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Joy Global Inc. Announces Fiscal 2008 Third Quarter Operating Results

Sep 3, 2008 (GlobeNewswire via COMTEX News Network) --



 * Record-high new orders of $1.5 billion
 * Sales of $904 million, up 45% over the prior-year period
 * EPS of $1.03, inclusive of a $0.22 benefit related primarily to
   the realization of foreign tax credits
 * Operating cash flow of $142 million

MILWAUKEE, Sept. 3, 2008 (GLOBE NEWSWIRE) -- Joy Global Inc. (Nasdaq:JOYG), a worldwide leader in high-productivity mining solutions, today reported results for the 2008 fiscal third quarter ended August 1, 2008. Net sales for the quarter were $904 million, up 45% from the same quarter of last year. Operating profit increased from $110 million in the third quarter of last year to $134 million in the current quarter. Operating income was adversely affected by charges for purchase accounting associated with the acquisition of Continental Global Group ("Continental"), the extension of the union contract at the P&H Milwaukee operations, foreign exchange movements, and operating costs that include start-up of the P&H China factory and acceleration of certain R&D programs. Net income was $113 million, or $1.03 per fully diluted share, compared to $73 million, or $0.66 per share in the year-ago quarter. Net income in the current quarter benefited from the realization of foreign tax credits of $24 million, or $0.22 per share.

"Our results for the third quarter reflect exceptional demand for our surface and underground mining equipment and services," said Mike Sutherlin, president and chief executive officer of Joy Global Inc. "Bookings for the current quarter were a record-high $1.5 billion, with quarterly orders averaging over $1 billion for the last four quarters. The latter supports our view of the long-term strength for equipment demand as our customers continue to expand mine production to fill the gap between available supply and growing demand. Our capacity expansion programs are beginning to deliver results, with 32% revenue growth in the quarter before adding in Continental. Despite record revenues, our backlogs have extended, and we continue to increase our capacity expansion plans to meet the needs of our customers.

"I am pleased to highlight several significant additional accomplishments during the quarter. We not only reached agreement on the P&H Milwaukee union contract reopener, but were able to extend that contract to August 2012 to provide cost and performance stability for four more years. Continental's third quarter reported results improved sequentially from the second quarter and were in line with our expectations. Also, we recently announced that we had entered into an agreement for our first acquisition in China with the proposed purchase of Wuxi Shengda, a manufacturer of longwall shearing machines. This acquisition will provide us access to the middle-tier provincial mining companies in China and is a platform for future growth in this major market segment."

Third Quarter Operating Results

Order bookings in the third quarter increased by 139% from the prior year to $1.5 billion, reflecting the combination of continued strength in the international markets and a resurgence of the U.S. underground coal market. Orders for original equipment increased more than threefold, while aftermarket orders were up strongly at 40%.

Underground equipment orders at Joy increased 89% to a record $743 million in the quarter. Order growth was led by the U.S., with Australia and South Africa also posting meaningful order increases. Although orders were up significantly in all product categories, they increased most strongly in room and pillar products, reflecting acceleration of mine expansion programs by the Company's domestic customers to take advantage of exceptional demand and pricing as the U.S. continues to grow its coal exports. Surface equipment orders at P&H increased 174% to a record $645 million in the quarter. Original equipment orders were up over sevenfold, and shovel orders were broadly based, with bookings in North and South America and in Australia. When delivered, those shovels will mine coal, copper, iron ore, oil sands, gold and phosphate. Continental booked $113 million of conveyor orders in the quarter, led by orders from Australasia and Eurasia (does not include China).

Sales in the quarter were up 45% from last year to $904 million -- also a Company record. Sales growth was strong in both original equipment and aftermarket products and services, which were up 61% and 35%, respectively.

