Good morning. My name is Mike and I will be your conference operator today. At this time I would like to welcome everyone to the Hyster-Yale Materials Handling Inc. 2015 Fourth Quarter and Full Year Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. [Operator Instructions] Thank you. I will now turn the call over to Christie Kmetko, Investor Relations. You may begin your conference.

Thank you. Good morning, everyone, and welcome to our 2015 fourth quarter and year end 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 Hyster-Yale Group; and Ken Schilling, our Senior Vice President and Chief Financial Officer. Yesterday, we published our fourth quarter and full year 2015 results and filed our 2015 10-K. Copies of the earnings release and 10-K are available on our website. For anyone who is not able to listen to today’s entire call, an archived version of this webcast will be on our website later this afternoon and available for approximately 12 months. I would also like to remind participants that this conference call may contain certain forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements made here today in either our prepared remarks or during the following question-and-answer session. We disclaim any obligation to update these forward-looking statements which may not be updated until our next quarterly conference call, if at all. Additional information regarding these risks and uncertainties was set forth in our earnings release and in our 10-K. Also certain amounts discussed during this call are considered non-GAAP. The non-GAAP reconciliations of these amounts are included in our earnings release and available on our website. Before I discuss our fourth quarter results, let me first discuss the news we announced early Monday morning. Our ultimate goal is to acquire 100% of Bolzoni, which is an Italian listed publicly traded company and a leading worldwide producer of attachments for forklift trucks under the…

[Operator Instructions] Your first question is from Mike Shlisky from Seaport Global.

Good morning guys.

Good morning.

Good morning, Mike.

I wanted to start out just making sure I understood what you mentioned in your outlook for 2016. Since last quarter, have you taken down your operating profit outlook for the lift truck business? It appears as it a language in the press release versus last quarters implies that, but I wanted to make sure.

I don’t think we quite look at it that way. We don’t have a crystal ball that allows us to say with specificity what forward periods are going to look like and I think that within the balance of uncertainty they are relatively similar. But I just leave it at that. We don’t make forecasts and key reason we don’t is that we don’t think it’s very forecastive.

Okay, okay. Got it. Can you maybe also just give us a little bit of – just perhaps little bit more breakdown on your backlog, it was down year-over-year. Could you maybe kind of tell us how much of that was due to currency and how much of it maybe due to a change in mix or pricing?

Are you talking about the dollar backlog or is the unit backlog?

The dollar, yes, the currency effect on the backlog, yes.

Mike, I think, if you look at it on a dollar value, we dropped from $25,267 per unit in the backlog at the end of last year to $24.5. Agree with you the currency is a portion of that. In particular where we saw currency rates dropped dramatically during 2015, but we are also seeing that mix shift issue that’s driving us out of the larger big trucks and class 5 trucks into the class 3 trucks which have a lower price point.

Okay.

And the other thing I’d say, is really that the key focus probably ought to be on the units and last year in the fourth quarter we had a single very large order, I think the largest in our history and it’s very unusual in the industry and so that meant that the backlogs at the end of last year were higher than might otherwise have been expected.

We also are closing – closing our plant down in Sao Paulo and the re-bookings in the fourth, because we are going to be out of production in or couple of months in early 2015.

And I think…

And that’s the only product.

And just to elaborate a bit on Colin’s point, which was about the fourth quarter last year in Brazil, I would say too that, there is still are headwinds in certain countries around the world and therefore a need for – to work off the inventories that are in the hands of our dealers and we are always very aggressive about working with our dealers to reduce their inventories. That of course means that, in those areas of the country where we are reporting on the basis of factory bookings that the numbers are lower than the run rate out in the market. And I think, Colin, we expect that to be pretty much over, maybe there is a little more to go in Brazil, but it’s close to over – you don’t have anything else?

That’s probably still a little bit over in Australia, because of a downturn in the market with our dealer. I think a little bit to go in Brazil, but I do say we what we don’t want to do is how our dealers holding too much inventory when the markets are slowing. So, we very aggressively try to work with our dealers so that they have the right level of inventory and that means we take a short-term hit and tell that bleeds out and then we get back to normal run rates.

