) | |
Other net tangible assets | 720.0 | | | 615.7 | | | 104.3 | |
Intangible assets | 54.5 | | | 58.5 | | | (4.0) | |
Goodwill | 113.7 | | | 114.7 | | | (1.0) | |
Net assets | 975.7 | | | 940.3 | | | 35.4 | |
Total debt | (345.7) | | | (289.2) | | | (56.5) | |
Total equity | $ | 630.0 | | | $ | 651.1 | | | $ | (21.1) | |
Debt to total capitalization | 35 | % | | 31 | % | | 4 | % |
BUSINESS PROSPECTS
As economiesLift truck markets continued to reopengrow during the 2021 second quarter, but not at the growth rates seen in the fourth quarter of 2020 thirdand first quarter lift truck market activity improved faster than anticipated, with markets ending the quarter at roughly pre-pandemic levels. Excluding China, which increased 78% over the prior year third quarter, theof 2021. The global lift truck market was down lessincreased more than 1% compared with the third quarter of 2019. Compared to70% over the second quarter of 2020 when the global economy was experiencing the peak of global pandemic-related shutdowns. Compared to the first quarter of 2021, the global lift truck market increased 22.5% in the 2020 third quarter4.7% primarily driven by a 28.8%an 11.9% increase in EMEA and a 25.9% increase in the Americas, as well as a 19.7% increase in China.EMEA. The market improvements over the secondfirst quarter combined with the Company's share gain programs, as well as long lead times and the pull forward of orders before price increases went into effect, translated into a solidan increase in 2020 third quarter Lift Truck bookings.the Company's 2021 second-quarter bookings that exceeded market growth.
The lift truck market growth for the remainder of the year is expected to decrease compared with the high levels in the first half of 2021 as markets begin to return toward pre-pandemic levels. As market conditions improve,a result, the Company expects that increasedlift truck business is anticipating a substantial decrease in bookings andin the second half of 2021 compared with the first half of 2021. Nevertheless, as a result of the strategic programsprojects which the Company continues to pursue will positionat each of its businesses, to recover to sound long-term financial returns. In the meantime, the Company continuesexpects increased bookings in the second half of 2021 over the second half of 2020 at levels higher than the expected year-over-year market growth rate. These strategic projects gained traction in the first half of 2021, although definitive time frames for achieving full potential share gain
results are still uncertain due both to focus on aggressive actions to keep its employees healthy as COVID-19 cases once again spike around the globe and on moderating any resulting additional near-term financial impactstiming of the COVID-19 pandemic.
The Company continues to maintain procedures designed to limitfull impact of the exposurestrategic projects and the continuing financial impact of employees to the spread of COVID-19, including adjusting shift schedules to promote social distancing, enhancing cleaningpandemic and sanitation, promoting recommended hygiene practices, limiting workplace accesssubsequent pandemic-related supply chain and maintaining remote working where possible. At the same time, the Company and its employees remain committed to meeting the needs of dealers and end customers by ensuring they receive equipment, parts and services in a timely manner to the degree reasonably possible.cost challenges.
While recent Lift Truck and Bolzoni market and bookings activity is encouraginghave been strong and growth since the 2020 second quarter shutdowns has been better than expected, the level of future bookings isand the resulting shipments are still uncertain. The trend line for bookings is improving, but improvements are occurring at a decreasing rate, and COVID-19 cases are increasing. Overall, the Company continues to operate on the assumption that the economic and market environment will remain difficult throughoutfor at least the remainder of 2020 withthe year until COVID-19 cases expected to increase in areas enteringand its variants are mitigated through the winter season,broad acceptance of vaccinations and in 2021, until an effective COVID-19 vaccination or alternative therapy is widely available.subsequent herd immunity, and related supply chain issues are resolved.