Underground revenues at Joy increased by 31% over last year's quarter to $453 million. Revenue increases were significant in both original equipment and aftermarket, with respective increases of 45% and 19%. Despite solid revenue increases in Eurasia and South Africa, the U.S. contributed 48% of the total revenue growth in response to exceptionally strong demand. Surface revenues were up 33% from the prior year to $366 million. Revenues were up 41% in original equipment and 29% in aftermarket. Revenue growth was greatest in North and South America and in the international business unit covering Europe, Africa and Asia. During the quarter, P&H started up its first factory in Tianjin, China, and will be increasing to full production over the next six to nine months. P&H's second factory in Tianjin is on schedule to come on line and ramp up about a year following its first. The Continental conveyor product line contributed $85 million to third quarter revenues.

Operating income was $134 million, or 14.8% of sales, in the quarter compared to $110 million, or 17.7% of sales, in the third quarter of last year. Operating income for the quarter was affected by $5.8 million of purchase accounting charges related to the acquisition of Continental. A portion of the union contract settlement at P&H's Milwaukee operations was made to a defined contribution plan, resulting in a $5.3 million third quarter charge that underscores the Company's objective to shift retirement benefits from defined benefit to defined contribution plans. Currency movement during the quarter resulted in charges that were $5.2 million higher than last year. The most significant portion of this increase came from the Chilean peso, which also reflects the Company's increased level of business in that country. The Company's annual incentive plan, which covers most employees except certain bargaining unit members, is based on the return on average working capital and rewards the combination of profitability and asset efficiency. The Company has reduced working capital during the year even as it has grown its revenues, and the associated bonus expense is up $12.4 million compared to last year. And finally, the Company continues to invest in the start-up of manufacturing in China and in the development of key new products and technologies, and those efforts resulted in additional charges in the 2008 third quarter of $1.9 million and $3.2 million, respectively. The Company believes that the China start-up, R&D and incentive compensation costs will continue, and that purchase accounting charges will decline to an interim annual run rate of approximately $6 million in fiscal 2009. The other cost increases are related to events specific to the current quarter.

Operating margins at the Joy underground business were 19.4% versus 18.3% in last year's third quarter. P&H's operating margins were 14.5% of revenues, down from 19.5% in the prior year's third quarter. Included in P&H's operating income are the $5.3 million union retirement benefit cost, $5.4 million of the exchange rate expense, $2.4 million of increased engineering expense and $1.3 million of the China start-up costs. The Crushing and Conveying division reported operating margins of 7.4% in the 2008 third quarter. This included purchase accounting charges associated with the Continental acquisition of $5.8 million, or 5.3% of the division's sales.

The provision for income taxes was $15.5 million compared to $30.3 million in the comparable period of last year. The current quarter includes a discrete tax credit of $23.6 million, primarily consisting of foreign tax credits that can now be recognized in the U.S. The impact of these credits, plus the changing geographic distribution of earnings, is expected to lower the Company's tax rate to 31-33% going forward.

Other Financial Matters

Cash flow from operations for the quarter was $142 million, including a $32.5 million contribution to the Company's U.S. defined benefit pension plan. Capital expenditures were $17.8 million. While this amount is substantially lower than the 3.5% to 4% of revenues that is needed to support the Company's planned capacity expansion, the difference is due to the timing of funding.

The Company continued its program to buy back outstanding shares of its common stock, repurchasing $24.4 million during the quarter. To date, the Company has repurchased $837 million of the authorized $1 billion share buyback program that expires at the end of this calendar year.

Continued Positive Long Term Market Outlook

The Company continues to see strong demand for its equipment based on the fundamentals of commodity demand versus supply and customer investments in productivity and capacity expansion. This view is consistent across all geographies and all commodities that the Company serves. Although there has been recent softening in the prices of exchange-traded commodities, the spot prices for physical delivery continue to remain strong and stay significantly above comparable benchmark and contract prices. Commodity end users, such as power generators and steel companies, are expanding their investment in mining companies to lock in surety of supply and as a hedge against future commodity price increases. Consolidation continues in the mining industry, as the Company's customers seek the critical mass needed to take on larger, green field projects to meet the growing demand for commodities over the long term.

