Hyster-Yale Inc (HY) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter four 2014 Hyster-Yale Materials Handling, Inc. earnings conference call. My name is Carolyn and I'll be your operator for today.

(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 have not received a copy of the release or would like a 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 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 were set forth in our Earnings Release and in our 10K. 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 a share, primarily for the release of previously recorded valuation allowances related to the Company's US, state and Australian deferred tax assets.

For the full year, revenues were $2.7 billion and net income was $110 million, or [$6.54] a share (corrected by company after the call), 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 5.0% 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 companies UK operations. The full-year effect 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 were that fourth-quarter operating profit increased 20.7% on a revenue increase 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 first quarter -- or for the fourth quarter of 2013 was $41.2 million and for the full year 2013 was $164.8 million. For the full year 2013, the Company's cash flow before financing activities was $127 million, which was comprised of net cash provided by operating activities of $153 million, less net cash used for investing activities of $26.1 million. For the full year 2012, in comparison, the Company's cash flow before financing activities was $109 million.

The Company's cash position was $175.7 million at December 31. That was up from $151 million a year ago, and debt as of December 31 decreased to $69.5 million from $142 million as of December 31, 2012. In December 2013, the Company entered into a new revolving credit agreement and concurrently with the new financing, the Company repaid the remaining $86.9 million outstanding under its term loan.

Since the inception of a stock repurchase program in December of 2012, which permits the repurchase of up to $50 million of the Company's outstanding Class A common stock, Hyster-Yale has purchased approximately 103,600 shares for an aggregate purchase price of $5.2 million, including $3.0 million purchased during 2013. The Company did not repurchase any shares during the fourth quarter of 2013.

Looking in more detail at the fourth quarter results, revenues increased in the fourth quarter. Primarily, it was a result of increases in unit volumes, mainly in the Americas and Europe. An increase in fleet services and parts volumes in the Americas, as well as higher unit prices in all markets, but principally in the Americas, also favorably affected revenues. Price increases in the Americas were implemented in Brazil during 2013, mainly to offset the impact of weakness in the Brazilian real. A shift in sales to lower-priced products, primarily in the Americas, partially offset the improvement in revenues. Unfavorable currency movements from the further weakening of the Brazilian real and the Australian dollar against the US dollar were fully offset by the strengthening of the Euro against the US dollar.

In the fourth quarter, worldwide new unit shipments were approximately 22,700 units, compared to shipments of approximately 20,100 in the fourth quarter of 2012, and shipments of approximately 21,200 units in the third quarter of 2013. Worldwide backlog was approximately 28,200 units at the end of the year, and that compared with 27,300 units at the end of 2012 and approximately 28,400 units at September 30 of 2013.

Excluding China, the Company gained market share in 2013 in all major global regions. In China, the Company's share of the foreign-brand markets, the portion of that market segment where the Company is effectively competing, also increased in 2013 compared with the previous year.

In the fourth quarter, operating profit increased but net income declined compared to the previous year, primarily due to the absence of a $10 million valuation allowance release taken in the fourth quarter of 2012 and the 2013 fourth-quarter write-off of $2.8 million pre-tax of deferred financing fees as a result of the full repayment of the companies term loan. Operating profit for the fourth quarter of 2013 improved mainly due to an increase in unit and parts volumes, the favorable effect of price increases and production efficiencies, driven by higher volumes all mainly in the Americas and Europe.

These improvements were partially offset by higher selling and general and administrative expenses. Selling, general and administrative expenses increased primarily due to higher marketing expenses in the Americas and Europe to support the Company's five strategic initiatives and higher incentive compensation expenses in the fourth quarter of 2013 compared to a year earlier, including a $3.2 million pre-tax increase in the non-cash equity component of the 2013 fourth quarter compared with a year earlier.

Looking forward, the global market for fork lift trucks is expected to grow slightly in all major global regions in 2014 compared with 2013. As a result of this market growth, and combined with expected increases in market share and a strong ending backlog in 2013, the Company anticipates an overall increase in unit shipments and parts volumes in 2014 compared with 2013. The majority of this increase is expected to come from the Americas, with smaller increases in the Asia Pacific and European unit shipments.

While sales are expected to increase moderately in 2014 compared with 2013, the Company expects to generate an increase in operating profit, excluding the anticipated gain on the sale of the Company's current Brazil plant and an amount in excess of the rate of sales increase, with a decrease in the first half of 2014 compared with 2013 that is expected to be more than offset by improvements in the second half of 2014 compared with 2013. The favorable effect of anticipated unit volumes resulting from the Company's strategic initiatives, increased parts volumes and product enhancements are all expected to contribute to this improvement.

