Good day, ladies and gentlemen, and welcome to the Hyster-Yale Materials Handling Inc. 2014 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I’d now like to turn the conference over to Christina Kmetko. Ma’am, you may begin.

Good morning, everyone, and welcome to our 2014 fourth quarter earnings call. I am Christina Kmetko and I am responsible for Investor Relations at Hyster-Yale. Joining me on today’s call are Al Rankin, Chairman, President and Chief Executive Officer of Hyster-Yale Materials Handling; Colin Wilson, President and Chief Executive Officer of NACCO Materials Handling Group; and Ken Schilling, our Senior Vice President and Chief Financial Officer. Also, joining me on this call are Jon Taylor, Head of Business Development for NACCO Materials Handling Group and the current CEO of Nuvera, our newly acquired fuel cell business; and Rajiv Prasad, our Senior Vice President responsible for Product Development, Manufacturing Strategy and Supply Chain. If you may have questions about our recent acquisition of Nuvera given that this is our first earnings call since the acquisition, we want to take this opportunity to provide you with more insight into the reason for the acquisition and our plans for this business moving forward. As a result, our format today is going to be a bit different than our normal earnings call format. I will cover our quarterly consolidated results and the Nuvera results, and then I will turn the call over to Colin who will outline briefly the background leading to our acquisition of Nuvera, and then Jon Taylor and Rajiv Prasad will provide further details. We will wrap up with our lift truck results and outlook, and then open up the call for your questions. Before we start, let me begin with the formality. Yesterday, we published our fourth quarter and full year 2014 results and filed our 2014 10-K. Copies of the earnings release and 10-K are available on our website at hyster-yale.com. For anyone who is not able to listen to today’s entire call, an archived version of this webcast…

Thanks, Christy. We are very excited and optimistic about the acquisition of Nuvera which we completed in December 2014. We believe the fuel cell market for lift truck is a significant growth opportunities and we want to able to participate in that growth. The Nuvera acquisition supports our key strategies of low cost of ownership, meeting customers’ needs, being leaders in independent distribution and increasing our presence in the warehouse business. Our due diligence indicated that the Nuvera product range have many features and advantages over competitors products and we believe the ability to fully commercialize Nuvera’s three core technologies of hydrogen fuel generation, hydrogen compression and hydrogen fuel cells will provide us with long-term competitive advantage. We’ve owned Nuvera for around two months now and we’ve been very pleased with the immediate progress of Nuvera, the development of its plans and with the team so far. Jon Taylor and Rajiv Prasad were both key members of the acquisition team and I’ll turn the call over to Jon and Rajiv so they can give you some background on why we bought Nuvera and our go forward plans. First, Jon, the current CEO of Nuvera.

Thanks, Colin. As Colin mentioned, we have owned Nuvera for two months. We have fully engaged with the Nuvera team following the acquisition. We have worked with the entire Nuvera team to establish a much more commercial set of priorities than on the previous ownerships and I am very encouraged by the team’s response to this challenge. Our primary goal is to be a major supplier of fuel cell engines to power lift trucks. We will move rapidly to bring our solutions to market with first production later this year. I will go into our plans in more detail later, but it may be useful for Rajiv to talk first about the science behind our fuel cell business and our development priorities.