I think, we think we will be back at normal run rates well within the first half and but we are very aggressive about monitoring our dealers’ inventory levels, because where our dealers get become stressed and they don’t spend the money that’s necessary to get the orders and develop their own business as efficiently and effectively as they should.

Okay, okay. And, it’s early, I also wanted to ask a quick question on Nuvera, again, it’s a little bit hard to parse in the press release, but this quarter you said that you’ll – that you hope to reach breakeven in late 2017 or early 2018. I don’t recall the 2018 piece being in last quarter’s thoughts. So I was wondering if you pushed out the target date for that breakeven and then I also wanted to ask about that secondly, you also mentioned reaching sort of a certain volume and then you have what’s called the target margins, I kind of wanted to ask about that as well. Is that a risk at all for you or is there any additional with the shaft to get yourself to those target margins based on where you are today?

First let me comment on the 2017 to 2018. I think, we – internally, we certainly have 2017 as our objective, but again, as in my earlier comments where it is tough to forecast these things with precision and what I would say is, if there is any risk is probably going into the first quarter of 2018 not coming earlier than the end of 2017. That’s kind of the way we look at it. Now, that could change depending on the uptake in the product. With regard to risks, there are two risks I suppose. One is, these are new products and we have to make sure that we gain a following in the marketplace. We think we are moving in the right direction, but we have to build up considerable volume in units, both in the PowerEdge and the PowerTap products. We think that it is reasonable to get to that breakeven running rate and in the period that we outlined. With regard to the margins, when you are in a developed metal product that’s being launched into the marketplace, remember, we acquired a business that had the technology well developed, but needed to commercialize and as you commercialize it, generally speaking, the cost structure is higher initially than your targets over time. And so, we have cost reduction programs that are in place that move us from limited run rate components to higher volume components and through cost reduction efforts on the components themselves. So, we are going through the normal process of trying to make sure that we have in place the programs to meet our target margins. We have target volumes, we have target margins for these products and we believe that we are on track to accomplish those programs by the timeframe we have outlined. I guess, there is risk in the margins in the sense that we haven’t accomplished those margins yet and there is risk in the volumes in the sense that we aren’t running at those rates yet. This is a new product launch and I think it’s appropriate to think that there is uncertainty associated with the timing to be the far more important issue is that the market enthusiasm appears to us to be coming along if anything more strongly than we felt a year ago when we completed the purchase of the business. So, absolutely nothing has come about that causes us any concern. I really think that more opportunities have opened up than we might have a vision envisioned or perhaps better said if we were willing to come a year ago. We feel better than that.

That’s a great color. Thanks so much. I will hop back in queue.

[Operator Instructions] The next question is from Mig Dobre from RW Baird.

Good morning everyone. This is Joe Grabowski on for Mig this morning. I guess, I want to start on the Americas segment and as I look at 2015, revenues were down 5%. They were down 10% in the fourth quarter and I realize the business was difficult to forecast, but just kind of some color on what gives you the confidence of unit shipments and revenues can grow in 2016?

Well, as you know, that two things going on. Number one, the market is moderating and Colin, in the fourth quarter, the market in the Americas, North America was…

It was down compared by…

It was down. So, the market is not moving in our direction. So that’s one factor, not down in a major way, but it was down.

At the half year, the market was up about 11% and ended up, up at round about 6% overall, just under 6%, so there was softening in the Americas.

