Joy Global Inc. announces fourth quarter and fiscal 2011 year-end operating results

Fourth Quarter and Full Year Highlights

“Our fourth quarter was a good finish to an exceptional year,” said Mike Sutherlin, President and Chief Executive Officer. “Bookings were strong as our customers continue to move ahead with mine expansion projects. Sales were up almost 18 percent from last year and exceptional operating leverage delivered margins of almost 23 percent, excluding the impact of acquisition related activities.”

“The strong fourth quarter performance enabled us to deliver a record year in most categories. Bookings for the year were up over 40 percent, and allowed us to grow sales by more than 20 percent and still carry strong backlogs into fiscal 2012. Even after funding this strong growth, we generated $500 million in cash from operations in fiscal 2011. Operating margins for the year were 21 percent, including all acquisition costs. In fact, margin improvement was essentially the same with or without the acquisition activity, as LeTourneau’s five months of reported results all but covered the costs related to all three transactions. This demonstrates the continued operational efficiency of our core businesses, and the positive contribution of the LeTourneau loader product line from day one,” said Sutherlin.

Fourth Quarter Operating Results

The 33 percent increase in fourth quarter bookings included $116 million from LeTourneau. Orders for the core Joy underground and P&H surface mining equipment business increased 22 percent over the fourth quarter of last year, with original equipment orders up 25 percent and orders for aftermarket parts and services up 20 percent.

Original equipment orders were up as mining companies continue to increase production at existing mines and bring new mines on line. The increase in aftermarket orders resulted from a larger operating fleet of equipment, increased mining production volume and more difficult mining conditions. The increase in orders is net of a $59 million reduction in fourth quarter orders due to a stronger U.S. dollar than in the fourth quarter of last year.

Orders for underground original equipment exhibited typical lumpiness, with a 24 percent decrease from last year’s fourth quarter, while the increase in orders for underground aftermarket parts and services was unusually strong at 24 percent. The decline in original equipment bookings was almost all attributable to the adjustment of beginning backlog for exchange rate movements. The backlog adjustment was particularly significant due to the large amount of underground backlog currently denominated in Australian dollars. Overall, orders for the Joy underground mining machinery business were reduced by 6 percent due to the unfavorable impact in foreign exchange rates, and were up 3 percent net of these adjustments. Orders for underground original equipment increased in the United States and Eurasia, but were down in Australia, China and South Africa due to the timing of projects. The increase in aftermarket bookings was strongest in China, Eurasia and the United States.

Bookings for the core P&H business, excluding LeTourneau, were up 49 percent from the fourth quarter of last year. This increase was reduced by 6 percent due to unfavorable movement in foreign exchange rates. Although aftermarket orders for surface parts and services were up 16 percent from last year, the majority of the total increase came from surface original equipment, which more than doubled from the prior year. Original equipment orders for surface equipment were broadly disbursed across geographies and commodities, including the United States, Canada, Latin America, China and Russia, for use in coal, copper, oil sands and gold mining operations.

Excluding LeTourneau, net sales for the fourth quarter of fiscal 2011 increased 18 percent to $1.2 billion, while original equipment and aftermarket sales were each up 18 percent over the prior year. Changes in foreign exchange rates increased net sales by $14 million compared to a year ago.

Net sales of underground mining equipment rose 15 percent in the fourth quarter compared to a year ago. Original equipment shipments were up 15 percent and aftermarket shipments were up 16 percent over the prior year fourth quarter. The original equipment sales were driven by higher shipments in Australia, the United States and South Africa. Aftermarket sales were up in all markets.

Net sales of surface mining equipment were up 21 percent in the fourth quarter. Original equipment sales increased 25 percent and aftermarket sales were up 19 percent. The increase in original equipment sales was led by Australia and South America, with aftermarket sales up across all regions.

Excluding the results from the LeTourneau acquisition, the equity earnings associated with the IMM shares owned by the Company, and acquisition transaction costs, operating income was $282 million in the fourth quarter of fiscal 2011, compared to $227 million in the fourth quarter of last year. Return on sales was 22.9 percent in the fourth quarter, compared to 21.6 percent last year, before these items.

The current quarter results include $22.6 million of operating profit from LeTourneau, which was reduced by $3.2 million of ongoing purchase accounting depreciation and amortization. The fourth quarter fiscal 2011 also includes $5.6 million of excess purchase accounting associated with the write-up of the acquired inventory and backlog of LeTourneau, $6.2 million in acquisition costs related primarily to financing transactions associated with the pending purchase of the remaining shares of IMM, and profit of $3.4 million related to the Company’s estimated share of IMM profits for the period the Company owned the shares.

The increase in operating profit before the acquisition activities was due to higher sales volume, a favorable mix of aftermarket sales, price realization and favorable manufacturing overhead absorption. These items were partially offset by an increase in selling, engineering and administrative expenses.

Net interest expense increased to $11 million in the fourth quarter of 2011 from $4 million in the prior year. The increase in interest expense is attributable to incremental borrowings associated with acquisition financing.

The effective income tax rate was 31.7 percent in the fourth quarter of fiscal 2011, compared to 34.1 percent last year. The effective tax rate is net of $2.8 million of discrete tax adjustment charges in the current quarter versus charges of $7 million in the prior year. Excluding these discrete adjustments would result in an effective tax rate of approximately 30.7 percent in the fourth quarter of fiscal 2011 and 31.1 percent in the fourth quarter of the prior year. The decrease is due to a mix of geographic earnings and the implementation of tax planning initiatives.

Income from continuing operations was $195 million, or $1.83 per fully diluted share, in the fourth quarter of fiscal 2011, compared to income from continuing operations of $146 million, or $1.39 per fully diluted share, in the fourth quarter of the prior year. The table above lists the unusual items that affected fourth quarter earnings per share compared to the same quarter last year.

Cash generated from continuing operations was $151 million in the fourth quarter of fiscal 2011, compared to cash generated from continuing operations of $211 million a year ago. The decrease in cash generated from continuing operations was due primarily to an increase in inventories to support planned shipments which was partially offset by an increase in accounts payable.

The Company purchased $236 million in shares of IMM during the fourth quarter of 2011, bringing its total ownership to 28.1 percent. The Company still awaits approval of the Anti-monopoly Bureau of the Ministry of Commerce (“MOFCOM”) of the People’s Republic of China to complete its acquisition of the 41.1 percent of the outstanding shares of IMM from an affiliate of The Jordan Company L.P., after which it will commence a mandatory tender offer for the remaining outstanding shares.

During the fourth quarter, the Company closed the previously announced sale of LeTourneau’s drilling products business to Cameron International Corporation for $375 million, subject to a post closing working capital adjustment.

Capital expenditures were $35 million in the fourth quarter of fiscal 2011, compared to $22 million in the prior year’s fourth quarter.