Hyster-Yale Inc (HY) 2015 Q4 法說會逐字稿

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. (Operator Instructions)

I will now turn the call over to Christy 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 For anyone who is not able to listen to today's entire call, an archived version of this webcast will be on our website later this afternoon and available for approximately 12 months.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 is 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 Bolzoni Auramo and Meyer brand names. To achieve our goal, the transaction must be completed in a couple of steps.

On Monday we announced that we had entered into an agreement to acquire all of the outstanding shares of Penta Holding, which holds a 50.4% stake, or 13.1 million shares, of Bolzoni. The cash purchase price for Penta, which is EUR53.5 million including the value of a majority stake of Bolzoni, Penta's other assets and liabilities, and consideration for the non-compete undertakings of Penta's shareholders. We expect the Penta transaction to close, subject to customary closing conditions, during the upcoming second quarter.

Once the Penta transaction closes, we move to step two, which is to launch a mandatory tender offer for all of the remaining outstanding shares of Bolzoni, approximately 12.9 million shares, for a cash price per share of EUR4.30. In the event that Bolzoni's Board of Directors recommends a dividend be paid to Bolzoni's shareholders in connection with approving the 2015 financial statements, the price per share in the mandatory tender offer may be reduced proportionally.

We expect to fund the acquisition of Penta and the subsequent mandatory tender offer with cash on hand and, as needed, borrowings under our existing credit facility. Once the transaction is complete, Bolzoni will become a subsidiary of Hyster-Yale, but we expect to continue to operate Bolzoni as a standalone business with its own management team and Board of Directors, with Bolzoni's current Chief Executive Officer expected to continue to lead Bolzoni. We expect this to ensure that the integrity of OEM, dealer, and customer information is maintained at all times, very consistent with how Toyota managed their acquisition of Cascade.

Since Bolzoni will be a separate business, it is likely Bolzoni will be a separate segment in our financial statements, but we cannot say for sure at this time.

This acquisition was driven primarily by a desire to enhance our ability to grow by meeting the demands of the customers we serve. The proposed transaction is expected to add a wider spectrum of products to our suite of products and provide an important platform for additional growth. We believe the addition of Bolzoni enhances the combined company's capacity to invest in solutions that will benefit all customers.

Bolzoni is well-known as a reliable world-class supplier of attachments, forks, and lift tables and has become the preferred attachment supplier for our products. In addition, Bolzoni has been investing in capacity expansion and we see an opportunity to leverage this by absorbing Bolzoni's unused capacity. For example, we expect a larger portion of our significant fork business to be resourced to Bolzoni.

Bolzoni's historical strength is in Europe, which still has growth opportunities, but the Company has also been expanding in the Americas and has a presence in China, where we want to expand. We envision using our global independent dealer networks and strong relationships with customers to whom we sell directly to expand the sales of our products fitted with Bolzoni's excellent range of products. In considering this acquisition, we were attracted to Bolzoni's solid financial history, including its margins and EBITDA performance, and we are anticipating that this transaction will be accretive to earnings, excluding the effect of the immediate costs of the transaction.

Since this is a highly-regulated process, we can only provide additional information at specific intervals. Yesterday we filed an 8-K with the purchase agreement for Penta. Once we close the Penta transaction, we will be able to provide more information. And, finally, additional information will be disclosed in the tender offer documents once the tender is launched.

That concludes my remarks of Bolzoni. Now let me move to our fourth-quarter and year-end results.

At the consolidated level, our results fall (technical difficulty) lower than last year were line, if not moderately better, than we anticipated in the third quarter. Our consolidated fourth-quarter 2015 revenues were down 9% to $645 million from $710.7 million in the prior year, and our net income decreased to $17.2 million, or $1.05 per diluted share, from $26.4 million, or $1.61 per diluted share.

Nuvera, which we owned for only two weeks in 2014, accounted for some of the decline, but the more significant decline was in our lift truck business. For the fourth quarter of 2015 the lift truck business's revenues were $644.6 million and net income was $20.7 million. This compared to revenues of $710.7 million and net income of $27.8 million for the fourth quarter of 2014.

Net income was down substantially, driven by a higher effective income tax rate during the quarter, but our operating profit was not down proportionally, declining to $32.3 million this quarter from $35.4 million last year. Despite the 9% revenue decline in the quarter, we maintained a 5% operating profit margin and for the full year, once you exclude the impact of last year's $17.7 million gain from our Brazil plant, we actually realized a small increase in the operating profit margin on a 7% decline in revenues.

