Joy Global Inc (JOYG)
Q4 2008 Earnings Call Transcript
December 17, 2008 11:00 a.m. ET

Executives

Sara Leuchter Wilkins - Vice President, Investor Relations and Corporate Communications
Michael Olsen - Executive Vice President, Chief Financial Officer and Treasurer
Michael Sutherlin - President and Chief Executive Officer

Analysts

Michael W. Gallo - C. L. King & Associates
Ann Duignan – J.P. Morgan
Andrew Kaplowitz - Barclays Capital
Charles Brady - BMO Capital Markets
Alex Blanton - Ingalls & Snyder LLC
Mark Koznarek - Cleveland Research Company
Henry Kirn – UBS
Seth Weber - Bank of America Securities
Jerry Revich - Goldman Sachs
Paul Bodnar - Longbow Research
Chris Weltzer - Robert W. Baird & Co.
Joe Bach - Keybanc Capital Markets
Alex – Buckingham Research Group
Barry Bannister - Stifel Nicolaus

Presentation

Operator

Good afternoon, my name is Suzette and I will be your conference operator today. At this time, I would like to welcome everyone to the Joy Global fourth quarter 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press “*” then the number “1” on your telephone keypad. If you would like to withdraw your question, press the “#” key. Thank you. I would now like to turn the call over to Miss Sara Wilkins, VP of Investor Relations and Corporate Communications. Ms.Wilkins, you may begin your conference

Sara Leuchter Wilkins

Thank you Suzette. 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 today’s call are Mike Sutherlin, President and Chief Executive Officer of Joy Global; Mike Olsen, our newly appointed Executive Vice President, Chief Financial Officer and Treasurer; Sean Major, our General Counsel and Secretary and Gene Furman, our Corporate Controller.

This morning, Mike Olsen will begin with some brief comments which expand upon our press release and which provide the results of the fourth quarter and 2008 fiscal year. Mike Sutherlin will then provide his insights into our operations and our market outlook. We will then conduct a question-and-answer session and would appreciate it if you would limit yourself to one question and one follow-up before going back into the queue. This will allow us to accommodate as many questioners as possible.

During the call today our executives 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 for other investor information we refer you to our website at www.joyglobal.com.

Now I would like to turn the call over to Mike Olsen. Please go ahead Mike.

Michael Olsen

Thank you Sara. Let’s take a minute and review some of the highlights from our 2008 fiscal year and the fourth quarter in particular.

Bookings for the 2008 fiscal year totaled $4.8 billion compared to $2.9 billion in 2007. Of the $1.9 billion increase in new orders in 2008, $273 million resulted from the acquisition of the conveyor business of Continental Global Group. Excluding the Continental new orders bookings increased by 57% in 2008 with a 52% and 63% increase in new orders for the underground mining equipment business and surface mining equipment business respectively. For both the underground and surface mining equipment businesses the increase in bookings were led by significant original equipment orders, but also both businesses reported double-digit increases for after market orders as well.

Net sales in 2008 increased to $3.4 billion from $2.5 billion in 2007. The Continental acquisition contributed $251 million of this $900 million increase. Excluding the Continental sales, net sales increased 24% in 2008, with the underground equipment business increasing 22%, while the surface mining equipment business increased 27%. Both businesses reported increases in original equipment net sales in the mid-30% range with after market net sales increases of 22% and 12% for the surface and underground mining equipment businesses respectively.

Operating income increased from $473 million in 2007 to $551 million in 2008, which included a $23 million charge for a cancellation of a surface mining equipment repair and maintenance contract and $20 million of purchase accounting charges associated with the Continental acquisition. After these purchase accounting charges Continental contributed $10 million of operating profit during approximately eight months of the 2008 fiscal year.

Fully diluted earnings per share were $3.45 in 2008 and $2.51 in 2007. The effective tax rates were 29.2% in 2008 which benefited by discreet tax adjustment and 37.7% in 2007 which were adversely affected by discreet tax adjustment. Additionally, cash generated by operations increased from $382 million in the 2007 fiscal year to $577 million in the 2008 fiscal year. A substantial portion of the increase in cash flow was a result of the effective management of working capital during the year.

Now let’s turn to the fourth quarter.