Good day ladies and gentlemen and welcome to the Quarter Four [2014] Hyster-Yale Materials Handling, Inc. Earnings Conference Call. My name is (inaudible) and I’ll be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, the call is being recorded for replay purposes. And now I’d like to turn the call over to Ms. Christina Kmetko. Please go ahead.

Thank you. Good morning everybody and thank you for joining us today. Yesterday, a press release was distributed outlining Hyster-Yale’s results for the fourth quarter and year-ended December 31, 2013. If you’ve not received the copy of the release or would like the copy of the K you may obtain these items on our website at hyster-yale.com. Our conference call today will be hosted by Al Rankin, Chairman, President, and Chief Executive Officer of Hyster-Yale Materials Handling also in attendance are Michael Brogan, Vice Chairman and Chief Executive Officer of NACCO Materials Handling Group, and Ken Schilling, Vice President and Chief Financial Officer. Al will provide an overview of the quarter and full year and then open up the call to your questions. Before we begin, I would 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. Additional information regarding these risks and uncertainties are set forth in our earnings release and in our 10-K. In addition, certain amounts discussed during this call are considered non-GAAP numbers the non-GAAP reconciliations of these amounts are included in our fourth quarter earnings release which is available on our website. I will now turn the call over to Al Rankin. Al?

Good morning to all of you. For the fourth quarter Hyster-Yale had revenues of $718 million and net income of $25.7 million or $1.53 a share. That compared with revenues of $652 million and net income of $32.4 million or $1.93 per share for the fourth quarter of 2012. Operating profit importantly increased to $35 million for the fourth quarter of 2013 from $29 million in 2012. The 2012 fourth quarter net income included a tax benefit of $10 million or $0.59 share primarily for the release of previously recorded valuation allowances related to the company’s U.S. stayed Australian differed tax assets. For the full year revenues were $2.7 billion and net income was $110 million or $6.50 a share and that compared with $2.5 billion and net income of $98 million or $5.83 a share for the 2012 full year. Operating profit increased to $134.3 million for the full year of 2013 from $111.7 million in 2012, and operating margin increased to 5%, 5.0% from 4.5%. Full year 2013 net income included a tax benefit of $12.8 million or $0.76 a share due to the second quarter 2013 release of certain portions of previously recorded income tax valuation allowances related to the company’s UK operations. The full year affect of the 2012 valuation allowance releases was $10.7 million or $0.64 a share. So I think in overview, the highlights for the fourth quarter and full year where the fourth quarter operating profit increased to 20.7% and revenue increased of 10.1% and full year operating profit increased 20.2%, on a revenue increase of 8%. Lift truck shipments in 2013 increased 11% to approximately 85,500 units from approximately 76,900 units in 2012. EBITDA for the fourth quarter 2013 was $41.2 million and for the full year 2013 was $164.8 million. For…

Thank you. (Operator Instructions). The first question comes from the line of Greg McKinley of [Houston Dougherty]. Please go ahead.

Yes. Thank you. In your prepared remarks you talked about some new innovations launching in 2014 both the 1 to 3 ton and 4 to 9 ton internal combustion engine trucks. And then I think you also mentioned you had about 85,000 or 86,000 total units shipped in 2013. Can you give us a sense of what portion of your overall shipments are represented by those classes that you call out with some of the innovations coming for ‘14?

Well those, generally speaking the trucks that I think you’re referring to are very important and very significant portion of our product launch. And so there are not new niche products that we aren’t offering today. There are improved products in what I think I would call the heart of the line. There are some products that we have introduced that are a little more specialized, but I think that mainly that would be the right way to capture. Michael any comment from you?

Yes. I think we refer a significant portion of business, but certainly less than half. We are focused particularly on improving efficiencies particularly on the energy side as we focus on low cost of ownership strategies. So we will be rolling out these improvements not only on those lower capacity ICE trucks, but also over a wide range over the next couple of years as part of our wider strategy of providing customers with lowest cost of ownership.

Thank you. And then are these products specific to the North American market or will these products be available in the majority of the regions where you supply?

Michael?

These products are made for the global instance; ICE trucks are quite most global of all trucks whereas the warehousing trucks are more specific to a market. So these trucks will be made available in all the markets, because we operate on a global basis.

Thank you.

Thank you. The next question comes from the line of Mig Dobre from Robert W. Baird.

Good morning, gentlemen.

Good morning Mig.

I am looking to clarify something, I want to make sure I understood your comment; you are basically setting the expectations here for SG&A to run relatively flattish versus the fourth quarter, so it’s something close to $90 million, $91 million for the remainder of 2014?

