Quarterly Report (10-q)

Date : 04/30/2019 @ 10:28PM
Source : Edgar (US Regulatory)
Stock : Hyster Yale Materials Handling Inc (HY)
Quote : 51.81  0.96 (1.89%) @ 10:59PM
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Last Trade
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Quarterly Report (10-q)


 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 _______________________________________________________________________________________________________________________________________________________________________________________________________
FORM 10-Q
(Mark One)
 
 
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2019
OR
o
 
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, OHIO  
 
44124-4069
 
 
(Address of principal executive offices)
 
(Zip code)
 
 
 
 
 
 
 
 
(440) 449-9600
 
 
 
 
(Registrant's telephone number, including area code)
 
 
 
 
 
 
 
 
 
N/A
 
 
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
 

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 þ NO o

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 þ NO o
 
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   þ
 
Accelerated filer   o
 
Non-accelerated filer o
 
Smaller reporting company o
 
Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

Number of shares of Class A Common Stock outstanding at April 26, 2019 : 12,780,942
Number of shares of Class B Common Stock outstanding at April 26, 2019 : 3,875,320



HYSTER-YALE MATERIALS HANDLING, INC.
TABLE OF CONTENTS

 
 
 
 
 
Page Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1


PART I
FINANCIAL INFORMATION
Item 1. Financial Statements


HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
MARCH 31
2019
 
DECEMBER 31
2018
 
(In millions, except share data)
ASSETS
 

 
 
Current Assets
 

 
 
Cash and cash equivalents
$
55.7

 
$
83.7

Accounts receivable, net
485.4

 
465.5

Inventories, net
588.9

 
533.6

Prepaid expenses and other
54.9

 
48.8

Total Current Assets
1,184.9

 
1,131.6

Property, Plant and Equipment, Net
295.2

 
296.2

Intangible Assets, Net
65.6

 
67.7

Goodwill
108.7

 
108.3

Deferred Income Taxes
27.9

 
26.3

Investment in Unconsolidated Affiliates
73.4

 
75.6

Other Non-current Assets
116.0

 
36.4

Total Assets
$
1,871.7

 
$
1,742.1

LIABILITIES AND EQUITY
 

 
 
Current Liabilities
 

 
 
Accounts payable
$
458.3

 
$
415.5

Accounts payable, affiliates
21.7

 
21.3

Revolving credit facilities
28.7

 
13.3

Current maturities of long-term debt
76.9

 
78.1

Accrued payroll
38.3

 
56.3

Deferred revenue
56.3

 
37.6

Other current liabilities
178.1

 
154.1

Total Current Liabilities
858.3

 
776.2

Long-term Debt
203.8

 
210.1

Self-insurance Liabilities
24.6

 
25.2

Pension Obligations
20.9

 
23.1

Deferred Income Taxes
17.4

 
17.8

Other Long-term Liabilities
195.3

 
130.2

Total Liabilities
1,320.3

 
1,182.6

Stockholders' Equity
 

 
 
Common stock:
 

 
 
Class A, par value $0.01 per share, 12,775,846 shares outstanding (2018 - 12,682,755 shares outstanding)
0.1

 
0.1

Class B, par value $0.01 per share, convertible into Class A on a one-for-one basis, 3,875,498 shares outstanding (2018 - 3,877,967 shares outstanding)
0.1

 
0.1

Capital in excess of par value
317.4

 
321.5

Treasury stock
(17.1
)
 
(24.1
)
Retained earnings
410.8

 
407.3

Accumulated other comprehensive loss
(191.8
)
 
(177.5
)
Total Stockholders' Equity
519.5

 
527.4

Noncontrolling Interests
31.9

 
32.1

Total Equity
551.4

 
559.5

Total Liabilities and Equity
$
1,871.7

 
$
1,742.1


See notes to unaudited condensed consolidated financial statements.