Each segment has its nuances, but the overriding story for the quarter was that shipments were down 1,300 units compared with the prior-year quarter and currency was a substantial headwind, specifically almost a $34 million detriment to revenue. Shipments were approximately 22,200 units, compared with 23,500 units last year. For the full year, unit shipments of 86,900 units were only slightly below 2014 shipments of 87,600 units.

As we continue to experience a moderating Americas market, we saw a 1,200-unit decrease in our backlog from 28,100 units last year to 26,100 units this quarter and an 11% decline in our bookings. However, it should be noted that the 2014 bookings were increased by a single very large order for North America that was not repeated in 2015.

Looking at the individual geographic segments, Americas was the driver of the unit shipment decrease with a 1,300-unit drop in the prior year as a result of the moderating US market and the depressed Brazil economy. This combined with the shift in trucks sold from higher-priced, higher-margin Class 5 trucks, including big trucks, to lower-priced, lower-margin Class 3 warehouse trucks and unfavorable currency movements, primarily related to Brazilian sales, resulted in the 10% decline in the Americas revenues.

However, even with the lower revenues, gross profit and operating profit improved in the Americas. Much of this improving came from lower material costs and favorable currency movements, as well as overall lower operating expense, all of which were partially offset by the lower unit and parts volumes, including the related unfavorable manufacturing variances driven by the lower production volumes and the shift in product mix to lower margin products.

Europe realized benefits on higher unit shipments in the fourth quarter, but these benefits were completely offset by unfavorable currency effects. In our JAPIC segment, fourth-quarter 2015 revenues and operating results declined on a 300-unit decrease in unfavorable currency effects as well as a shift in mix to lower margin lift trucks. Tax benefits for the quarter offset a substantial portion of the operating profit decline.

Looking forward to 2016, we continue to expect currency and the slowdown in several key markets to negatively affect our segment results. In 2016, we expect the Americas market to continue to moderate, driven primarily by Brazil declining further from its already highly-depressed levels. However, despite these market conditions, we expect unit shipments, revenues, and parts sales to increase in 2016 of 2015, due to our success in winning initial orders at large customer accounts this past year.

Revenues in the first half of the year, and particularly the second quarter, are expected to be down compared with 2015, primarily as a result of strong North American sales in the first half of last year, due to the very large customer order late in 2014 already mentioned that shipped primarily in the first half of the year. We expect the Americas full-year 2016 operating profit to be down slightly compared with 2015 as expected benefits from currency movements at current currency rates and higher unit and parts volumes, as well as anticipated improvement in Brazil's operating results, are expected to be mostly offset by higher employee-related operating expenses and lower product prices.

While the Americas full-year 2016 operating profit is expected to be down slightly compared with the prior year, operating profit in the first half of the year is expected to be lower than the first half of 2015, primarily due to a shift in mix toward lower-price and lower-margin products. This decline is expected to be mostly offset by operating profit improvements in the second half of the year, driven by increased unit volumes, particularly in the fourth quarter.

EMEA is experiencing a different trend in the Americas. We expect the overall Europe, Middle East, and Africa market to grow in 2016. This is driven mainly by moderate increases in Western Europe and slight growth in Middle East and Africa, partially offset by a decline in Eastern Europe. As a result, we expect unit and parts revenues to increase in the coming year.

However, despite these improvements, operating profit in the EMEA segment is expected to decrease substantially in 2016 compared with 2015. As I explained last quarter, EMEA had currency hedges in place that mitigated the unfavorable effects of the strengthening US dollar during 2015. As these hedges have expired, increased US dollar-based costs will be incurred. As a result, the strong US dollar is expected to have a larger unfavorable impact on results in 2016.

These unfavorable net currency movements and an anticipated shift in sales mix to lower-margin products are expected to drive the decline in EMEA's operating profit.

Finally, in 2016 we expect the JAPIC segment market overall to continue to weaken, predominantly due to lower demand in China, only partially offset by modest growth in certain other markets. However, as a result of the implementation of our strategic initiatives, we expect full-year shipments, as well as unit and parts revenues, to increase compared with 2015. Full-year operating results are also expected to improve in 2016, primarily due to the increase in revenues and improved pricing.

To provide further clarity, we expect shipments and operating results in the first half of 2016, particularly the first quarter, to be lower than the first half of 2015, but to be more than offset by expected improvements in the second half of the year.