No, that’s really not what I think I was trying to say, I think I referred to the core expenses in the fourth quarter and those core expenses represent an appropriate running rate, so let me be more explicit about that. Fourth quarter SG&A in total was around $91 million. And if you look at it an overview there is about $7 million of what I would call non-core and expense that simply was associated with that particular quarter, but isn’t necessarily going to repeat and is not part of our longer term flow out of these expenses. Out of that $7 million something on the order of $4.5 million is related to people expenses and particularly that includes the stock incentive amounts that we referred to earlier, it also includes pension adjustment in Europe that was required from an accounting point of view that won’t repeat. And in addition to that $4.5 million there was about $1 million of information system expense, good bit of it is associated with Brazil and some with the timing of some renewals. And there was a charge for in our product liability that is not a repeating charge either. And so from our advantage point, the best way to think about it I think is that the running rate on a normalized basis is about $84 million. And so that’s the basis on which I make comment that I made.

That’s excellent. That’s very helpful. Thank you. Then maybe we can talk a little bit about pricing too because in 2013 you have been successful at pricing in excess of material cost and obviously in your comment you have an expectation for a slight increase in material cost in the second half of ‘14. How are you thinking about pricing broadly for 2014?

I think what I'd say is that for the material cost come to pass that we would be moving forward with some pricing, but we don't expect net pricing improvement of significance as we look at the year in the sense that we had it previously. So I think that situation is a little bit different as we look forward and then it was before. But if inflation starts to pick up at some of those expenses, they will start to increase in a significant way. You can be very sure that we'll respond. There will be some price increase that is rolling through that's related to the price increases that we had earlier in the year. But I think generally the real emphasis is on our unit volume increases as we look to the year and there are a number of other things going on in revenues in addition to some price increases.

I see. And sort of sticking with this topic, I'm wondering what you're seeing as far as competition from other Japanese OEMs on a heels of a weaker yen. Other equipment providers have noticed increased level of competition primarily on the pricing side. Are you seeing something similar or…

Well certainly, the extreme cost pressure that was on all of us, who produce in Japan and you should remember that we are a large producer in Japan and we have significant plant in Japan. The pressure was very extreme and those plants, both ours and theirs are much more competitive in the market place and therefore there is somewhat more pricing flexibility and people are adjusting their prices to some degree, I think the bulk of that activity occurs in Asia and not so much in other parts of the world. Michael is that the way you see it is well?

I do, I mean most, many of our significant creditors producing their own market of sale like in Europe and U.S. So the benefit they get from the game change is very sort of much more focused or concentrated in Japan or Japanese market.

Okay. I see that's helpful. Can you also maybe provide a little color on the recently announced strategic supply agreement with PSI? I’m wondering the long term impact here, should we see maybe GM or somebody else be in overtime displaced by these guys as far as the engine supply team?

The engine supply business has been a very dynamic one as I think you know, as these newer missions requirements are faced in and some suppliers really choose not to undertake the very significant investment required to continue to offer their engines in a way that will need the new requirements. But Michael, I’d ask you to comment more specifically.

Sure. Some of these companies in Detroit are concentrating on their car businesses and getting out in a sense of the industrial business. We expect some increasing focus on the automobile business leaving us with less choice. And so therefore we’ve been looking at alternatives and therefore we’ve been generating programs with the PSI over a number of years and so we will be moving more our business to PSI as they outlined in their recent press release.

Is there in anyway additive to margins for Hyster-Yale or…

It can be because we will be getting engines from U.S. large resource components compared with someone we’re getting from Japan over the years, but again with the yen weakening recently that has been such a big problem. So I think you could see some, what you’ll see is a better supply chain for us, we have less inventory more delivery, just in time and sequenced to our factories. And so I think you’ll see less working capital requirements.

I think another thing to keep in mind is that make no mistake about it, these new engines are more expensive than their predecessors, because of the emissions requirement, right Michael?

Absolutely. On a comparable basis before and after tier 4 on diesel engine, yes, you’re right, but the ones we’re talking about here are more initially and this recognizes technologies. So LPG, CNG and so therefore not has impacted us as the diesel engines have been.

Sure. I appreciate that. And then my last question is on UTILEV, I guess I was always thinking of this brand kind of an emerging market product primarily, but I saw in the release that you’re introducing in a North America as well with some product. Can you kind of walk us through your thinking on UTILEV and how your strategy is developing there?

Yes. I think one of our key strategic initiatives as I think you know is to understand our customers’ needs and to offer a full range of product and solutions for specific applications. And also they have lowest cost of ownership as the second key strategic initiative for our customers. And what that means in practice is that, if a customer, wherever that customer is needs the utility truck, the customer should have one. The customer needs a standard truck, customer should have one. And if a customer needs a premium truck, the customer should have that. And so what we are doing in the Americas is to offer that so that those customers that need them have that capability available. However your point about emerging markets and developing markets is key in this sense. The portion of the market with utility applications is far, far higher in developing markets than it is in developed markets such as the United States or North America and the bulk of Western Europe countries. And so we would expect that it certainly meets needs in North America and other develop markets but we would expect that its far more applicable in the emerging and developing markets which was I think bankrupt that you were referring to.