2


HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
THREE MONTHS ENDED
 
MARCH 31
 
2019
 
2018
 
(In millions, except per share data)
Revenues
$
834.8

 
$
788.5

Cost of sales
708.6

 
656.4

Gross Profit
126.2

 
132.1

Operating Expenses
 
 
 
Selling, general and administrative expenses
122.8

 
112.9

Operating Profit
3.4

 
19.2

Other (income) expense
 

 
 
Interest expense
4.5

 
4.0

Income from unconsolidated affiliates
(2.7
)
 
(2.8
)
Other
(3.1
)
 
(1.8
)
 
(1.3
)
 
(0.6
)
Income Before Income Taxes
4.7

 
19.8

Income tax provision
1.5

 
4.9

Net Income
3.2

 
14.9

Net loss attributable to noncontrolling interests
0.2

 

Net Income Attributable to Stockholders
$
3.4

 
$
14.9

 
 

 
 
Basic Earnings per Share
$
0.20

 
$
0.90

Diluted Earnings per Share
$
0.20

 
$
0.90

 
 
 
 
Dividends per Share
$
0.3100

 
$
0.3025

 
 

 
 
Basic Weighted Average Shares Outstanding
16.607

 
16.506

Diluted Weighted Average Shares Outstanding
16.679

 
16.568


See notes to unaudited condensed consolidated financial statements.

3


HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 
THREE MONTHS ENDED
 
MARCH 31
 
2019
 
2018
 
(In millions)
Net Income
$
3.2

 
$
14.9

Other comprehensive income (loss)
 
 
 
Foreign currency translation adjustment
(2.3
)
 
9.8

Current period cash flow hedging activity
(9.8
)
 
13.0

Reclassification of hedging activities into earnings
0.8

 
0.8

Reclassification of pension into earnings
0.9

 
0.7

Comprehensive Income (Loss)
$
(7.2
)
 
$
39.2

Other comprehensive (income) loss attributable to noncontrolling interests
 
 
 
Net loss attributable to noncontrolling interests
(0.2
)
 

Foreign currency translation adjustment attributable to noncontrolling interests

 
(0.2
)
Comprehensive Income (Loss) Attributable to Stockholders
$
(7.4
)
 
$
39.0


See notes to unaudited condensed consolidated financial statements.


4


HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
THREE MONTHS ENDED
 
MARCH 31
 
2019
 
2018
 
(In millions)
Operating Activities
 
 
 
Net income
$
3.2

 
$
14.9

Adjustments to reconcile net income to net cash provided by (used for) operating activities:
 

 
 
Depreciation and amortization
11.2

 
11.4

Amortization of deferred financing fees
0.4

 
0.4

Deferred income taxes

 
(0.1
)
Stock-based compensation
3.1

 
0.7

Dividends from unconsolidated affiliates
5.1

 
22.2

Other non-current liabilities
(1.2
)
 
1.2

Other
(3.5
)
 

Working capital changes, excluding the effect of business acquisitions:
 

 
 
Accounts receivable
(26.8
)
 
(10.6
)
Inventories
(58.9
)
 
(13.1
)
Other current assets
(6.5
)
 
(4.4
)
Accounts payable
46.5

 
26.3

Other current liabilities
5.0

 
(20.4
)
Net cash provided by (used for) operating activities
(22.4
)
 
28.5

Investing Activities
 
 
 
Expenditures for property, plant and equipment
(8.6
)
 
(7.4
)
Proceeds from the sale of assets
0.6

 
0.4

Net cash used for investing activities
(8.0
)

(7.0
)
Financing Activities
 
 
 
Additions to long-term debt
16.7

 
8.9

Reductions of long-term debt
(23.3
)
 
(17.1
)
Net change to revolving credit agreements
15.5

 
0.1

Cash dividends paid
(5.2
)
 
(5.0
)
Other
(0.1
)
 
(1.2
)
Net cash provided by (used for) financing activities
3.6

 
(14.3
)
Effect of exchange rate changes on cash
(1.2
)
 
0.8

Cash and Cash Equivalents


 

Increase (decrease) for the period
(28.0
)
 
8.0

Balance at the beginning of the period
83.7

 
220.1

Balance at the end of the period
$
55.7

 
$
228.1


See notes to unaudited condensed consolidated financial statements.


