QUARTERLY REPORT FOR THE THREE MONTHS AND SIX MONTHS ENDED 30 JUNE 2014 HYVA GLOBAL B.V. (the Issuer ) 29 August 2014
Introduction On 24 March 2011, Hyva Global B.V. (the Issuer or the Company ) issued its 8.625% Senior Secured Notes due 2016 (the Notes ) pursuant to an indenture dated 24 March 2011 among the Issuer, Hyva III B.V., Wilmington Trust FSB, as Trustee, Principal Paying Agent, Registrar and Transfer Agent, and Wilmington Trust (London) Limited, as Security Agent (as amended or supplemented, the Indenture ). Unless otherwise specified, capitalised terms used herein that are not otherwise defined, have the meanings given to such terms in the Indenture. Section 4.16(1)(b) of the Indenture requires, so long as any Notes are outstanding, the Issuer to furnish to the Trustee, within 60 days following the end of each of the first three fiscal quarters in each fiscal year of the Issuer thereafter, quarterly financial statements containing the following information: (i) the Issuer s unaudited condensed consolidated balance sheet as at the end of such quarter and unaudited condensed statements of income and cash flow for the most recent quarter year to date period ending on the unaudited condensed balance sheet date and the comparable prior period, together with condensed footnote disclosure; (ii) an operating and financial review of the unaudited financial statements, including a discussion of the results of operations, financial condition, and material changes in liquidity and capital resources of the Issuer; and (iii) calculations of Consolidated EBITDA, Consolidated Non-Guarantor EBITDA, Consolidated Interest Expense and Consolidated Non-Guarantor Debt, in each case, for the four quarters ended with such fiscal quarter. Section 4.16(3) of the Indenture further requires the Issuer to make available copies of the report discussed above (a) on the Issuer s public website; (b) through the newswire service of Bloomberg, or, if Bloomberg does not then operate, any similar agency; and (c) if and so long as the Notes are listed and quoted on the Official List of the SGX-ST and to the extent that the rules of the SGX-ST so require, copies of such reports furnished to the Trustee shall also be made available at the specified office of the paying agent in Singapore. This Quarterly Report as of and for the three months and six months ended 30 June 2014, is published to comply with the reporting requirements in the Indenture discussed above. Forward-Looking Statements This Quarterly Report may include forward-looking statements. All statements other than statements of historical fact contained in this Quarterly Report, including, without limitation, those regarding future financial position and results of operations, strategy, plans, objectives, goals and targets, future developments in the markets in which the Issuer and its consolidated subsidiaries (together Hyva ) participate or seek to participate, and any statements preceded by, followed by or that include the words believe, expect, aim, intend, will, may, anticipate, seek, should or similar expressions or the negative thereof, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Hyva, which may cause actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements are based on numerous assumptions regarding present and future business strategies and the environment in which Hyva will operate in the future. Actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this document are based on information available to Hyva as of the date of this Quarterly Report and Hyva assumes no obligation to update any such forward-looking statements. 1
Presentation of Financial Information and Use of Non-GAAP Financial Information The condensed consolidated financial statements presented in this Quarterly Report have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRS ) and International Financial Reporting Interpretations Committee interpretations applicable to companies reporting under IFRS. However, please note that this Quarterly Report does not necessarily include all disclosure required by IFRS, including IAS 34 Interim Financial Reporting. The quarterly condensed consolidated financial statements included herein do not include all the information and disclosure required in the annual consolidated financial statements, and should therefore be read in conjunction with the Issuer s annual financial statements as at 31 December 2013. Detailed information regarding the accounting policies used for preparing the condensed financial statements included in this Quarterly Report is provided in Note 2 to the Issuer s