The growth was moderating through the year and in the fourth quarter it was down some. It remains to be seen how – what the trend is. I think we see continued moderation. So that’s the market side. On the other hand, as we’ve said, consistently over the last three years, we have been pursuing in a highly – in my view, in a highly disciplined way, a series of programs that are designed to improve our share in the market. Those programs are reaching not maturity, but they are increasing their maturity at this point. And we see that process going on through 2016, 2017, and even it’s 2018. However, we think we will see tangible results from those programs in 2016. We have had – as we indicated in the earnings release, new product orders from customers that we have not been doing business with at least for those products in the past and here are the results we believe of the kinds of efforts that we’ve been expending. So, we think that we are going to have increasing maturity from all of that and that it will help us move forward. In addition, we made a number of moves to strengthen our dealerships for the long-term during the course of 2016, of course in 2015. We brought in some new dealers that we think are very strong, some of which are convergence from other competitor lift truck companies in the marketplace and that those new dealers are going to be achieving more momentum as we go into 2016. And so, there are a number of factors that we think are moving in the direction of enhancing our share position. Let me comment a little bit about market share because, as Ken suggested earlier, there are some mix…

That’s very helpful color. Thanks. Kind of staying on Europe, can you give us any sense of kind of how margins are progressing 2015 to 2016 if we were to eliminate all the impacts from currency and hedges and just kind of try to strip it down to actual product margins. Are they kind of progressing well in Europe?

It’s almost impossible to do what you would like to do. Believe me, we would like to do it. That’s on the ground that the costs are what they are and we have some substantial US dollar content in some of our production in Europe and to that extent, those costs are no – over the course of 2016 are no longer hedged at favorable rates. And so, the very high dollar will be impacting margins in certain products. That’s not all products, but it is certain products. So, I think the best answer to your question is, except for that, our margins, we don’t expect to change dramatically, but on a percentage basis, but remember on a dollar basis, they are being translated into dollars at a level that is much – is very disadvantageous in comparison to two years ago.

Yes, now it makes perfect sense. Maybe shifting quickly to Asia, maybe talk about some of the programs and initiatives going on in Asia and it sounds like you are pretty optimistic about revenue growth in the back half of 2016, maybe kind of talk through what’s driving that optimism?

Colin, do you want to talk about Asia?

Well, I mean, Asia in our world is, we split it down, so, we include specifics in our calculations. We actually call it JAPIC which is Japan, Asia-Pacific, India and China. Japan, we see the market there being fairly steady. We do reasonably well though with our joint venture with Sumitomo Heavy Industries. In China, we kind of look at what our foreign brand share is and we’ve sort of – over the last couple of years, we’ve edged up in terms of our foreign brand share, but the mix of trucks we are selling is changing much more towards electrics away from Hyster engine at the Chinese domestic manufacturers are basically taking more and more of the Hyster engine share. And we are doing well in Asia overall. We are building up our distribution networks there. We are working very hard on our core programs of account identification, distribution strengthening, working with our dealers on excellence programs. Really focusing on industries where we believe we have the right solutions for the market. So, even in the relatively close market like Korea for example, we can be successful by targeting certain types of customers. And then, Australia, that market obviously has been very heavily impacted by the economy there and we have one large Hyster dealer and a number of smaller Yale dealers and we are working with all of those dealers to – again, working with our core programs to help to grow share. So, overall, we feel we were on track. We do have – I did mention in India we do have two partners in India that are producing trucks under our license, doing very well, particularly on the big truck side with our licensee partner and our dealer in India. And then we have a strategic relationship in China with a large forklift truck company that we continue to broaden our portfolio with.

I’d only add to that, that again, remind you, I think we said it before that in Australia, we are still going through a process of rightsizing our dealer inventories. I think we still have way to go on that process, but we think it’s getting close to the end depending on the order pattern will start to turn out there.

Right, okay. And my final question, I guess, I just maybe ask a little bit more on Bolzoni, I mean, I think you kind of walked through the strategic rationale for the acquisition, but, maybe a little bit more – are you expecting very many cost synergies? Is it more of a revenue synergy story will Bolzoni have higher revenue as part of Hyster-Yale versus had it been independent kind of the – I guess, the synergy side of how the Hyster and Bolzoni together add up to more than they do apart?

