Hyster-Yale Materials Handling, Inc.

Thank you. Good morning, everyone, and thank you for joining us today.

Yesterday, a press release was distributed outlining Hyster-Yale's results for the 2013 first quarter. If you have not received a copy of the release or would like a copy of the Q, 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, President 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 then open up the call to your questions.

Before we begin, I would like to remind participants that this conference call may contains 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-Q. In addition, certain amounts discussed during this call are considered non-GAAP.

Non-GAAP reconciliations of these amounts are included in our 2013 first quarter earnings release, which is available on our website.

I will now turn the call over to Al Rankin. Al?

Good morning. Hyster-Yale Materials Handling had earnings of $24.6 million, $1.47 a share, revenues were $645 million, and all of that in the first quarter.

And that compared with $21.2 million, $1.26 a share, $630 million of revenue a year ago. Operating profit increased to $32.1 million from $29.8 million, and operating profit margins to 5% from 4.7%.

The EBITDA for the trailing 12 months ended March 31 was $147 million. And the company's cash position was $131 million; debt, $139 million, decreased from $142 million at the end of last year.

Revenues increased in the first quarter compared to the first quarter of the year before, primarily as a result of an increase in unit volumes; the favorable effect of unit price increases implemented in 2012, primarily in the Americas; and an increase in part sales. An increase in shipments in the Americas and Asia-Pacific was partially offset by fewer shipments in Europe.

Unfavorable foreign currency movements, mainly attributable to the weakening of the Brazilian real against the U.S. dollar, partially offset the increase in the revenues.

For the first quarter, worldwide new unit shipments were 20,756 units compared with 20,079 units a year ago and 20,065 units in the fourth quarter. Worldwide backlog was roughly 27,500 units at the end of March, and that compared with 22,300 units a year ago and 27,300 units at December 31.

The improvement in net income was driven primarily by improved gross margins as a result of the favorable effect of price increases, mainly in the Americas, and an increase in the sales of higher-margin products in all geographic areas. These improvements were partially offset by higher employee-related expenses in the first quarter, primarily due to increased headcount in marketing and engineering to support the company's 5 strategic initiatives and higher incentive compensation estimates.

A lower income tax rate, mainly attributable to changes in certain U.S. and foreign tax laws, and lower interest expense on reduced debt levels also contributed to the increase in net income.

Looking forward, the overall global market is expected to grow moderately in 2013, driven primarily by increased volumes in the Americas, principally as a result of growth in Brazil and Latin America and moderate growth in Asia-Pacific, Middle East and Africa. Europe is expected to continue to decline, mainly as a result of Western Europe macroeconomic conditions.

In the context of these market conditions and expected increases in market share, the company anticipates an overall increase in shipments and parts volume in all markets in 2013, with the majority of this increase driven by the Americas.

The company anticipates flat material cost for 2013, with decreases generally expected during the first of the year and small increases in the second. Price increases already implemented are expected to offset the impact of net material cost changes projected through the year -- through year end.

Although commodity costs continued to stabilize in the first 3 months, these markets are highly volatile, and they remain sensitive to changes in the global economy. And the company will continue to keep an eye on those conditions and the resulting effect on cost to determine the need for future price increases.

The company expects operating profit in 2013 to be comparable to 2012, with improved operating profit in the first half and fourth quarter compared with the prior year, somewhat offset by lower operating profits in the third quarter of 2012. An increase in operating expenses as a result of increases in marketing and employee-related costs put in place over the course of 2012 to support the company's 5 strategic initiatives and the full year effect of incremental public company cost the company will incur as a standalone public entity is expected to offset the expected increase in gross profit as a result of the increased sales volumes.

Net income is expected to decline compared with 2012 as a result of the absence of the $10.7 million valuation allowance release, which was taken in 2012, and also as a result of expected higher effective income tax rate for 2013's full year, primarily because the company will now record the effect of U.S. state and Australian income taxes in 2013 and future years and because income is expected to shift from Europe to the Americas.

Full year 2013 geographic segment results are expected to improve in the Americas segment, which includes North America, Latin America and Brazil markets, but decrease significantly in the Europe segment, which includes Middle East and Africa. Within Europe, the anticipated decline in the Western European market and the absence in 2013 of significant benefit that was gained in 2012 from currency hedging are expected to contribute to the decline in the Europe segment results.

