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Joy Global Inc. (JOYG)

F3Q2011 Earnings Call

August 31, 2011 11:00 am ET

Executives

Michael Olsen - EVP and CFO

Michael Sutherlin - President and CEO

Shawn Major - EVP, General Counsel and Secretary

Analysts

Ingrid Aja - JPMorgan

Henry Kirn - UBS

Seth Weber – RBC Asset Management

Charley Brady - BMO Capital Markets

Jerry Revich – Goldman Sachs

Michael Gallo - C.L. King & Associates

Ted Grace – Susquehanna Financial Group

Presentation

Operator

Please standby we are about to begin. Good day and welcome to the Joy Global third quarter earnings conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Mike Olsen, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Michael Olsen

Thank you, Melissa. Good morning and welcome everyone. Thank you for participating in today's conference call, and for your continued interest in our Company. Joining me on the call this morning is Mike Sutherlin, President and Chief Executive Officer; and Shawn Major, Executive Vice President, General Counsel and Secretary.

This morning I will begin with some brief comments which expand upon our press release and which provide some additional background on the results for our third quarter. Mike Sutherlin will then provide an overview of our operations and our outlook. After Mike's comments, we will conduct a question-and-answer session.

During this session, we ask you to limit yourself to one question and one follow-up question before going to the back of the queue. This will allow us to accommodate as many questioners as possible.

During the call today, we will be making forward-looking statements. These statements should be considered along with the various risk factors detailed in our press release and other SEC filings. We encourage you to read and become familiar with these risk factors. We may also be referring to a number of non-GAAP measures, which we believe are important to the understanding of our business. For a reconciliation of non-GAAP metrics to GAAP, as well as for other investor information, we refer you to our website at www.joyglobal.com.

Now, let’s spend a few moments reviewing the results for the third quarter of the 2011 fiscal year. During the third quarter a number of actions were announced which are consistent with the implementation of our strategic plan. In May, we announced the acquisition of LeTourneau Technologies Inc. which consisted of mining equipment and drilling products businesses.

In July, we announced an agreement had been reached with a private equity company to acquire 41% of the outstanding shares of international mining machineries, a public company traded on the Hong Kong Stock Exchange depending regulatory approval and our intention to issue a tender offer for the remaining shares once regulatory approval has been granted.

In July, and August in separate transactions, we acquired approximately 18% of the outstanding shares of IMM in the open markets. Lastly, today we announced an agreement had been reached to sell the drilling products business which was part of the LeTourneau acquisition earlier in the quarter for $375 million. The results of the drilling products business for the six week period from the acquisition closing date to the end of the quarter are reported as discontinued operation.

With all of the moving parts in the current quarter’s results we have included several payables in the third quarter’s earnings press release and have posted similar tables on our website at www.joyglobal.com to enable our shareholders to better understand the operating results for the third quarter.

The tables provide comparative results for the current quarter and for the third quarter last year for Joy Global as it was structured at the beginning of the 2011’s fiscal year and breaks out separately the items associated with unique transactions in the quarter.

Turning to slide two on the website, you take a look at our bookings comparison. Excluding LeTourneau Mining Equipment results, bookings in the current quarter were 46% higher than bookings in the third quarter last year and just slightly less than the record new orders received in the second quarter.

In the current quarter, the amount of new orders received were just about evenly split between the surface and underground mining equipment segments with both businesses exceeding $700 million in bookings in the current quarter. Surface equipment bookings were almost double the amount of orders which were received last year while underground equipment bookings were 17% higher than they were a year ago.

Total original equipment orders were 78% higher than last year led by more than a 200% increase for surface original equipment recorded across all commodities and geographic markets. Aftermarket bookings in total in the third quarter continued their seasonal trend of declining from aftermarket bookings in the second quarter but were 22% higher than they were in the third quarter last year.

Aftermarket bookings were 31% and 13% higher in the current quarter than they were a year ago for surface and underground mining equipment respectively. Mining activity and the increase in the installed base of equipment resulted in higher aftermarket demand across most commodities and geographic markets. The weaker US dollar compared to a year ago caused a $79 million increase in bookings compared to last year.

Turning to slide three on the website, our net sales comparison is provided. Net sales once again excluding LeTourneau Mining Equipment exceeded the prior year by 29% with the underground and surface mining equipment businesses reporting revenue increases of 31% and 24% respectively.

In total, original equipment revenue was 34% higher than last year, while aftermarket net sales increased 25% both businesses reported strong revenue results for both original equipment and aftermarket products and services which is the result of strong original equipment orders over the last several quarters and the level of mine production in the markets we serve.

Read the rest of this transcript for free on seekingalpha.com