Let me suggest that you just re-read what we’ve said in our earnings release and in our 8-K and let me just say that, we have to meet very specific requirements in terms of disclosures that comply with the Italian law. This is a sequential acquisition and I think that it’s appropriate to comment more on it when we actually have achieved ownership of the business. So, I think we’ve called out the things that we feel we should call out at this point. Certainly, we feel that when the acquisition is completed, there are going to be opportunities of a variety of kinds but we are simply not prepared to comment on them at this time.

And I think one thing Al is, Bolzoni, we’ll probably accompany that investor presentation which tell a lot about that company and their strategy – novel laid against us and see where the complementary areas are.

And we have said that they have excess capacity and we view that as an opportunity and so, to that extent, I think, I’d underline that comment, but, we’ll have more to say when the process is complete and we have an opportunity to do more detailed analysis and comment on specific – more specifically on opportunities and we are prepared to do at this point.

Okay, that makes perfect sense. Thanks for taking my questions.

The next question is from Mike Shlisky from Seaport Global.

Hey guys. Thanks for taking my follow-ups here. I saw you had mentioned you have a new class 5 ICE lift truck line, it’s going to launch at some point in mid-2016. Can you get us through like, what’s new about that particular line? Maybe perhaps kind of customer that serves and could that be a good mix – a positive mix to orders in late 2016 that might offset something maybe in 2017?

Well, you know, I said earlier, that we had been focusing on share gain programs and the share gain programs include a large number of specific actions, some of them are in products, some of them are in dealer structures, some are in dealer excellence, some are in account identification or customers that we do not do business with, some are in support activities for markets where we haven’t had a stronger position. As we think we can gain those are broad programs in our warehouse segment of the business, in our big truck segment and a variety of other share gain programs. So, I think that, the major comment I would make about the new internal combustion engine product which will be coming out sort of call on mid-year or so that. Absolutely, it is part of our share gain strategy and I think the best way to think about that product is to think about it as positioned for customers who don’t need an absolutely premium product in the marketplace and who neither can be served by a utility type product. So, we see this is strengthening our product offering with a broad range of customers in quite a significant way.

When you say premium, I mean, it will be a premium quality, it’s just – it’s targeted at certain…

Premium performance as opposed to…

Right.

Premium quality as all products are.

Right.

But we distinguish in our own minds between utility, standard and premium segments in the performance aspects of the marketplace. So, this should give us a very competitive position for a range of customers where it’s been difficult for us to compete as effectively as we would like, because, obviously, these trucks are lower cost and if you are selling a premium truck into a lower cost – into an application where your competitors have lower cost, your margins decline and it’s very difficult to be fully competitive. So, I think the answer to your question is, we think this is going to be a very significant addition to our product line in the internal combustion engine product range.

Okay, okay. Maybe, I’d just squeeze another quick question here on the – on Q4 and the model. You had a little bit higher rate than you had historically here in Q4. Could you maybe give us any kind of color as to what was going on there? And then secondly, for the 2016 outlook, is there any change from last – from last quarter where you said you have a tax rate impact, because the high taxes from Q4 and then you might you have a lower tax rate in 2016 than 2015?

Ken, do you want to take that?

Yes, Mike, I think, in the fourth quarter, as we talk through in our K and more detail in our Q in a less detail, we did book a number of – what are called, valuation allowances in the quarter that are somewhat distorting the rate if you just simply look at the provision divided by income. In Brazil, because of the economic situation there, our sense was that the net operating loss that we accumulated, we had a post-evaluation allowance for it. That was the most significant item that drove up our effective rate a bit in the fourth quarter. Now that’s behind us. Going forward, it won’t affect us on a immediate basis, the current losses that we incur losses in Brazil, we won’t be able to benefit them in our rate, but it’s a smaller number going forward. Contrary to that in Australia, we saw improving results in our corporate business there and in light of the tax situation there, we are able to release some valuation allowance. So, it’s really a story of puts and takes. I think to give you kind of a more simple answer, I’d look at the – kind of overall, static rates that we’ve been talking about over the long-term, this 28% to 29% to 30% range and we’ll be somewhere in there over the period on average.