Cash flow before financing activities in 2013 is expected to be significant but decline compared to 2012, as the company anticipates an increase in capital expenditures, largely due to building a new plant and related additional information technology enhancements in Brazil.

Over time, the company's focused on gaining market share, as well as improving margins on new lift truck units, especially in its internal combustion engine business, through the execution of 5 strategic initiatives. And the first is understanding customer needs at the product and aftermarket levels in order to create and provide a differentiated full range of product and service solutions for specific industry applications; offering the lowest cost of ownership by utilizing the company's understanding of customers' major cost drivers and developing solutions that consistently lower cost of ownership and create a differentiated competitive position; third, improving the company's warehouse market position through enhancing dealer and customer support, adding products, increasing incentives and implementing programs to increase focus on key customers; fourth, enhancing independent distribution by implementing programs aimed at broadening account coverage of the market, expanding the company's dual-brand ownership strategy and ensuring dealer excellence in all areas of the world; and fifth, expanding in Asian markets by offering products aimed at the needs of those markets, enhancing distribution excellence and focusing on strategic alliances with local partners in China, India and Japan.

In order to meet specific application needs of its customer, the company is focusing on developing utility standard and premium products. To this end, the company has development programs underway for its electric truck, warehouse, internal combustion engine and big truck product lines, and the electric-rider truck program is designed to bring a full line of newly designed products to market.

The company launched the final model in the electric-rider lift truck program, the 4- to 5-ton cushion tire electric-rider truck, in the Americas during the first quarter of 2013. And the company also expects to introduce a new reach truck for the European warehouse industry in the fourth quarter of 2014.

In mid-2011, the company introduced into certain Latin American markets a new range of UTILEV-branded lift trucks, which meet the needs of lower intensity users. This new UTILEV-branded series of internal combustion engine utility trucks was gradually introduced into global markets during 2012 and is expected to continue to gain market position in 2013.

The company currently offers only 1- to 3-ton internal combustion engine UTILEV truck models and 1 model, for both Hyster and Yale, of the standard internal combustion engine lift truck for medium-duty applications. In 2013, the company expects to begin to expand the UTILEV lift truck series and also to add more trucks to the standard-model series as we look out to future years.

All of these products are expected to improve revenues and enhance operating margins, as well as help increase market share. 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.

The company has begun to launch, and expects to continue to launch, lift truck series over this period that will meet these emission requirements.

That completes my first quarter update, and I'd be happy to answer any questions that you may have. We're open for questions.

I guess, the first question that I would have is a little bit on your guidance. I remember, on the last call, the one that we had towards the end of February, you mentioned that the first quarter of 2013 was supposed to be the weakest quarter of the year, and really, operating income was to be weak in the first half with slight improvement in the second half.

Now obviously, performance in the first quarter has been very good. Operating income, apparently, is going to be strong in the first half but weak in the third quarter and strong again in the fourth quarter.

That seems to be sort of a big shift that has happened within the last couple of months, and I'm wondering: why this shift? Can you give me any color as to what transpired in the last couple of months here?

I think I have to be a little bit careful about just the last couple of months in that comment. Really, we put together an annual operating plan at the end of 2012, and I think all those references you're referring to are really references to how we were thinking about the year unfolding in our annual operating plan.

And so in that sense, very correctly, the question is, well, in a sense, what changed? And so if you look at it and try to think about what is different from what we thought, I think we signaled in our release that material costs had been favorable early in the year, and that was a significant pickup in comparison to what we had anticipated.

I think the weak economic conditions around the world have led to better-than-expected material cost flowing through or, if you will, a failure of suppliers to carry through with the demands that they might have made for some material cost increases and, in fact, even some reductions in selected cases. So I think that, that was one factor.

Our margins in parts and some miscellaneous stuff were a little bit better as well, and there was some improvement over our expectations in operating expenses. It's a little hard to say how much of that will really fall to the bottom line over the full year.

Sometimes, in our plans, we're a little overambitious about how quickly we put in place certain expenses that we think can be beneficial over the course of the year, and it's possible that some of those will be deferred into later periods. So I think that gives you the basic flavor here.

