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Joy Global Inc. Announces Fourth Quarter Fiscal 2013 Operating Results

MILWAUKEE--(BUSINESS WIRE)-- Joy Global Inc. (NYSE: JOY), a worldwide leader in high-productivity mining solutions, today reported fourth quarter and fiscal 2013 results.

Fourth Quarter Highlights

Fourth Quarter and Full Year Operating Results

"This quarter once again demonstrates outstanding execution in a difficult market," said Mike Sutherlin, President and Chief Executive Officer. "We were very encouraged by the sequential recovery of aftermarket orders. This puts us almost back to the levels of a year ago, even though some regions are still lagging. It was especially good to see the return of machine rebuilds to the U.S. underground business, which is an important step in the recovery of this market segment.

"As lead times come down, the historical lumpiness has returned to our order rates. The third and fourth quarter bookings bound a range that we expect to continue in 2014. Although we booked a major longwall project this quarter as expected, there are fewer other projects moving forward which meet today's stringent criteria of operating on the lower half of the global cost curve.

"With a limited number of projects that can book in time to help 2014, we continue to see both the need and opportunity to lower the cost base in our business. Much of the costs we have taken out so far are structural reductions coming from our Operational Excellence program and One Joy Global initiative, and this will improve our leverage on market recovery. We have made substantial progress in streamlining our businesses and regions, and are now taking the next step of consolidating our surface and underground businesses and products under the Joy Global brand. Although the reduced value of the separate brands results in a non-cash charge, this is an important step that will continue to make us more efficient, responsive and competitive."

           
Bookings - (in millions)
Quarter Ended
October 25, October 26, %
2013 2012 Change
Segment:
Underground Mining Machinery $ 629.6 $ 667.3 (5.7 )%
Surface Mining Equipment 475.1 694.5 (31.6 )%
Eliminations   (28.6 )   (40.1 )  
Total Bookings by Segment $ 1,076.1   $ 1,321.7   (18.6 )%
 
Product:
Aftermarket $ 711.5 $ 733.9 (3.1 )%
Original Equipment   364.6     587.8   (38.0 )%
Total Bookings by Product $ 1,076.1   $ 1,321.7   (18.6 )%
 

Total bookings decreased 19 percent from last year to $1.1 billion in the fourth quarter of fiscal 2013. Original equipment orders decreased 38 percent while aftermarket orders declined 3 percent when compared to the prior year period. The current quarter bookings were reduced by $22.4 million for the impact of foreign exchange, with original equipment and aftermarket bookings reduced by $2.9 million and $19.5 million, respectively. When adjusted for foreign exchange, current quarter bookings were down 17 percent from the same period last year with original equipment orders down 37 percent and aftermarket orders flat. On a sequential basis, current year fourth quarter aftermarket and original equipment bookings increased 19 percent and 279 percent, respectively.

Bookings for underground mining machinery decreased 6 percent in comparison to last year's fourth quarter. Original equipment orders decreased 11 percent compared to the fourth quarter of last year, with declines in all regions except Australia in which a longwall system was booked in the current quarter. Aftermarket orders decreased 1 percent, led by strong orders for rebuilds in North America offset by declines in China and Eurasia. Orders for underground mining machinery were reduced by $18.7 million or 3 percent for the impact of foreign exchange compared to the fourth quarter of last year.

Bookings for surface mining equipment were down 32 percent. Original equipment orders were down 62 percent from the fourth quarter of last year, while aftermarket bookings decreased 5 percent. Original equipment orders were down in all regions except Eurasia. Aftermarket orders increased in South America and Eurasia but were more than offset by declines in all other regions. Current quarter surface orders for original equipment and aftermarket were negatively impacted by foreign exchange of $3.7 million or 1 percent.

Backlog at the end of the fourth quarter was $1.5 billion compared to $1.6 billion at the beginning of the fourth quarter.

