Joy Global Inc. (JOY)

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Joy Global (JOY)

Q4 2012 Earnings Call

December 12, 2012 11:00 am ET


Michael S. Olsen - Chief Financial Officer and Executive Vice President

Michael W. Sutherlin - Chief Executive Officer, President, Executive Director, Member of Executive Committee and Chief Executive Officer of Joy Mining Machinery


Andy Kaplowitz - Barclays Capital, Research Division

Jerry Revich - Goldman Sachs Group Inc., Research Division

Robert Wertheimer - Vertical Research Partners, LLC

Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division

Ann P. Duignan - JP Morgan Chase & Co, Research Division

Michael W. Gallo - CL King & Associates, Inc., Research Division



Good day, everyone, and welcome to the Joy Global Inc.'s Fourth Quarter Earnings Fiscal 2012 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference to Mr. Mike Olsen, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Michael S. Olsen

Thank you, Augusta. 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; Sean Major, Executive Vice President, General Counsel and Secretary; Jim Sullivan, Executive Vice President; and Ted Doheny, Executive Vice President, President and Chief Operating Officer of the company's underground mining equipment business.

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. [Operator Instructions]

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 understanding our business. For a reconciliation of non-GAAP metrics to GAAP, as well as other investor information, we refer you to our website at

Now let's spend a few moments reviewing the fourth quarter of the 2012 fiscal year.

In our press release, we include tables that provide information which makes it easier to compare the current-period results to the prior year on a consistent basis. These tables provide the results for the surface and underground mining equipment businesses on an historical basis and lists the LeTourneau and IMM results separately, along with unusual charges included in the calculation of operating profit.

My comments this morning will focus on the legacy historical results for the company's surface and underground mining equipment businesses, excluding unusual charges listed individually in the press release, and we will break out separately the LeTourneau and IMM results.

Legacy bookings in the fourth quarter were $1.1 billion and were 15% lower than they were last year. The decrease in bookings was a result of a 5% decrease in aftermarket orders and a 27% decrease in original equipment bookings.

Aftermarket equipment bookings for the underground mining equipment business were approximately 9% less than they were a year ago due to fewer rebuilds and parts in the U.S. coal market; and lower order rates in China, where parts orders are typically very large and sporadic in their timing; and in Eurasia. The decrease in underground market orders was partially offset as surface mining equipment aftermarket bookings increased 3%, with small increases from the prior year in aftermarket orders in South America, Australia and Africa.

The decrease in original equipment bookings was attributable to a 47% decrease in the surface mining equipment business from an exceptionally strong OE bookings quarter last year, which was partially offset by a 21% increase for underground mining equipment business. Surface original equipment orders were down in all regions except Africa and Australia. Underground original equipment orders were up in China, Africa and Australia, where an order for longwall equipment was received during the current quarter, partially offset by lower orders in the U.S. due to the soft coal market.

LeTourneau recorded $191 million of bookings in the quarter, a 65% increase from the prior year. This increase in new orders included a large order for loaders from a customer in South America. IMM recorded $40 million of bookings in the quarter, reflecting the soft demand for their products in the mid-tier market in China.

Approximately $23 million of the $70-million overall decrease in bookings in the current quarter compared to a year ago was due to the translation impact of fluctuations in foreign currency exchange rates. Our investor website contains 2 graphs which track rolling 4-quarter new order trends for our legacy businesses for both original equipment and aftermarket. The graphs reflect a continued increase in aftermarket orders for both businesses and the softness for OE bookings reported in the 2012 fiscal year.

Net sales for the legacy businesses in the fourth quarter were $1.4 billion and were 15% higher than they were a year ago. Both legacy businesses reported revenue growth, with the underground equipment business recording a 4% increase, while the surface mining equipment business had a 35% increase in net sales. The revenue growth trends for the aftermarket business continued with increased sales of 6% and 7% for the underground and surface mining equipment businesses, respectively.

Surface mining aftermarket sales were up in all regions except China and Australia, where the increase in underground aftermarket sales was associated with strong parts sales in China. Underground original equipment net sales were essentially flat with the strong quarter a year ago, while original equipment revenue for the surface equipment business was 90% higher than OE sales in the fourth quarter last year. Higher shipments of underground equipment to Australia and China were offset by lower shipments in the United States and Africa, while strong surface equipment OE sales were reported across all regions.

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