Beginning lateEarly in the first quarter,2020, the Company put plans in place plans to mitigate the impact of declining markets and bookings and the consequential impact of reduced manufacturing activity from pandemic-related shutdowns by initiating cost reduction measures. These measures which were designed to lower costsincluded spending and enhance liquidity. Despite currently improving markets, these measurestravel restrictions, significant reductions in temporary personnel, furloughs, salary reductions and suspension of other benefits, including incentive compensation. Effective January 1, 2021, the Company reinstated pre-pandemic salaries, benefits and incentive compensation programs. The other cost containment actions are generally still in place, and are expected to remain in placeso until market and economic uncertainty dissipates and results improve, whichimprove.
In the 2020 fourth quarter, the Lift Truck business restructured some of its operations to create a lower long-term cost structure. The Company expects to occur over the courseanticipates it will incur charges of 2021. The implementation of these company-wide cost reduction actions is designed to achieve $60 million to $75approximately $0.8 million in operating expense savingsthe remainder of 2021 for additional costs related to this restructuring. Estimated benefits from this restructuring program are expected to be approximately $9 million annually beginning in 2020 compared with 2019, of which approximately $47 million have been realized through September 30, 2020. 2022.
The Company alsoLift Truck business adjusted production levels at its manufacturing plants during theearly in 2020 second quarter to align them more closely with the anticipated reduced levels oflower market demand and target bookings levels. Throughoutlevels and has been building those levels back up moderately over the past 12 months. Given the strong bookings in the prior year fourth quarter and the first half of 2021, as well as backlog levels at historic highs, higher build rates at first appeared reasonable for 2021, but as a result of continuing supply chain and logistics constraints, the Lift Truck business and Bolzoni have not been able to achieve the production levels originally planned for the first half of 2021. The Company is beginning to see improvement in the supply chain, but production levels are expected to experience continued disruption in the third quarter the Company increased production levels moderately to adjust for improved market levels, and the Company anticipates increasing production levels furtherof 2021, with easing anticipated in the fourth quarter givenquarter. However, the Company hopes that these challenges will abate sooner and production levels will be able to be increased above currently planned rates for the second half of the year. Significant material cost inflation and higher freight costs are also expected bookingsto continue into the second half of the year, and the non-renewal of tariff exclusions is also expected to affect the cost of components in the second half of 2021. Both the Lift Truck business and Bolzoni have announced and implemented price increases to moderate the effect of material cost inflation but many of the orders in the backlog barring,slotted for production in 2021 do not reflect the full effect of course, any new government shutdowns. Based on current backlog levels and planned production levels,these price increases. As a result, the Company expects to have adequate component supplycontinue to experience margin pressure throughout the second half of 2021 due to the lag between when these price increases went into effect and minimal open production slots overwhen they are effective since customer orders in the remainder of 2020. This is expected to position the Company with both competitive lead times and an acceptable ongoing backlog level.are generally price protected. The Company continueswill continue to focus on adjusting production levels quickly to market and bookings changes and on workingwork closely with suppliers to help ensure appropriateincrease component supply levels asand its production levels change. Against this backdrop,levels. However, the Company anticipates that commodity costs will remain elevated through the second half of the year, although these costs, particularly for steel, remain volatile and sensitive to changes in the global economy and to tariffs, and could be higher or lower than currently forecasted. The Company will continue to monitor potential future supply and logistics costs and tariffs closely and adjust pricing accordingly.
As a result of these factors, and the increase in costs associated with the reinstatement of pre-pandemic salaries and benefits and the loss of the COVID-related government subsidies, the Company expects substantially lower consolidated operating profit and net income in the fourthsecond half of 2021 compared with the second half of 2020, primarily due to the Americas and EMEA Lift Truck businesses, with anticipated operating and net losses in the third quarter of 2020 to be significantly higher than2021 partly as a result of the Lift Truck business' seasonal third-quarter plant shutdowns. Bolzoni expects significant increases in operating profit and net income in the second half of the year compared with both the 2020 third quarterrespective prior-year period and prior year fourth quarter.the first half of 2021.
