With news from Joy Global, Actuant Corp. and Harley-Davidson
Joy Global grows sales but warns of slowdown
Joy Global Inc. recently reported record sales of $1.0 billion for the fourth quarter, up from $735.9 million in the same period a year ago, but the Milwaukee mining equipment manufacturer warned of a slowdown for 2009.
The company’s net income in the fourth quarter grew to $118.0 million, or $1.11 per share, up from $69.6 million, or 64 cents per share, a year earlier.
For the full year, the company reported net income $374.3 million on sales of $3.4 billion.
"I am extremely pleased with our fourth quarter results. Order rates continued to be strong, indicating our customers’ commitment to the fundamentals for the mining industry," said Mike Sutherlin, president and chief executive officer of Joy Global Inc. "We did an excellent job of translating those orders into record revenues at margins that are at the top of our target range. More importantly, we made substantial progress on working capital, with a reduction in absolute amount from the year-ago period and even greater progress when measured in days of working capital. As a result, we finished 2008 as a stronger, more focused company, and one which is much better prepared to handle the volatility and uncertainty for the year ahead."
The company warned that the global economic slowdown is reducing demand for commodities, forcing prices down and limiting mining company cash flows.
"In addition, we enter our fiscal 2009 with an unprecedented level of volatility and uncertainty. The major economies of the world are expected to continue weakening. Despite the predictability that our backlogs provide, we must also consider this uncertainty as we manage through 2009. Therefore, we have taken steps to restrict increases in headcount, expenses and capital expenditures to ensure we can deliver performance under a wider range of possible outcomes. Although this may limit our ability to grow revenues in 2009, we believe it is a precautionary but appropriate step to take at this time," Sutherlin said.
Detroit’s problems weigh on Johnson Controls
Responding to the rapid decline in global automotive production and uncertain industry conditions, Glendale-based Johnson Controls Inc. has withdrawn its financial guidance.
"Global automotive production is significantly worse than just two months ago," said Johnson Controls chairman and chief executive officer Stephen Roell. "Our customers continue to announce production reductions and plant shut downs on a weekly basis. Every region of the world is down by a double- digit rate, with virtually every automotive customer affected. The ongoing uncertainties and rapid changes in the automotive industry make it difficult to provide meaningful financial guidance for the upcoming year."
On Oct. 14, Johnson Controls issued financial guidance based on 2009 assumptions of 12.3 million vehicles in North America and 21.2 million in Europe. The company’s latest production estimates for 2009 are 9.3 million units in North America and 16.2 million units in Europe.
The company also announced that it expected to report a loss in its 2009 first quarter, which will end on Dec. 31, 2008. The first fiscal quarter is traditionally the company’s weakest and generates the smallest portion of its annual profitability.
The loss in the first quarter will primarily result from the impact of the dramatically lower automotive production levels on the company’s automotive experience business. North American production in the quarter is expected to be 25 percent lower than the year-ago period, while European production is estimated to decline 32 percent.
The company’s power solutions business profitability will be also be negatively impacted by the lower auto production levels as well as lower stocking levels at certain aftermarket customers.
The company said it is continuing to adjust its cost structure and evaluate other cost reduction options. In September, the company announced a restructuring program to improve its cost structure. Under that program, 21 plants will be closed in 2009 in North America and Europe.
The company said it was reducing its 2009 capital expenditure forecast from $975 million to $600 to $650 million.
"Johnson Controls is strong and well-positioned for the future," Roell said. "We have a strong balance sheet and ample liquidity. Our businesses will continue to benefit from their participation in the global growth mega- trends of energy efficiency and sustainability."
Roell added, "We are optimistic about the new U.S. Administration’s infrastructure investment plans which target energy efficiency improvements in federal buildings and schools, two of our building efficiency businesses’ largest markets. This could substantially strengthen the growth opportunities for our company."
Actuant reports ‘challenging’ quarter
Butler-based Actuant Corp. announced fiscal first quarter net income of $11.6 million late last week, or 19 cents per share, which was down from $27.4 million, or 43 cents per share, in the same period a year ago.
The quarterly results include a non-cash impairment charge related to the company’s recreational vehicle product line of $26.6 million, or 26 cents per share.
The manufacturer of highly engineered position and motion control systems and branded hydraulic and electrical tools and supplies reported quarterly net sales of $380.0 million, which was down from $415.1 million a year earlier.
Robert Arzbaecher, chairman and chief executive officer, said, "We experienced a challenging first quarter as the speed and magnitude of declining end market demand was extraordinary. While overall core sales declined 11 percent in the quarter, we did see continued strong performance from our Industrial segment which delivered 12 percent year-over-year core sales improvement. This was driven by the diversity of its end markets and geographies, the maintenance nature of its products and services as well as its strong brands and market positions. We were also pleased with the performance of the recently acquired Cortland business, and the integration activities and financial results are progressing as anticipated."
Distressed Harley-Davidson borrows $500 million
Harley-Davidson Inc. has received $500 million in an advance loan from its lenders, according to a document filed by the company with the U.S. Securities & Exchange Commission.
The Milwaukee-based motorcycle manufacturer’s subsidiaries Harley-Davidson Warehouse Funding Corp. and Harley-Davidson Credit Corp. entered into a loan and servicing agreement with a group of lenders, including JPMorgan Chase Bank NA.
Repayment of the loan will be due March 31, 2009.
Harley (ticker symbol HOG) has $400 million in medium term notes (MTN) that recently matured, according to a research note written by UBS analyst Robert Farley.
"On the back of this announcement it appears the unsecured debt markets may have been too difficult for Harley to access, with this arrangement providing additional time for HOG to complete a deal," Farley wrote.
The company’s Harley-Davidson Financial Services Inc. (HDFS) unit continues to carry some bad debt, Farley wrote.
"It is estimated HDFS will require $1.5 billion to continue funding its loan operations for 2009. HOG is working thru its options for securing this liquidity, but as this transaction may indicate, conditions in the unsecured debt market remain difficult, and this deal only provides $500 millon thru March 31. Recent checks show that HDFS has not pared back its lending to subprime borrowers (25 to 30 percent of loan portfolio)," Farley wrote.