In addition, a lower estimate for the equity incentive compensation that is, in part, driven by changes in the market price of the Company's stock, which increased 91% during 2013, is also expected to contribute to the improved operating profit. These favorable items are expected to be partially offset by the full-year impact of marketing and employee costs associated with the strategic initiatives that were put in place over the course of 2013 and by unfavorable foreign currency movements in the Americas and Asia Pacific.

After excluding the gain from the sale of the Company's Brazilian plant in 2014, and after excluding the $12.8 million valuation allowance release taken in 2013, net income in 2014 is expected to improve moderately compared with 2013. The effect of improved operating profit, as well as lower interest expense due to lower debt outstanding and lower interest rates under its new revolving credit agreement, are expected to be partially offset by a higher expected effective income tax rate. The higher effective income tax rate in 2014 is expected to result primarily from the effect of higher US, state, United Kingdom and Australian income taxes as a result of the 2012 and 2013 valuation allowance releases combined with an anticipated increase in income from the Americas operations, which have a full higher tax rate.

Full-year 2014 operating profit results, excluding the anticipated gain on the sale of the Brazil plant, are expected to improve in the Americas segment, which includes the North American, Latin American and Brazil markets, with anticipated increases in unit and parts margins, partially offset by an expected strong Euro and slight material cost increases. Operating profit in the Europe segment, which includes the Middle East and Africa, is expected to increase in 2014 compared with 2013, due to volume increases and the anticipated benefits of the current strength of the Euro, but these improvements are expected to be partially offset by the full-year effect of increased marketing and employee costs implemented during 2013. Asia Pacific results for 2014 are expected to be lower, largely due to the weakness of the Australian dollar, despite the favorable effect of increased volume.

I particularly note here that operating profit results are expected to be better in the second half than in the first half, and despite the fact that in the first half gross profit will be up, the operating -- the GS&A expenses in the first half of 2013 were considerably lower than the running rate of the core operating expenses in the fourth quarter. That fourth quarter core operating GS&A running rate in the fourth quarter is expected to continue through 2014. So there is a catch-up, particularly in the first half of the year from a comparative point of view, which will make the comparative results likely to be somewhat lower despite the increase in gross profit as the GS&A impact is fully absorbed on a comparative basis.

Cash flow before financing activities for 2014 is expected to decrease from 2013, primarily due to an increase in capital expenditures that is largely driven by the construction of a new plant in Brazil, and those capital expenditures will be partially offset by the final cash payment, which is expected to be received in 2014 when the sale of the current facility is expected to be finalized.

The Company continues to be focused on gaining market share over time, as well as on improving margins and its internal combustion engine business. The focus for doing that is through the execution of its five strategic initiatives which I won't review here. They're outlined in the press release. They're the same initiatives, of course, that we've been discussing with you at our succeeding discussions of our earnings each quarter. They are generally on track and we believe that over time, they are going to lead us to the results that we are hoping for in terms of increased market share and the full capacity utilization of our existing capacity.

To meet the specific application needs of our customers, the Company is focusing on developing utility standard and premium products, and to this end the development programs are under way for its electric-rider, warehouse, internal combustion engine and big truck product lines. The Company is in the process of launching the new mast for the two- to three-ton electric and internal combustion engine counterbalance trucks, and the changes to the mast are focused on improving visibility, performance and robustness on these trucks, which in turn is expected to lead to lower cost of operations.

In addition, in October, the Company introduced a new Reach Truck, predominantly for the European warehouse market. That product entered the market in January of this year. The Company also introduced two new big truck models in the fourth quarter of 2013 to better serve specialized big truck market segments. In 2014 the Company is instituting a new model year update program for annual improvements of key performance and capability features of each of its existing lift truck model platforms. This new program is expected to keep these platforms soundly positioned in the market over time.

The first model year updates are expected to occur in April of this year on the one- to three-ton and four- to nine-ton internal combustion engine counterbalance lift trucks. The one- to three-ton platform will receive a new premium spark-ignited engine with improved robustness and durability and is expected to lower the customer's cost of ownership through improved fuel economy and service intervals. The four- to nine-ton platform will have features optimized to handle the increasingly demanding needs of key industry segments. Further, new platforms are expected to be developed and launched over the next few years, based on long term segment needs or technological change opportunities.

