(Exact Name of Registrant as Specified in Its Charter)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED July 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD from to
Commission File number 1-9299
|
JOY GLOBAL INC. (Exact Name of Registrant as Specified in Its Charter) |
|
Delaware (State of Incorporation) | 39-1566457 (I.R.S. Employer Identification No.) | |
| 100 East Wisconsin Ave, Suite 2780 Milwaukee, Wisconsin 53202 (Address of principal executive offices) (Zip Code) (414) 319-8500 (Registrant’s Telephone Number, Including Area Code) |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ X ] No [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING
FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class
Common Stock, $1 par value | Outstanding at August 20, 2004 51,419,576 shares |
JOY GLOBAL INC.
FORM 10-Q
TABLE OF CONTENTS
July 31, 2004
| PART I. - FINANCIAL INFORMATION | Page No. | |
| Item 1 - Financial Statements (unaudited): | ||
| Condensed Consolidated Statement of Income - Three and Nine Months Ended July 31, 2004 and August 2, 2003 | 3 | |
| Condensed Consolidated Balance Sheet - July 31, 2004 and November 1, 2003 | 4 | |
| Condensed Consolidated Statements of Cash Flows - Nine Months Ended July 31, 2004 and August 2, 2003 | 5 | |
| Notes to Condensed Consolidated Financial Statements | 6 - 23 | |
| Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 - 31 | |
| Item 3 - Quantitative and Qualitative Disclosures About Market Risk | 31 | |
| Item 4 - Controls and Procedures | 31 | |
| PART II. - OTHER INFORMATION | ||
| Item 1 - Legal Proceedings | 32 | |
| Item 2 - Changes in Securities and Use of Proceeds | 32 | |
| Item 3 - Defaults Upon Senior Securities | 32 | |
| Item 4 - Submission of Matters to a Vote of Security Holders | 32 | |
| Item 5 - Other Information - Forward-Looking Statements and Cautionary Factors | 32 - 33 | |
| Item 6 - Exhibits and Reports on Form 8-K | 33 | |
| Signatures | 34 | |
PART I. - FINANCIAL INFORMATION
| Three Months Ended |
Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| July 31, 2004 |
August 2, 2003 |
July 31, 2004 |
August 2, 2003 | |||||||||||
| Net sales | $ | 381,920 | $ | 300,091 | $ | 1,003,288 | $ | 838,140 | ||||||
| Costs and expenses: | ||||||||||||||
| Cost of sales | 282,063 | 224,810 | 742,523 | 637,802 | ||||||||||
| Product development, selling | ||||||||||||||
| and administrative expenses | 70,575 | 59,776 | 202,763 | 175,484 | ||||||||||
| Restructuring charges | 102 | 1,044 | 604 | 3,212 | ||||||||||
| Other income | (735 | ) | (1,406 | ) | (2,730 | ) | (1,996 | ) | ||||||
| Operating income | 29,915 | 15,867 | 60,128 | 23,638 | ||||||||||
| Interest expense, net | 5,022 | 5,390 | 15,056 | 16,895 | ||||||||||
| Loss on early retirement of debt | -- | 261 | -- | 261 | ||||||||||
| Income before reorganization items | 24,893 | 10,216 | 45,072 | 6,482 | ||||||||||
| Reorganization items - (income) expense | (737 | ) | 450 | (2,386 | ) | 546 | ||||||||
| Income before income taxes | 25,630 | 9,766 | 47,458 | 5,936 | ||||||||||
| Provision for income taxes | 9,375 | 3,225 | 11,425 | 2,525 | ||||||||||
| Net income | $ | 16,255 | $ | 6,541 | $ | 36,033 | $ | 3,411 | ||||||
| Net income per share: | ||||||||||||||
| Basic | $ | 0.31 | $ | 0.13 | $ | 0.70 | $ | 0.07 | ||||||
| Diluted | $ | 0.30 | $ | 0.13 | $ | 0.68 | $ | 0.07 | ||||||
| Dividends per share | $ | 0.075 | $ | -- | $ | 0.20 | $ | -- | ||||||
| Weighted average shares outstanding: | ||||||||||||||
| Basic | 52,400 | 50,229 | 51,844 | 50,229 | ||||||||||
| Diluted | 53,936 | 50,588 | 53,321 | 50,393 | ||||||||||
See accompanying notes to condensed consolidated financial statements
JOY GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In
thousands)
| July 31, 2004 |
November 1, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 169,876 | $ | 148,505 | ||||
| Accounts receivable, net | 227,726 | 193,882 | ||||||
| Inventories, net | 426,005 | 382,929 | ||||||
| Other current assets | 44,174 | 51,251 | ||||||
| Total current assets | 867,781 | 776,567 | ||||||
Property, plant and equipment, net | 208,954 | 226,101 | ||||||
| Intangible assets, net | 73,573 | 77,709 | ||||||
| Deferred income taxes | 147,233 | 136,192 | ||||||
| Other assets | 67,063 | 70,160 | ||||||
| Total assets | $ | 1,364,604 | $ | 1,286,729 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Short-term notes payable, including current portion | ||||||||
| of long-term debt | $ | 4,297 | $ | 4,767 | ||||
| Trade accounts payable | 105,842 | 89,136 | ||||||
| Income taxes payable | 29,874 | 26,097 | ||||||
| Other accrued liabilities | 271,645 | 205,706 | ||||||
| Total current liabilities | 411,658 | 325,706 | ||||||
Long-term debt | 202,601 | 202,912 | ||||||
| Accrued pension costs | 238,956 | 313,214 | ||||||
| Other | 73,164 | 74,624 | ||||||
| Total liabilities | 926,379 | 916,456 | ||||||
| Shareholders' equity | 438,225 | 370,273 | ||||||
| Total liabilities and shareholders' equity | $ | 1,364,604 | $ | 1,286,729 | ||||
See accompanying notes to condensed consolidated financial statements
JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In
thousands)
| Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| July 31, 2004 |
August 2, 2003 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 36,033 | $ | 3,411 | ||||
| Non-cash items: | ||||||||
| Depreciation and amortization | 34,958 | 39,321 | ||||||
| Amortization of financing fees | 2,756 | 2,659 | ||||||
| Loss on debt extinguishment | -- | 261 | ||||||
| Increase (decrease) in deferred income taxes, net | ||||||||
| of change in valuation allowance | (10,553 | ) | (7,390 | ) | ||||
| Change in long-term accrued pension costs | 11,289 | 934 | ||||||
| Other, net | 1,384 | 2,928 | ||||||
| Contributions to U.S. qualified pension plans | (88,000 | ) | (47,086 | ) | ||||
| Changes in Working Capital Items: | ||||||||
| (Increase) decrease in restricted cash | -- | 253 | ||||||
| (Increase) decrease in accounts receivable, net | (29,577 | ) | 10,081 | |||||
| (Increase) decrease in inventories | (36,678 | ) | 6,406 | |||||
| (Increase) decrease in other current assets | 7,116 | 4,257 | ||||||
| Increase (decrease) in trade accounts payable | 14,157 | 5,862 | ||||||
| Increase (decrease) in employee compensation and benefits | 7,483 | 13,941 | ||||||
| Increase (decrease) in advance payments and progress billings | 44,641 | 28,129 | ||||||
| Increase (decrease) in other accrued liabilities | 6,215 | (15,339 | ) | |||||
| Net cash provided by operating activities | 1,224 | 48,628 | ||||||
| Cash flows from investing activities: | ||||||||
| Property, plant and equipment acquired | (10,976 | ) | (17,368 | ) | ||||
| Proceeds from sale of property, plant and equipment | 1,746 | 1,904 | ||||||
| Purchase of equity interest in subsidiary | -- | (12,316 | ) | |||||
| Other, net | 5,015 | 2,814 | ||||||
| Net cash used by investing activities | (4,215 | ) | (24,966 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Exercise of stock options | 33,356 | 34 | ||||||
| Dividends paid | (10,147 | ) | -- | |||||
| Repayment of long-term obligations | (1,047 | ) | (12,962 | ) | ||||
| Financing fees | (1,000 | ) | (250 | ) | ||||
| Increase in short-term notes payable | 50 | 1,159 | ||||||
| Net cash provided (used) by financing activities | 21,212 | (12,019 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | 3,150 | 7,887 | ||||||
| Increase in Cash and Cash Equivalents | 21,371 | 19,530 | ||||||
| Cash and Cash Equivalents at Beginning of Period | 148,505 | 70,906 | ||||||
| Cash and Cash Equivalents at End of Period | $ | 169,876 | $ | 90,436 | ||||
See accompanying notes to condensed consolidated financial statements
JOY GLOBAL INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2004
(Unaudited)
| Joy Global Inc. manufactures and markets products classified into two business segments: underground mining machinery (Joy Mining Machinery or “Joy”) and surface mining equipment (P&H Mining Equipment or “P&H”). Joy is a major manufacturer of underground mining equipment for the extraction of coal and other bedded minerals and offers comprehensive service locations near major mining regions worldwide. P&H is a major producer of surface mining equipment for the extraction of ores and minerals and provides extensive operational support for many types of equipment used in surface mining. |
| The Condensed Consolidated Financial Statements presented in this quarterly report on Form 10-Q are unaudited and have been prepared by us in accordance with accounting principles generally accepted in the United States for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. |
| In our opinion, all adjustments necessary for the fair presentation on a going concern basis of the results of operations, cash flows and financial position for all periods presented have been made. All adjustments made are of a normal recurring nature. |
| These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended November 1, 2003. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. |
| The preparation of the financial statements in conformity with generally accepted accounting principles for interim financial information requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts could differ from the estimates. |
| On January 23, 2004, we entered into a second amended and restated credit agreement (“Credit Agreement”) which consists of a $200 million revolving credit facilty maturing on October 15, 2008. Substantially all of our assets and our domestic subsidiaries’assets, other than real estate, are pledged as collateral under the Credit Agreement. Outstanding borrowings bear interest equal to either LIBOR plus the applicable margin (3.25% to 2.00%) or the Base Rate (defined as the higher of the Prime Rate or the Federal Funds Effective Rate plus 0.50%) plus the applicable margin (2.25% to 1.00%) at our option depending on certain of our financial ratios. We pay a commitment fee ranging from 0.50% to 0.75% on the unused portion of the revolving credit facility. In 2002, we issued $200 million in 8.75% Senior Subordinated Notes due March 15, 2012. |