Worldwide demand for steel should continue to grow at 4-5% per year over the next five years, driven by the industrialization of the emerging markets. Demand in China and India should continue to grow near or into double-digit rates over this period. This growth exceeds the capacity of both iron ore and metallurgical coal producers. Benchmark prices for these commodities have roughly doubled and tripled, respectively, and are expected to rise further next year. As a result, the Company's customers are making significant investment to accelerate new capacity in these commodities.

Seaborne traded thermal coal demand has been largely driven by the electrification of the emerging markets. Earlier this year, the Company saw evidence that supply was not meeting demand as stockpile levels depleted in China, India and South Africa. Stockpile levels in South Africa have improved at the expense of exports, but still remain at less than half the targeted levels. Thermal coal demand in China continues to exceed supply, resulting in stockpile levels staying below three days. Demand continues to grow in China, with 80 new generating plants scheduled to come on line this year. In response, China is reducing export licenses for the remainder of this year to about half the year ago level and has added a 10% tariff to thermal coal exports to further limit outflow from the country.

Seaborne traded thermal coal supply is further exasperated by export restrictions from tradition coal exporting countries. Indonesia has halted exports by six of its coal producers. Australia is expanding its rail and port capacity, but significant relief is not expected before 2010. As a result, seaborne traded thermal coal continues to trade above its benchmark price and the supply deficit is expected to continue for several more years.

The U.S. is the only coal producing region with upside capacity in the near term, and has become the swing supplier to the international market. Exports last year were 59 million tons and are running about 50% above last year through the first half of 2008. As a result, the export prices are setting pricing levels in the U.S. market, with Eastern coal selling at prices around two-and-a-half times year-ago levels. At the same time, power generation in the U.S. is up 1.7% from the previous twelve-month period. Stockpile levels were staying above 50 days, but heavy cooling demand this summer has reduced that to 45 days. There are 29 new coal fueled power plants under construction in the U.S. Of this, 14 gigawatts will come on line by the end of 2009 and an additional 8 gigawatts will come on line by 2013, adding about 80 million tons of coal demand. The Company has consistently supported the fact that coal is essential to meeting this country's future energy needs and that coal-to-liquids with carbon capture and storage technologies are important to delivering that essential energy with a cost advantage and a competitive carbon footprint. The recent focus on energy prices and the effects of wealth transfer have broadened the understanding and support for the critical role that coal must play in our energy future.

Copper prices have weakened to six-month lows. The Company believes that much of the softness is due to normal seasonal factors and restricted industrial activity in China in the build-up to the Olympics, but also acknowledges impact from the weak U.S. economy and the slowing economies of Europe and Japan. Despite weaker prices, there has been little change in inventories because copper production is down 3.5% due to labor, weather, declining grades and other operational problems. Copper expansion requires long lead times, and the Company's copper mining customers continue to pursue mine expansion projects and purchase equipment in anticipation of the extra supply that will be needed in 2010 and beyond, when these projects begin to come on line.

The oil sands region continues to grow at high rates. Investment in oil sands projects is expected to reach $20 billion this year, almost double the investment rate of just three years ago. To support this growth, the Company has major expansion projects underway in both Edmonton and Ft. McMurray that will more than double capability to support the Company's current and growing fleet of its equipment in this region.

The strength of these market fundamentals, combined with the specific projects and prospects that are jointly being discussed with various customers, convinces the Company that the demand for its equipment will remain strong for several more years.

Updated Forward Guidance for Fiscal Year 2008

"Despite orders that have set new records for the past several quarters, the list of qualified prospects continues to remain very strong," Sutherlin commented. "We believe the recent order rates reflect an effort to achieve surety of equipment supply and expect that future order rates will begin to moderate to a more sustainable level. However, we also expect the sustainable order rate to remain well above the current industry capacity. As a result, we are continuing our program of expanding realizable capacity.