consolidated financial statements for the year ended 31 December 2013. In this Quarterly Report, reference is made to EBITDA, Pro forma EBITDA and Adjusted EBITDA. EBITDA is defined as operating profit plus depreciation, amortisation and impairment of assets. Pro forma EBITDA is defined as EBITDA adjusted to exclude Transaction (as defined herein) related expenses. Adjusted EBITDA is defined as Pro forma EBITDA adjusted to exclude other additional extraordinary items, non-recurring costs and certain other items. Unless otherwise indicated, the EBITDA, Pro forma EBITDA and Adjusted EBITDA figures in this Quarterly Report are calculated on a consolidated basis, inclusive of all subsidiaries of Hyva Global B.V., as of 30 June 2014. It should also be noted that EBITDA is calculated differently from Consolidated EBITDA as defined and used in the Indenture governing the Notes. Management believes that EBITDA, Pro forma EBITDA and Adjusted EBITDA serve as useful indicators of Hyva s (as defined herein) operating performance. EBITDA, Pro forma EBITDA and Adjusted EBITDA are non-gaap measures and are not required by or presented in accordance with IFRS. They are not intended as a replacement for, or alternatives to, measures such as net cash from operating activities or operating profit as defined and required under IFRS. Hyva believes that EBITDA, Pro forma EBITDA and Adjusted EBITDA are measures commonly used by analysts, investors and peers in the industry. Accordingly, this information is disclosed to permit a more complete analysis of Hyva s operating performance. EBITDA, Pro forma EBITDA and Adjusted EBITDA, as calculated herein, may not be comparable to similarly titled measures reported by other companies. EBITDA, Pro forma EBITDA and Adjusted EBITDA may not be indicative of historical results of operations, nor are they meant to be predictive of future results. In this Quarterly Report, where information has been presented in thousands or millions, amounts may have been rounded. Accordingly, totals of columns or rows of numbers in tables or charts may not be equal to the apparent sum of the individual items. Actual numbers may differ from those contained herein due to such rounding. Important Note Regarding Confidentiality This Quarterly Report is confidential and has been prepared exclusively for use by any holder of the Notes or any prospective investor in accordance with Section 4.16 of the Indenture. You are authorised to use this Quarterly Report solely for the purpose of evaluating your investment in, or considering the purchase of, the Notes. Neither the delivery of, or access to, this Quarterly Report implies that any information set forth in this Quarterly Report is correct as of any date after the date of this Quarterly Report. You may not reproduce or distribute this Quarterly Report, in whole or in part, and you may not disclose any of the contents of this Quarterly Report or use any information herein for any purpose other than evaluating your investment in, or considering the purchase of, the Notes. You agree to the foregoing by accepting delivery of, or access to, this Quarterly Report. 2
TABLE OF CONTENTS 1. GENERAL... 4 1.1 Introduction... 4 1.2 Corporate Information... 4 1.3 Material Recent Developments... 4 1.4 Senior Management Update... 4 1.5 Risk Factors... 4 2. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS... 5 2.1 Introduction... 5 2.2 Unaudited Condensed Consolidated Statement of Income... 5 2.3 Unaudited Condensed Consolidated Balance Sheet... 6 2.4 Unaudited Condensed Consolidated Statement of Cash Flow... 7 3. OPERATING AND FINANCIAL REVIEW... 8 3.1 Introduction... 8 3.2 Results of Operations... 8 3.3 Financial Condition... 11 3.4 Liquidity and Capital Resources... 12 3.5 Outlook... 13 4. CERTAIN CALCULATIONS... 14 3
1. GENERAL 1.1 Introduction This Quarterly Report provides an operational and financial review, including condensed consolidated financial information, for the Issuer for the three months and six months ended 30 June 2014. ( Q2 2014 and H1 2014 respectively). 1.2 Corporate Information The Issuer s registered address is Naritaweg 165, Amsterdam, The Netherlands. Hyva is engaged in the development, production, marketing and distribution of hydraulic products and solutions for application in heavy duty equipment used in the mining, infrastructure, construction and environmental services end markets. 