Thanks, Jon. Today, the three main alternatives for providing power energy, to power fuel cell, to power lift trucks. LPG, spark ignited internal combustion engines used in classes 4 and 5 lift trucks; diesel compression ignition ICE engines for class 4, 5 and our big truck range and lead acid batteries used in class 1, 2 and 3 products. Each of these solutions is used today to meet the needs of customers in different applications and duty cycles, and we believe diesel remains significant alternative in the industry. However, there is increasing demand for higher energy efficiency, improved overall productivity and lower emission power solutions. Lead acid batteries have been the primary solution to offer the lower cost zero emission solutions. However, there is always been a level of dissatisfaction with the performance and cost of managing lead acid batteries. Internal combustion engines offer high performance and low fueling cost, however, their energy efficiency, inherent high service and maintenance cost and carbon emissions are growing concerns amongst many customers. To determine the best path to meet customer needs and deliver the lowest overall cost of ownership, we have explored all energy alternatives in the marketplace. Our analysis led us to conclude that there are multiple advanced technologies of fueling lift trucks including lithium ion batteries, compressed natural gas and hydrogen powered fuel cells. Each of these technologies alongside the traditional lead-acid batteries and internal combustion engine power has a place in meeting customers’ needs. We believe the most promising technology to meet higher kilowatt usage and/or environmentally sensitive application is the hydrogen fuel cell. Hydrogen has three characteristics that make it appropriate for mobility application. One, it can be considered to be portable electricity. Two, it is clean. When using a fuel cell, the only emission is water. Three, the…

Thanks, Rajiv. We believe these attributes will prove to be significant advantages in other applications as well and are reviewing several exciting opportunities to leverage this technology with partners in many industries. We plan on offering these products to our customers beginning in the fourth quarter of this year. We have already had substantial interest from several major customers in the warehouse space. They are interested in this product due to the combination of the distinctive technical capabilities of Nuvera technology that Rajiv just described and the integration and commercial expertise of NMHG. We are reviewing our PowerEdge program with them and are beginning the process of selecting customers for our early production demonstration units. We also intend to invest in exploring the opportunity to fully industrialize the PowerTap hydrogen appliance combining Nuvera’s technological expertise with the commercial strength of NMHG’s supply chain, manufacturing capabilities and distribution to ensure that we have the most cost competitive hydrogen solution for our customers. Our fuel cell strategy will also include the use of internal alternative commercial sources of hydrogen for applications where it is more appropriate. Of course to realize the full potential of Nuvera, further work is needed to commercialize the Nuvera technology and investments will need to be made. As a result, we expect to incur pre-tax losses of $40 million to $50 million cumulatively over the next two to three years before we earn a position to break-even. We believe this is a highly efficient method of investing in new solutions for our customers. Rather than invest after-tax dollars in the acquisition of new technologies, we are able to invest pre-tax operating expenses seeking partnership opportunities and to realize the income tax benefits along with potential R&D tax credits associated with this type of investment. In addition, our projected…

Thanks, Jon. Now let me discuss the lift truck business results. Our lift truck revenues were impacted significantly by currency, but still came in generally in line with the forecast we provided last quarter. Last quarter, we told you that we expected the Americas market to slow during the fourth quarter but market growth will be driven by Western Europe and the Middle East and Africa market and that there would be weakness in the Latin America and Brazil market. As it turned out, that was not exactly the case. While the majority of our new unit shipment gains came from North America as expected, the market growth was more than expected and Latin America and Brazil contributed to that growth. Our new unit shipments increased substantially during the fourth quarter mainly due to an increase of over 1,200 units in the Americas resulting from large orders placed as major customers refreshed their fleet with substantial volume short falls in Europe, primarily in Eastern Europe partially offset the Americas improvement. The increase in shipments in the large orders during the fourth quarter put our full year shipments at approximately 87,600 units and drove our backlog up 5% from the third quarter to approximately 28,100 units. We continue to focus on the elements of the business we have the most control over and believe our strategic initiatives are gaining traction as evidenced by the increase in unit shipments. As we expected, we experienced increased unit volume as shift in sales to higher-priced lift trucks and higher-priced revenue during the fourth quarter. These favorable items were partially offset by lower fleet services and anticipated pricing pressure. However, despite the net improvement from the factors we have more ability to control, overall revenues decreased in the fourth quarter of 2014 compared with 2013…

[Operator Instructions] And our first question comes from the line of Joe Mondillo of Sidoti and Company. Your line is now open.

Hi, good morning, everyone.

Good morning, Joe.

Good morning.

So, I guess, I will start with the Nuvera acquisition. I understand the technology and how could – pretty much a homerun. I’m just sort of wondering how big of a sort of a, I guess, a gamble would you say the acquisition of the technology or the technology is? In other words, how much certainty do you know in three or four years that this is the new source of power for the industry?