However, importantly,While the Company's expectations for the 2020 fourth quarter were established prior to2021 second half have been based on the most recent spikesinformation available, past quarters have shown that the effects of COVID-19 casesthe pandemic on the economic and lift truck market environments can change expectations rapidly. Further Company shutdowns or supplier shortages could occur as a result of the new Delta variant that has emerged globally. Lockdown measures are still in place in a number of countries, including in the Company's largest markets. This environment could develop into a headwind for current fourth quarter booking expectations. Further the Company or supplier shutdowns could occur. For example, while renewed measures have already been taken in a number of European and Asian countries to mitigate the spread of the COVID-19 virus and its variants, and similar actions are likely tocould be taken by other countries, atcountries. At this time, the newlockdown measures put in place have not had a significant impact onrequired closure of the Company's plants or suppliers. However, theplants. The Company is monitoring the evolvingthis situation, including closely monitoring closely a number of suppliers based in areas where COVID-19 cases are spiking.high. The Company continues to maintain procedures designed to limit the exposure of employees to COVID-19. However, the Company is prepared to take further action if necessary to maintain the health and safety of its global employeesworkforce and to address anyadditional production and supply chain issues whichthat may develop. The Company remains committed to meeting the needs of dealers and end customers by
ensuring they receive equipment, parts and services in a timely manner to the degree reasonably possible. More broadly, as a result, pandemic-related uncertainty continuesand its effect on the supply chain continue to limit the Company's ability to forecast bookings and shipment levels forpast the third quarter of 2021.
In addition to the Company's focus on cost containment actions,Despite these challenges, the Company has also focused on actionsexpects to enhanceincrease its cash flow before financing, including reducinginvestment in working capital and reducing or deferring capital expenditures.other expenditures to support growth in its business. Capital expenditures are expected to be approximately $61$50 million in 2020. Enhancingthe second half of 2021. While the Company expects to make these substantial additional investments in the business during 2021, maintaining liquidity also continues to be a priority. At SeptemberJune 30, 2020,2021, the Company's cash on hand was $89.9$87.5 million and debt was $297.7$345.7 million compared with cash on hand of $60.5$103.0 million and debt of $337.7$285.4 million at June 30, 2020.March 31, 2021. Term Loan debt increased with the refinancing of the Company's term loan in May 2021. In addition, as of SeptemberJune 30, 2020,2021, the Company had unused borrowing capacity of approximately $260$313.9 million under the Company's existing revolving credit facilities, including the Company's recently refinanced Asset Backed Revolver, compared with $218$265.3 million at June 30,March 31, 2020. Looking to the future in the context of an improving bookings trend, the Company plans to increase its investment in working capital to support growth in its business.
Despite the uncertainty related topotential volatility of near-term economic activity, the Company continues to execute its long-term strategy. Asstrategy by focusing on advancing its key strategic initiatives. Collectively, the Company entered the COVID-19 crisis, it was in the midst of undertaking the largest set ofkey projects underlying its strategic programs in its history with the expectation that they would collectivelyinitiatives are expected to have a transformational impact on the Company’s competitiveness, market position and economic performance. While essentially all of the projects required to execute these strategiesinitiatives continue to move forward, in the context of the COVID-19 pandemic and current logistics challenges, the pace of certain projects has been given greater emphasis than others to reduce near-term operating expensesothers. In addition, certain accelerated projects have experienced delays as a result of the impact of pandemic-related challenges, although the continued increase in bookings and capital expenditures.the Company's historically high backlog reinforce the long-term potential payoff from these programs.
At the Lift Truck business, product programsprojects are expected to lay the groundwork for enhanced market position by providing lower cost of ownership and enhanced productivity for the Company’s customers. While the Company continues to introduce a number of new products during this period, Lift Truck'sthe primary focus iscontinues to be on athe Company's new set of modular and scalable product families covering both internal combustion engine and electric trucks which willdesigned to provide customers with enhanced flexibility for meeting their application needs in addition to the benefit of lowestlow total cost of ownership. The Company has been focused on maintaining the timing of the introduction of the first of these new modular products, the standard version of the 2-to-3 ton internal combustioninternal-combustion engine lift truck for the EMEA market, which is expected to bewas launched in the first quarter ofApril 2021. TheThese new EMEA trucks have been very well received and the launch of this new range of the 2-to-3 ton counterbalanced trucks willin other markets is expected to continue throughout 2021 with trucks for the Americas market expected to be launched in the second half of 2021.and 2022.
