Joy Global Inc. Announces Operating Results for Second Quarter of Fiscal Year 2005 (2005-6-2)
Joy Global Inc., a worldwide leader in high-productivity mining solutions, reported results for the second quarter of fiscal year 2005. Net sales increased by 43 percent to $482 million, compared to $338 million in the second quarter of last year. Operating income totaled $65 million in the second quarter, versus $22 million in the corresponding quarter last year. Net income amounted to $39 million or $0.47 per fully-diluted share in the quarter, compared with $19 million or $0.23 fully-diluted share in the second quarter of fiscal 2004. Earnings per share in the second quarter of fiscal 2004 were favorably impacted by an $0.08 per share income tax adjustment. All per share data reflects the 3-for-2 stock split of the company\’s common stock in January 2005.
Results of Operations
"We continue to be pleased with the strong results achieved by our businesses," commented John Hanson, chairman, president and CEO of Joy Global Inc. "New orders exceeded $500 million for the first time in the second quarter last year, and yet grew by 17 percent in the current quarter of $591 million. Joy Mining enjoyed particularly healthy bookings in the quarter, with new orders increasing 32 percent to $320 million. Our incremental profit margins of almost 30 percent were driven by restructuring savings, aggressive control of costs, continuing process improvements, recovery of material cost increases and positive manufacturing cost absorption. Given our solid operating performance, we are pleased to have been able to implement severawl initiatives aimed at enhancing shareholder returns, including three divident increases during the past five quarters, and today\’s $300 million stock repurchase announcement."
Aftermarket order strength continued in the second quarter, with replacement parts a significant contributor to the increase. The percentage increases in original equipment and aftermarket bookings were relatively equal. Several mining shovel orders and significant underground continuous miner orders positively impacted original equipment bookings.
Total revenues in the second quarter increased by 43 percent. Net sales at Joy Mining were very strong fro teh second consecutive quarter, up 47 percent over sales in the corresponding quarter of the prior year. Aftermarket revenues were up 19 percent over the second quarter last year, with strong shipments of replacement parts occurring in both businesses. Original equipment revenues increased over 100 percent in the second quarter due to higher production levels at both Joy Mining and P&H Mining. Hanson added, "Maintaining high percentage revenue growth will become increasingly difficult in subsequent quarters. However, contributions from the emerging markets, particularly China and Russia, should continue to grow. Revenues from these markets for the first half of fiscal 2005 already exceeded those for all of fiscal 2004."
Gross profit margins also improved in the quarter to 29 percent of sales, compared to the 27 percent achieved in the second quarter of fiscal 2004. This was primarily due to favorable margins in some product lines, the control of manufacturing spending and increased factory absorption from higher production levels. Constraints in the supply chain contribute to exist along with higher prices for many purchased items. However, both operations continue to successfully mitigate the impact of increased steel and steel-related costs through both cost reductions and price realization. Nonetheless, management does not anticipate a continuation in the rate of improvement in gross profit margins experienced in the last two quarters. The anticipated product and margin mix in the second half of fiscal 2005 and higher comparable results in the second half of fiscal 2004 make it more difficult to achieve improvements. Product development, selling and administative expenses totaled $75 million, or 16 percent of sales in the current quarter, as compared to $69 million, or 21 percent of sales in the comparable quarter of fiscal 2004. The increase in dollar amount was due to increased legal costs, foreign pension costs and other items.
Reported results in the second quarter of both the current and prior year were affected by selected non-recurring items, including debt repurchase premiums, reorganization gains, and an income tax adjustment. Results in 2004 were impacted by reorganization income in the quarter and positive income tax adjustments. Combined, these two items increased prior year\’s quarterly EPS by approximately $0.10 per share. In the current year\’s quarter, additional reorganization income was essentially offset by the loss on debt repurchases in the quarter. The effective income tax rate in the current quarter was 37 percent of pre-tax book income compared with a rate of 8 percent in the corresponding quarter last year. Seconed quarter fiscal 2004 taxes included a $6.3 million positive adjustment related to taxes on repatriation of foreign earnings. Cash taxes continue to be substantially lower than book taxes, with total cash taxes in the second quarter of $10 million, or less than 17 percent of pre-tax income.
(Source: yahoo.com)