"As we approach the end of our fiscal year, available capacity to increase revenues remains limited and in line with our expectations when we last issued guidance. However, we expect our operating leverage to return to the 20% range in the fourth quarter. And although we expect Continental's margins to improve significantly over the next several years, the weighting effect of its current margins resets the base for future margin improvement. We therefore expect operating earnings to remain in the range we previously guided, but are adjusting earnings per share to reflect the discrete tax adjustment we realized in this quarter. As a result, we continue to expect revenues to be between $3.3 and $3.4 billion and now expect earnings per fully diluted share to increase from the previous range of $3.15 to $3.30 to the new range from $3.37 to $3.52."

Quarterly Conference Call

Management will host a quarterly conference call to discuss the company's third quarter results to be held at 11:00 AM EDT on September 3, 2008. Investors and interested parties may participate on the call by dialing 800-649-5127 in the U.S. and 706-679-0637 elsewhere, both with access code #59336117. A rebroadcast of the call will be available until the close of business on October 3, 2008 by dialing 800-642-1687 or 706-645-9291, access code #59336117. Finally, a replay of the webcast will be accessible until October 3, 2008 through the Investor Relations website at (http://www.joyglobal.com/investorrelations/confcalls.jsp).

About Joy Global Inc.

Joy Global Inc. is a worldwide leader in manufacturing, distributing and servicing equipment for surface mining, through its P&H Mining Equipment division; underground mining, through its Joy Mining Machinery division; and bulk material conveyor systems, through its Continental Crushing & Conveying division.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Terms such as "anticipate," "believe," "estimate," "expect," "indicate," "may be," "objective," "plan," "predict," "will," "will be," and the like are intended to identify forward-looking statements. The forward-looking statements in this press release are based on our current expectations and are made only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect new information. We cannot assure you the projected results or events will be achieved. Because forward-looking statements involve risks and uncertainties, they are subject to change at any time. Such risks and uncertainties, many of which are beyond our control, include, but are not limited to: (i) risks of international operations, (ii) risks associated with acquisitions, (iii) risks associated with indebtedness, (iv) risks associated with the cyclical nature of our business, (v) risks associated with the international and U.S. coal and copper commodity markets, (vi) risks associated with access to major purchased items, such as steel, castings, forgings and bearings, (vii) risks associated with labor markets and other risks, uncertainties and cautionary factors set forth in our public filings with the Securities and Exchange Commission.



                           JOY GLOBAL INC.
             SUMMARY OF CONSOLIDATED STATEMENT OF INCOME
                             (Unaudited)
               (In thousands except per share amounts)

                            Quarter Ended          Nine Months Ended
                        ----------------------  ----------------------
                         August 1,   July 27,    August 1,   July 27,
                           2008        2007        2008        2007
                        ----------  ----------  ----------  ----------

 Net sales              $  903,769  $  621,785  $2,387,231  $1,811,413
 Costs and expenses:
  Cost of sales            657,798     424,896   1,707,135   1,230,485
  Product development,
   selling and
   administrative
   expenses                113,488      88,909     322,977     259,772
  Other (income)
   expense                  (1,136)     (2,286)     (1,926)     (4,669)
                        ----------  ----------  ----------  ----------
 Operating income          133,619     110,266     359,045     325,825

 Interest income
  (expense), net            (4,881)     (6,930)    (14,686)    (19,415)
 Reorganization items         (135)       (135)     (2,311)       (415)
                        ----------  ----------  ----------  ----------
 Income from continuing
  operations before
  income taxes             128,603     103,201     342,048     305,995

 Provision for income
  taxes                    (15,524)    (30,300)    (86,950)    (95,850)
                        ----------  ----------  ----------  ----------

 Income from continuing
  operations               113,079      72,901     255,098     210,145
 Income from
  discontinued
  operations, net of
  taxes                         --          --       1,141          --
                        ----------  ----------  ----------  ----------