1.3 Material Recent Developments As discussed in our previous quarterly report, our hook and skip loader manufacturing activities are being relocated from the Netherlands into our existing crane manufacturing facility in Italy. This relocation is proceeding according to plan and expected to be finalised in the last quarter of 2014. There is no material new development since 28 May 2014, the date of our previous material developments update. 1.4 Senior Management Update With a view to improve oversight of Hyva s global operatrional footprint and to sharpen the focus on our engineering and product development efforts, the role of Chief Operations Officer (COO) has been split into two distinct positions, Vice-President of Operations in charge of Manufacturing, Supply China, Quality and Purchasing and Vice President of Research and Development (R&D) to whom our 4 Engineering functions in Hydraulics, Cranes, Container Handling and Waste Handling will report. Consequently, Mr Sean Robinson, formerly Chief Operations Officer left Hyva in July 2014 and Mr. Morten Steen Hansen has been appointed Vice President of Operations. He joins Hyva with an extensive international manufacturing and supply chain organisation experience and was previously Global Operations Director at GKN Wheels. The search for the position of Vice President of R&D is ongoing and in the interim, the engineering function will be reporting directly to our CEO, Mr Brice de La Morandiere. There are no other significant developments since 28 November 2013, the date of our previous senior management update. 1.5 Risk Factors An investment in our Notes involves significant risks. This Quarterly Report does not include a detailed discussion of these risks. Existing and prospective investors should refer to the risk factors set forth in the Offering Memorandum dated 17 March 2011 relating to the Notes. Prospective investors should consider those risks carefully before making a decision to invest in the Notes. If any of those risks actually materialize, then our business, financial condition and results of operations would suffer. In addition, there may be risks of which we are currently unaware or that we currently regard as immaterial based on the information available to us that later may prove to be material. These risks may adversely affect our business, financial condition and operating results. As a result, you may lose all or part of your original investment in the Notes. 4
2. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2.1 Introduction The following summarises the unaudited condensed consolidated financial data of the Issuer, including the unaudited condensed consolidated statement of income, the unaudited condensed consolidated balance sheet and the unaudited condensed consolidated statement of cash flow. 2.2 Unaudited Condensed Consolidated Statement of Income Unaudited condensed consolidated statement of income For the three months and six months ended 30 Jun 2014 and 2013 QTD QTD YTD YTD 1 Apr 2014 1 Apr 2013 1 Jan 2014 1 Jan 2013 to to to to 30 Jun 2014 30 Jun 2013 Change 30 Jun 2014 30 Jun 2013 Change USD '000 USD '000 % USD '000 USD '000 % Revenue 167,233 165,239 1.2% 338,548 310,942 8.9% Cost of sales (122,625) (120,000) 2.2% (247,459) (228,236) 8.4% Gross profit 44,608 45,239-1.4% 91,089 82,706 10.1% Selling, general and administrative costs (25,112) (25,134) -0.1% (50,354) (48,760) 3.3% Other operating expenses (5,063) (4,899) 3.3% (10,148) (10,063) 0.8% One-time restructuring costs (1,250) (1,687) -25.9% (1,761) (1,687) 4.4% Total operating costs (31,425) (31,720) -0.9% (62,263) (60,510) 2.9% Operating profit 13,183 13,519-2.5% 28,826 22,196 29.9% Interest income 627 391 60.3% 1,022 832 22.8% Interest costs (9,907) (9,867) 0.4% (18,793) (18,782) 0.1% Other finance income/(expense) net (354) (2,078) -83.0% (59) (860) -93.1% Net finance costs (9,634) (11,554) -16.6% (17,830) (18,810) -5.2% Profit before income tax 3,549 1,965 80.6% 10,996 3,386 224.8% Income tax expense (4,573) (4,878) -6.3% (8,922) (8,945) -0.3% Result for the period (1,024) (2,913) -64.9% 2,074 (5,559) -137.3% Result attributable to: Owners of the parent (1,005) (2,913) -65.5% 2,133 (5,559) -138.4% Non-controlling interests (19) - (59) - (1,024) (2,913) -64.9% 2,074 (5,559) -137.3% Other comprehensive income: Currency translation differences 1,547 (2,977) -152.0% (5,902) (5,058) 16.7% Comprehensive income for the period 523 (5,890) -108.9% (3,828) (10,617) -63.9% Comprehensive income attributable to: Owners of the parent 542 (5,890) -109.2% (3,769) (10,617) -64.5% Non-controlling interests (19) - (59) - 523 (5,890) -108.9% (3,828) (10,617) -63.9% 5