5


HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 
 
 
 
 
 
 
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 on AFS Securities
Deferred Gain (Loss) on Cash Flow Hedging
Pension Adjustment
Total Stockholders' Equity
Noncontrolling Interests
Total Equity
 
(In millions)
Balance, December 31, 2017
$
0.1

$
0.1

$
(31.5
)
$
323.8

$
389.1

 
$
(58.5
)
 
$
2.8

 
$
(1.5
)
 
$
(58.9
)
 
$
565.5

 
$
6.9

 
$
572.4

Cumulative effect of change in accounting




3.9

 

 
(2.8
)
 

 

 
1.1

 

 
1.1

Stock-based compensation



0.7


 

 

 

 

 
0.7

 

 
0.7

Stock issued under stock compensation plans


7.0

(7.0
)

 

 

 

 

 

 

 

Purchase of treasury stock


(0.6
)


 

 
 
 

 

 
(0.6
)
 

 
(0.6
)
Net income




14.9

 

 

 

 

 
14.9

 

 
14.9

Cash dividends




(5.0
)
 

 

 

 

 
(5.0
)
 

 
(5.0
)
Current period other comprehensive income





 
9.8

 

 
13.0

 

 
22.8

 

 
22.8

Reclassification adjustment to net income





 

 

 
0.8

 
0.7

 
1.5

 

 
1.5

Foreign currency translation on noncontrolling interest





 

 

 

 

 

 
0.2

 
0.2

Balance, March 31, 2018
$
0.1

$
0.1

$
(25.1
)
$
317.5

$
402.9

 
$
(48.7
)
 
$

 
$
12.3

 
$
(58.2
)
 
$
600.9

 
$
7.1

 
$
608.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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



3.1


 

 

 

 

 
3.1

 

 
3.1

Stock issued under stock compensation plans


7.2

(7.2
)

 

 

 

 

 

 

 

Purchase of treasury stock


(0.2
)


 

 
 
 

 

 
(0.2
)
 

 
(0.2
)
Net income (loss)




3.4

 

 

 

 

 
3.4

 
(0.2
)
 
3.2

Cash dividends




(5.2
)
 

 

 

 

 
(5.2
)
 

 
(5.2
)
Current period other comprehensive income (loss)





 
(2.3
)
 

 
(9.8
)
 

 
(12.1
)
 

 
(12.1
)
Reclassification adjustment to net income





 

 

 
0.8

 
0.9

 
1.7

 

 
1.7

Balance, March 31, 2019
$
0.1

$
0.1

$
(17.1
)
$
317.4

$
410.8


$
(88.2
)
 
$

 
$
(23.6
)
 
$
(80.0
)
 
$
519.5

 
$
31.9

 
$
551.4


See notes to unaudited condensed consolidated financial statements.

6


HYSTER-YALE MATERIALS HANDLING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(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 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, Italy, Vietnam, Japan and Brazil.

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-truck attachments and industrial material handling.

In 2018, the Company announced, as part of a plan to expand Bolzoni's capabilities in the United States, Bolzoni's North America attachment manufacturing would be moved into HYG's Sulligent, Alabama manufacturing facility over the course of 2019. As a result, effective January 1, 2019, the Sulligent facility became a Bolzoni facility. Accordingly, the results of the Sulligent facility for the first quarter of 2019 have been included in the Bolzoni segment. In addition, the Company reclassified the historical results of operations of the Sulligent facility for 2018 in this Quarterly Report on Form 10-Q.

The Company operates Nuvera Fuel Cells, LLC ("Nuvera"). Nuvera is an alternative-power technology company focused on hydrogen fuel-cell stacks and engines.

The Company owns a 75% majority interest in Hyster-Yale Maximal Forklift (Zhejiang) Co., Ltd. ("Hyster-Yale Maximal"). Hyster-Yale Maximal is a Chinese manufacturer of utility and standard lift trucks and specialized material handling equipment. Hyster-Yale Maximal designs, manufactures, services and distributes Class 1 electric and Class 5 internal combustion engine counterbalance utility and standard platforms, and Class 2 and Class 3 electric warehouse products for both the local China and global markets under the Hyster ® , Yale ® , Utilev ® , Maximal and SAMUK brands. Hyster-Yale Maximal also designs and produces specialized products in the port equipment and rough terrain forklift markets. The results of Hyster-Yale Maximal are included in the JAPIC segment since the date of acquisition. There have been no changes in the purchase price allocation for Hyster-Yale Maximal during the first quarter of 2019. The Company will complete the purchase price allocation in the second quarter of 2019.

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.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles 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 principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair

7


presentation of the financial position of the Company as of March 31, 2019 and the results of its operations for the three months ended March 31, 2019 and 2018 , and the results of its cash flows and changes in equity for the three months ended March 31, 2019 and 2018 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, 2018 .