 Net income             $  113,079  $   72,901  $  256,239  $  210,145
                        ==========  ==========  ==========  ==========
 Basic earnings per
  share
  Income from continuing
   operations           $     1.04  $     0.67  $     2.36  $     1.89
  Income from
   discontinued
   operations                   --          --        0.01          --
                        ----------  ----------  ----------  ----------
  Net income            $     1.04  $     0.67  $     2.37  $     1.89
                        ==========  ==========  ==========  ==========

 Diluted earnings per
  share
  Income from continuing
   operations           $     1.03  $     0.66  $     2.34  $     1.87
  Income from
   discontinued
   operations                   --          --        0.01          --
                        ----------  ----------  ----------  ----------
  Net income            $     1.03  $     0.66  $     2.35  $     1.87
                        ==========  ==========  ==========  ==========

 Dividends per share    $     0.15  $     0.15  $     0.45  $     0.45
                        ==========  ==========  ==========  ==========

 Weighted average shares
  outstanding:
  Basic                    108,495     109,137     108,193     111,079
                        ==========  ==========  ==========  ==========
  Diluted                  109,446     110,462     109,230     112,410
                        ==========  ==========  ==========  ==========

 Note - for complete information, including footnote disclosures,
 please refer to the Company's Form 10-Q filing with the SEC.


                           JOY GLOBAL INC.
                 SUMMARY CONSOLIDATED BALANCE SHEET
                           (In thousands)

                                                 August 1,  October 26,
                                                   2008        2007
                                                ----------  ----------
                                                (Unaudited)
 ASSETS
 Current assets:
  Cash and cash equivalents                     $  306,885  $  173,248
  Accounts receivable, net                         601,918     560,242
  Inventories                                      892,613     727,360
  Other current assets                             122,987      76,945
                                                ----------  ----------
   Total current assets                          1,924,403   1,537,795

 Property, plant and equipment, net                293,742     234,029
 Other intangible assets, net                      198,343      62,932
 Goodwill                                          130,076      16,784
 Deferred income taxes                             234,124     248,139
 Prepaid benefit cost                               14,143         779
 Other assets                                       29,486      34,445
                                                ----------  ----------
   Total assets                                 $2,824,317  $2,134,903
                                                ==========  ==========

 LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
  Short-term notes payable, including current
   portion of long-term obligations             $   18,483  $      240
  Trade accounts payable                           268,377     199,198
  Employee compensation and benefits                99,829      59,490
  Advance payments and progress billings           465,985     324,102
  Accrued warranties                                50,421      49,382
  Other accrued liabilities                        126,875     121,127
                                                ----------  ----------
   Total current liabilities                     1,029,970     753,539

 Long-term obligations                             546,094     396,257

 Other non-current liabilities                     347,096     261,113

 Shareholders' equity                              901,157     723,994
                                                ----------  ----------

   Total liabilities and shareholders' equity   $2,824,317  $2,134,903
                                                ==========  ==========

 Note - for complete information, including footnote disclosures,
 please refer to the Company's Form 10-Q filing with the SEC.


                           JOY GLOBAL INC.
                     SUPPLEMENTAL FINANCIAL DATA
                             (Unaudited)
                            (In thousands)

                            Quarter Ended          Nine Months Ended
                        ----------------------  ----------------------
                         August 1,   July 27,    August 1,   July 27,
                           2008        2007        2008        2007
                        ----------  ----------  ----------  ----------
 BREAKDOWN OF SALES
  REVENUE:

 Net Sales By Operation:
  Underground Mining
   Machinery            $  453,003  $  347,149  $1,209,417  $1,037,449
  Surface Mining
   Equipment               365,543     274,636   1,019,630     773,964
  Crushing & Conveying     108,628          --     220,726          --
  Eliminations             (23,405)         --     (62,542)         --
                        ----------  ----------  ----------  ----------
  Total Sales By
   Operation            $  903,769  $  621,785  $2,387,231  $1,811,413
                        ========== ===========  ==========  ==========