In summation, this is our outlook for our overall Lift Truck business. For 2016, based on what we know today, we are expecting global markets to remain roughly stable, driven positively by the Western European markets with a moderating Americas market and weakening JAPIC market. However, despite these market conditions and because of our success in winning new business at large customer accounts, we expect overall revenues, unit shipments, and parts sales to increase in 2016 compared to 2015.

Operating profit and net income, on the other hand, are expected to be lower than in 2015 as we expect the increases in sales and parts volumes to be offset by higher operating expenses and an anticipated shift in sales mix to lift trucks with lower average profit margins. More specifically, we are expecting lower operating profit in the first half of the year, with improvements coming during the second half.

Finally, we expect cash flow before financing activities in Lift Truck business to be positive in 2016, but to decline compared with 2015.

At Nuvera this is the first quarter for which we have prior-year results to discuss. However, as I explained earlier, we owned Nuvera for only two weeks in 2014 so results are not comparable.

Nuvera reported revenues of $400,000, an operating loss of $6.1 million, and a net loss of $3.5 million for the fourth quarter of 2015 compared with no revenue, an operating loss of $2.2 million, and a net loss of $1.4 million in the fourth quarter of 2014. The fourth-quarter 2015 operating loss is partially offset by a $900,000 favorable contingent consideration purchase accounting adjustment, while the fourth-quarter 2014 operating loss includes $1.5 million of post-acquisition severance.

Nuvera's results in the fourth quarter were in line with our expectations. We continue to see significant growth opportunities in the fuel cell market and strong interest from our customers, dealers, and potential partners regarding Nuvera's products. We believe strongly that the fuel cell market for lift trucks has significant growth opportunity. We are ramping up our sales and commercial efforts as we prepare for the more widespread rollout of our products.

Substantial progress toward commercialization of Nuvera's PowerEdge units was made in 2015 and early stages of PowerEdge unit production began in late 2015. In the fourth quarter of 2015, Nuvera secured its first total power solution agreement with a customer and expects to begin shipping PowerEdge units to this customer in the first half of 2016, along with lift trucks and a PowerTap hydrogen generation system. We expect production to ramp up throughout 2016 as additional sales of PowerEdge units are made.

As a result of the production ramp-up, we expect moderate revenues in the first quarter and that these revenues will grow gradually over the course of 2016 as production accelerates and new units are sold. We expect the PowerEdge products to be sold at an average selling price of between $17,500 and $35,000 depending on the model. We have also been encouraged by growing interest in and demand for our PowerTap units.

We expect Nuvera to continue to focus on commercializing its fuel cell technology and expanding its product line, integrating this technology into the Hyster and Yale lift truck product ranges, while also increasing its focus on reducing manufacturing costs per unit at both PowerEdge and PowerTap as production increases. As a result of the cost to implement these programs, we expect Nuvera to generate an operating loss in 2016 of approximately $23 million to $26 million.

We continue to have an objective of reaching a quarterly breakeven operating profit at Nuvera by the end of 2017 or early 2018 on a rate of approximately 700 PowerEdge and 10 PowerTap units per quarter at target margins. Nuvera is also exploring a number of partnership opportunities which will be complementary to its core operating plan and could potentially accelerate achievement of breakeven results.

Our projected losses from Nuvera are on a standalone basis and do not include the synergistic impact of incremental volumes in the lift truck business we expect to achieve or the ongoing associated aftermarket revenues for these products that help us meet the rigorous needs of our lift truck customers.

That concludes our prepared remarks. I will now open up the call for your questions.

(Operator Instructions) Mike Shlisky, Seaport Global.

Good morning, guys. I wanted to start out just making sure I understood what you mentioned in your outlook for 2015. Since last quarter have you taken down your operating profit outlook for the lift truck business? It appears as though the language in the press release versus last quarter implies that, but I wanted to make sure.

You know, 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 bounds of uncertainty they are relatively similar, but I'd just leave it at that.

We don't make forecasts and a key reason we don't is that we don't think it's very forecastable.

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

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

The dollar, the currency effect on the backlog.

Mike, I think if you look at it on a dollar value, we dropped from 24 -- $25,267 per unit in the backlog at the end of last year to $24,500. I agree with you; currency is a portion of that, in particular where we saw currency rates drop dramatically during 2015. But we're 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.

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

We also have are closing our plant down in Sao Paulo and got pre-bookings in the fourth quarter because we're going to be out of production in a couple of month period in early 2015. (multiple speakers) lesser impact.

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 still are headwinds in certain countries around the world and, therefore, a need for -- to work off inventories that are in the hands of our dealers. We're 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's a little more to go in Brazil, but it's close to over. You have anything else?