This is Al Rankin. I think I would like to again ask Rajiv to talk about that. We are doing a lot of development work in a number of different technologies, battery technology, as well as fuel cells. But I think we have a particular point of view about fuel cells, their applicability. And Rajiv mentioned in particular, the confidence we have in the particular technology that this company has in comparison to others that are out in the marketplace. Rajiv, maybe you’d like to elaborate in answering that question?

Sure. So there is two elements I guess with the question. The first one is the applicability of the fuel cell technology that Nuvera has to lift trucks. And we believe, as I said, the generation one Orion is fully developed, we are just going through the integration process. And that fuel cell stack is an excellent match for class one, two and three battery box replacement unit. So we believe that is an excellent match for the product. In terms of how useful the fuel cell technology is for our customer base, we feel that for high productivity, customers who are looking for a different solution than lead-acid batteries, it’s a very, very good fit. We have already seen some traction from fuel cells in the industrial mobility market. In both of those circumstances, we see a good fit. Both in terms of technology match to fuel cell and lift trucks as well as the fuel match of hydrogen to our industry.

And I will elaborate a little bit on that by saying that, in my own mind, I’d divide this into the shorter-term and the longer-term. In the shorter-term, we feel that we have a technology that can be commercialized quite quickly and that we are very fortunate to have had this opportunity to buy a company that had reached this level – this stage in its technology development and then apply our ability to commercialize these products for the lift truck market. So I think we feel that the risk profile of commercializing existing technology and finding a very acceptable set of applications in the marketplace in term is quite good. As your opening comment in your question suggested however, if you look at the longer-term, there is real opportunity for this technology to do things that we certainly hope may come to pass, which we are not banking on at this time. We think there it’s certainly possible that as the costs come down, as we apply this technology, as we develop our PowerTap capability for local sourcing of hydrogen in the appropriate application locations, we may well be able to drive a level of application of this technology that it would be hard to be clear about today. So I think the way I would leave it is that we have a great deal of confidence about our short-term prospects and finding a very good level of application for both phase one and phase two. And then in the longer-term, there may be a great deal of upside potential, but I think it would be imprudent for us to really account on that at this time and we are not managing the business with that in mind. We are commercializing. We are going to get into the marketplace in a very solid way and then we will take the next steps as appropriate much further down the track. Hope that answers your question.

Yeah, it does, very helpful. I just had a couple of follow-ups to it though. First off, is the two to three years is that just attempting or trying to incorporate it into the trucks or does that also incorporate – you said, two to three years until breakeven. So does that include time or you are actually commercializing the truck, trying to sell the trucks with this technology, but you are still losing money on the venture?

Jon, would you like to answer that question?

Yeah, you are exactly right. We plan on offering product to the customers at the end of this and being full production next year. So we will begin ramping up the volume in sales and margins achieved and that will being to offset the expenses that we are investing this year. So I think you can expect to see a continued ramp out of the products through phase one, then into phase two beginning to offset the investment that we have this year and bringing us towards that breakeven point in year three.

Okay. So if that’s the case, then if you are offsetting some of the expenses that are going to see this year, you’d see less expenses related to this next year, so how do you get to the $40 million to $50 million in two to three year time period?

Well, the $40 million to $50 million or the $13 million to $15 million of net losses in 2015 are really the ongoing level of expense to develop – to enhance the technology and commercialize it. And then we being to have revenues that generate operating profit towards the end of this year and into next year and we would hope at the beginning of year three that the volumes would be generating enough operating profit to cover the GS&A expenses, which include a continued level of – a substantial level of technology development and further commercialization of gen two and other products as Rajiv outlined.

Okay. So you may spend the same amount or if not maybe more next year, but the revenue will offset that so that the bottom line is potentially less than the $40 million that you see this year, is that sort of how to look at it?

