Joy Global Inc. (JOY)

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Joy Global Inc. (JOY)

F4Q11 Earnings Conference Call

December 14, 2011 11:00 a.m. ET

Executives

Michael Olsen - EVP, CFO and Treasurer

Michael Sutherlin - CEO and President

Sean Major - EVP, General Counsel and Secretary

Analysts

Andy Kaplowitz - Barclays Capital

C. Schon Williams - BB&T Capital Markets

Henry Kirn - UBS Securities

Robert McCarthy - Robert W. Baird

Ann Duignan - JPMorgan

Charles Brady - BMO Capital Markets

Ted Grace - Susquehanna Financial Group

Seth Weber - RBC Capital Markets

Presentation

Operator

Please standby. Good day and welcome to the Joy Global Incorporated Fourth Quarter 2011 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. 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 Sean 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 fourth quarter. Mike Sutherlin will then provide an overview of our operations and our market outlook. After Mike's comments, we will conduct a question-and-answer session.

During the 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 fourth quarter of the 2011 fiscal year. The fourth quarter and the full year results included number of items which make a comparison to the prior year period difficult. In the press release, we’ve provided information in a format to allow the reader to compare the current quarter and fiscal year with the prior year period on a consistent basis.

My comments this morning will address current quarter results for the most part on a historical basis, excluding the LeTourneau Mining results, acquisition transaction costs, the International Mining Machinery equity income and incremental interest expense. I will then summarize these items at the end of my remarks.

Bookings in the fourth quarter were $1.3 billion and were 22% higher than they were last year. This increase in bookings was a result of a 25% increase in original equipment bookings and a 20% increase in aftermarket orders. The increase in aftermarket bookings continues the trend we have seen for the last nine quarters. The increase in aftermarket bookings was very broad with a 24% increase for the underground mining equipment business and a 16% increase in surface mining equipment.

The increase in original equipment orders was not as broad based, with surface mining equipment, original equipment bookings more than doubling, with orders being received across most geographic regions and for all commodities.

Original equipment bookings for the underground mining equipment business were approximately 24% less than they were a year ago. However, $45 million of the $65 million decrease in bookings were due to the impact of translating the beginning backlog of the quarter’s original equipment with the weaker U.S. dollar last year compared to a stronger dollar at the end of the current quarter.

With the exception of the roof support product line, where no large system orders were received in either period, orders remained strong across the other product lines.

Our investor website contains two graphs which track rolling fourth quarter new order trends by business for both original equipment and aftermarkets. The graphs reflect the continued increase in aftermarket orders for both businesses and for OE bookings for the surface mining equipment business with the leveling for the underground OE orders.

Net sales in the fourth quarter were $1.2 billion and were 18% higher than they were a year ago. Both the businesses continued with strong revenue growth with the surface mining equipment business having a 21% increase in net sales while the underground business had a 15% increase. The positive revenue trends for the aftermarket business continued with increased sales of 20% and 16% for the surface and underground mining equipment businesses respectively.

Higher aftermarket sales were reported at all markets. Original equipment revenue benefitted from the strong OE bookings over the last several quarters with the surface equipment business reporting a 33% increase in net sales while the underground equipment business was up 15%. Strong OE shipments were reported across all commodities that were mined with our equipment.

Operating profit in the fourth quarter was $282 million with a 23% return on net sales, compared to $227 million with a 22% return on net sales in the fourth quarter last year. The underground mining equipment business had an exceptionally strong quarter with the return on sales percentage in excess of 25%.

During the quarter, the majority of the variables went in the right direction, as the underground equipment business benefitted from a favorable sales mix, both between OE and aftermarket, but also a favorable sales mix within the OE product lines.

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