The introduction of these new products has led to, and will continue to lead to, significant changes in supply chain sourcing and in the Company’s various manufacturing facilities around the world as certain products are moved between plants. Consolidated component volume sourced globally from reliable partners is expected to reduce long-term costs and improve quality as these new products are brought to market over time. Lift Truck’sHyster-Yale Group’s largest manufacturing facilities, its Berea, Craigavon and GreenvilleFuyang plants, are undergoing significant changes to accommodate these new products and additionalsignificant investments are being made at theseto expand the Berea and Craigavon plants. Given the current environment,Further, the Company has also acceleratedis accelerating plans to move certain products in orderproduction locations to provide permanent structural changes designed to reduce costs.costs and optimize its manufacturing footprint.
The Company believes the modular nature of the new products being introduced will enhance its ability to meet customer needs at lowestlow cost, and with more specificity, both at the industry level and at the individual customer level. To capitalize on this capability, the Company has accelerated its focus on implementing comprehensive industry strategies and investing in industry-focused sales capabilities to support its dealers. Given the COVID-19 environment, the Company has also focused on enhancing its remote selling capabilities through technology and IT enhancements.
Bolzoni continues to focus on implementing its "One Company - 3 Brands" organizational approach to help streamline corporate operations and strengthen its North America and JAPIC commercial operations. Bolzoni is also focused on increasing its Americas growth strategy bybusiness and strengthening its ability to serve industries in the North America market through the supply of cylinders and various other components from its Sulligent, Alabama plant, and by introducing a broader range of locally produced attachments with shorter lead times to serve its customer base. Bolzoni is also implementingbase and through continuing to sell cylinders and various other components produced in its "One Company - 3 brands" organizational approach to help streamline corporate operations and strengthen its North America and JAPIC commercial operations.Sulligent, Alabama plant.
Nuvera continues to focus on serving heavy-duty applications, particularly bus and truck applications, with its 45kW engine,and 60kW engines, which waswere both released for sale duringlate in 2020. As a result of those milestones, Nuvera accelerated the 2020 second quarter. It45kW and 60kW engine commercialization operations for the global market and has been focusing on ramping up demonstrations, quotes and bookings of these products in 2021. In addition, Nuvera has initiated development of a new 125kW engine and also continues to focus on the forklift truck market. During the second quarter of 2020, Nuvera, which had successfully achieved certification of its first 45kW engine for China in 2019, received its first integration certification which allows the engines to operate in buses. During the third quarter, testing of these engines in Chinese buses was completed for one company, and that company has now included the certified bus design in its sales catalog. Certifications for other bus companies are expected late in the fourth quarter of 2020 and in the first half of 2021. As a result of these milestones, Nuvera has accelerated the 45kW engine commercialization operations for the global market and is focusing on ramping up sales of this product in the fourth quarter of 2020 and in 2021. Nuvera is also developing a new engine of approximately 60kW for the Chinese market that is expected to begin the certification process during the fourth quarter. The engine certification for this new engine is expected to be received during the 2020 fourth quarter, with the vehicle integration certification expected to be completed late in the quarter or early in the first quarter of 2021.
The Company believes that, despite significant current inflation and logistics issues, it is at an inflection point in its businessbusinesses as a result of the momentum of its strategic programsprojects as they move to full implementation. While these initiatives may reduce the Company's near-term financial results, they are expected to position the Company with enhanced market position as market and component supply conditions return to more normal levels. Nevertheless, since the Company recognizes that the timing and shape of the market recovery is highlyremains uncertain, and it will focus on respondingcontinue to changing conditions with agility based onmaintain its contingency plans which are designed to respond appropriately respondand with agility to conditions as they unfold.changing conditions. Once the COVID-19 pandemic hasand its resulting effects have fully abated and markets have returned to normal, the Company believes the full impact of these programs canprojects will lead to significant profitability improvements for a number of years into the future.