Yes, it's probably still a little bit over in Australia because of the downturn in the market there with our dealer. It's, I think, a little bit to go in Brazil, but you say what we don't want to do is have 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. That sometimes means we take a short-term hit until that bleeds out and then we get back to normal run rates.

I think we will be back to normal run rates well within the first half. But we are very aggressive about monitoring our dealers' inventory levels, because if our dealers become stressed then 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. Thirdly, 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 hope to reach breakeven in late 2017 or early 2018. I don't recall the 2018 piece being in the 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 is 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 [addition of when to shop] to get yourselves to those target margins based on where you are today?

First, let me comment on the 2017 to 2018. I think internally we certainly have 2017 as our objective, but again, as in my earlier comments, boy, it is tough to forecast these things with precision. What I would say is if there's any risk, it's 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. Now that could change depending upon 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 be sure that we gain a following in the marketplace. We think we're 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 in the period that we outlined.

With regard to the margins, when you are in a developmental product that's being launched into the marketplace, remember we acquired a business that had the technology well-developed but needed to commercialize it. And as you commercialize it, generally speaking, the cost structure is higher initially than your targets over time. 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.

We're 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.

But, yes, there is risk in the margins in the sense that we haven't accomplished those margins yet, and there's 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's uncertainty associated with the timing. To me, 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 envisioned, or perhaps better said, than we were willing to count a year ago. We feel better about it.

That's some great color, thanks so much. I will hop back in queue.

(Operator Instructions) Mig Dobre, Robert W. Baird.

Good morning, everyone. This is Joe Grabowski on for Mig this morning. I guess I wanted to start in the Americas segment.

As I look at 2015 revenues were down 5%. They were down 10% in the fourth quarter. And I realize the business is difficult to forecast, but just kind of some color on what gives you the confidence that unit shipments and revenues can grow in 2016.

As you know, there are two things going on. Number one, the market is moderating. Colin, in the fourth quarter the market in the Americas, North America was --?

It was down compared to the prior year.

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 is -- it was down and --.

At the half-year the market was up about 11% and ended up around about 6% or more, just under 6%, so a softening (multiple speakers).

The growth was moderating through the year and then the fourth quarter 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 have said consistently over the last two or 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 into 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. They are the result, we believe, of the kinds of efforts that we've been expanding. 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 -- course of 2015. We brought in some new dealers that we think are very strong, some of which are conversions from other competitor lift truck companies in the marketplace. Those new dealers are going to be achieving more momentum as we go into 2016. So there are a number of factors that we think are moving in the direction of enhancing our share position.

Now let me comment little bit about market share because, as Ken suggested earlier, there are some mix shifts going on in the marketplace and we have to be very attentive to those. I would tell you that mix shifts which have been occurring in 2015 did not play to our areas of greatest historical strength, which are in internal combustion engine, trucks including big trucks, and secondly, in four-wheel counterbalanced electric trucks.

So it moved more toward the warehousing and retail distribution side of the business, where our share position is lower, but that is also, as you might assume, the area of maximum focus for us in our share gain efforts. A number of these new orders are coming from exactly those industries and products where our share position is somewhat lower. So we feel that the programs are coming together and that that will overcome the downturn in the market, the moderate downturn in the market and lead us to this stronger second half.

Remember, we can book these units in the first half and they will get shipped, more or less, in the second half. Certainly the second-quarter trucks that are -- booking trucks will be in the second half and some of the first-quarter trucks as well. So we see that process leading to greater strength through the year in 2016 and then we see it, frankly, beginning -- accelerating in 2017. So that's kind of the Americas story.

In Europe, our share position was up in 2016 -- 2015 over 2014. We think that that trend will continue as we move forward. But, again, there has been, as is typical, when the cycle reaches more maturity there's a shift in mix away from some of our strengths, so same comments that I made about North America apply there.

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

It's almost impossible to do what you would like to do -- and believe me, we would like to do it -- but the facts on the ground are that the costs are what they are. 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.

Now 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 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.

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

Colin, do you want to talk about Asia?

Asia, in our world is -- we split it down, so we include Pacific in our calculations. We actually call it JAPIC, which is Japan, Asia Pacific, India, and China.

Japan we see the market there has been fairly steady. We do reasonably well there with our joint venture with Sumitomo Heavy Industries. In China, we tend to look at what our foreign brand share is and we have sort of -- over the last couple of years we have edged up in terms of our farm brand share. But the mix of trucks we're selling is changing much more towards electrics, away from IC engine, as the Chinese domestic manufacturers are basically taking more and more of the IC engine share.