 Net Sales By Product
  Stream:
  Aftermarket Revenues  $  515,422  $  381,026  $1,423,402  $1,138,433
  Original Equipment       388,347     240,759     963,829     672,980
                        ----------  ----------  ----------  ----------
  Total Sales By
   Product Stream       $  903,769  $  621,785  $2,387,231  $1,811,413
                        ========== ===========  ==========  ==========

 Net Sales By Geography:
  United States         $  398,194  $  260,941  $1,117,816  $  897,404
  Rest of World            505,575     360,844   1,269,415     914,009
                        ----------  ----------  ----------  ----------
  Total Sales By
   Geography            $  903,769  $  621,785  $2,387,231  $1,811,413
                        ========== ===========  ==========  ==========

 OPERATING INCOME BY
  SEGMENT:

  Underground Mining
   Machinery            $   87,817  $   63,563  $  233,334  $  203,374
  Surface Mining
   Equipment                53,185      53,671     152,030     144,184
  Crushing & Conveying       7,996          --      11,932          --
  Corporate                 (9,309)     (6,968)    (25,881)    (21,733)
  Eliminations              (6,070)         --     (12,370)         --
                        ----------  ----------  ----------  ----------
  Total Operating
   Income               $  133,619  $  110,266  $  359,045  $  325,825
                        ========== ===========  ==========  ==========

 DEPRECIATION AND
  AMORTIZATION BY
  SEGMENT:

  Underground Mining
   Machinery            $    7,801  $    8,811  $   22,643  $   25,292
  Surface Mining
   Equipment                 4,918       4,246      14,227      11,958
  Crushing & Conveying       7,751          --      21,746          --
  Corporate                      9          11          27          47
  Eliminations              (1,126)         --      (3,391)         --
                        ----------  ----------  ----------  ----------
  Total Depreciation
   And Amortization     $   19,353  $   13,068  $   55,252  $   37,297
                        ========== ===========  ==========  ==========

 CASH FLOW DATA:

  Decrease (Increase)
   in Net Working
   Capital Items        $   64,010  $   70,480  $   86,803  $  (36,381)
  Property, Plant and
   Equipment Acquired       17,838      19,310      56,317      43,115
  Cash Interest Paid        14,957      13,417      29,236      17,626
  Cash Taxes Paid           12,224      18,822      99,938      47,422


 BOOKINGS DATA:

  Underground Mining
   Machinery            $  742,746  $  393,362  $1,847,694  $1,103,897
  Surface Mining
   Equipment               645,068     235,065   1,555,557     817,865
  Crushing & Conveying     126,494          --     263,916          --
  Eliminations             (13,862)         --     (64,546)         --
                        ----------  ----------  ----------  ----------
  Total Bookings        $1,500,446  $  628,427  $3,602,621  $1,921,762
                        ========== ===========  ==========  ==========


                                        Amounts as of
BACKLOG DATA:            August 1,    May 2,    February 1, October 26,
                           2008        2008        2008        2007
                        ----------  ----------  ----------  ----------

 Underground Mining
  Machinery             $1,442,811  $1,153,068  $  969,597  $  804,534
 Surface Mining
  Equipment              1,368,991   1,089,466     897,627     833,064
 Crushing & Conveying      234,216     197,129          --          --
 Eliminations              (60,266)    (50,589)         --          --
                        ----------  ----------  ----------  ----------
 Total Backlog          $2,985,752  $2,389,074  $1,867,224  $1,637,598
                        ==========  ==========  ==========  ==========

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Joy Global Inc.

Joy Global Inc.
          Sara Leuchter Wilkins, Vice President, Investor Relations 
           and Corporate Communications
          414-319-8513

          Financial Relations Board:
          Analyst Contact
          George Zagoudis
          312-640-6663

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