2.3 Unaudited Condensed Consolidated Balance Sheet Unaudited condensed consolidated balance sheet As at 30 June 2014 and 2013 30 Jun 2014 30 Jun 2013 USD '000 USD '000 Property, plant and equipment 38,409 43,409 Intangible fixed assets 671,382 691,396 Deferred income tax assets 11,001 12,457 Financial fixed assets 137 - Total non-current assets 720,929 747,262 Inventories 105,434 87,399 Trade and other receivables 175,764 155,811 Current income tax receivable 1,063 1,329 Cash and cash equivalents 79,143 83,956 Current assets 361,404 328,495 Total assets 1,082,333 1,075,757 Equity attributable to the owners of the parent 408,483 419,254 Non-controlling interest 159 - Total equity 408,642 419,254 Non-current liabilities Borrowings 371,425 368,598 Deferred income tax liabilities 85,128 90,294 Other non-current liabilities 4,214 4,173 Current liabilities Borrowings 813 3,932 Current income tax payable 3,848 5,179 Trade and other payable 201,669 178,100 Other current liabilities 6,594 6,227 Total liabilities 673,691 656,503 Total equity and liabilities 1,082,333 1,075,757 6
2.4 Unaudited Condensed Consolidated Statement of Cash Flow Unaudited condensed consolidated statement of cash flow For the three months and six months ended 30 June 2014 and 2013 QTD QTD YTD YTD 1 Apr 2014 1 Apr 2013 1 Jan 2014 1 Jan 2013 to to to to 30 Jun 2014 30 Jun 2013 30 Jun 2014 30 Jun 2013 USD '000 USD '000 USD '000 USD '000 Cash flows from operating activities Profit before income tax 3,549 1,965 10,996 3,386 Adjustments for: - Depreciation and amortisation 6,872 6,799 13,812 13,678 - Change in provisions 319 1,245 598 224 - Result on disposal of property, plant and equipment 2 (18) 13 (62) - Net interest expense 9,280 9,477 17,771 17,950 - Changes in working capital 1,289 15,515 (30,485) (2,392) Cash generated from operating activit\ies 21,311 34,982 12,705 32,784 Taxes paid (4,919) (5,374) (10,172) (8,606) Interest received/(paid) 250 (1,516) (16,036) (18,026) Net cash from/(used in) operating activities 16,642 28,092 (13,503) 6,152 Cash fows from/(used in) investing activities Purchases of property, plant and equipment (1,453) (3,262) (2,095) (5,012) Investments in intangible assets (263) (117) (317) (221) Proceeds from sale of property, plant and equipment 19 23 3,142 68 Net cash from/(used in) investing activities (1,697) (3,356) 730 (5,165) Cash flows used in financing activities Movements in loans and borrowings (344) (547) (382) (2,037) Net cash used in financing activities (344) (547) (382) (2,037) Net increase/(decrease) in cash and cash equivalents 14,601 24,189 (13,155) (1,050) Cash and cash equivalents at beginning of the period 65,065 61,372 93,941 89,239 Exchange gains/(losses) on cash and cash equivalent (523) (1,605) (1,643) (4,233) Cash and cash equivalents at end of the period 79,143 83,956 79,143 83,956 7
3. OPERATING AND FINANCIAL REVIEW 3.1 Introduction This section presents an operating and financial review, including condensed consolidated financial information, for the Issuer for the three months and the six months ended 30 June 2014. For purposes of this section, the terms we, our and us refer to Hyva. 3.2 Results of Operations 3.2.1 Consolidated Results Hyva s consolidated Q2 2014 revenue of USD 167.2 million is broadly in line with the prior corresponding period ( pcp ) (up 1.2% or 2 USD million versus pcp). Performance varies by region with (1) appreciable improvement noted in EMEA, India and to a lesser extent Other Asia compensated by (2) a deceleration in the second quarter in China that followed a very strong start of the year and (3) some revenue pressure in the Americas region, particularly in the Brazil hydraulics market. For the first half of the year, revenue is 8.9% higher than H1 2013, largely due to a relatively strong Q1 this year in certain geographies, like China and the EMEA region. The Q2 2014 gross margin level decreased lightly to 26.7% vs the pcp level of 27.4% mainly as a result of a change in regional revenue and product mix H1 2014 gross margin was 26.9% versus the pcp margin of 26.6%. Aside from the impact from mix changes, we expect margin improvement to continue as the full year effect of cost savings achieved YTD flows through and from better absorption of our manufacturing fixed costs. The Q2 2014 SG&A cost was USD 25.1 million, which was similar to pcp (-0.1%). H1 2014 SG&A costs increased to USD 50.4 million compared to USD 48.8 million in the pcp (up 3.3%, or USD 1.6 million versus pcp) and were mainly driven by the revenue increase observed in the first half of the year. Expressed as a percentage of revenue, SG&A cost in H1 2014 are 15.0% compared to 15.2% in pcp. Other operating expenses mainly represent the amortization of intangible fixed assets that resulted from the purchase