Well, I understand that. But, look, when I look at your price-cost comment, you're basically not outlining [ph] a significant benefit there, even though from your comment, that seems -- on the quarter, that seems to be one of the things that shifted your guidance.

That shifted the guidance, but it didn't shift the -- our comments in the news release only relate to comparisons to the previous year. We didn't really comment at all here on the guidance aspect.

Nonetheless though, the question still stands. If suppliers were unable to pass through these cost increases that you're referring to, then why is it, for instance, that we shouldn't see this be sustainable through the rest of the year?

And it also begs the question as to how much visibility, I guess, do you have in your guidance, given what clearly is a shift in just one quarter, a meaningful shift?

It's a meaningful shift in the first quarter, and we'll have to see how it plays out in the second, third and fourth quarters. We, I think, are hopeful that there's less of an impact from material cost than perhaps we've been looking at before and that the price increases will have a bigger net effect than they might have had before.

But I think I've outlined what our comparisons are for the full year and what we are anticipating. And I'd say at this point, it is -- that's -- the way I've outlined it is the way we see it at this stage of the game for the future.

With regard to the third quarter, it's really very much a mix of different elements coming into effect in the third quarter. First of all, you should keep in mind that the third quarter is the seasonal time for vacations, and in Europe, there is a significant change in the volumes as a result of that, less so in the Americas, although in comparison to potential, it probably could be a bigger number.

So you have a situation where the Americas is looking a little bit better; Europe, a little bit worse in terms of the volumes and gross profits. And then the increase in GS&A costs in comparison to the previous year, when you net all that out, we think the third quarter could be a little bit weaker.

So that's generally how we see it at this point. Obviously, the folks in the business are always working to try to do better than we're anticipating, and that's a factor that we hope moves in our direction over the course of the year.

And I think I'd leave it at that.

Great. Let me switch gears a little bit.

When I'm looking at your growth, reported growth in the Americas, frankly, I find that number to be, for lack of a better term, surprisingly strong. And I say that especially as we've heard a lot of your peers and competitors highlight that demand from port equipment has been soft, manufacturing has been soft.

Industrial cranes, for instance, have been soft as we've seen a lot of the heavy equipment OEMs pull back on production schedules. So a lot of end markets have actually been quite soft in the first quarter and the fourth quarter.

And yet, we're seeing year-over-year and sequential growth in sales. And what's most interesting to me is that we're seeing this growth on, arguably speaking, the toughest comp that you've got in 2013 in the Americas.

So in an environment like this, what exactly is the growth driver for the Americas? Why this performance?

Well, I think there's a couple of pieces to the equation. One is our overall perspective on the industry, and we did anticipate improvement in the industry in the first quarter compared to a year ago.

And I think we've seen a little more strength than we had anticipated. In addition, we have 5 strategic initiatives that you're well aware of, all of which are aimed at trying to improve our market share position, and so we're cautiously optimistic that over the course of the full year, those are going to pay off as well.

So I think you've got a combination, in our particular case, of industry growth and share growth. And it's important to keep in mind, I think, as part of this a distinction between what I would call construction-oriented markets and markets like ours, which are partially manufacturing activity and partially driven by the movement of goods.

And there's a fair amount of pent-up demand from the downturn in 2008, '09, and '10, and that may be playing into this as well. But let me emphasize that the contrary side of the equation is really in Europe, where our current thinking continues to be that the full year is going to be under pressure, especially in Western European markets, which are profitable markets for us.

Well, I recognize that, but -- I'm sorry to interrupt. In Europe also, you posted a 4% decline.

And again, that's on the toughest comp of the year. Over the next couple of quarters, you're comping against negative 12% and negative 17% growth.

So, again, theoretically speaking, it should be easier for you to deliver growth over the next couple of quarters, even in Europe. And it's both the Americas and EMEA that have the same situation.

So why shouldn't we be expecting acceleration from here in growth? That's the question.

Well, I think everything depends on bookings in the end, not -- we have a backlog, we've been working the backlog, and a lot's going to depend on whether we're able to enhance our share position. We've been working to strengthen our distribution, particularly in Europe.

We have probably some favorable factors in Europe that are coming to bear. We had consolidations going on, which in the short term, last year, led to fewer trucks being ordered, and now those are worked through and more orders are starting to come through.