I’d only add to that, it’s worth keeping in mind that, obviously, given the currency situation, our profits in North America as a proportion of our total profits have gone way up and our profits in Europe have declined and as you read about the newspaper with consistency tax rates in the US are generally higher than they are elsewhere in the world. So, our profits have shifted to a higher tax location over the course of the last year, particularly as a result of the currency.

Okay. If I could just squeeze in one last here on Bolzoni, can you give me a sense as to – I still see the lift truck market as having a lot of smaller niche players in it. I was wondering kind of why you chose an attachment company as opposed to a small niche lift truck company that might have some pretty solid margins given some specialized uses when you combine them with perhaps your expertise at making large numbers of these things. I am just kind of curious as to why you chose a attachment company as opposed to somebody else?

Let me just comment. I am not sure that the primus that there are niche players out there that would be complementary to what we already have is correct. In general, we have a full product line. I don’t think there are niche players. In that sense, there are smaller other players, no question. But, generally speaking, if there are global participants, they would be highly duplicative of what we already have and we’ve got a family of brand names and offerings and that is perfectly appropriate for the markets that we serve. And so the complications that we come from that are very substantial. So, there maybe some opportunities in some areas of the world as we look forward, but, that’s my general comment about that. Now, as to Bolzoni itself, I think we’ve stated the reasons that we believe that it’s a very good acquisition for us. We wouldn’t have done it if we didn’t think that that was the case and again, I just suggest that you take particular note of the comments we made about the things that we can take advantage of there and as this process – the acquisition process is completed, we will be in a position eventually after some additional work to say more and to elaborate. But that’s the way I’d put it at this point. It is important to understand that the attachments are sold or you saw in lift trucks. And therefore the users of those attachments are customers that are potentially customers of ours. And so, they are a part of providing full solutions to customers and typically, the more sophisticated attachments are very application-specific and helps solve customer-specific problems. So, we think there are opportunities to pull together the full offering for customers in an integrated way which can be very attractive to our customer base.

Okay, great. I’ll follow-up offline. Thank you.

And the next question is from Joe Mondillo from Sidoti and Company.

Hi, good morning everyone. I apologize, I actually hopped on late. So if I do ask any questions that were already asked, please tell me and we can – I can just look at the transcript later. But, in terms of – I just wanted to clarify in terms of your optimistic view that things will improve in the back half of the year. I did catch the part where you were talking about how you’ve been working with your dealers trying to reduce inventory relative to demand. Is it just a case in point of now that sort of at the tail-end of things? Things can sort of normalize and you start to see the backlog stabilize which the backlog has been coming down throughout 2015? And hopefully orders start to come back and you start to see improvement in the back half of the year. Is that sort of the thing – just sort of broad level thinking of that?

The factors that you cited is one of the factors, but again, to your point, I would just suggest that you do take a look at that transcript, because we answered almost specifically that question with quite a little bit of elaboration that went beyond the part that you must have heard?

Okay. Also, I don’t know, if you addressed the overall markets, 2015 for the lift truck industry overall, I believe we cleared the 2006 volume levels for North America and I think maybe for the globe?

Again, we did have some very specific comments on our views on that and I think you’ll pick those up, if you have any questions to ask, you go over that, I think you can certainly pass them on to Christie and she can let us know if there is something we haven’t addressed.

Okay. Did you address currencies, 2015, you benefited thorn on currency hedges, you have a tough comp in 2016. Any…

Again, we went through that considerably.

Okay, I’ll follow-up offline. Thank you.

Okay.

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

Al, do you have any closing remarks?

I don’t have any closing comments.

Okay, thank you everybody for joining us today. If you do have any additional questions, you can reach me at 440-229-5168. Thanks so much.

Thank you for participating in today’s conference call. This call will be available for replay beginning at 2:30 PM Eastern today through 11:59 PM Eastern on Thursday, February 25. The conference ID number for the replay is 5496147. Again the conference ID number for the replay is 5496147. The number to dial for the replay is 1800-585-8367. This concludes today’s conference call. You may now disconnect.