           
Net Sales - (in millions)
Quarter Ended
October 25, October 26, %
2013 2012 Change
 
Underground Mining Machinery $ 696.3 $ 827.5 (15.9 )%
Surface Mining Equipment 535.5 837.3 (36.0 )%
Eliminations   (50.0 )   (69.9 )  
 
Total Net Sales $ 1,181.8   $ 1,594.9   (25.9 )%
 

Net sales decreased 26 percent from a year ago to $1.2 billion in the fourth quarter. Original equipment sales decreased 38 percent and aftermarket sales decreased 14 percent compared to the prior year period. Changes in foreign exchange rates decreased net sales by $43 million or 3 percent in the fourth quarter compared to the year ago period. On a sequential basis, current year fourth quarter net sales for aftermarket and original equipment decreased 3 percent and 19 percent, respectively.

Net sales of underground mining machinery declined 16 percent in the fourth quarter compared to a year ago. Original equipment sales decreased 17 percent and aftermarket sales declined 14 percent from the prior fourth quarter. Original equipment sales were stronger in Eurasia and Africa but were more than offset by declines in all other regions compared to the year ago period. The aftermarket sales decline was primarily due to weak sales in China compared to record sales in China in the prior year fourth quarter. Eurasia and Australia were the only regions which showed aftermarket growth from the prior fourth quarter.

Net sales of surface mining equipment were 36 percent lower than the same period last year. Original equipment sales decreased 58 percent while aftermarket sales decreased 13 percent. Original equipment sales increases in Africa were more than offset by declines in all other regions compared to the fourth quarter of 2012. Aftermarket growth in South America and Eurasia was more than offset by lower aftermarket sales in all other regions compared to the prior year.

 
Operating Profit - (in millions)
      Quarter Ended          
October 25,     October 26, Return on Sales
2013 2012 2013 2012
 
Underground Mining Machinery $ 121.1 $ 180.8 17.4 % 21.8 %
Surface Mining Equipment 99.1 198.1 18.5 % 23.7 %
Corporate Expenses (14.1 ) (14.9 )
Eliminations   (13.4 )   (15.3 )    
Subtotal, Before Unusual Items 192.7 348.7 16.3 % 21.9 %
 
Restructuring charges (18.5 ) (9.5 )
Excess purchase accounting - (2.0 )
Pension related items - (11.4 )
Acquisition settlement 13.5 -
Legal settlement 15.0 -
Trade name impairment (155.2 ) -
Acquisition costs   -     0.1      
 
Total Operating Profit $ 47.5   $ 325.9   4.0 % 20.4 %
 

Operating profit for the fourth quarter of fiscal 2013 totaled $47.5 million compared to $325.9 million in the fourth quarter of fiscal 2012. Excluding the unusual items listed in the table above, operating profit totaled $192.7 million in the current fourth quarter compared to $348.7 million in the prior period and return on sales before unusual items was 16.3 percent in the current quarter compared to 21.9 percent in the fourth quarter of 2012. The decrease in operating profit, before unusual items, was due to lower sales volumes, unfavorable product mix and lower manufacturing cost absorption, partially offset by reduced product development, selling and administrative costs.

In the fourth quarter of fiscal 2013, the company reviewed its brand portfolio and developed a strategy to increase the visibility of its core brands in furtherance of the One Joy Global initiative. During this review the company determined that the indefinite life assumption was no longer appropriate for most of its previously acquired trademarks. As a result, a non-cash impairment charge of $155.2 million was recorded in the fourth quarter of fiscal 2013, of which $130.2 million was recorded by the underground mining machinery segment and $25.0 million was recorded by the surface mining equipment segment.

Other income in the fourth quarter of fiscal 2013 also included $28 million for the successful settlement of two legal claims.

 

Earnings Per Share Reconciliation

 
     
Quarter Ended
October 25, 2013     October 26, 2012
Dollars     Fully     Dollars     Fully

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