Q1 2020 Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Hyster Yale Q1, 2020 earnings Conference call. At this time, all participants are not listen only mode. After the speakers presentation, Debbie a question and answer session.

If he would like to ask a question. During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you're acquiring any further assistance. Please press star zero I would like to have now hand, the conference over to your speaker today, Chris Christy Kmetko. Please go ahead ma'am.

Thank you.

Good morning, everyone and welcome to our 2021st quarter earnings call.

Christina Kmetko and I'm responsible for Investor Relations at Hastings, Yeah. Thank you for joining US. This morning, I Hope you and your families are all healthy insane.

Joining me on today's call or Al Rankin, Chairman, President and Chief Executive officer or pay for young until its handling regime, Persaud, President and Chief Executive Officer of Hayfield Group and Ken filling our senior Vice President and Chief Financial Officer Yesterday evening, We published our first quarter 2020 results.

Earnings releases are available on our website <unk>.

Anyone who is not able to listen to today's entire call. An archived version of this webcast will be on the website. Later this afternoon and available for approximately 12 month.

Our remarks that follow including the answers to your questions contain forward looking statements. These forward looking statements are subject to risks and uncertainties that could cause actual results to be to differ materially from those expressed or implied by such forward looking statements made here today.

These risks include among other matters that we have described in our earnings release issued last night and other filings we make with the FCC.

We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly conference call if at all.

So certain amounts discussed during this call may be considered non-GAAP to non-GAAP reconciliations of these amounts are included in our earnings release and available on our website.

In a moment I'll discuss our first quarter results, but first let me turn the call over to our chairman and CEO Oh ranking for some opening remarks out.

[noise], Thanks, Christine good morning, everybody.

This is an uncertain stressful.

Fine or more than that.

Everyone.

We appreciate your participation.

I also want to think coaster yield global workforce.

We have one brand that is celebrating its antonio anniversary this year and another that celebrated nine years and pointing 90.

First century, we faced and overcome many challenges.

That's in the past or employees are rising to the occasion.

Our studio leadership couldn't be more pleased with how well they are managing through the krish.

I appreciate our [noise].

Our employees commitment to supporting our dealers and customers, while also working diligently to keep themselves and others safe.

Our first priority has been to keep our workforce safe and help reduce the spread of the Corona virus.

Safety focused approach is coupled with our responsibility to our customers to supply them with products and services that are operate that operate in many critical industries to the extent possible.

That's the cobot 19 pandemic spreads around the world. Many governments have classified our operations is essential.

Working with our dealers were delivered products and services that enable our customers to provide critical infrastructure that is essential to support the economy around the world. During this pandemic.

Well, we are serving these important needs employees, who can work from home could work from home are doing so.

And our facilities that are open we have implemented safeguards in accordance with regulatory requirements and guidance from health authorities to protect our workforce and limit their exposure to covert 19, including adjusting shifts schedules to promote social distancing enhance enhancing cleaning and sanitation.

Equipment workers in common areas.

Coating recommended hygiene practices and limiting works for the workplace access.

We came out of 29 team with momentum in our strategic programs optimistic at that time about the progress we expected to see in 2020, both of these programs and in our results and of course, we did not expect the effects of the cobot 19 pandemic, which we're now experiencing.

Christie will discuss our first quarter performance next which was quite strong and which reflects limited impact of cobot 19 on heister yields results, particularly in the first few months of the quarter.

Then rajiv and I will provide our perspectives on the cobot 19 environment in the actions. The company is taking to address this changed environment, including a near term demand and supply challenges we've been through many challenges in past years, including the 2008 nine downturn.

Cobot 19 is different we believe our employees in our businesses are well positioned to manage through this pandemic.

Now, let me turn the call over to Christy to cover the results for the quarter.

Thank you al.

I will first provide some highlights about the quarter and then review the individual segments in more detail.

2021st quarter consolidated revenues decreased to $785.7 million.

Down 5.9% from last year's first quarter, mainly due to lower market volumes, primarily in Europe, and China and the impact of Cobot 19.