price allocation and fair value adjustments arising in relation to the Acquisition. We incurred one-time costs of USD 1.3 million in Q2 2014, which mainly relate to the costs associated with the relocation of manufacturing activities from the Netherlands into our existing crane manufacturing facility in Italy as mentioned in section 1.3 above. Overall, Q2 2014 revenue and profitability was in line with the same period last year. Adjusted EBITDA amounted to USD 21.6 million or 12.9% of sales, slightly lower than 13.3% pcp, with the decrease driven by changes in regional and product mix. Currency movements during Q2 2014 had a net adverse impact on sales of USD 1.7 million, or 1.0% and USD 0.7 million or 3.4%, on EBITDA. For H1 2014,, currency movements had a net unfavourable impact of USD 5.2 million or 1.5% on sales and USD 1.3 million or 2.9% on EBITDA. This is largely due to the devaluation of Indian Rupee and Brazilian Real. 8
The table below sets forth EBITDA (as reported), Pro forma EBITDA and Adjusted EBITDA: EBITDA adjustments For the three months and six months ended 30 June 2014 and 2013 (Unaudited) QTD QTD YTD YTD 1 Apr 2014 1 Apr 2013 1 Jan 2014 1 Jan 2013 to to to to 30 Jun 2014 30 Jun 2013 Change 30 Jun 2014 30 Jun 2013 Change USD '000 USD '000 % USD '000 USD '000 % EBITDA (as reported) 20,054 20,133-0.4% 42,637 35,874 18.9% Transaction related adjustments: Transaction related expenses - - - - Pro forma EBITDA 20,054 20,133-0.4% 42,637 35,874 18.9% Other exceptional items: Restructuring costs 1,250 1,875-33.4% 1,761 2,033-13.4% Various other normalisations 252-529 - Adjusted EBITDA 21,556 22,008-2.1% 44,927 37,907 18.5% EBITDA (as reported) as % of revenue 12.0% 12.2% 12.6% 11.5% Pro forma EBITDA as % of revenue 12.0% 12.2% 12.6% 11.5% Adjusted EBITDA as % of revenue 12.9% 13.3% 13.3% 12.2% 3.2.2 Segment Results The table below sets forth revenue by region on an originating sales entity basis for the Hyva Group: Revenue by region on an originating sales entity For the three months and six months ended 30 June 2014 and 2013 (Unaudited) QTD QTD YTD YTD 1 Apr 2014 1 Apr 2013 1 Jan 2014 1 Jan 2013 to to to to 30 Jun 2014 30 Jun 2013 Change 30 Jun 2014 30 Jun 2013 Change USD '000 USD '000 % USD '000 USD '000 % China 45,095 58,532-23.0% 112,174 104,701 7.1% India 27,046 22,594 19.7% 49,037 44,619 9.9% Other Asia 9,503 8,880 7.0% 17,316 18,105-4.4% Americas 16,758 20,415-17.9% 32,719 37,234-12.1% Europe/Middle East/Africa (EMEA) 68,831 54,818 25.6% 127,301 106,283 19.8% Total 167,233 165,239 1.2% 338,548 310,942 8.9% As shown in the table above, the varying degrees of movements across each region has impacted the geographic mix of business compared to last year. In Q2 2014, China s contribution in consolidated revenue has decreased to 27.0% from 35.4% in pcp while EMEA s contribution increased to 41.2% in Q2 2014 from 33.2% in the pcp. 9
China China s Q2 2014 sales decreased by USD 13.4 million or 23.0% versus pcp (21.4% lower excluding exchange rate movements). On a YTD basis, sales increased by USD 7.5 million or 7.1% in H1 2014 compared to H1 2013 (6.7% higher excluding exchange rate movement). The H1 performance is in line with the developments in the market for heavy duty trucks and tippers in China where, after a good Q1 especially in South West China where Hyva has a strong position, a significant deceleration was noted in Q2. A number of projects, particularly in the construction and infrastructure sectors, are have seen a slowdown due to tighter credit conditions as well as local government's funding difficulties. We continue our strategy of broadening our product portolio in China through the introduction of new products such as our new line of truck mounted cranes as well as our expanded waste handling product range, which we intend to bring to the market over the next few months. We continue to believe that the long term prospects for the primary end markets that our products serve (infrastructure, mining, construction and waste management) remain strong in China. India Sales in India increased by USD 4.5 million or 19.7% pcp in Q2 2014 (USD 6.5 million or 28.7% higher excluding exchange rate movements). This result was driven by the continuing improvement in industrial and infrastructure demand in India which has increased demand for our hydraulics and tipper products, partly offset by the devaluation of Indian Rupee against the US dollar since the second half of last year. Overall, India s H1 2014 sales of USD 49.0 million are 9.9% higher than H1 2013 (USD 54.2 million or 21.4% higher excluding exchange rate movements. Other Asia