The accompanying unaudited condensed consolidated balance sheet at December 31, 2018 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 principles for complete financial statements.
Reclassification:   Certain amounts in the prior period’s unaudited condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.

Note 2—Recently Issued Accounting Standards

The following table provides a brief description of recent accounting pronouncements adopted January 1, 2019. Unless otherwise noted, 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
Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842)(Subsequent ASUs have been issued in 2017, 2018 and 2019 to update or clarify this guidance)
 
The guidance requires lessees (with the exception of short-term leases) to recognize, at the commencement date, a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. See Note 4 for additional information.
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
 
The guidance makes targeted changes to the hedge accounting model intended to facilitate financial reporting that more closely reflects an entity’s risk management activities and to simplify the application of hedge accounting. Changes include expanding the types of risk management strategies eligible for hedge accounting, easing the documentation and effectiveness assessment requirements, changing how ineffectiveness is measured and changing the presentation and disclosure requirements for hedge accounting activities.
ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("OCI")
 
The guidance provides an election to reclassify the stranded tax effects resulting from the Tax Reform Act from OCI to retained earnings. In addition, the guidance requires new disclosures regarding the election to adopt and the manner in which tax effects remaining in OCI are released. The Company adopted the standard on January 1, 2019 and recorded a cumulative adjustment to retained earnings of $3.9 million for income tax benefits stranded in OCI resulting from the Tax Reform Act.
ASU 2018-07, Compensation-Stock Compensation (Topic 718)
 
The guidance addresses the accounting for non-employee share-based payment transactions.
ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
 
The guidance permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes in addition to treasury obligations of the U.S. government, the LIBOR swap rate, the OIS rate based on the Federal Funds Effective Rate, and the Securities Industry and Financial Markets Association Municipal Swap Rate.
The following table provides a brief description of recent accounting pronouncements not yet adopted:
Standard
 
Description
 
Required Date of Adoption
 
Effect on the financial statements or other significant matters
ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326)(Subsequent ASUs have been issued in 2018 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.
 
January 1, 2020
 
The Company is currently evaluating the alternative methods of adoption and the effect on its financial position, results of operations, cash flows and related disclosures.
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.
 
January 1, 2020
 
The Company is currently evaluating the guidance and the effect on its financial position, results of operations, cash flows and related disclosures.

8


Standard
 
Description
 
Required Date of Adoption
 
Effect on the financial statements or other significant matters
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)."
 
January 1, 2020
 
The Company is currently evaluating the guidance and the effect on its financial position, results of operations, cash flows and related disclosures.
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.
 
January 1, 2020
 
The Company is currently evaluating the timing of adoption and the effect on its current impairment testing process.
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.
 
January 1, 2020
 
The Company is currently evaluating the guidance and the effect on its financial position, results of operations, cash flows and related disclosures.
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.
 
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.

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 first quarter of 2019 and 2018.


9


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
 
MARCH 31, 2019
 
Lift truck business
 
 
 
 
 
 
 
 
 
Americas
 
EMEA
 
JAPIC
 
Bolzoni
 
Nuvera
 
Elims
 
Total
Dealer sales
$
284.5

 
$
153.8

 
$
54.8

 
$

 
$

 
$

 
$
493.1

Direct customer sales
120.1

 
4.0

 

 

 

 

 
124.1

Aftermarket sales
100.9

 
25.9

 
8.3

 

 

 

 
135.1

Other
29.0

 
6.4

 
0.3

 
91.8

 
4.5

 
(49.5
)
 
82.5

Total Revenues
$
534.5

 
$
190.1

 
$
63.4

 
$
91.8

 
$
4.5

 
$
(49.5
)
 
$
834.8

 
THREE MONTHS ENDED
 
MARCH 31, 2018
 
Lift truck business
 
 
 
 
 
 
 
 
 
Americas
 
EMEA
 
JAPIC
 
Bolzoni
 
Nuvera
 
Elims
 
Total
Dealer sales
$
301.9

 
$
165.3

 
$
40.0

 
$

 
$

 
$

 
$
507.2

Direct customer sales
81.7

 
1.7

 

 

 

 

 
83.4

Aftermarket sales
87.6

 
27.0

 
9.2

 

 

 

 
123.8

Other
24.7

 
3.9

 
0.3

 
89.5

 
0.6

 
(44.9
)
 
74.1

Total Revenues
$
495.9

 
$
197.9

 
$
49.5

 
$
89.5

 
$
0.6

 
$
(44.9
)
 
$
788.5

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 dealers. 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 forklift components to HYG plants. Nuvera's revenues include the sale of battery box replacement ("BBR") units to HYG for sale to a dealer and development funding from third-party development agreements. 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.