Unfavorable currency movements also contributed to the decline. Despite this decrease in revenues our consolidated operating profit increased to 20.2 million from $3.4 million last year as a result of improved earnings mainly at the lift truck businesses Americas segment.

Higher operating profit of Bolzoni was largely offset by lower operating results at Nuvera net income overall improved to $15.3 million or 91 cents per share.

$3.4 million, a 20 cents per share in the prior year quarter.

It is important to point out that while these are the operating results quarter. At this time, the operating profit and net income amounts may change when our 10 Qs filed after completion of further impairment analysis.

Because of the impact across the world of Cobot 19, the company's future prospects have been adversely affected the significant decline in current economic activity has reduced the current demand for our products from customers and reduced the availability of components from suppliers.

These circumstances require us to evaluate certain assets at March 31, 2020 for impairment.

Since we are still evaluating several scenarios for the four for the forward forecast necessary to complete the impairment assessment.

We were not able to reasonably estimate a provisional impairment amount for this release.

Based on our preliminary analysis, we estimate that we could have an impairment in the range of zero to $10 million.

Our assessment is expected to be finalized and the impairment reported as part of our final first quarter 2020 results as included in our form 10-Q for the quarter ended March 31, 2020, which will be filed at a later date.

Turning specifically to the lift truck business has to yell groups revenues decreased to $747.4 million.

From $788 million in 2019, primarily as result of lower shipments in EMEA and Jay pick partly offset by higher shipments in the Americas.

Consolidated unit shipments bookings and backlog our decreased compared with the 2019 fourth and first quarter, mainly due to market and bookings levels and some impact from cobot 19 late in the quarter.

Generally markets and bookings were lower in the 20 units in the 2021st quarter than in the 2018 first quarter.

We ended the quarter with strong backlog, but at a lower level than the extended lead time backlog in the prior year, which was affected by lower production due to supplier shortages in.

In addition, while unit bookings decreased from prior periods. The average sales price per unit in bookings increased compared with the fourth quarter of 2019 as a result of an increase in bookings of higher priced units.

Production was reduced or suspended in several of our Asian and European facilities. During the first quarter largely due to covert 19 government regulation and the material shortages from suppliers, who closed their manufacturing plants or could not deliver components. As a result of increased controls and borders, Florida closures and traffic delays.

Hey, stereo group's operating profit increased to $28 million in the first quarter, an increase from $10.8 million last year because of improved results in the Americas, partly offset by a higher operating loss in EMEA and Jay pick, resulting mainly from unfavorable currency movements and lower volumes.

In the Americas Hayfield group realized benefits from favorable pricing actions taken in 2019 higher unit volumes and a shift in sales to higher margin lift truck.

Operating expenses also decreased in all three geographic segments, primarily as a result of the reduction or elimination of certain employee related costs as the complaint company implemented its initial cost containment actions to mitigate the expected impact of the cobot 19 pandemic.

At the Bolzoni segment reported net income was $2.7 million and revenues were $87.9 million for the 2021st quarter compared with net income of $300000 and revenues of 91.8 million in last year's first quarter.

Well done is operating profit increased to $2.7 million, an increase from $1.2 million last year.

Well as any revenue decrease resulted from extended plant closures in China early in the first half of the quarter and the closer Bolzoni the tie in facilities in the latter part of the quarter. Both as a result of cobot 19, as well as unfavorable currency movements of 1.5 million.

Improved operating profit was primarily due to the absence of a $1.4 million restructuring charge taken in the prior year quarter related to the transfer Bolzoni is North America attachment manufacturing from home would Illinois to solid in Alabama in 2019.

Finally at Nuvera revenues were $1.4 million in the first quarter of 2020 down from $4.5 million in the prior year. The decline was the result of reduced receipts of development funding associated with third party development agreements and fewer sales of fuel cell battery boxer placements this year than in the prior.

Your first quarter.

As operating loss was $9.4 million up from the $8.4 million loss reported in last year's first quarter, but lower than the $10.4 million operating loss reported in the fourth quarter of 2019.