Yeah, I think that’s right. And I think that is the right way to look at it. But I would further emphasis it from our point of view, we tend to look at this as a single investment made over three years on the order of a combination of the very modest upfront purchase price of $6.9 million in cash, plus the operating loss on a net income basis in 2015, plus a net loss in 2016. And we think of that as the total investment, if you will, that we’re putting into this to drive it to breakeven. So we think that it’s – we’re fortunate because of the tax benefits to be able to do it this way as opposed to buying the company two or three years from now and with that commercialization all completed, we think that we’re in a better position to expense those on and gain after-tax benefits for our investment in the R&D that’s necessary to commercialize the product. So we look at this as an upfront investment over three years and then breakeven position.

Okay. I just had one question regarding the core business and then I’ll hop back in queue.

We have one more comment, I think, on –

Sure.

– from Jon here on the Nuvera business, Jon?

No problem.

Yeah, Joe, the other thing I wanted to make sure people recognize is, is the numbers we’re talking about are for Nuvera as a stand-alone business. The core part of this strategy is to use this technology to drive our strategic initiatives and help us gain incremental share. And so you can think of it as, every time we’re going to sell a lift truck into the warehouse equipment space or other applications where this is an incremental sale because of the technology that profitability and the ongoing aftermarket profitability is not reflected in my numbers. That would be an improvement in the core lift truck business operating profit, but is not included in my results.

Okay, great. Thanks for clearing that up. So I just had one question on the core business before I let someone else to get a chance here. I just want to sort of understand sort of your outlook for the year. It sounds like the industry itself will be sort of flattish maybe varies depending on region, but overall sort of flattish. You guys will outperform that as you go thorough these – you’ve been going through the key initiatives trying to drive market share. So it sounds like you’d – maybe top line slightly up for the year, you could add the currency in, maybe sort of flattish to down, your backlog is flat entering the year and then you have disruptions in Brazil, maybe some issues with Eastern Europe and then you have all the costs that are increasing related to Brazil in stock comp I guess and a couple of other things. And it also sounded like the qualitative guidance that you provided in the press release sort of read that you’re expecting sort of operating income to be maybe comparable to 2014 on a total basis. So with all that combined, it seems like I’m reading into it going through all the detail, it seems like you could potentially be down for the year, however, it read that your operating income, you’re expecting it to be comparable. So I’m just trying to decipher sort of all the puts and takes between your sort of outlook?

Well, I think your sort of summary was pretty well correct and if you exclude the gain on the sale of assets in the Brazil – the old Brazil plant from 2014’s results and you exclude the – of course the Nuvera acquisition, so that you’re looking just at the lift truck business, we would expect that our operating profits are going to be relatively flat for the year. But as Christy noted, the first two quarters are going to be more difficult. We have Brazil, we have some of the issues in Eastern Europe that affect us and the second half of the year we think will be stronger comparisons than the first half of the year. So I think roughly speaking, the summary that you went through is right, but you put all those puts and takes in there and we think we’re going to come out an essentially roughly comparable operating profit. I would note, however, that there is some increase in GS&A maybe a couple of percent or so that is due to the annualization of the new hires who are important to our strategic initiatives in the sales and marketing areas particularly in the Americas and in Europe. And in that sense, Colin, I think it’s appropriate to say that we think that process of manning up to accomplish our strategic initiatives on an annualized basis is pretty much over and we’ll see that.

We had a significantly – backend of 2014. So our new structures are in place. Our substantially – we still have a few additional people to bring on board, but we basically how our organization set now for the delivery of the strategic initiatives.

Colin, why don’t you just make a comment about our gathering of our senior leadership team in January and it’s the first time we brought all these people together as a complete team with the fully fleshed out organization structures in the sales and marketing areas around the world and I think it brought us altogether. Colin?