| Both the Credit Agreement and Senior Subordinated Note Indenture contain restrictions and financial covenants relating to, among other things, minimum financial performance and limitations on the incurrence of additional indebtedness, liens, asset sales, and capital expenditures. The covenants in the Senior Subordinated Note Indenture are generally less restrictive than the covenants in the Credit Agreement. Interest coverage, leverage and fixed charge coverage covenants in the Credit Agreement generally become more restrictive over the term of the agreement. At July 31, 2004, we were in compliance with financial covenants in the Credit Agreement and the Indenture. |
| At July 31, 2004, there were no outstanding borrowings under the Credit Agreement. Outstanding letters of credit issued under the Credit Agreement, which count toward the $200 million credit limit, totaled $70.4 million. The amount available for borrowings under the Credit Agreement is also limited by a borrowing base calculation. At July 31, 2004, there was $129.6 million available for borrowings under the Credit Agreement. |
| We have 150,000,000 shares of authorized common stock, par value $1.00 per share, 50,000,000 of which will ultimately be distributed in connection with our July 12, 2001 (“Effective Date”) emergence from bankruptcy and are deemed outstanding for accounting purposes at the Effective Date. Under our Plan of Reorganization (“POR”), the 50,000,000 shares are being distributed to holders of allowed claims in the bankruptcy case. As of July 31, 2004, total distributions under the POR were 48,766,577 shares. The remaining 1,233,423 shares are held in a disputed claims equity reserve and will be distributed in accordance with the POR as the two remaining bankruptcy related claims are finally resolved. |
| Our stock incentive plan authorizes the grant of up to 8,056,000 stock options, performance units, restricted stock units and other stock-based awards to officers, employees and directors. As of July 31, 2004, stock option grants aggregating approximately 5.1 million shares of common stock had been made to approximately 250 individuals. Options to purchase 15,000 shares have also been granted to each of our six outside directors. On February 25, 2003, and February 24, 2004, restricted stock unit grants of 5,582 and 2,159, respectively, were made to each of our six outside directors. These restricted stock units vest one year after the grant date and provide that a number of shares of common stock equal to the number of vested units will be delivered one year after the director’s service on the board terminates. On January 21, 2004, grants of 47,465 restricted stock units were made to certain executive officers and key employees. These restricted stock units vest over a five-year period with one-third vesting on the third, fourth and fifth anniversaries of the grant date and provide that a number of shares of common stock equal to the number of vested units will be delivered to the individual as the units vest. Individuals are credited with additional units to reflect cash dividends paid on the underlying common stock. In the event of a change in control, the units will be paid out in cash based on the market price of the common stock as of the date of the change in control. |
| The 2001, 2003 and 2004 Performance Unit Award Programs under our stock incentive plan provide long-term incentive compensation opportunities to certain senior executives. Up to approximately 818,000 shares of common stock may be earned by the senior executives under the 2001, 2003 and 2004 Performance Unit Award Programs if, at the end of a three and one quarter year award cycle, for the 2001 Performance Unit Awards, or at the end of a three year award cycle, for the 2003 and 2004 Performance Unit Awards, cumulative net cash flow, as defined in the performance award agreements, exceeds certain threshold amounts. Each performance unit represents the right to earn one share of common stock. Awards can range from 0% to 150% of the target award opportunities and may be paid out in stock, cash or a combination of stock and cash. In the event of a change in control, the performance units are paid out in cash based on the greater of actual performance or target award. |
| As of July 31, 2004, awards under the stock incentive plan, were accounted for under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. The following table illustrates the effect on net income and net income per share if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation. |
| Three Months Ended |
Nine Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In thousands except per share data |
July 31, 2004 |
August 2, 2003 |
July 31, 2004 |
August 2, 2003 | ||||||||||
| Net income, as reported | $ | 16,255 | $ | 6,541 | $ | 36,033 | $ | 3,411 | ||||||
| Add: | ||||||||||||||
| Compensation expense included | ||||||||||||||
| in reported net income, net of | ||||||||||||||
| related tax effect | 2,170 | 481 | 4,405 | 1,424 | ||||||||||
| Deduct: | ||||||||||||||
| Compensation expense determined | ||||||||||||||
| under SFAS No. 123, net of related taxes | (2,835 | ) | (1,979 | ) | (7,964 | ) | (6,621 | ) | ||||||