The higher operating loss was due to lower third party fuel cell development services provided in the first quarter of 2020 compared with last year.

That completes my summary of first quarter results I will now turn the call over to reshape who will discuss the actions our businesses are taking to manage through this crisis.

Thank you Christy the effective covered 19 pandemic are continuing to evolve rapidly.

As Youre all aware by now much uncertainty exists.

For the duration as well if the dexcom severity of the economic downturn that is occurring as a result, kogan 19 in conjunction with a broad measures taken by government businesses and others across the globe to limit the spread off the virus.

Global economic and market conditions have deteriorated dramatically.

Beginning in China for Us.

During the first quarter, an increasingly rocket increasing rapidly around the world throughout the remainder of the quarter and in April.

We believe the global economy is entering what is likely to be a deep recession.

I suppose Alan Christy as noted our first quarter 2020 result around the moderately.

Our only moderately affected by the Kobin 19 pandemic.

The impact of the measures taken to limit is spread and the most.

Important economic regions for our company began late in the quarter and have continued to increase into intensity in the early part of the second quarter.

The magnitude of the impact of this a pandemic on our financial and operational results will ultimately depend primarily on the severity and duration of the economic downturn.

And the consequential impact over the pandemic on demand.

For our products and services.

In the near term that effect on our product production levels supply chain resiliency and magnitude of the impact of our actions to mitigate the effects of pandemic will affect our result.

It is too early to reasonably estimate the financial impact covered 19 on high steels future quarters.

Okay.

The effect could be significant.

And have had and we'll continue to have an unfavorable impact on our near term results of operations.

Cash flow and financial condition.

We could experience material adverse effects due to reduced demand for our products.

The recovery from recession is slow.

During late March and ending April markets, and bookings with severely reduced due to lock down makeshift implemented in our most significant market.

However, we do not believe that these locked down related booking levels provide useful perspective on what market and booking levels will look like post locked down.

As Oh post locked down markets and bookings level cannot currently be reasonably forecasted.

As lockdown met Lockdown measure, so relaxed and market conditions improve we expect that increase booking and the strategic programs. We are continuing to pursue is well positioned each about business to recover to sound long term financial returns.

As market and booking visibility improves and uncertainty is reduced over the next few months, we plan to provide increased perspective on our anticipated results in future running releases.

We are not included an update to our fourth quarter 2019, investor perspective in this earning release because of the uncertainty about future market conditions and their impact on average so as a result, because at 19.

We will update our investor.

Perspective, and future earnings releases once the current uncertainty moderates.

In the meantime, we have focused on aggressive actions in moderate the near term financial impact of coded 19, as a result, lower market reduce bookings and factory in supply chain disruptions.

The global lift truck market decreased 12% in 2021st quarter from 2019 fourth quarter in large part because of the beginning of.

The impact of covered 19 in China.

We are anticipating a substantial decrease in bookings into second quarter in all of that geographic regions, because markets and bookings have deteriorated us the actions taken to limit the spread of Iris.

Hi become more widespread.

Aspects for the second quarter, given our plant closures and partial closures.

And given potential supply production disruptions.

For significant decline in shipments revenue and operating profit, including the possibility of the second quarter operating lot more broadly.

The nature of recovery and lift truck market in future quarters of 2020, and its consequential impact on our revenue and earnings is too speculative to comment at this time.

Due to cope with 19, we have implemented many actions focused on maintaining the health and safety if our employees.

Since the beginning of year production has been significantly reduced doors suspended.

Very periods is set several about Chinese European and American facilities.

Generally as a result of government covered 19 requirement.

All planned with appropriate health and safety protocols in place for employee safety, our operating as of today.

Assisted to some degree by the fact that in most countries, including the United States, We have considered an essential business.

As Alan noted, we have implemented procedures limits, our employees exposure to cope with 19, while maintaining operations and our commitment to meeting the needs of our dealers and customers by ensuring their receive equipment parts and services in a timely manner to the degree.

Possible.

Operating on the assumption that the economic and market environment will be very difficult throughout 2020.