10


 
Deferred Revenue
Balance, December 31, 2018
$
61.8

Customer deposits and billings
28.0

Revenue recognized
(9.3
)
Balance, March 31, 2019
$
80.5


Note 4—Leases

On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") Topic 842, "Leases" ("new lease standard"). The new lease standard was adopted using the optional transition method approach that allows for the cumulative effect adjustment to be recorded without restating prior periods. The Company has elected the practical expedient package related to the identification, classification and accounting for initial direct costs whereby prior conclusions do not have to be reassessed for leases that commenced before the effective date. As the Company will not reassess such conclusions, the Company has not adopted the practical expedient to use hindsight to determine the likelihood of whether a lease will be extended or terminated or whether a purchase option will be exercised.

The Company's adoption of the new lease standard included new processes and controls regarding asset financing transactions, financial reporting and a system-related implementation required for the new lease standard. The Company's accounting for finance leases (formerly referred to as capital leases prior to the adoption of the new lease standard) remained substantially unchanged. The impact of the adoption of the new lease standard included the recognition of right-of-use ("ROU") assets and lease liabilities. The adoption of the new lease standard resulted in additional net lease assets and net lease liabilities of approximately $82.7 million and $80.8 million , respectively, as of January 1, 2019. The $80.8 million is net of $6.2 million of lease related liabilities which had been recorded under previous accounting standards and have been reclassified as a contra-asset under the new standard. In addition, a cumulative adjustment was recorded to increase retained earnings by $1.4 million as of January 1, 2019, for certain sales-leaseback transactions for which profit recognition was deferred previously under accounting standards but is no longer deferred under the new lease standard. The new lease standard did not materially affect the Company's consolidated net earnings and had no impact on cash flows as of March 31, 2019.

As of January 1, 2019, the cumulative effect on the Company’s unaudited condensed consolidated balance sheet for the adoption of the new lease standard was as follows:
 
Balance at December 31, 2018
 
Adjustments due to New Lease Standard
 
Balance at January 1, 2019
Other non-current assets
$
36.4

 
$
82.7

 
$
119.1

Deferred income tax assets
26.3

 
(0.5
)
 
25.8

Other current liabilities
154.1

 
16.3

 
170.4

Other long-term liabilities
130.2

 
64.5

 
194.7

Retained earnings
407.3

 
1.4

 
408.7

In accordance with the new lease standard, the Company determines if an arrangement contains a lease and the classification of that lease, if applicable, at inception. The Company has elected to not recognize a lease liability or ROU asset for short-term leases (leases with an initial term of twelve months or less). For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration, and to account for the lease and non-lease components as a single lease component. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments under the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The implicit rate within the operating leases are generally not determinable and the Company has obtained rates from third-party financiers for relevant geographies, currencies and lease terms to determine the incremental borrowing rate at the date of adoption of the new lease standard and at the inception of new leases. The operating lease ROU asset also includes any lease prepayments, offset by lease incentives. Certain of the Company's leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain the Company will exercise that option. An option to terminate is also considered in connection with determining the ROU asset and lease liability unless it is reasonably certain the Company will not exercise the option. Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease.


11


As of March 31, 2019 , the Company has the following amounts recorded on the Company's unaudited condensed consolidated balance sheet:
 
 
Location on Balance Sheet
 
March 31, 2019
Assets
 
 
 
 
Operating lease assets
 
Other non-current assets
 
$
81.1

Finance lease assets
 
Property, plant and equipment, net
 
24.5

Total
 
 
 
$
105.6

Liabilities
 
 
 
 
Current
 
 
 
 
Operating lease liabilities
 
Other current liabilities
 
18.8

Finance lease liabilities
 
Current maturities of long-term debt
 
6.9

Long-term
 
 
 
 
Operating lease liabilities
 
Other long-term liabilities
 
66.7

Finance lease liabilities
 
Long-term debt
 
10.2

Total
 
 
 
$
102.6

Finance lease assets are recorded net of accumulated amortization of $12.2 million as of March 31, 2019 . In addition, leases with HYGFS included in the unaudited condensed consolidated balance sheet at March 31, 2019 , include $15.9 million of ROU assets and $16.0 million of lease liabilities, respectively.