So I'm encouraged with those things. But nevertheless, we have some certainly negative market forces coming forward.

But remember, as far as the profitability in Europe is concerned, the biggest driver is currency change from year-to-year.

I'm also wondering what's going on with inventory in the channel, and I'm wondering if you're seeing anything different there. Because obviously, we've had 3 consecutive quarters in 2012 where we've had revenue declines in both Americas and the EMEA.

All of a sudden, we've got this quarter where we've got very strong performance. So I'm wondering what the dealers are doing.

Perhaps you're shipping a little more to them. There's also an increase, sequential increase, in your receivables.

And as I understand it, you quoted, in the Q, a shift in sales to customers with longer payment terms. I don't know exactly what that means, so maybe you can help me understand that a little bit.

Well, go back to the first part of your question and ask me again.

So, basically, I'm trying to figure out what happened with inventory in the channel, your dealers. Is it that you've seen...

I'll comment on inventory in the channel and just say this: that we've seen no indication that I am aware of, of any inventory build amongst our dealers. And certainly in Western Europe, they're very conservative, and have been for quite some time because they see the trends and are well aware of them.

So I am not aware of any indications of that nature. Secondly, we monitor not only our market share performance in terms of factory bookings, but also our market share performance in most areas around the world in terms of retail bookings where those numbers are adequately reported, and we feel pretty comfortable that those numbers are in line.

So I don't think that there is anything going on out at the retail channel that I'm aware of, and we would -- in certain cases, where we have concerns, we monitor that in a very special way. But those concerns are not significant at this stage of the game.

So, from that point of view, I don't see any issues there that I could comment on.

And can you talk about the shift in sales to customers with longer payment terms and the receivables, sequentially?

Ken, do you have any thoughts on that?

In North America, when we sell to our national account customers, we don't book a sale and we don't get the revenue until it's delivered. When it's delivered, we have to go through the process with the -- typically, the national account customers, clearance of that payment.

And that typically takes longer than the terms that we work with under our dealers directly. So as we see a shift in national account customers, we see an extension in days.

There's also great variability outside of the U.S. in terms of the days that we have on terms with dealers as well.

Southern Europe has typically longer terms than Northern Europe, for example. So we're seeing a shift towards the jurisdictions that have longer days, the territories that have longer days, as well as a shift towards national account sales in North America.

Having said that, our days sales outstanding are at or better than the number of days, at the end of the first quarter, that we've had over the last recent period of time. So working capital performance is pretty good.

Sort of piggybacking on the last few questions. Your performance, obviously, this year has been very good.

And I guess I can only conclude that you're gaining market share. Do you have any data that supports that?

And also, from a competitive standpoint, are your competitors doing anything differently? You talked about a lot of the new products coming forward.

Are they a little bit more static in some of the market product developments and initiatives than you are? Can you comment on the competitive landscape a little bit?

I think the competitive landscape is pretty much consistent with the way we've seen it recently. We have some very strong and very good competitors in the market leaders around the world, particularly Toyota and the KION Group Linde.

They're very capable, good, long-term competitors. There are a group of secondary competitors that have struggled, particularly with the high yen content, and they have had declining economies of scale, and they probably are somewhat less well positioned than they were in earlier times.

We have some strong niche competitors, especially in the warehouse business. But we have our 5 strategic initiatives to try to really take advantage of the fact that over the last 10 years, we've invested very heavily in our product.

We've invested in ensuring that we -- in product that we have the difference performance categories -- utility, standard, premium -- where those are appropriate in each product line so that we can meet the needs of all customers. We have really, I think, brought our product line to a much better position than it was a while back.

We have a really excellent supply chain process supplying us that is deployed in low-cost countries in a significant way. It's much more centralized than it was a half-dozen years ago and therefore able to get better volume economies in terms of working with our suppliers.

We have completed -- with the exception of some aspects of Brazil, we've just about completed the implementation of demand flow technology around the world, which is our version of Lean manufacturing. Our productivity levels in our plants are very high compared to our historical levels.

We've outsourced components, become quite efficient in our manufacturing operations, and our quality has really improved dimensionally and therefore, customer satisfaction, we believe, over the last few years. And so against that backdrop, really, are the 5 strategic initiatives.