Okay well. Thank you and good luck.

Thanks.

Thanks for that question. Next question we have comes from the line of Joe Mandela (inaudible).

Hey, good morning everyone.

Good morning.

Good morning.

So I first wanted to just comment on so the increased SG&A that you saw in the fourth quarter. I am guessing a lot of that was hit in the Americas segment is that fair, or is that right?

I certainly think a good portion of it was in the Americas, yes.

Okay. So it looks like adding back that…

The excess over the running rate.

That’s correct. When you started talking about the $7 million and breaking that all down. So if you add maybe say half of that back it looks like you are closing in on 7% half the margins at least in the fourth quarter and you also mentioned that the product mix was a little unfavorable in the quarter as well. So potentially on a normal run rate you could be over 7% in that part of the world. Is that a fair way of looking at it?

Well I think you have some numbers that our released that tell you a bit about operating profits in North America and in the fourth quarter. And I think you can figure the calculations if that’s really your point.

Yes, I mean I was just doing some simple math and it seems like you are at on a normal run rate excluding some of these additional costs. And maybe I guess one thing is, is the product mix is that more normalized or was that much less favorable compared to historic and should that bounce back? If that’s the case, are we looking at 7%, 7.5% margins in that part of the world on a normalized basis?

You have do the whatever math you think is appropriate based on the numbers that I have outlined. I guess all I would add is that our mix changes from quarter to quarter and it reflects a couple of things, one it can reflect a change in the relative size of markets. Two it can reflect a change in our share position in different markets and three it can reflect simply some seasonality factor. So, I wouldn't call the quarter mix abnormal. But I think the overall point that you make in a different sense about the Americas is a very useful one. Because what it does show is that if we can get our manufacturing capacity utilized around the world, we can make very good operating profits indeed. And we’ve told to the investment community that our objective is to be at 7% as a company at the peak of this cycle or that is in the next few years. That's what we're aiming toward. And I think the performance of the Americas just gets evidence and it's not unrealistic. We’ve stated it in the past that we were putting in some extra cost in SG&A. I went through that, we think that's now going to level out the core running rate that I described a bit earlier and that that will be the running rate during 2014 and that is as a part of implementing the five key strategic initiatives, the basis for improving the share and filling up the plans and driving this sort of profitability that we are looking for. So I look at the Americas performance as an indicator that our objective, so reasonable and total.

Okay. Great and then I want to also ask you about the increased SG&A cost and just one and I apologize I missed the very beginning of your commentary so I apologize if we’re covering something that we already have, but in terms of the actual spend that you are making or the increased spend what is that exactly going forward? That's number one and then number two it seems like the last few years you’ve been introducing all these products and now we’re really making a focus of selling at sales and marketing, working with your dealerships, understanding customer needs, talk about that all process and towards gaining market share?

Well I think for, when Hyster-Yale first became a public company that one of the key themes that we struck was that our product line was in pretty good shape although we will always be improving it. And we outlined some of those improvements that are coming along. Two, that our manufacturing was very efficient with demand flow technology implemented at all of our plans around the world. Three that our supply chain activities have been centralized and we’re very robust with a high element of low cost country content. And finally that the engineering techniques that we had used that improved the quality of our product and lowered our [warding] cost. And so with it as we came into this overall process, we felt or this overall period of time, we felt that we had the right product at the right cost at the right quality. And therefore investing in the programs to ensure we took full advantage of them in the marketplace was a wise thing to do. And there were 5 of those programs, one was a crack the code and warehouse business, and do better job of strengthening our position overall in the warehousing product marketplace. I mentioned earlier, understanding customer needs at the product and aftermarket levels and then communicating that and not only in the product that we offer but in the way we presented to the marketplace, having the lowest cost of ownership not only in fact with some of the engine improvements and other productivity improvements we’ve had, but also in communicating that to our customers, really continuing to strengthen our independent distribution by implementing programs that are broadening our count coverage in the marketplace and expanding our dual brand ownership and increasing our dealer excellence around the world, and finally making…

Yes, great. That’s a lot of good information, I appreciate that. Lastly and I’ll hop back in queue. I just wanted to clarify, how much of your total sales comes out of Japan?

Ken, why don’t you just describe if you would how that is accounted for and the way it’s consolidated?

