Joy Global Inc. Announces Fourth Quarter and Fiscal 2012 Year-End Operating Results

Joy Global Inc. Announces Fourth Quarter and Fiscal 2012 Year-End Operating Results

MILWAUKEE--(BUSINESS WIRE)-- Joy Global Inc. (NYSE: JOY), a worldwide leader in high-productivity mining solutions, today reported fourth quarter and full year fiscal 2012 results.

Net sales in the fourth quarter increased 19 percent to $1.6 billion compared to the same period last year. Operating income was $326 million, or 20 percent of sales, in the fourth quarter of 2012, compared to operating income of $296 million, or 22 percent of sales, in the fourth quarter of 2011. Income from continuing operations was $212 million or $1.99 per fully diluted share for the fourth quarter compared to income from continuing operations of $195 million, or $1.83 per fully diluted share in the fourth quarter of 2011. Earnings per share were reduced by $0.06 in the quarter due to restructuring costs, $0.07 due to pension curtailment charges and $0.01 due to excess first year purchase accounting charges at International Mining Machinery ("IMM"). Fourth quarter bookings decreased 5 percent to $1.3 billion in fiscal 2012 compared to the fourth quarter of last year, but were up 22 percent sequentially from the third quarter.


Fourth Quarter and Full Year Highlights

"Our entire organization did an outstanding job of catching up on deliveries and giving us an exceptional finish to fiscal 2012," said Mike Sutherlin, President and Chief Executive Officer. "This strong execution will be important as we begin adjusting to the lower volumes that we expect for 2013. We are setting our plans for 2013 on the basis that current market conditions continue. Although there is upside potential in our markets, the timing is uncertain and unlikely to occur until current excess mine capacity is reduced."

Bookings - (in millions)      
Quarter Ended
October 26, October 28, %
2012 2011 Change
 
Underground Mining Machinery $ 638.0 $ 632.7 0.8 %
Surface Mining Equipment 530.8 678.9 (21.8 )%
Eliminations   (77.8 )   (35.6 )  
Legacy Business 1,091.0 1,276.0 (14.5 )%
 
LeTourneau 190.7 115.8 64.7 %
IMM   40.0     -    
 
Total Bookings $ 1,321.7  

$

1,391.8

  (5.0 )%
 

Bookings decreased 5 percent to $1.3 billion in the fourth quarter of fiscal 2012, with year over year order declines in our legacy business partially offset by $75 million of incremental bookings from LeTourneau and $40 million of bookings from IMM. The LeTourneau bookings include a multiple unit order for wheel loaders in South America. Our current quarter includes the full results of both of these acquisitions, while the fourth quarter of last year only included LeTourneau activity. Orders for the legacy underground and surface businesses, which exclude IMM and LeTourneau, decreased 15 percent in total compared to the fourth quarter of last year. Aftermarket orders declined 5 percent, and original equipment orders were down 27 percent over last year's fourth quarter. The stronger U.S. dollar reduced current quarter bookings by $23 million compared to the fourth quarter of last year. On a sequential basis, current year fourth quarter aftermarket and original equipment bookings increased 8 percent and 39 percent, respectively, from the third quarter of this year.

Bookings for underground mining machinery, excluding IMM, were flat in comparison to last year's fourth quarter. Original equipment orders were up 21 percent compared to the fourth quarter of last year, largely due to roof supports sold into Australia and increased orders in most other international regions. This was offset by a decline in orders in the U.S., due to its weak coal market. Aftermarket orders decreased 9 percent, driven by fewer rebuilds in the weak U.S. coal market. Orders from the international markets were not strong enough to offset the declines in the U.S. Orders for legacy underground original equipment and aftermarket were negatively impacted by foreign exchange of $11 million and $9 million, respectively.

Bookings for surface mining equipment, excluding LeTourneau, were down 22 percent. Original equipment orders were down 47 percent from the record bookings in the fourth quarter of last year, while aftermarket bookings increased 3 percent. Original equipment orders were down in all regions except Africa and Australia. Aftermarket order increases were centered in South America, Australia and Africa. All other regions experienced a decrease in orders. Current quarter legacy surface orders for original equipment and aftermarket were negatively impacted by foreign exchange of $1 million and $2 million, respectively.

Backlog at the end of the fourth quarter was $2.6 billion compared to $2.8 billion at the end of the third quarter. Backlog related to the legacy business was $2.3 billion at the end of the fourth quarter, down $0.2 billion from the beginning of the quarter, while backlog related to LeTourneau and IMM remained at $0.3 billion.