We think we have the right platform, for the reasons that I've mentioned. And then we can implement these strategic initiatives that are all designed to really come together.

And although they're 5 separate strategic initiatives, in fact, as you would well expect, they play together. They're complementary in the way that they work.

And so we're certainly hopeful that those strategic initiatives can help us enhance our market share position. A good portion of that may come from some of the weaker players in the industry, but we'll get our fair share of business against the major players as well.

So we're very focused on that. We're carrying those programs through.

We're planning to do those programs through the 5 strategic initiatives as opposed to buying a business with price reductions and margin reductions. We're expanding our coverage so that we get to more accounts, tell our story about our products, than we have been in the past.

And so I think all of those things are increasingly going to come together over time in the future. What is difficult for us is to make any particular prediction as to how quickly those can have an impact.

If you ask me, "Over 5 years, how comfortable do you feel?" The answer is, "Very comfortable."

We've got a terrific set of programs that we're working on. Will they pay off next quarter in some significant way?

Even taking into account the fact that bookings have a lag before they turn into shipments, the answer is that's very hard to predict. And it also depends on what segments of the market come back and -- for example, building construction is improving in the United States.

And we have some important customers who serve those industries. And a couple of years ago, believe me, they weren't buying any forklift trucks.

And now they're starting to replace trucks that arguably could have been replaced earlier but for very logical reasons, weren't. So all those factors are coming together.

It's probably a very broad answer to your question, but I think it's important, in terms of the dynamics of what we're dealing with here to put into those terms. It's not so much a quarter-by-quarter game as it is a focus on these programs and continuing to be committed to them and get them to be executed adequately.

Okay. A couple of follow-ups.

You talked about a higher tax rate going forward, and it was about 20% here in the first quarter. What kind of magnitude of increases should we expect in subsequent quarters?

Let me ask Ken to address that. The biggest impact, of course, is the very specific onetime item that I mentioned in my remarks.

And that's sort of a double-whammy effect because on the one hand, the reversal was a benefit last year. And on the other hand, now we have those taxes that we have to pay each time along the way as they appear on the books.

Now from a cash point of view, it doesn't change anything because we were still getting the benefits of the tax losses as we earned income. So 0 impact on cash and -- from that particular aspect of it and a larger impact on GAAP reporting.

And then, of course, the other aspect of it is there is a shift, for the performance reasons, to stronger results in the United States, where the tax rates are higher, as you know. And let me just ask Ken to elaborate on that to give you a better flavor.

Thanks, Al. I think the best place to point you is, if you look at our footnote in the Q, we do talk a bit about the onetime items we incurred in the first quarter.

We had $1.4 million of favorable tax adjustments that are onetime items in the first quarter. They primarily relate to U.S.

tax law changes that occurred in the first week of the year when the tax law change was put in place that reinitiated the R&D credit. There were also some other items in Europe, in a similar fashion, that were tax law changes that really just are onetime pops in the quarter.

So you've got to take that $1.4 million out of the provisions, you get your provision adjusted, then you look at the provision compared to the pretax, and you'll get a pretty good idea where we have, as of the first quarter, judged our effective tax rate to be going forward. The onetime item we had in the fourth quarter last year, we don't anticipate, at this point, a recurrence of.

We continue to monitor whether other tax attributes can be released. But until you get to those trigger events, you just can't forecast the release of those other items.

Okay, okay. I understand.

And I'm sorry, I should know this, but I am looking at the 10-Q and I can't remember from the previous Qs. Are there any -- is there a likelihood of any debt refinancing or debt repayments at this time?

And can you -- tell me what kind of rate you're paying on your debt now? I can't -- again, I apologize.

I can easily get that.

Not a problem. It's in there.

But frankly, we refinanced, in last year's period, both our revolver and our term loan. But we're refreshed and pretty well set for a period of time.

Obviously, we keep our eyes on the market and if opportunities arise, but we think we financed at a very good point. I think our overall rate ends up being about 5% on the Term Loan B.

We borrow, if at all, very limited amounts under the revolver. So I think you can get there.

We do have a couple of other small loan obligations that add to that interest expense items to support some of our dealer commitments in Latin America. But, predominantly, the interest relates to the Term Loan B at the rates that you can look up in the...