In mid-2011, the Company introduced into certain Latin American markets a UTILEV-branded one- to 3.5-ton ICE pneumatic tire lift truck model to meet the needs of the lower intensity users. This UTILEV-branded utility lift truck was gradually introduced into global markets during 2012. During the third quarter of 2013, the Company expanded the UTILEV-branded series of lift trucks by introducing a one- to three-ton ICE cushion tire truck in North America and a three wheel electric-rider truck globally. The UTILEV-branded series of lift trucks is expected to continue to gain market position in 2014. The Company offers one model of the standard ICE lift truck for medium duty applications in both pneumatic and cushion tires for both Hyster and Yale. The Company expects to launch additional trucks in the standard ICE model series for future years.

All of these products, these new products and upgraded products, are expected to help increase market share, to improve revenues and enhance operating margins. In addition, stricter diesel emission regulations for new trucks began to go into effect in 2011 and will be fully in effect by 2015 in certain global markets, and the Company has launched and continues -- and expects to continue to launch lift truck series over this period that will meet those emission requirements.

That completes the prepared remarks and I'd be happy to answer questions that any of you may have.

Thank you.

(Operator Instructions)

The first question comes from the line of Greg McKinley, and he's from Dougherty. Please go ahead.

Yes, thank you. In your prepared remarks, you called out some new innovations launching in 2014 on both the one- to three-ton and four- to nine-ton internal combustion engine trucks, and then I think you also mentioned you had about 85,000 or 86,000 total units ship in 2013. Can you give us a sense what portion of your overall shipments are represented by those classes that you call out with some of the innovations coming for 2014?

Well, those -- generally speaking, the trucks that I think you're referring to are very important, very significant portion of our product line, so they're not new niche products that we aren't offering today. They're 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 it. Michael, any comment from you?

Yes, I think they would refer a significant portion of our business, but certainly less than half. We're focused particularly on improving efficiencies, particularly on the energy side, as we focus on our low cost of ownership strategies. So we'll be rolling out these improvements, not only on those lower capacity ICE trucks, but also over a wider 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?

Oh, yes, these products are very fairly global, in sense. ICE trucks are probably the most global of all trucks, whereas the warehousing trucks are more specific to our market. So these products will be made available in all of the markets, but because we operate on a global basis.

Thank you.

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

Good morning, gentlemen.

Good morning, Mig.

I'm looking to clarify something. I want to make sure I understood your comment. You're basically setting 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 that 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 in overview there's about $7 million of what I would call non-core 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 a 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, a good bit of it 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. So from our vantage 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 the 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've been successful at pricing in excess of material costs and obviously, in your comment you have an expectation for a slight increase in material cost in the second half of 2014. How are you thinking about pricing broadly for 2014?

I think what I'd say is that if the material costs 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 of having -- in the sense that we had it previously. So I think the situation is a little bit different as we look forward than it was before, but if inflation starts to pick up, if some of those expenses 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, I think 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 the heels of a weaker yen. Other equipment providers have noticed an increased level of competition, primarily on the pricing side. Are you seeing something similar?

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; we have a significant plant in Japan. The pressure was very extreme and those plants, both ours and their's, are much more competitive in the marketplace 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 as well?

I do, Al. Most -- many of our significant competitors produce in their own market of sale, like in Europe and the US, so the benefit they get from the yen change is varied and it's much more focused or concentrated in Japan and Japanese Markets.

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 over time displaced by these guys as far as an engine supplier team?

On the engine supply business has been a very dynamic one, as I think you know, as these new emissions requirements are phased 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 meet the new requirements. But Michael, I'd ask you to comment more specifically.

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

Is that in any way additive to margins for Hyster-Yale?

Yes, it can be, because we will be getting engines from US largely sourced components, compared with some we've been getting from Japan over the years. But again, with the yen weakening recently, that hasn't been such a big problem, so I think you could see some. What you will see is a better supply chain for us. We'll have less inventory, more delivery, just in time and sequenced to our factories, and so I think you'll see less working capital requirements.

But 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 engines, you're absolutely right, but the ones we are talking about here are more initially in the spark igniters technologies, so LPG, CNG, and so therefore, not as impacted 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 you're introducing it in 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?

I think one of our strategic -- 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 to have lowest cost of ownership as a second key strategic initiative for our customers. What that means in practice is that if a customer, wherever that customer is, needs a utility truck, the customer should have one. The customer needs a standard truck, the customer should have one, and if a customer needs a premium truck, the customer should have that.

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 a developed market such as the United States or North America and the bulk of Western Europe countries. So we would expect that it certainly meets needs in North America and other developed markets but we would expect it's far more applicable in the emerging and developing markets, which was, I think, the back drop that you were referring to.

Very well. Thank you and good luck.

Thanks.

Thanks for that question. The next question we have comes from the line of Joe Mondillo from Sidoti & Company.

Hi. Good morning, everyone.

Good morning.

