Bucyrus International, Inc. Q2 2010 Earnings Call Transcript

Bucyrus International, Inc. (BUCY)

Q2 2010 Earnings Call Transcript

July 23, 2010 9:00 am ET

Executives

Shelley Hickman – Director, Global Communications

Tim Sullivan – President and CEO

Craig Mackus – CFO and Secretary

Analysts

Robert Wertheimer – Morgan Stanley

Andrew Kaplowitz – Barclays Capital

Jerry Revich – Goldman Sachs

Charles Brady – BMO Capital

Steve Barger – KeyBanc

Schon Williams – BB&T Capital Markets

Ben Elias – Sterne, Agee

Jason Ho [ph] – Blair Advisors [ph]

Ann Duignan – JP Morgan

Paul Bodnar – Longbow Research

Seth Weber – RBC Capital Markets

Chris Weltzer – Robert W. Baird

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2010 Bucyrus International Incorporated earnings conference call. My name is Glen and I will be your operator for today. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions) I would now like to turn the conference over to your host, Shelley Hickman, Director of Global Communications, with Tim Sullivan, President and CEO, and Craig Mackus, CFO. Please proceed.

Shelley Hickman

Thank you, Glen. Good morning and thank you for joining us for Bucyrus International Incorporated second quarter 2010 earnings release teleconference. In a few moments I’ll turn the conference over to Mr. Tim Sullivan, President and CEO, and Mr. Craig Mackus, Bucyrus’s Chief Financial Officer.

As we begin, I want to remind you that Bucyrus desires to apply the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain statements in this conference call are subject to factors that could cause actual results to differ from those expressed or implied by those statements. For a further description, I refer you to our filings with the SEC. Any forward-looking statements speak only as of today, and there is no obligation to update these statements to reflect future events or circumstances.

Now I’ll turn the call over to Tim.

Tim Sullivan

Good morning, everyone. And as usual, thank you for joining us on this call. We’re struggling here a little bit in Milwaukee this morning. We’ve got two months of rain in one hour yesterday and it is continuing to rain here. So we’re going to make the call quick so we can start building her ark. I’d also like to begin the call today by thanking all of the analysts that attended our session in Pennsylvania on Tuesday. I realize it is a little bit difficult out of your schedules, especially with earnings this week to do that. And hopefully, you found it informational and beneficial to everyone.

I think in summary, very pleased with the quarter. I think all things being equal, we were exactly on our plan and in many respects exceeded it in several areas. I’ll have Craig go through the numbers. As usual, I’ll give a little bit of color to the operating performance, give you some feedback on where we see the market to be and then obviously our projections for the remaining of the year. Craig?

Craig Mackus

Okay. Thanks, Tim. Before we begin, I would like to advise everyone that our financial results for 2010 include the net assets and results of operations of Terex since February 19th, the date of acquisition, as well as the preliminary acquisition accounting adjustments and acquisition costs incurred related to the Terex acquisition. As a result, our financial results for the quarter and six months ended June 30, 2010 are not necessarily comparative to the results of the same period last year or as of December 31, 2009 and may not be indicative of future results.

Sales for the second quarter of 2010, which included $277 million for Terex, were $869 million, an increase of $144 million or 20% compared to the same quarter of 2009. Original equipment sales, which include $133 million for Terex, increased by $69 million or 19% compared to the second quarter of 2009. And aftermarket sales, which included $144 million for Terex, increased by $76 million or 21% compared to the second quarter of 2009.

Sales for the first six months of 2010, which included $369 million for Terex, were $1.5 billion, an increase of $146 million or 11% compared to the first six months of 2009. Original equipment sales, which included $169 million for Terex, were relatively flat compared to the first six months of 2009. And aftermarket sales, which included $200 million for Terex, increased by $137 million or 22% compared to the first six months of 2009.

Non-Terex surface mining original equipment sales for the second quarter and the first six months of 2010 were relatively flat compared to 2009. And underground mining original equipment was down 30% compared to the second quarter of last year and 37% compared to the first six months of 2009. The decrease of underground mining was in all product lines, with the largest change being longwall systems in the Czech Republic.

Non-Terex aftermarket sales were down primarily in the United States and the Eastern European markets and reflects lower mining activity primarily in the United States. Sales were reduced by $12 million for the second quarter of 2010 due to the strengthening of the US dollar.

Gross margins after adjusting for amortization of Terex acquisition accounting adjustments was 30% for the second quarter and first quarter of 2010 compared to 28% for the same period last year. Gross margin in 2010 has been negatively impacted by lower gross margins on the Terex business compared with historical Bucyrus.

This was offset by lower absorption losses at our underground mining manufacturing locations and improved original equipment gross margins in part due to productivity efficiencies and bringing subcontract work back into our manufacturing facilities. There were $17 million of remaining inventory acquisition accounting adjustments remaining. $16 million will be expensed in the third quarter with the remaining $1 million being expensed in the fourth quarter.

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