I want to ask about the cash. It seems to have come down about $20 million sequentially, and debt only went down $4 million, so the delta was about $16 million.

What happened to that cash?

Well, we had some use in working capital. Ken, do you have a cash flow there?

Yes. I think that the best way to describe it is we did have an increase in accounts receivable due to that extension of the days due to the mix shift that we described previously.

Also, in the first quarter, we typically pay out incentives and we typically pay out our dealer commissions. So first quarter tends to be a quarter where we have more going out the door that relate to annual accruals than any other quarter in the year.

And that's a historical trend that you can follow along in our financials.

So the $16 million delta plus the cash that you generated in the quarter -- I don't know, your net income was $25 million, $24 million. That's like $40 million that...

Our net cash before financing activities was actually, I think, down because of the $9 million worth of CapEx we had in the quarter as well. So our CapEx was up as well year-over-year.

Right. You had $9 million of CapEx, and then how much in working capital usage?

Well, primarily, the working capital usage was in the receivable line.

And how much did that increase?

Well, compared to the prior year quarter, receivables were up $40 million from 385 -- from $345 million to $385 million.

Okay. And you anticipate, over the year, that going back down?

Well, I think the issue there is volume. And to the extent you see increasing volumes, you're going to see an investment in receivables.

We also, again, had that shift in days. So we're holding the receivables slightly longer.

But overall, I think our working capital cycle is pretty tight. We end up with receivables being on a days basis -- our inventory and payables are truly almost offsetting in terms of days.

Our receivables is really the net working capital that we hold, and payable days tend to be something just shy of 60.

And last quarter, you said that some of the offset to the CapEx for the new plant in Brazil, is you're going to sell the old one in a highly desirable residential area. Can you just comment on if you've sold it or what kind of -- how much money you think you'll get for it?

Contract negotiations are continuing, and we're certainly very hopeful that the scenario that we discussed with you before is going to come to pass. But it is not yet signed, sealed and delivered, and so we don't comment on specific numbers.

Okay. And the cash in general, the usage of cash.

You plan just keeping it on the balance sheet for a rainy day, or do you plan on maybe buying back stock, paying dividends again?

We have a share repurchase program underway at the current time. And we have been buying back shares.

And I believe, Christy, we've put those numbers in the Q. And I think we'll continue the program that we had previously outlined.

It's on Page 22 on the 10-Q.

Okay. And last question.

In terms of the margin improvements, this quarter, you had 5%. Do you still think you can get to 7%?

And how long do you think it's going to take?

I'm going to be very clear about what's involved in getting to 7%. There are really 2 elements to that.

One, and it's the bigger driver, is more volume. We expect that markets will continue to improve, but the bigger driver is payoff from our 5 strategic programs, which we are very hopeful, on a global basis, will lead to improved market share.

Basically, that comes from filling up our plants and having less unabsorbed manufacturing variances, lower unabsorbed manufacturing variances. And secondly, recognition that our GS&A expenses have a significant degree of fixed character to them, which means that as the volume goes up, we wouldn't expect the expenses to go up proportionately.

So it is absolutely essential that we get the additional volume in order to get to the 7%. If we don't get it, we won't get there.

It's not a question of reducing the cost of the products, improving the margins of the products through price. I'll come to one exception in the margin area in a minute.

It's really a question of driving volume against a very solid cost structure that is in place today. The one exception on the margin area is that our margins in the certain internal combustion engine product lines are lower than we would like to have -- that we have in our target margins, and more generally, that we're able to achieve in other product lines.

And we believe that the reason that they are lower is that we have not have adequate product line in the utility and standard products. And, therefore, we're selling a high-cost premium truck at prices that are appropriate, to some degree, in the standard and utility lines where the prices, obviously, are lower.

So that's why we're putting energy into the UTILEV utility product line and expanding it, as I outlined, and secondly, into the standard internal combustion engine product line, which we will also be expanding over time. And so we're going to get some improvement in our margins over time from the ability to offer the right product for the application.

But the biggest impact to that is going to come through expanded volume. And so the 2 kind of come along in parallel, from our point of view.

But those are the drivers of the 7%. And it's really important, I think, to understand that the 5 strategic initiatives are the initiatives that are aimed at accomplishing the 7% and that it's not sort of general improvement in costs and quality and manufacturing and supply chain and the rest.