We're doing well in Asia overall. We're building up our distribution networks there. We're 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 a 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. We have one large Hyster dealer and a number of smaller Yale dealers, and we're working with all of those dealers to again working with our core programs to help grow our shares.

Overall, we feel we're on track. We do have -- I did mention India. We do have two partners in India that are producing trucks under 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 would only add to that that -- again remind you; I think we said it before that in Australia we're still going through a process of rightsizing our dealer inventories. I think we still have a way to go on that process, but we think it's getting close to the end. And then the order pattern will start to turn up there.

Okay. My final question I guess I'd just maybe ask a little bit more on Bolzoni. I think you 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? I don't know the synergy side of how Hyster and Bolzoni together add up to more than they do apart.

Let me suggest that you just reread 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 disclosure that comply with 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.

One thing I'll add is, Bolzoni were a public company. They've got investor presentations which tell a lot about their company and their strategy. You can overlay that 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, so to that extent I think I would underline that comment. But we will 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 than we're prepared to do at this point.

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

Mike Shlisky, Seaport Global.

Thanks for taking my follow-ups here. I saw you had mentioned you have a new Class 5 ICE lift truck line that is going to launch at some point in mid 2016. Can you take us through like that's new about that particular line, maybe perhaps what kind of customer that serves? And could that be a good mix, a positive mix to orders in late 2015? You might offset something maybe in 2017.

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 product, some of them are in dealer structure, some are in dealer excellence. Some are in account identification of customers that we do not do business with.

Some are in support activities for markets where we haven't had as strong a position as we think we can gain. Those are broad programs in our warehouse segment of the business and our big truck segment, and there are 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, Colin, midyear or so? That --.

Early third quarter.

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 as strengthening our product offering with a broad range of customers in quite a significant way.

When you said premium, it will be a premium quality. It's just targeted at certain (multiple speakers).

Premium performance as opposed to -- premium quality, as all our products are. But we distinguish in our own minds between utility, standard, and premium segments in the performance aspects of the marketplace. This should give us a very competitive position for a range of customers where it has 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 in to a lower cost -- in to an application where your competitors have lower costs, 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 if I could just squeeze another quick question here on Q4 and the model. You had a little bit higher tax rate than you've had historically here in Q4. Could you maybe give us any kind of color as to what was going on there?

Then, secondly, for the 2015 outlook is there any change from last quarter where you said you'll have a tax rate impact? Does the high taxes from Q4 mean you might have a lower tax rate in 2016 than 2015?

Ken, do you want to take that?

Yes. Mike, in the fourth quarter, as we talked through in our K in more detail and our Q in a little 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 up to post a valuation allowance for. That was the most significant item that drove up our effective rate of debt in the fourth quarter.

Now that's behind us. Going forward it won't affect us. On an immediate basis, the current losses, if 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, were 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 would look at the overall static rates that we've been talking about over the long term, this 28% to 29% to 30% range. And we will be somewhere in there over the period on average.

I would 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. As you read about in 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 currency movement.

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 still having a lot of smaller niche players in it. I was wondering 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 with perhaps your expertise at making large numbers of these things.

I'm just kind of curious as to why you chose an attachment company as opposed to somebody else.

Let me just comment. I'm not sure that the premise 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.

Now there are smaller other players, no question. But generally speaking, if they are global participants, they would be highly duplicative of what we already have. We've got a family of brand names and offerings that is perfectly appropriate for the markets that we serve. And so the complications that would come from that are very substantial.

There may be 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 have stated the reasons we believe that that's a very good acquisition for us. We wouldn't have done it if we didn't think that that was the case. 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 at this point.

It is important to understand that the attachments are sold for use on 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. Typically, the more sophisticated attachments are very application-specific and help solve customers' 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.

Joe Mondillo, Sidoti & Company.

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 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 that's 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 2014 -- 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 just 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 bit of elaboration that went beyond the part that you must've heard.

Okay. Also, I don't know if you addressed the overall market. 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 very specific comments on our views on that and I think you will pick those up. If you have any questions after you go over that, I think you could certainly pass them on to Christy and she can let us know if there's something we haven't addressed.

Okay. Did you address currencies? 2015 you benefited a ton on currency hedges. You have a tough comp in 2016 and you (multiple speakers).

Again, we went through that in considerable detail.

Okay, I will follow up offline. Thank you.

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.

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