Yeah. I mean the objectives were really threefold. First of all, we wanted to celebrate the forecast we have made over the last couple of years as a separate public company. Then we wanted to basically get everybody sort of calibrated on what the challenge was or what the commitment was in terms of our business going forward. And then thirdly to identify any gaps, any additional initiatives we needed to put in place in order to drive towards a 7% operating profit. We had a three day meeting, we had about 90 people from all around the world, all are key business units anybody that has responsibility for a P&L together with all of the senior staff of the operating division themselves. We reviewed the strategies, we looked at it region-by-region, strategy-by-strategy. It was a very electric meeting and at the end I believe we had a full alignment from the whole organization about what we had to get done. And everybody committed in writing to the task ahead and I really believe it got us set to drive our business forward during this cycle to hit the 7%.

And the target timeframe we think for the peak of this cycle which is when our objective is to reach the 7% is probably in the 2017 or so timeframe. So the objective was to bring everybody together, make sure that the programs and the implementation to those programs was going to put us into a position to all pull together to generate the volume that would fill up our plans. Because as you’ll remember, the objective here is really to gain volume, some from the market, some from market share and with the additional volume to have the additional incremental profit grabbed to the bottom line, given the fact that we already have in place now as I said a bit earlier on an annualized basis the GS&A capabilities that we think we need to accomplish the programs to lead us to the 7% objective at the peak of the cycle.

I’m just going say, Al. It’s really a numbers game. We set the task we’re getting to 115,000 lift truck. That’s how we’ll drive the 7% bottom line. So the market is stronger, it will help us a little bit. If the market is weaker, we just have to make sure that we get additional trucks on our initiative. So we really focus the organization on getting to that 115,000 trucks.

Okay. I hope that answers your question.

Yes, definitely. Thanks a lot. I appreciate it. Thanks for taking my questions.

Thank you. [Operator Instructions] And our next question comes from the line of Mike Shlisky of Global Hunter Securities. Your line is now open.

Good morning everybody.

Good morning, Mike.

Got a whole bunch of questions, but I'll keep them brief here. Very quickly as a housekeeping item, just given all the investments you have got here in 2015 for the Nuvera deal, can you maybe update us on what you think your effective tax rate might be going forward? There is some R&D credits there and so forth. I was wondering if you could just give us some kind of a range at least to kind of help us out.

Let me ask Ken Schilling to address that.

Yeah. I think Mike, the best thing to do is, this is totally in the U.S. so virtually totally in the U.S. So I think using a U.S. rate with the state tax rate attached to it would be appropriate. I don’t think we’ve disclosed the amount of R&D credits we expect to earn out of it, but from a statutory perspective 35% plus 4% or so would be probably in the range.

In the range for that investment?

Yeah. 39% to 40% roughly, it would be the tax effect of those losses on our results.

It’s a little early to really know on the tax credits.

Yeah. I mean Congress reenacted them for the 2014 year. Everyone expects that they continue to re-up them but you can’t forecast what happens in legislative.

So we don’t.

Okay, got you. Alright, moving on to Nuvera real quick here, I guess the first question I had was about competitive response out there. Are there other types of alternative systems that are being developed today, whether they are fuel cell or other types of propulsion that you are aware of that other folks could do? Obviously it’s hard [ph] for every lift truck in the marketplace.

Let me just again ask turn to Rajiv to answer your question but I’d say in advance of that, that we are committed to having a full range of energy sources and capabilities for our forklift trucks. We think that different kinds of energy supply systems will have different niches and be appropriate for different applications. It’s not going to be a one size fits all situation. So Rajiv if you may want to comment a little bit on some of the other work we are doing as well as how fuel cells again fits with those other potential applications. And I think in the broadest sense, we think there is not going to be anything that is fully – that would challenge fuel cells fundamentally for their niche. Rajiv?