Revenue from Other Asia in Q2 2014 was 7.0% higher versus pcp (13.3% higher excluding exchange rate movements). In H1 2014, sales have decreased by 4.4%, or USD 0.8 million (up by 2.9%, or USD 0.5 million excluding exchange rate movements) due to the impact of the depreciation observed in some of the currencies in that region, notably the Australian dollar and Indonesian Rupiah. Excluding exchange rate movements, the positive development of our H1 sales largely results from a very strong improvement in Indonesia somewhat compensated by (1) soft market conditions in Australia and (2) a weak market in Thailand due to political instablility. Americas Americas revenue decreased by 17.9% or USD 3.7 million in Q2 2014 versus pcp (down 12.6% or USD 2.6 million excluding exchange rate movements) mostly driven by a soft hydraulics market in Brazil in Q2 2014. In H1 2014, the Americas revenue was USD 4.5 million or 12.1% lower than H1 2013 (2.7% or USD 1.0 million lower excluding exchange rate movements). Short term prospects for the Brazilian HDT market remain challenging with latest 2014 GDP forecast growth revised below 1%, upcoming elections in October and the reduced activity subsequent to the football World Cup. 10
EMEA EMEA revenue increased by USD 14.0 million or 25.6% in Q2 2014 versus pcp (20.3% or USD 11.1 million higher excluding exchange rate movements). On a YTD basis, sales increased by USD 21.0 million or 19.8% (USD 16.6 million or 15.6% increase excluding exchange rate movements). This was largely driven by the recovery observed in Western, Eastern Europe and, to a lesser extent, in the Middle East. Demand for new commercial vehicles has seen a growth over the last 9 months and our sales continued to benefit from the transition to Euro VI emission standards, particularly in the UK. 3.2.3 Tax, Financing and Other Items Interest costs Interest costs mainly represent interest and amortisation expenses on the Notes of approximately YTD USD 16.1 million and USD 1.8 million respectively. Other finance income/ (expense) net Other finance income for Q2 2014 is mainly made up of the net realized and unrealized foreign exchange loss for approximately USD 0.3 million. The significant net other finance expense in 2013 was largely driven by unrealised foreign exchange losses on various currencies, among other Australian Dollar and Polish Zloty. Income tax expense Our income tax expense decreased by 6.3% to USD 4.6 million in Q2 2014 compared to USD 4.9 million in Q2 2013. Currency translation differences Currency translation differences (as included in other comprehensive income) amount to a positive USD 1.5 million impact in Q2 2014 mainly as a result of the appreciation of Brazilian Real and Chinese Renminbi. The positive effect of these 2 currencies is partly offset by some depreciation noted on the Euro and Indian Rupee for the three months ended 30 June 2014. 3.3 Financial Condition Working Capital 1 Hyva s net working capital increased by USD 14.5 million to USD 88.1 million as at 30 June 2014 (30 June 2013 : USD73.6 million). The increase was driven by the combined effect of (1) increases in inventory (USD 18.0 million) and trade and other receivables (USD 20.1 million) caused by higher sales in China, India and EMEA, offset by (2) an increase in creditors (USD 23.6 million, mostly due to China, India and EMEA). 1 Working capital: inventories plus trade and other receivables (excluding interest related receivables) less current liabilities (excluding provisions, income tax payables, interest related payables and current debt items). 11
Cash and debt The table below sets forth the debt of Hyva as at 30 June 2014: Debt (consolidated) (Unaudited) As at As at 30 Jun 2014 30 Jun 2013 USD '000 USD '000 Non-current debt Interest bearing loans and borrowings * 375,026 375,300 Financial lease liabilities 1,219 1,312 Other financial liabilities 1,387 1,774 377,632 378,386 Current debt Interest bearing loans and borrowings 288 274 Financial lease liabilities 212 407 Bank overdrafts - 2,011 Other financial liabilities ** 9,773 6,590 10,273 9,282 Guarantees 106 159 Gross debt *** 388,011 387,827 Cash and cash equivalents (excl. bank overdrafts) (79,143) (83,956) Net debt 308,868 303,871 Gross leverage (Gross debt / Consolidated EBITDA ****) 4.5 6.3 Net leverage (Net debt / Consolidated EBITDA ****) 3.6 5.0 Notes: *: Total interest bearing loans and borrowings classified as non-current debt as at 30 June 2014 include USD 375 million Notes issued by the Issuer and USD 0.2 million government loans in Italy. The amount in the balance sheet is net of the capitalised