Accordingly, we have moved aggressively to put plans in place to mitigate the impact of lower market and bookings, including reduced manufacturing activity.

Global cost constraint actions.

Global cost containment action, including suspension enough incentive payments.

Lending and travel restrictions hiring freezes and minimization or elimination of all contracted temporary workers reduction in base salaries oil implode salaried employees and work schedules furloughs.

And suspension so for one k. contributions and profit sharing.

These companywide cost reduction actions are targeted to achieve 80 million to 110 million in operating expenses savings in 2020.

Savings of also being generated by utilizing government support programs available in various countries outside North America.

We also expect savings from actions to reduce costs at our manufacturing locations. We have adjusted production levels have manufacturing plant aligned with an assumption of sharply reduced levels of demand and we're working closely with supplies to ensure a component inventories or reduce the levels needed.

To support these reduced production schedule.

I'll turn the call over the 10 for an update on further liquidity measures when taking.

Thanks Rajiv.

As we achieved noted we are taking the situation seriously and reducing cost in a thoughtful way.

In combination with these cost containment actions. We're also focused on actions that will enhance our cash flow before financing.

Clootie, reducing working capital and reducing our deferring capital expenditures as we entered the cold in 19 crisis, we were in the midst of undertaking the largest set of strategic programs in our history with the expectation that they would collectively have a transform it'll transformational impact on our competitiveness.

Market position and economic performance.

The projects required to execute these strategies do continue to move forward, but in light of Koby 19, we are required to execute these strategies.

If I prioritizing them flytrap prior part prioritizing certain projects over others.

In some projects have been delayed to reduce operating expenses in capital expenditures. Our full year 2020 capital expenditures are now expected to be up $55 million compared with our original 2020 estimate of $86.1 million that we provided in our 2019 10-K.

During the first quarter capital expenditures were $17 billion.

Enhancing our liquidity also continues to be a priority at March 30, Onest 2020, our cash position was $50 million and debt was $340.1 million.

Paired with cash on hand of $64.6 million and debt of $287 million at December 30, Onest 2019.

In addition, as of March 31st 2020, we have unused borrowing capacity of approximately $194 million under existing revolving credit facilities.

Note that at the end of April we had a similar amount of availability under our revolving credit facility.

Our businesses are doing a very good job at Meg managing to maximize cash flow. We're also working very closely with our banks and financial partners globally to develop programs that enhance our liquidity during this downturn.

Additionally, we are placing new leave legislative tax and other governmental support programs to increase our near term liquidity.

I'll now turn the call back over to al for some closing comments [noise].

In closing, let me say that we're actively responsibly and successfully navigating our way through this crisis, we have a substantial backlog, which provides us with production support over the remainder of 2020.

And Weve Clicklist quickly, taking the right actions to manage our cost structure.

We will respond to any further production and supply chain disruptions that we may see should the company.

In the coming months.

While we have not dealt.

With a pandemic before.

Hi, stir yield is very fortunate to have experienced leaders, who have managed through challenging situations in the plant past, including severe economic downturns.

We have emerged from these challenges as stronger company. Each time, we expect to do that this time as well.

What does prices clearly demonstrated this quarter strong global team our company has.

That concludes my prepared remarks, and our collective prepared remarks, and we will now open up the call.

For any questions that you may have.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby Lilly composite culinary roster.

Your first question comes the line as Joe Mondello from Sidoti.

Your line is now open.

Good morning, everyone hope everyone as well.

Good morning, Joe.

First question.

Just regarding the the cost.

Actions you've taken.

Seemingly is they seem pretty pretty aggressive, but obviously the business has changed a lot over the last couple of months I'm, just curious depending on how things recover or rebound later in the year and how this whole thing transpires how much of these cost cuts are.

Permanent or we definitely going to see 80 to 110 in 2020 or does it sort of depend on how things were cover how much is sort of a permanent cost called versus more of a temporary.

Well, let me.

Say that debt.

As you can imagine.

All of the expenses that we had in our.

Previous.

Plans.

We're expenses that we thought were work while at the time, we put them together.

And so in that sense.

If conditions return instantaneously.