Yeah. Thanks, Al. so maybe I’ll take a top-down approach for this. The first thing is, we continue to invest heavily in our current fuel systems. Just to give you an idea, the diesel engine systems have been going through a heavy change in their legislative emission requirements and we’ve invested over the last five years or so close to somewhere between $25 million and $30 million developing and integrating the new diesel solutions. So we believe that traditional fuel systems will continue to play a big part in the lift truck marketplace and we continue to invest. In terms of emerging energy solutions, the ones that you can see being applied in automotive and also will be applicable to lift trucks, the advanced batteries such as lithium ion and we have done significant amount of work in that area. We’ve looked at compressed natural gas, but in our research especially for our productive customers who are running multi-shift operations, our conclusion is the fuel cell is the right solution for those type of customers especially if they are looking for an emission free and lead acid battery free application. And there are competitive fuel cell solutions out there for the reasons I’ve stated before such as the substrate and in metallic substrate, the open field giving us the higher power density. Some of those characteristics of our fuel cell will make it a leading solution for our market.

Rajiv, if you might just comment a little bit on our perception that while fuel cells will have a role to play in automobiles as well as forklift trucks that the requirements for those fuel cells and the technology is likely to be different.

Yes. I think that’s the key point, Al. So if you think about cars and we think about life of cars in terms of how many miles they’ve driven, so let’s say 150,000 miles which is around 6,000 hours of use, we’re designing our productive lift trucks to be 20,000 hour life. And under those circumstances, you need to fuel system to have much higher level of life and robustness and that’s where the Nuvera solution differentiates itself and becomes more applicable for industrial mobility.

And that’s really a key point for us because our niche of course is in forklift trucks and I think it’s fair to say Rajiv that the enormous proportion of the development, technology in fuel cells has gone into the automotive side of the business and very little relatively speaking into the development of specialized fuel cell stacks for the heavy duty robust requirements of the forklift truck industry.

Right, Al. I think the two main area of fuel cell development is focused on is, number one, stationary power which is obviously a very different application to mobility. And in mobility the biggest focus has been automotive as you can start to see some of the OEMs are now releasing their fuel cell solutions and will continue to do so over the next couple of years.

Okay. If I can just squeeze in one more, maybe a two-part question here on the technology itself. You had mentioned earlier that you can basically refuel a fuel cell system similar to the time frame of a gas or diesel tank. My question is the first part, do you have any view as to whether the range or the time between refuelings is longer or shorter than other systems? And secondly, is there any kind of special kind of transmission or any kind of any parts needed that you don't see in an ordinary diesel truck that you have to have on these trucks?

Rajiv, I think I’ll take that one. So maybe firstly refueling, the refueling is again as you said very straightforward maybe I’ll describe it. You plug the hydrogen supply nozzle into our system, you also have to make a connection to extract the water out because as I said the only output of the fuel cell is water and you make an electrical connection. So it’s done in a few seconds. It refills in about four to five depending on the size of the tank. The size of the tank and the application determines how long. We are planning to size the tank, so that will go half a shift for sure and will extend up to a shift which will make it very relatively straightforward and convenient to refuel. In terms of…

Time to refuel.

Yeah, time to refuel is about three to five minutes I would say, that’s a good indicator. You had a second part of the question.

Yes, I was just curious if you – if these new trucks need any kind of a transmission or other special parts that other trucks don't normally have.

Yeah, thanks. So this is again very good from our perspective because as you may know we’ve over the last few years, we’ve rolled out a new set of electric trucks both for our warehouse products and especially for our counterbalanced product line. And you can put the fuel cell system in without any changes, you can basically pull the battery pack out of those trucks and put a very – exactly the same dimension pack in with fuel cell in and it will work just the same with the same power train. And in our Phase II, we will utilize those developments to integrate a fuel cell in future trucks.

Great. I’ll leave it there guys. Thank you so much.

We’ve already done that work.

It’s going to give you constant power, right.

Constant power, that’s right.

So you won’t get the degradation of the battery.

Thank you. And our next question comes from the line of Joe Mondillo of Sidoti & Company. Your line is now open.

Hey, guys. I just had a couple of quick follow-up questions. First off, I was wondering how much product mix was a positive or a negative in 2014 and how you look at that in 2015?

In 2014, product mix was not a major factor in the fourth quarter. It was significant over the full year and it was really a positive compared to 2013. As we look to 2015 in comparison to 2014, product mix is really going to be in all likelihood a negative. I think we call out in the press release that we expected to sell more product in the warehouse area and those are lower value products and so we would expect some negative mix impact that offsets unit volume increases in 2015 compared to 2014.