In summary, the Company's strategy for the longer term is clear and transformative. Key projects, as well as explicit objectives for the Lift Truck, Bolzoni and Nuvera businesses, support this long-term strategy, but nearer-term prospects, particularly in 2021, are uncertain as a result of a number of abnormal, largely external, influences. These influences include the direct impact of the COVID-19 pandemic on some markets, suppliers' manufacturing levels around the world and logistics issues, which collectively create supply and cost challenges, as well as the timing of adoption rates for key fuel cell market segments. Importantly, the Company has a record lift truck backlog and a strong current booking environment. Future increased shipment opportunities are very significant. However, when these increases will occur, given the supply and logistics challenges, is difficult to come.forecast.
EFFECTS OF FOREIGN CURRENCY
The Company operates internationally and enters into transactions denominated in foreign currencies. As a result, the Company is subject to the variability that arises from exchange rate movements. The effects of foreign currency fluctuations on revenues, operating profit and net income are addressed in the previous discussions of operating results. See also Item 3, "Quantitative and Qualitative Disclosures About Market Risk,” in Part I of this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
The statements contained in this Form 10-Q that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) delays in delivery, and other supply chain disruptions, or increases in costs, including materials and transportation costs, shortages, the imposition of tariffs, or the renewal of tariff exclusions, of raw materials or sourced products and labor or changes in or unavailability of quality suppliers, (2) the duration and severity of the COVID-19 pandemic, any preventive or protective actions taken by governmental authorities, the effectiveness of actions taken globally to contain or mitigate its effects, and any unfavorable effects of the COVID-19 pandemic on either the Company's or its suppliers plants' capabilities to produce and ship products if COVID-19 continues to spread or quarantines are re-established, (2)(3) reduction in demand for lift trucks, attachments and related aftermarket parts and service on a global basis, including any reduction in demand as a result of a COVID-19 triggered economic recession, (3)(4) the ability of the Company and its dealers, suppliers and end-users to access credit in the current economic environment, or obtain financing at reasonable rates, or at all, as a result of current economic and market conditions, (4) delays in delivery or increases in costs, including transportation costs, the imposition of tariffs, or the renewal of tariff exclusions, of raw materials or sourced products and labor or changes in or unavailability of quality suppliers, (5) delays in manufacturing and delivery schedules, (6) the successful commercialization of Nuvera's technology, (7) customer acceptance of pricing, (8) the political and economic uncertainties in the countries where the Company does business, (9) exchange rate fluctuations and monetary policies and other changes in the regulatory climate in the countries in which the Company operates and/or sells products, (10) bankruptcy of or loss of major dealers, retail customers or suppliers,
(11) customer acceptance of, changes in the costs of, or delays in the development of new products, (12) introduction of new products by, or more favorable product pricing offered by, competitors, (13) product liability or other litigation, warranty claims or returns of products, (14) the effectiveness of the cost reduction programs implemented globally, including the successful implementation of procurement and sourcing initiatives, (15) changes mandated by federal, state and other regulation, including tax, health, safety or environmental legislation, and (16) unfavorable effects of geopolitical and legislative developments on global operations, including without limitation the United Kingdom's exit from the European Union, the entry into new trade agreements and the imposition of tariffs and/or economic sanctions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See pages 3227 and 3328 and F-27F-23 through F-30F-26 of the Company's Annual Report on Form 10-K for the year ended December 31, 20192020 for a discussion of the Company's derivative hedging policies and use of financial instruments. There have been no material changes in the Company's market risk exposures since December 31, 2019.2020.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures: An evaluation was carried out under the supervision and with the participation of the Company's management, including the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, these officers have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in internal control over financial reporting: During the thirdsecond quarter of 2020,2021, there were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 1A Risk Factors
The following risk factor updates theThere have been no material changes from risk factors previously disclosed in the Company’sCompany's Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 in the sectionSection entitled “Risk"Risk Factors.” The impact of COVID-19 may also exacerbate the risks discussed therein, any of which could have a material effect on the Company.