As of March 31, 2019 , the Company has the following remaining lease term and weighted average discount rates:
 
 
Operating Leases
 
Finance Leases
Weighted-average remaining lease term in years
 
6.92

 
2.81

Weighted-average discount rate
 
5.12
%
 
3.28
%
For the three months ended March 31, 2019 , the Company recorded the following amounts on the unaudited condensed consolidated statements of operations:
 
 
 
 
THREE MONTHS ENDED
 
 
Location on Income Statement
 
March 31, 2019
Operating lease cost
 
Cost of sales
 
$
1.9

Operating lease cost
 
Selling, general and administrative expenses
 
4.0

Finance lease cost
 
 
 
 
Amortization of leased assets
 
Cost of sales
 
1.8

Interest on lease liabilities
 
Interest expense
 
0.1

Other lease costs 1
 
Selling, general and administrative expenses
 
0.4

Sublease income
 
Revenues
 
(1.7
)
Total
 
 
 
$
6.5

1  - Includes short-term and variable lease costs.
 
 
 
 
The Company recognizes sublease income primarily related to lift trucks in which the Company records revenues over the term of the lease in accordance with the rental agreements with its customers. Aggregate future minimum rentals to be received under noncancellable subleases of lift trucks as of March 31, 2019 were $24.4 million .


12


For the three months ended March 31, 2019 , the Company recorded the following amounts on the unaudited condensed consolidated statements of cash flows:
 
 
THREE MONTHS ENDED
 
 
March 31, 2019
Cash paid for lease liabilities
 
 
Operating cash flows from operating leases
 
$
5.7

Operating cash flows from finance leases
 
0.1

Financing cash flows from finance leases
 
1.8

Non-cash amounts related to right-of-use assets obtained in exchange for lease obligations
 
 
Operating
 
3.4

Finance
 
0.9

Annual maturities of lease liabilities are as follows:
 
 
Operating Leases
 
Finance Leases
 
Total
Amounts remaining in 2019
 
$
17.2

 
$
6.8

 
$
24.0

2020
 
19.2

 
6.1

 
25.3

2021
 
15.0

 
3.3

 
18.3

2022
 
11.8

 
1.1

 
12.9

2023
 
8.6

 
0.5

 
9.1

Thereafter
 
30.7

 
0.1

 
30.8

 
 
102.5

 
17.9

 
120.4

Less: Interest
 
(17.0
)
 
(0.8
)
 
(17.8
)
Net
 
$
85.5

 
$
17.1

 
$
102.6


Note 5—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. In 2018, the Company completed the acquisition of the majority interest in Hyster-Yale Maximal, which is also included in the JAPIC segment from the date of acquisition. 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.

In 2019, as part of a plan to expand Bolzoni's capabilities in the United States, Bolzoni's North America attachment manufacturing began moving into HYG's Sulligent, Alabama manufacturing facility. As a result, effective January 1, 2019, the Sulligent facility became a Bolzoni facility. Accordingly, the results of the Sulligent facility for the first quarter of 2019 have been included in the Bolzoni segment and the historical results of operations of the Sulligent facility for 2018 have been included in the Bolzoni segment. As part of the reorganization of the two facilities, restructuring costs of approximately $1.4 million were incurred for the three months ended March 31, 2019. See Note 15 to the unaudited condensed consolidated financial statements for additional information on restructuring costs.