Net Sales - (in millions)      
Quarter Ended
October 26, October 28, %
2012 2011 Change
 
Underground Mining Machinery $ 775.4 $ 748.1 3.6 %
Surface Mining Equipment 708.3 524.4 35.1 %
Eliminations   (69.9 )   (38.8 )  
Legacy Business 1,413.8 1,233.7 14.6 %
 
LeTourneau 129.0 101.6 27.0 %
IMM   52.1     -    
 
Total Net Sales $ 1,594.9   $ 1,335.3   19.4 %
 

Net sales, excluding LeTourneau and IMM, increased 15 percent from a year ago to $1.4 billion in the fourth quarter. LeTourneau and IMM contributed incremental sales of $27 million and $52 million, respectively, to the fourth quarter. Original equipment sales were up 27 percent and aftermarket sales were up 6 percent over the prior year period. Changes in foreign exchange rates decreased net sales by $7 million in the fourth quarter compared to a year ago.

Net sales of underground mining machinery, excluding IMM, rose 4 percent in the fourth quarter compared to a year ago. Original equipment shipments were flat and aftermarket shipments were up 6 percent over the prior fourth quarter. The original equipment sales were driven by higher shipments in Australia and China offset by lower shipments in the U.S. and Africa. Aftermarket sales increased in China with reductions in all other regions.

Net sales of surface mining equipment, excluding LeTourneau, were 35 percent higher than the same period last year. Original equipment sales increased 90 percent, with aftermarket sales up 7 percent. Original equipment sales increases were led by strong results in all regions. Aftermarket sales were up in all regions except China and Australia compared to the prior fourth quarter.

Operating Profit - (in millions)        
Quarter Ended
October 26, October 28, Return on Sales
2012 2011 2012 2011
 
Underground Mining Machinery, before unusuals $ 176.7 $ 188.5 22.8 % 25.2 %
Restructuring charges (6.1 ) -
Pension curtailment   (1.1 )   -      
Underground Mining Machinery 169.5 188.5 21.9 % 25.2 %
 
Surface Mining Equipment, before unusuals 168.0 114.7 23.7 % 21.9 %
Restructuring charges (2.4 ) -
Pension curtailment   (10.3 )   -      
Surface Mining Equipment 155.3 114.7 21.9 % 21.9 %
 
Corporate Expenses (14.8 ) (12.3 )
Restructuring charges (1.0 ) -
Eliminations   (15.3 )   (8.8 )    
Legacy Business 293.7 282.1 20.8 % 22.9 %
 
LeTourneau 30.0 23.6 23.2 % 23.2 %
IMM   4.1     -   7.9 %  
Subtotal 327.8 305.7 20.6 % 22.9 %
 
Excess Purchase Accounting
LeTourneau - (6.5 )
IMM (2.0 ) -
IMM Equity Accounting - 3.3
Acquisition Costs   0.1     (6.2 )    
 
Total Operating Profit $ 325.9   $ 296.3   20.4 % 22.2 %
 

Operating profit for the legacy business was $294 million for the fourth quarter of 2012, compared to $282 million in the fourth quarter of last year. The increase in operating profit, before acquisition activities, was due to higher sales volume offset by pension curtailment charges, restructuring costs and an increase in period costs in the fourth quarter. Return on sales was 21 percent in the fourth quarter, compared to 23 percent last year. Excluding charges for restructuring and the pension curtailment, incremental profitability was 18 percent on a 15 percent increase in net sales. This low incremental profitability is largely due to the exceptionally strong performance by the underground business last year, which is the basis of comparison. Restructuring activities were undertaken to better align the business cost structure to our anticipated future requirements. The pension curtailments were the result of completed negotiations with certain of our U.S. bargaining units which will freeze their respective defined benefit plans at the end of the calendar year.

The current quarter results include $30 million of operating profit from LeTourneau. In addition, the current quarter results also include $4 million of operating profit from IMM, before $2 million of first year excess purchase accounting charges. Excess purchase accounting charges associated with the write-up of the acquired inventory and backlog from the IMM transaction were completed in the fourth quarter of fiscal 2012.

Net interest expense increased to $17 million in the fourth quarter of 2012, up from $11 million in the prior year, but flat with the third quarter. The increase in interest expense is attributable to incremental borrowings associated with financing the LeTourneau and IMM acquisitions.

The income tax rate was 31.1 percent in the current quarter compared to 31.7 percent in the fourth quarter of 2011. The current quarter includes $3 million of net favorable discrete benefits compared to $3 million of net unfavorable discrete charges last year.