The Company faces risks related to the global outbreak of COVID-19, which has adversely affected and may continue to adversely affect the Company’s business, results of operations and financial condition.
The Company faces risks related to pandemics and other public health crises, including the global outbreak of COVID-19, which has reached and disrupted areas in which the Company has operations, suppliers, customers and employees. The COVID-19 pandemic and actions taken by governments and others in response have resulted in and may continue to cause the closure of certain of the Company’s customers’ facilities, which in turn has reduced and may continue to reduce demand for its products. Furthermore, as a result of the COVID-19 pandemic, certain of the Company’s suppliers have been unable to provide materials to its facilities. This disruption to the Company’s supply chain has negatively impacted its business and results of operations and it is unable to predict the ultimate duration of such disruption and whether it will be able to secure supplies from alternate suppliers on favorable terms or at all. Moreover, the Company has closed and may continue to close certain of its facilities in response to the COVID-19 pandemic and measures taken by governments in response, which has and may continue to have a negative impact on its business and results of operations. The COVID-19 pandemic has also disrupted the Company’s internal operations, including by causing a large number of its employees to work remotely, subjecting the Company to heightened cyber and other risks. There is also a heightened risk that a significant portion of the Company’s workforce will suffer illness or otherwise not be permitted or be unable to work. The Company cannot predict whether any of these disruptions will continue or whether its operations will experience more significant or frequent disruptions in the future. Any measures the Company implements to mitigate these risks and disruptions may not be successful.
The circumstances surrounding the COVID-19 pandemic continue to evolve and it is not possible to predict the full nature and extent of the impacts of the COVID-19 pandemic. However, the continued spread of COVID-19 and reactions by governments and others has caused an economic slowdown that is significant, which the Company expects to continue and, therefore, could extend the duration of the period of reduced demand for the Company’s products and disruption of its supply chain. Additionally, deteriorating economic conditions could result in material impairment charges in the value of certain of the
Company’s assets. Moreover, circumstances surrounding the COVID-19 pandemic have negatively impacted global financial markets leading to greater volatility and increased cost of capital. If such conditions continue, the Company’s ability to borrow capital and otherwise finance its operations and expenditures may be negatively impacted.
"
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Mine Safety Disclosures
Not applicable
Item 5 Other Information
None
Item 6 Exhibits
The following exhibits are filed as part of this report:
| | | | | | | | |
Exhibit | | |
Number* | | Description of Exhibits |
| | |
10.1 | | Amended and Restated Term Loan Credit Agreement, dated as of May 28, 2021, among Hyster-Yale Group, Inc., as the Borrower, Hyster-Yale Materials Handling, Inc., as Holdings, Bank of America, N.A., as Administrative Agent, and the Other Lenders party thereto is attached hereto |
10.2 | | Second Amended and Restated Loan, Security and Guaranty Agreement, dated as of June 24, 2021, among Hyster-Yale Materials Handling, Inc., Bolzoni Auramo, Inc. and Hyster-Yale Group, Inc., as U.S. Borrowers, Hyster-Yale Nederland B.V., as a Dutch Borrower, Hyster-Yale UK Limited, as a UK Borrower, any other Borrowers party thereto from time to time and certain Persons party thereto from time to time as Guarantors, certain financial institutions, as Lenders, Bank of America, N.A., as Administrative Agent and Security Trustee, BOFA Securities, Inc. and CitiBank, N.A., as Joint Lead Arrangers and Joint Book Managers and CitiBank, N.A., as Syndication Agent is attached hereto |
10.3 | | |
31(i)(1) | | |
31(i)(2) | | |
32 | | |
101.INS | | Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | | The cover page from this Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2020,2021, formatted in Inline XBRL and contained in Exhibit 101 |
* Numbered in accordance with Item 601 of Regulation S-K. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | Hyster-Yale Materials Handling, Inc. | |
| | | |
Date: | NovemberAugust 3, 20202021 | /s/ Kenneth C. Schilling | |
| | Kenneth C. Schilling | |
| | Senior Vice President and Chief Financial Officer (principal financial and accounting officer) | |
| | | |