13


Financial information for each reportable segment is presented in the following table:
 
THREE MONTHS ENDED
 
MARCH 31
 
2019
 
2018
Revenues from external customers
 
 
 
Americas
$
534.5

 
$
495.9

EMEA
190.1

 
197.9

JAPIC
63.4

 
49.5

Lift truck business
788.0

 
743.3

Bolzoni
91.8

 
89.5

Nuvera
4.5

 
0.6

  Eliminations
(49.5
)
 
(44.9
)
Total
$
834.8

 
$
788.5

Gross profit (loss)
 

 
 

Americas
$
81.4

 
$
85.8

EMEA
25.1

 
25.8

JAPIC
6.1

 
4.5

Lift truck business
112.6

 
116.1

Bolzoni
15.6


17.0

Nuvera
(1.8
)

(0.9
)
     Eliminations
(0.2
)

(0.1
)
Total
$
126.2

 
$
132.1

Operating profit (loss)
 

 
 

Americas
$
15.3

 
$
27.9

EMEA

 
0.9

JAPIC
(4.5
)
 
(2.2
)
Lift truck business
10.8

 
26.6

Bolzoni
1.2


2.7

Nuvera
(8.4
)

(10.0
)
     Eliminations
(0.2
)

(0.1
)
Total
$
3.4

 
$
19.2

Net income (loss) attributable to stockholders
 

 
 

Americas
$
12.1

 
$
20.4

EMEA
(0.1
)
 
1.0

JAPIC
(2.4
)
 
(0.7
)
Lift truck business
9.6

 
20.7

Bolzoni
0.3

 
1.9

Nuvera
(6.1
)
 
(7.3
)
     Eliminations
(0.4
)
 
(0.4
)
Total
$
3.4

 
$
14.9


Note 6—Income Taxes

The income tax provision includes U.S. federal, state and local, and foreign income taxes and is 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

14


effective annual 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.

A reconciliation of the consolidated federal statutory rate to the reported income tax rate is as follows:  
 
 
THREE MONTHS ENDED
 
 
MARCH 31
 
 
2019
 
2018
Income before income taxes
 
$
4.7

 
$
19.8

Statutory taxes (21%)
 
$
1.0

 
$
4.2

Interim adjustment
 
0.4

 
0.3

Permanent adjustments
 

 
0.3

Discrete items
 
0.1

 
0.1

Income tax provision
 
$
1.5

 
$
4.9

Reported income tax rate
 
31.9
%
 
24.7
%

Note 7—Reclassifications from OCI

The following table summarizes reclassifications out of 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
 
 
 
 
MARCH 31
 
 
 
 
2019
 
2018
 
 
Gain (loss) on cash flow hedges:
 
 
 
 
 
 
Interest rate contracts
 
$
(0.2
)
 
$

 
Interest expense
Foreign exchange contracts
 
(1.1
)
 
(1.0
)
 
Cost of sales
Total before tax
 
(1.3
)
 
(1.0
)
 
Income before income taxes
Tax expense (benefit)
 
0.5

 
0.2

 
Income tax provision
Net of tax
 
$
(0.8
)
 
$
(0.8
)
 
Net income
Amortization of defined benefit pension items:
 
 
 
 
 
 
Actuarial loss
 
$
(1.0
)
 
$
(1.0
)
 
Other, net
Prior service credit
 

 
0.1

 
Other, net
Total before tax
 
(1.0
)
 
(0.9
)
 
Income before income taxes
Tax expense
 
0.1

 
0.2

 
Income tax provision
Net of tax
 
$
(0.9
)
 
$
(0.7
)
 
Net income
Total reclassifications for the period
 
$
(1.7
)
 
$
(1.5
)
 
 

Note 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 March 31, 2019 , the fair value and carrying value of revolving credit agreements and long-term debt, excluding finance leases, was $291.3 million and $292.3 million , respectively. At December 31, 2018 , the fair value and carrying value of revolving credit agreements and long-term debt, excluding finance leases, was $281.0 million and $284.2 million , respectively.


15


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 uses cross-currency swaps, which hedge the variability of expected future cash flows that are attributable to foreign currency risk of certain intercompany loans. These agreements include initial and final exchanges of principal and associated interest payments from fixed euro denominated to fixed U.S.-denominated amounts. Changes in the fair value of cross-currency swaps 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 other (income) expense and interest expense.