Okay, great. And then foreign currency, I guess it was about 2% headwind. I think you mentioned $16 million in the fourth quarter, so 2% I guess.

Yes.

Yes.

I was a little surprised that it wasn’t higher. How big of a headwind, I imagine it’s going to be a bigger headwind in the first half of the year but given that 50% of your revenue roughly is from outside of the U.S., how was that only 2%?

You rightly calibrated the number for the fourth quarter. You mentioned I think the $16 million number. But if you look to next year, we see very significant foreign currency headwinds in comparison to 2014. And they will be obviously quite significant in quarters one, two and three with quarter four not so significant because we’ve already had the $16 million of currency swing. And so if you look at that from a year-on-year basis, it’s not as – it doesn’t have as big an impact. But I think your surmise is correct that that is a significant headwind for us in terms of revenues.

Yeah, Joe, I mean the euro dollar went from a $1.36 to $1.22, that was a 10% decline throughout the year. As you’ve been following lately, obviously the euro is even weaker than when it exited 2014. So we are going to see that translation of our sales from our European unit which their functional currency is the euro into lower U.S. dollars even though euro sales would reflect the unit sales in that territory and not necessarily be reduced because of the unit issues.

Let me just say about currencies in a different sense in revenues that. I think we tried to have a very thoughtful program of hedging our cost structures and we hedge very differently when the euro is strong in comparison to the dollar than we do when the dollar is very strong compared to the euro. We look at each currency and we are prepared when you have a very strong dollar to go forward on currencies to lock-in a competitive benefit over a relatively extended period of time depending on how overvalued compared to more normal times a particular currency is and at this point is the dollar. So we try to take advantage of circumstances of the strong dollar and working with our supply chain activities. And as you know, while we have a strategy of manufacturing, fabricating and assembling in the market of sale in each major market of sale around the world, on the other hand, our components are produced all over the world. We have components that are sourced with really very good suppliers that are European suppliers, we have a component sourced in Japan, we have components sourced in low cost countries, we have a components sourced in the U.S. and those that are flowing – all those components are flowing to plants in the U.S., plants in Europe and plants in Asia. So currency hedging, when you have this sort of volatility that we have right now, we hope can be an advantage for us over the longer term.

Okay. So I just wanted to really just understand on the exposure that you have. So 2% in the fourth quarter. Like Ken said, the euro itself was down 10%. So your European region is 25% of your sales. If all of that 25% is the euro which I don’t think is all the euro, but if it’s all the euro 10% headwind on the euro would make it 2.5% just on that 25% exposure alone. So I was just uncertain in how it’s only 2% headwind in the fourth quarter given all the currency movements against the dollar?

Joe, the decline I gave you was the full year 2014, not just the fourth quarter.

And the $16 million was in the fourth quarter.

Right. Right.

Yeah. That’s a 10% reduction there.

So the euro was off by 8% to 10% in the fourth quarter. You understand? I guess I can follow-up with you.

Yeah. It’s probably a good follow-up question.

That’s the best way to handle it. We’ve called out the numbers and there are many moving parts here in terms of currency flows.

I understand. I’ll follow-up. I just have one last question though. Regarding the Nuvera, I was wondering the manufacturing expenses once you start actually manufacturing these things and incorporating into your units, is the cost of goods sold and the SG&A all together once you start manufacturing, is that going to be more than the $14 million expenses that you saw this year?

Well, they will be cost of goods sold that are applied against the revenues that come when we produce those products and they’ll be in the separate segment report for the Nuvera segment. At the moment what you have is, GS&A which is mainly the continuation of the product development and commercialization expense. And then as we go forward, you are going to see a regular more normal P&L with revenues and cost of goods sold put-in in addition to the GS&A that’s already there.

Right. So right now, you are seeing $14 million of SG&A and then you’re going to have a whole cost of goods sold to manufacture these fuel cell units, right?