Impact of Acquisitions and Unusual Items on Earnings Per Share

  Quarter Ended
October 26, 2012   October 28, 2011
Dollars   Fully Dollars   Fully
in millions Diluted EPS in millions Diluted EPS
 

Income from continuing operations, attributable to Joy Global Inc., as reported

$ 212.4 $ 1.99 $ 195.0 $ 1.83
 
Add:
LeTourneau excess purchase accounting, net of tax - - 3.6 0.03
IMM excess purchase accounting, net of tax 1.5 0.01 - -
Acquisition costs, net of tax - - 4.2 0.04
Incremental interest expense, net of tax 5.3 0.05 4.7 0.04
Pension curtailment, net of tax 7.8 0.07 - -
Restructuring charges, net of tax 6.5 0.06 - -
Net discrete tax charges - - 2.8 0.03
 
Deduct:
Net discrete tax benefits 3.1 0.03 - -
LeTourneau, net of tax 19.2 0.18 14.1 0.13
IMM, net of tax   2.9   0.03   2.5   0.02
 

Income from continuing operations attributable to Joy Global Inc., before acquisition activities and unusual items

$ 208.3 $ 1.94 $ 193.7 $ 1.82
 

The table above lists the acquisition activities and unusual items that affected fourth quarter earnings per share compared to the same quarter last year. The LeTourneau and IMM acquisitions, net of the increase in interest expense, added $0.15 to fully diluted EPS in the fourth quarter.

Cash provided by continuing operations was $211 million in the fourth quarter, compared to cash provided by continuing operations of $154 million a year ago. The increase in cash provided by continuing operations during the fourth quarter was due to higher earnings and a reduction in inventory. These benefits were partially offset by increases in accounts receivable primarily due to the late timing of sales and by a reduction in advance payments resulting from a decline in new original equipment order activity.

Capital expenditures were $72 million in the fourth quarter of fiscal 2012, compared to $35 million in the prior year fourth quarter. The expenditures resulted from the investments in manufacturing capacity in emerging markets and aftermarket service infrastructure.

Full Year Fiscal 2012 Operating Results

Fiscal 2012 full year results include IMM operating results for the 43-week period from December 29, 2011 through the end of the fiscal year. Fiscal 2011 full year results include LeTourneau operating results for the 19-week period from June 22, 2011 through the end of the fiscal year.

Bookings - (in millions)      
Year Ended
October 26, October 28, %
2012 2011 Change
 
Underground Mining Machinery $ 2,563.2 $ 3,102.3 (17.4 )%
Surface Mining Equipment 2,126.8 2,517.5 (15.5 )%
Eliminations   (331.4 )   (167.8 )  
Legacy Business 4,358.6 5,452.0 (20.1 )%
 
LeTourneau 495.1 139.4
IMM   217.6     -    
 
Total Bookings $ 5,071.3   $ 5,591.4   (9.3 )%
 

Bookings decreased 9 percent to $5.1 billion from the prior year, with year over year order declines in our legacy business partially offset by $356 million of incremental bookings from LeTourneau and $218 million of bookings from IMM. Orders for the legacy underground and surface businesses decreased 20 percent compared to last year. Aftermarket orders were flat while original equipment orders were down 40 percent over last year. The stronger U.S. dollar reduced bookings by $97 million for the year.

Total backlog at the end of fiscal 2012 was $2.6 billion, compared to $3.3 billion at the beginning of the fiscal year. Backlog related to the legacy business was $2.3 billion at the end of the year while backlog related to LeTourneau and IMM was $0.3 billion.

Bookings for underground mining machinery, excluding IMM, decreased 17 percent in comparison to last year. Original equipment orders declined 35 percent compared to the last year. All regions, except for Africa, experienced a decrease in orders. Aftermarket bookings were flat compared to last year as bookings increases in China, Africa and Australia were offset by lower orders in the U.S. Current year orders for legacy underground original equipment and aftermarket were negatively impacted by foreign exchange of $41 million and $39 million, respectively.

Bookings for surface mining equipment, excluding LeTourneau, were down 16 percent from the last year. Original equipment orders were down 37 percent from the record bookings of last year, while aftermarket bookings increased 5 percent. Original equipment orders were down in all regions except Africa and Australia. Aftermarket order increases were led by South America, Australia, and Eurasia. All other regions experienced declining aftermarket orders. Current year legacy surface business orders for original equipment and aftermarket were negatively impacted by foreign exchange of $7 million and $10 million, respectively.


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Net Sales - (in millions)      
Year Ended
October 26, October 28,
TWX +0.55 84.93

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