So I first wanted to just comment on -- so the increased SG&A that you saw in the fourth quarter, I'm 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.

So it looks like adding back--

Talking about the excess over the running rate.

That's correct.

Yes.

When you started talking about the $7 million and breaking that all down.

Right.

So if you add maybe say half that back, it looks like you're closing in on 7% of 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 are 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 was just doing some simple math and it seems like your 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 historicals, 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 to do whatever math you think is appropriate based on the numbers that I have outlined. I guess all I'd 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 factors. 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 the investment community that our objective is to be at 7% as a Company at the peak of this cycle, that is in the next few years. That's what we're aiming toward and I think the performance of the Americas just gives evidence that it's not unrealistic.

We've stated that in the past that we were doing, we were putting in some extra cost in SG&A. I went through that. We think that, that's now going to level out at 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 strategic -- key strategic initiatives -- the basis for improving the share and filling up the plants and driving the sort of profitability that we are looking for. So I look at the Americas performance as an indicator that our objectives are reasonable in total.

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

Well, I think when Hyster-Yale first became a public company, 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 plants 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 had improved the quality of our product and lowered our warranty cost, so that 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 insure we took full advantage of them in the marketplace was a wise thing to do.

There were five of those programs. One was crack the code in the warehouse business and do a better job of strengthening our position overall in warehousing product marketplace. I mentioned earlier understanding customer needs at the product and after-market levels and then communicating that in not only in the product that we offer, but in the way we present it 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 account coverage in the marketplace and expanding our dual brand ownership and increasing our dealer excellence around the world; and finally, making sure that all those things come together very specifically in the Asian markets, where our share has not been as strong as we think it could be, and having a good local partners in China and India as we already do in Japan.

We've made a very substantial investment over the last three years in those five programs. Its been supplemented in addition by some investment in our big truck businesses as sort of an associated strategic initiative and in the strengthening of our sales and marketing organization structure in Manning. And if you look at all of those programs, the investment that we've put in place on a running rate is it's a very substantial amount of money. Our quarterly GS& A rates in 2011 and early 2012 were in the low- to mid-$60 million levels and now we're running at sort of the $84 million core level, and on an annualized basis, those are the investments that are really put in place to drive the market share increase. So I think we have clearly identified the programs we need to implement to gain share that we believe we can gain, and secondly, we've invested in those programs both significantly, but very knowledgeable and thoughtfully. Perhaps that gives you some added perspective on those.

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 in Japan is owned 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 into Japan are accounted in our sales or 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 US GAAP numbers -- our proportion share of it. Does that help you?

Okay, yes. That's good. Thank you.

Thanks for that question.

(Operator Instructions)

We have Joe back in the call again.

Hi, I just had one follow-up question. In terms of the financials, you're generating a lot of cash. You've 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, or just sort of 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 than 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 insure 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.

All right. Appreciate it. Thanks a lot.

Thank you. The next question we have comes from the line of [Felix Steenam from Farrenberg]. Please go ahead.

Yes, hi, gentlemen. I just wanted to ask a question on the outlook that you're giving. You state in terms of unit shipments you see stronger growth in the Americas than in Europe or in Asia. Why is that, exactly, and what do you think about the European market? I think there's an argument that the volumes here are still about 20% below the pre-crisis level and with potential European industrial demand starting to pick up again, wouldn't you see more growth potential there than in the US where we've already seen quite strong volume growth? And then in terms of that, or in relationship to that, could you please also briefly comment on your distribution agreement with your distributer in Germany, Zeppelin, from Caterpillar, where you seem to split up over the last year. What was 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 a significant upturn in European Markets and we're being -- as a result, we're 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 a 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're 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 forecasts and our volume forecasts 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, Al, that's right. I think we have continuity of the business in the meantime and we've also been adding some -- converting some competitor dealers, as well as adding our own salespeople. So I foresee an opportunity to increase our business in addition to the existing Yale business that we have in Germany so I'm quite optimistic.

Thank you very much.

Thank you. We have no further questions so now I'd like to turn the call back over to the Company.

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, but that we do see a decrease in the first half of the year as compared with 2013, and that, that's more than offset by improvements in the second half. 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're significantly lower than the running rate that I described for the fourth quarter, the sort of $84 millionish number. So that puts -- now that those expenses are embedded in our cost structure, it means that they will flow through in the first two quarters and the GS&A comparisons in the first two quarters will be disadvantageous and then we begin to have that turn around in the second half of the year. I just wanted to emphasize that.

Those are all the comments I have. Christy?

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 1-888-286-8010 using access code 68225300#. You may now disconnect. Thank you and enjoy the rest of your day.