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 its variable rate financings are predominately based upon the one 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 $ 1.0 billion at March 31, 2019 , primarily denominated in euros, U.S. dollars, Japanese yen, British pounds, Swedish kroner, Mexican pesos, Chinese renminbi, Brazilian real and Australian dollars. The Company held forward foreign currency exchange contracts with total notional amounts of $ 1.1 billion at December 31, 2018 , primarily denominated in euros, U.S. dollars, Japanese yen, British pounds, Swedish kroner, Mexican pesos, Chinese renminbi, Brazilian real and Australian dollars. The fair value of these contracts approximated a net liability of $ 30.3 million and $ 19.5 million at March 31, 2019 and December 31, 2018 , 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 March 31, 2019 , $ 10.6 million of

16


the amount of net deferred loss included in OCI at March 31, 2019 is expected to be reclassified as expense into the unaudited condensed consolidated statement 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 million term loan (the "Term Loan") borrowings. The following table summarizes the notional amounts, related rates, excluding spreads, and remaining terms of interest rate swap agreements at March 31, 2019 and December 31, 2018 :
Notional Amount
 
Average Fixed Rate
 
 
March 31
 
December 31
 
March 31
 
December 31
 
 
2019
 
2018
 
2019
 
2018
 
Term at March 31, 2019
$
56.5

 
$
56.5

 
1.94
%
 
1.94
%
 
Extending to November 2022
$
81.3

 
$
83.5

 
2.20
%
 
2.20
%
 
Extending to May 2023

The fair value of all interest rate swap agreements was a net asset of $0.2 million and $ 1.6 million at March 31, 2019 and December 31, 2018 , 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 March 31, 2019 , $0.3 million of the amount included in OCI is expected to be reclassified as income in the unaudited condensed consolidated statement 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
 
MARCH 31
2019
 
DECEMBER 31
2018
 
Balance Sheet Location
 
MARCH 31
2019
 
DECEMBER 31
2018
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
 
 
 
 
 
 
 
 
 
Current
Prepaid expenses and other
 
$
0.4

 
$
0.6

 
Prepaid expenses and other
 
$

 
$

Long-term
Other non-current assets
 
0.1

 
1.0

 
Other non-current assets
 

 

 
Other long-term liabilities
 

 

 
Other long-term liabilities
 
0.3

 

Foreign currency exchange contracts
 
 
 
 
 
 
 
 
 
 
Current
Prepaid expenses and other
 
2.8

 
2.1

 
Prepaid expenses and other
 
0.7

 
0.4

 
Other current liabilities
 
2.3

 
3.3

 
Other current liabilities
 
18.6

 
12.8

Long-term
Other non-current assets
 
0.1

 
1.0

 
Other non-current assets
 

 
0.6

 
Other long-term liabilities
 
1.3

 
0.5

 
Other long-term liabilities
 
16.2

 
13.8

Total derivatives designated as hedging instruments
 
$
7.0

 
$
8.5

 
 
 
$
35.8

 
$
27.6

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Cash Flow Hedges
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
 
 
 
 
 
 
 
 
 
Current
Prepaid expenses and other
 
0.6

 
0.4

 
Prepaid expenses and other
 
0.6

 
0.2

 
Other current liabilities
 
0.9

 
1.5

 
Other current liabilities
 
2.2

 
0.5

Total derivatives not designated as hedging instruments
 
$
1.5

 
$
1.9

 
 
 
$
2.8

 
$
0.7

Total derivatives
 
$
8.5

 
$
10.4

 
 
 
$
38.6

 
$
28.3



17


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 March 31, 2019
 
Derivative Liabilities as of March 31, 2019
 
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
0.5

 
$
(0.3
)
 
$
0.2

 
$
0.2

 
$
0.3

 
$
(0.3
)
 
$

 
$

Foreign currency exchange contracts
 
2.2

 
(2.2
)
 

 

 
32.5

 
(2.2
)
 
30.3

 
30.3

Total derivatives
 
$
2.7

 
$
(2.5
)
 
$
0.2

 
$
0.2

 
$
32.8

 
$
(2.5
)
 
$
30.3

 
$
30.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets as of December 31, 2018
 
Derivative Liabilities as of December 31, 2018
 
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap agreements
 
$
1.6

 
$

 
$
1.6

 
$
1.6

 
$

 
$

 
$

 
$

Foreign currency exchange contracts
 
2.3

 
(2.3
)
 

 

 
21.8

 
(2.3
)
 
19.5

 
19.5

Total derivatives
 
$
3.9

 
$
(2.3
)
 
$
1.6

 
$
1.6

 
$
21.8


$
(2.3
)
 
$
19.5

 
$
19.5


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
 
 
 
THREE MONTHS ENDED