Obviously, we're in a mode of continuous improvement, but so is everybody else. So relatively speaking, the we move ourselves forward is by filling up our plants.

And the important additional aspect to that is that, by filling up our plants, we not only get the higher utilization, but we're not in a position where we have to invest significantly in capital equipment. We already have in place the capacity that we need to fill up those plants in terms of machine tools, infrastructure in the plants and so on and so forth.

So to get to the 7%, we feel very comfortable that we can do that without dramatic capital expenditures as well. So the major capital expenditure program we have underway is the one that you mentioned earlier, which is the Brazil one.

A question on the increase in operating expenses related to marketing and employee-related costs in pursuit of your strategic initiatives and the incremental public company costs. Have you disclosed approximately how much you think that will be over the course of this year, either in terms of a percentage or dollars?

I believe we commented on that in our last quarterly discussion. Did we not, Christy?

And really, our comments haven't changed materially from what we said at that time.

Our guidance was $3.5 million, over the year, of incremental public company cost. That's just the public company side of it, not the marketing and engineering cost for the 5 programs.

That would be on top of that.

And we had commented on those marketing and engineering programs, I believe, Christy, as well. Have we not?

Yes, that was the $5 million.

I'm sorry, how much? $5 million?

$5 million. The number we said last quarter.

Over and above what we had last year. So in other words, the 5 strategic initiatives have been in place for a while.

And during the course of 2012, increasingly, we had been implementing those. And so there will be some increase that is related to those as well.

And then with respect to price increases being taken this year, over the course of the year, what are those anticipated to be?

At this point, I don't think we're saying anything about future price increases. We've got some that are rolling through.

And I think what we indicated was that they should cover any material cost that we see rolling through, but we watch it and adjust to things accordingly. I think the important point is that we wouldn't be initiating price increases with the objective of improving our margins.

We would be generating any price increases in the context of supplier cost increases. And as I indicated, those have moderated, particularly in the first quarter, over what we anticipated.

And it remains to be seen how quickly they flow through. Now we put in place anticipatory price increases, and so those appear to be in a position of covering the cost that we're going to be incurring, and that's kind of where it stands at the moment.

Okay. And in terms of the first quarter, what was kind of the overall impact of price increases on the top line?

There was some small increase in price.

Okay. And then I don't know if you can answer this one because it's relatively new, but in recent days, we've been seeing some pushback from the governments in France and in Italy about the austerity programs, and they're making noise about implementing pro-growth programs as well as, probably, diminishing some of the austerity programs to kind of jump-start their economies, because they believe austerity alone is not the only way to go.

How does that possibly impact your operations over there?

I'd answer that question very cautiously and, I think, this way, that the most likely way that austerity is going to be relieved is to somehow put more money in consumers' pockets. And lift trucks, like many other things, are more in the nature of investments, and I think the activity levels are sufficiently low that the chance you're going to get a big impact from austerity reduction in Europe -- in Western Europe soon is low.

Now if you look out a couple of years, that could be different. But in the immediate future, it's hard for me to see a significant impact.

And also, I sense there's a huge amount of conversation and not a lot of action on all this. And there's such dramatic austerity going on now that any relief on the margin is just less worse than the difficulties they're struggling with now.

And within your European group, which encompasses the Mid East and Africa, any pockets of strength, even if they are relatively small operations within the total European group?

Well, we continue to work -- I guess I'd come back to my comment that we continue to work with our dealers, around the world, to try to strengthen our market position. And the stronger our dealers are, the stronger that we can be.

We have a partnership with our dealers. They are absolutely key to our performance over the longer term.

And if they can perform well out in the field, that'll benefit us. And there the certainly are some countries where we expect those impacts to be greater than others.

There are not a lot of markets out there that are dramatically booming. It's much more a question of doing better than we're doing in Western Europe.

So it's a question more of strengthening the existing dealer network rather than adding additional dealers?

Right. And one of those 5 strategic initiatives is to really focus on enhancing the capabilities of our independent distribution.

Okay, thank you all very much. We appreciate your being a part of the conference.

If you do have any further questions, please feel free to give me a call. You can reach me at (440) 229-5168.

Thanks for joining us, and have a good day.