Pre cobot 19, we would want to reinstate those expenses.

The other hand.

To the extent that now or.

In the future and pointing 24, even in 2021.

Conditions adult return, we will not put that full cost structure back in place.

Our position was that.

Given the nature of this unprecedented.

Very quick decline and economic activity around the world.

Yeah, we needed to act immediately or we would lose the benefit.

In the near term all the actions that we could have taken and we would lose that benefit forever.

Since we don't know what's coming.

Our position was to reduce expenses aggressively now.

And then put them back again.

When conditions warrant putting them back on.

So and we're going to be in essentially entirely.

Dependent and our thinking on how.

Forklift truck markets and bookings.

At each of our three businesses respond in this environment and we'll act accordingly with regard to cost reductions.

Okay and.

I know.

Things are changing week by week.

Have you noticed anything you know at this point in time has anything sort of stabilize.

Versus you know, which I assume or some very severe weeks in April has anything stabilized since or is it still sell sorta unclear.

I think it's just it's just too early.

To see any real indications of stabilization as you know.

Europe is just now this week are beginning to reopen and won't be fully reopen for some time and then it's probably going to take.

Some period of time for.

Confidence to return or people to get organized to carry out plans for forklift truck.

Okay and attachment purchases.

And I think similar conditions exist in the United States.

China is beginning to emerge.

We've had.

Certainly had increased booking levels.

Hi.

April.

In comparison with the first quarter in China.

But.

Situation is still not one where we can say with any confidence it's indicative of what.

The post Coven 19 world is going to look like and in that regard I would add.

We expect that different industries will come back at very different rates.

And.

Using the United States and our strengths in the market there.

We will be analyzing.

And our in the process of analyzing the individual markets.

That make up the totality of the North American forklift truck market.

To think through.

The pace at which.

Those markets.

Tend to come back for forklift trucks, and then we'll monitor that page together, what we think might happen in those industries.

Some of them are going to be quite delayed in coming back others could come back quite a bit more quickly.

So that's the general approach that will take but.

I think our our general position is too.

We expect the worst.

And then respond as conditions you Josh that is clearly prudent to do so.

Okay and to endure in response to your final comments in terms of end markets.

I would imagine warehousing, maybe food and beverage and pharma would be some of those stronger end markets could you.

Help us understand the difference in sort of product mix in margin related to maybe some of those markets versus some of your industrial is there any difference generally.

I'm, just wondering with gross margins how product mix me.

Sure.

Yes.

Well I think I'd really leave it at the general terms that you saw what the gross what the.

Margins were.

In the in the first quarter now of course those include the impact of Unabsorbed manufacturing expense in some other.

Cost of sales elements, but our.

Adjusted standard margins, which we monitor very closely.

We think we'll be in the environment that we see no matter, how the mix of market.

Markets turns out will be relatively.

Stable.

I would add that.

We do enjoy.

Good margins on our big truck business, and we'll have to see how quickly that comes back.

And that that could be.

That will be an important thing for us to monitor.

Okay, and what would big trucks being mostly associated with more heavier industrial type end markets.

Well its porch terminals and heavy equipment.

In yen.

Very broad number of industries, including steel.

And others.

Okay yesterday at the Americas segment of the Hi studio group, a part of the business.

The core lift truck business was lower than I anticipated I assume that's partially relative to some of the cost actions that you've made so I'm. Just curious you know in terms of that those costs actions. The 80 to 100 million 110 million that you cited how much how do you did you initiate.

The in the first quarter already versus initiating in the second quarter, just trying to get an idea of run rates and where are your Uh huh.

Well I think gifted divided into two sort of pieces a one.

Our expenditures.

And the expenditures of money.

Probably a relatively small impact on the.

On the first quarter. It would only have pertained into a limited degree hit the last couple of weeks of March and even then probably a relatively small number.

The second our accruals.

And some of the expenses that we incur are not cash expenses for our accrual expenses significant among those are the actions we took with regard to incentive compensation.

Which we are which rajiv outlined in his comments we've.