Correct.

So the actual expenses associated would just the fuel cell itself will be probably much more than $14 million and then your hope is that it drives more unit sales to offset that.

No. No, no, no, no. I think what we will do is sell the fuel cell products, the Nuvera products to make a significant margin in the sale of those products. So effectively they will be sold to either directly to customers through application and trucks that are out in existing fleets or alternatively sold as part of new truck sales that we have at Hyster-Yale. So it’s just going to be a regular P&L for the business.

Okay. But looking at just the expenses, once you start incorporating cost of goods sold which you are not seeing at all right now, the actual expenses will be higher than $14 million.

Correct. But you have a margin that is associated with the additional expenses. So they are not just expenses.

No, I understand.

So it’s the margin of the additional sales after the cost of goods sold that generates a reduction in the losses.

Right, okay. Okay, good enough for me. Thanks a lot.

It’s totally involved with the battery which is what happened today in which we really enjoy de minimis revenue and profitability instead of buying a battery, we’re going to be buying a fuel cell. And so Nuvera will enjoy the margin from our fuel cell sale.

Yeah, let me just emphasize what Colin said. It’s really very, very important point. We do sell batteries, but it’s really an accommodation to our customers. We are, if you will, a conduit for ensuring that the battery arrives at the customers’ location along with the forklift truck but we don’t make much money on a battery sale. The company that makes the money on a battery sale is the battery manufacturer, not us and if you will de minimis distributor. So we hope to have a very different economic model with the fuel cell business. This is a business now where we expect to make money on the fuel cell sale, which we don’t on the battery sale. And secondly, we expect to make money on the parts and servicing of the fuel cells which really is not an area where we make money today on traditional batteries. So this is a very important initiative for us from the long-term point of view in terms of the economic model of the business and I think it’s important to emphasize the point that Colin made.

You do expect to sell your units with the fuel cells already in them at some point in time, correct?

Alright. Rajiv, go ahead Jon.

That will be part of our Phase II plans. Initially there will be – basically we are replacing the customers today by about three batteries per truck and a charger. And in essence, we want to replace that sale. Our current customers are doing today through a third party company. We want to bring that in-house and sell them a fuel cell instead.

Right, okay.

In essence, have close to the same spend by the customer but it goes through our product rather through a third party product.

When do you start incorporating into your 90,000 units that you sell a year? When do you start to incorporating into that?

Yeah. The plan for Phase II would be 2017 when we would be doing that. In essence that would be the same answer. Today the customer can choose an LPG or a diesel engine and that has a price and in the future they’ll have a third option which will be a fuel cell, and that will have a separate price for it which we will sell from Nuvera to NMHG and incorporate that into the product and earn a margin on that.

But that’s a little longer-term. In the meantime we see broad application for fuel cells in as a replacement for existing batteries and that’s going to be the nearer term source of revenue for us and source of margin for us if we don’t get today as well as driving greater share.

Right, okay. I understand.

Just want to emphasize a point, though. As we commercialize the PowerEdge, the battery part replacement, we will be shipping trucks from our factories with that PowerEdge in them as early as the fourth quarter this year and then into next year. So what Jon was just talking about was really the integration into other parts of our product range.

But it will be integrated of the line in Greenville with the PowerEdge in it rather than a battery box in the fourth quarter of this year.

Okay. Thank you.

Thank you. And I’m showing no further questions at this time. I’d like to turn the conference back over to management for any further remarks.

Thank you again for joining us today. We appreciate your interest. If you do have any follow-up questions, please feel free to give me a call and my number is 440-229-5168.

And thank you all very much for joining us and if you do have further questions, Christy can work to see that you get answers to them and from our point of view I think we’ve had a very I hope for you all helpful exchange on the opportunities that we see in our fuel cell acquisition both in the short term and potentially in a very significant way in the long-term. So we thank you all very much for joining us and I think that completes it from our point of view. Christy?

Yeah. Thank you. Have a good day.