financing costs (USD 6.2 million as at 30 June 2014 and USD 9.8 million as at 30 June 2013). **: The USD 9.8 million Other financial liabilities are predominantly specific to customer payment agreements in India (USD 9.5 million as at 30 June 2014 and USD 5.4 million as at 30 June 2013). ***: Gross debt is calculated as per Section 1.01 Indenture dated as at March 24, 2011. ****: Consolidated EBITDA is calculated as per Section 1.01 Indenture dated as at March 24, 2011 and shown in Section 4 of this report. Cash and cash equivalents (excl. bank overdraft) totaled USD 79.1 million as at 30 June 2014, a slight decrease from USD 84.0 million as at 30 June 2013. Cash generated during Q2 2014 amounted to USD 14.6 million compared to USD 24.2 million pcp and is mainly driven by the increase in working capital during the period. Non-current liabilities Non-current liabilities mainly represent the Notes, net of capitalised financing costs (approximately USD 368.8 million) as well as deferred tax liabilities (approximately USD 85.1 million) which mainly originate from the purchase price allocation (approximately USD 84.6 million). 3.4 Liquidity and Capital Resources Capital Expenditure Q2 2014 capex amounts to USD 1.7 million compared to USD 3.4 million pcp. We largely fund our capital expenditure and investments in property, plant and equipment through cash generated from operating activities. We intend to continue to fund our future investments from existing financial resources and cash generated from operations. 12
Net Cash from (used in) Operating Activities Q2 2014 cash generated from operating activities is USD 21.3 million. Operating activities recorded a net cash inflow of USD 16.6 million after tax payments (USD 4.9 million) and net interest received (USD 0.3 million). Net Cash from (used in) Investing Activities Our net cash used in investing activities Q2 2014 created an outflow of USD 1.7 million, primarily attributable to normal capital expenditures and investments in property, plant and equipment. Net Cash from (used in) Financing Activities Our net cash used in financing activities created an outflow of USD 0.3 million in Q2 2014, compared to an outflow of USD 0.5 million in Q2 2013. Available liquidity The Issuer s available liquidity as at 30 June 2014 is USD 109 million made up of USD 79 million of cash and a USD 30 million available credit facility. This provides the business with sufficient cash to meet operating requirements, debt service obligations under the Notes and budgeted capital expenditure and investments. 3.5 Outlook In the context of a mixed macro-economic growth on a global basis, Hyva continues to focus on executing a range of initiatives to ensure Hyva is well positioned to drive growth when the trading environment in our main markets further improves. Key initiatives include (i) investing in R&D and NPI to develop the next generation of products, (ii) continuing to expand geographic coverage to growth regions, (iii) globalizing Hyva s crane and waste handling business, with a particular focus on the emerging markets and (iv) leveraging Hyva s existing distribution network by exploring vertical and horizontal product expansion. We are also focused on actively control costs and contain working capital levels. We have implemented significant cost reductions programs that have achieved tangible results in 2013 and H1 2014 across a range of functions, and have additional cost savings targets for the rest of 2014. 13
4. CERTAIN CALCULATIONS This section should be read in conjunction with the section titled Presentation of Financial Information and Use of Non-GAAP Financial Information in this Quarterly Report. In order to calculate Consolidated EBITDA, Consolidated Non-Guarantor EBITDA and Consolidated Interest Expense, this report includes financial information for the Issuer for the twelve month period ended 30 June 2014. Hyva Global B.V. (Unaudited) Twelve month period ended 30 Jun 2014 USD '000 Consolidated EBITDA 86,114 Consolidated Non-Guarantor EBITDA 81,856 Consolidated Interest Expense 34,257 Consolidated Non-Guarantor Debt 9,916 The following table below sets forth the reconciliation from Reported EBITDA to Consolidated EBITDA for the Pro forma twelve month period ended 30 June 2014: Hyva Global B.V. EBITDA calculation (Unaudited) Twelve month period ended 30 Jun 2014 USD '000 Reported EBITDA 73,341 Transaction related expenses - Pro forma EBITDA 73,341 Restructuring costs 8,389 Other adjustments 1,468 Adjusted EBITDA 83,198 Realised FX gains 286 Management fee 1,366 Interest income 1,263 Consolidated EBITDA 86,114 14