Sure. Joe, our business is Japan is on 50-50 between us and Sumitomo Heavy. Under the accounting rules, it’s treated as an equity investment, so none of our sales in Japan of the trucks that are sold in Japan are accounted in our sales or our unit numbers that we report. So that would be in addition to the numbers that we currently have. We do report the net profit from that business in our U.S. GAAP numbers, our proportionate share of it. Did that help you?

Okay, yes that’s good. Thank you.

(Operator Instructions). We have Joe back in the call again.

Hey, just had one follow up question in terms of the financials, you are generating a lot of cash, you have gone from $0.50 a share about a year ago of net cash to about over $6, wondering what your sort of thinking is in terms of use of cash going forward if anything has changed, sort of just give us an update on that?

Well, I think what we have said since we became a public company was that we would look first at the needs of the business. There will be less cash flow before financing in 2014 and in 2013 because of the completion of the new plant in Brazil, but we’ll still be very cash positive. Then our objective would be to return cash to shareholders. And each year we take a look at our dividend and we’ll be doing that again as we do each year. And we have a share repurchase program in place. At this time, that’s where we sit in terms of our thinking. We think it leaves us in a very comfortable position to do what's necessary to ensure that we can properly and thoughtfully carry out our key strategic initiatives in the most effective way possible. And that's where we are at the moment.

Alright appreciate it. Thanks a lot.

Thank you. The next question we have comes from the line of (inaudible) from Warrensburg. Please go ahead.

Yes, hi gentlemen. I just want to ask a question on the outlook that you're giving. You stated that in terms of unit shipments you see stronger growth in the Americas and in Europe or in Asia. Why is that exactly and what do you think about the European market? I think there is an argument that the volumes here are still about 20% below the pre-crisis level. And with potentially European industry demands aiming to pick up again, would you see more growth potential there than in the U.S. we’ve already seen quite strong volume growth? And then in terms of that or in relationship with that, could you please also briefly comment on your distribution agreement with your distributor in Germany. Is that putting from Caterpillar where you seem to split up over the last year or what's the reason for that? Thank you.

First with regard to the European market, you could be right, but at this point, we've not seen evidence of significant upturn in European markets and we are being, as a result we are cautious. And if in fact the recovery is stronger that will certainly benefit us beyond the perspective that we have at the moment. It’s just too early in our view to say and as we think about our whole process of forecasting and planning for year, very important to understand that we try to do that in a very conservative way in the sense that we want to have the flexibility to build our backlog and then be very assured that we have the production levels or that we have the bookings to operate our plants at the production levels that they are set at. To have shortfalls in bookings that affect our plant production schedules is extremely costly and not something that we want to risk. So as we look at market forecast and our volume forecast in total, we try to be very careful, not to go beyond what we feel confident is likely to happen. So if the scenario you’ve outlined occurs, as I said, that would be beneficial in all likelihood for us. With regard to our Hyster distribution in Germany, it is certainly the case that Zeppelin has chosen to really focus on their construction equipment business. We had extremely low share in Germany in that business and this will give us an opportunity to put in place distribution, which we are hopeful will help us to gain share in Germany. Michael, do you want to add anything to that?

No, I think we have continued the business in the meantime and we’ve also been adding some providing some competitive dealers, as well as adding our own sales people. So I foresee an opportunity to increase our business in addition to the existing Yale business that we have in Germany, so I am quite optimistic.

Thank you very much.

I’m sure we have no further questions, so I’d like to turn the call back over to Mr. Rankin.

The one sort of final comment then that I’d like to make is that I indicated in the earnings release that the operating profits for the full year are expected to increase excluding the gain on sale of the Brazil plant. And, but we do see a decrease in the first half of the year compared with 2013 that’s more than offset by improvements in the second half. And I just wanted to emphasize the thinking behind those comments. Generally speaking our gross profits are moving in the right direction in the first half overall, although we would expect them to be better improvement in the second half. But if you compare the GS&A expenses in the first half of the year, region-by-region and in total, they are significantly lower than the running rate that I described for the fourth quarter, sort of $84 million number. And so that puts -- now that those expenses are embedded in our cost structure, it means that it will flow through in the first two quarters and the GS&A comparisons in the first two quarters will be disadvantageous, and then we began to have that turnaround in the second half of the year. So I just wanted to emphasize that. And those are all the comments I have. Christi?

Okay. Thank you, Al. Thank you for joining us today everyone, we do appreciate your interest. If you do have any follow-up questions, please feel free to call me, my number is 440-229-5168. Thanks so much.

Thank you, Christina. Ladies and gentlemen that concludes your conference call for today. The replay of this call may be available in approximately three hours, please dial in using the telephone number and plus one, 888-286-8010 using access code 68225300#. You may now disconnect. Thank you. And enjoy the rest of your day.