I will have no at least with the current conditions, we see will have no.

Short and long term incentive compensation payments and so those accruals would not have been charged against the first quarter in the Americas or in any other.

Area of the world, So thats probably the biggest.

Crew type expense that would have been resulting from actions taken.

And of this quarter and in the early part of April to a moderate expenses for the full year.

I think thats the best way to answer your question.

Okay and.

I just had a question on Nuvera, given where we are in the Chinese.

Economy recovery in reopening in one not what could you provide an update with the Chinese bus customers.

Where are you were and where you are now with with that.

Well I'll make a couple of general comments, and then ask review to comment in more more detail, but generally.

We have done the same at new Vera that we have done and our other businesses in terms of examining.

Every expansion, particularly our capital expenditures.

To take.

As a conservative approach toward expenses as possible in that business.

We are pursuing the same general strategy.

And we continue to pursue.

The bus market in China.

China and.

Let me turn that over to Rajiv for further comment.

Thanks out so what we see in China is number one there is.

Activity the government's encouraging.

Moved to.

Zero emission or Green technologies.

We see active discussions with as we regional governments about switching that transport.

The two to fuel cell based solutions. So that we see that became quiet during the covered 19 period in China, but it back.

And we're in deep discussions with our partner with some key regional governments.

Over the next few weeks, we're going through the.

Testing of Hot production intent engines with the Chinese government. The SMB I see test is occurring over the next few weeks and then we will do the working with the bus companies in June and July we'll do some integration testing.

You too.

Government required at the end my IP test.

So those will be over probably right around the end of the second quarter or a very early headquarter assuming that we are successful through that then we'll go.

Initiate the integration process.

Full production I think the solution and then further.

Let's see testing with that customer so.

Overall, there has been a delayed due to cover at 19, but the pick the activities pretty much gone back to where it was pre cobot 19.

Okay and last question that I have is just in terms of your order trends geographically.

Have any other have how would the regions been trending have.

No the shutdowns are affecting productivity in shipments, but in terms of the order trends have could you describe what you're seeing the differences and.

Amongst the different regions that you plan.

No I I, just rest with my comments earlier.

Around the World April once a month.

Which.

The impact of coated 91 ordering activity.

Which very severe because much of the world was locked down for just coming out of.

Locked down.

Even in China, our people, we're just really coming back to work.

And our customers. We're just beginning to come back to work and there are still restrictions on contact with customers and and normal commercial.

Savior and so whatever.

The numbers are at very low levels and in my view that is exactly what we expected them to be.

Hi, it's surprising in a way there were any orders during that period of time.

And.

So there are no real indications from the level of activity down.

We're really right up to the current time it give us any.

Real visibility into what order rates are going to be as we look forward.

And I don't think there were.

Differences.

Yeah, and the actual behaviors in the air different areas of the world that were significant enough to.

Call out any specific comments about one area as opposed to another.

Okay, all right well good luck with are going through this time period now it's tough in a I hope everyone dwell unsafe.

Well, we did as well we noted a couple of times and remarks at all of Us made.

We've been through things before our main focus was on a taking action aggressively and quickly and then we're going to wait and see.

We have.

Fortunately healthy backlog and that allows us to.

Really keep the relatively stabilized production within.

A range of bookings outcomes.

And then will change our production rates when we think it's justified based on.

Sustained a conviction that we have sustained improvement in bookings as we look forward. So that's where it stands.

Again, if you would like to ask a question press star one on your telephone.

There are no further questions at this time I will turn the call back over to the presenters.

Thank you very much for joining us allergies did you want to make any final comments.

No I think Mike.

Made my final comments.

Earlier Christie okay.

Thank you Yep. Thank you again for joining us if you do have any follow up questions or you can reach me at the number that's on the earnings really.

Thanks, so much.

Ladies and gentlemen, please note that a replay of this call will be available beginning today may 620, 20 at two PM and the abate and be available until May 13th 2020 at 23 59 PM you can access the replay by dialing 805, 858367 and referencing conference I'd.

4059977. Thank you. This concludes today's conference call you may now disconnect.

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