UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 13, 1995
- ----------------------------------------------------------------
Date of Report (Date of earliest event reported)
Harnischfeger Industries, Inc.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9299 39-1566457
- -----------------------------------------------------------------
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.
incorporation)
13400 Bishops Lane, Brookfield, Wisconsin 53005
- -----------------------------------------------------------------
(Address of principal executive offices)
(414) 671-4400
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
- -----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On November 29, 1994, Harnischfeger Industries, Inc. (the
"Company") completed its previously announced acquisition of Joy
Technologies Inc. through a stock-for-stock merger. Included in
this Form 8-K are restated financial statements prepared in
accordance with Regulation S-X for this business combination
accounted for as a pooling of interests subsequent to the fiscal
year ended October 31, 1994, as required by Item 11(b)(iii) of Form
S-3.
<PAGE>
Form 8-K
Index To
Current Report on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
Report of Price Waterhouse LLP
Report of Arthur Andersen LLP
Statement of Income for the years ended October 31,
1994, 1993 and 1992.
Balance Sheet at October 31, 1994 and 1993.
Statement of Cash Flows for the years ended
October 31, 1994, 1993 and 1992.
Statement of Shareholders' Equity for the years
ended October 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements
Financial Statement Schedules
For the Years Ended October 31, 1994, 1993 and 1992:
II. Valuation and Qualifying Accounts
(2) Exhibits
23(a) Consent of Price Waterhouse LLP
23(b) Consent of Arthur Andersen LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of
Harnischfeger Industries, Inc.
In our opinion, based upon our audits and the report of other
auditors, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the
financial position of Harnischfeger Industries, Inc. and its
subsidiaries (the "Company") at October 31, 1994 and 1993, and
the results of their operations and their cash flows for each of
the three years in the period ended October 31, 1994, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the
consolidated financial statements of Joy Technologies Inc.
("Joy"), which statements reflect total assets of $543.1 million
and $537.0 million at February 25, 1994 and February 26, 1993,
respectively, and total revenues of $572.7 million, $583.3
million and $614.5 million for the years ended February 25, 1994,
February 26, 1993 and February 28, 1992, respectively. Those
statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Joy
Technologies Inc., is based solely on the report of the other
auditors. We conducted our audits of these statements in
accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable
basis for the opinion expressed above.
As discussed in Note 9, in the first quarter of fiscal 1994, the
Company changed its method of accounting for postretirement
benefits other than pensions.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 5, 1994
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
Joy Technologies Inc.:
We have audited the consolidated balance sheet of Joy
Technologies Inc. (a Delaware corporation) and subsidiaries as of
February 25, 1994 and February 26, 1993, and the related
consolidated statements of income, accumulated deficit and cash
flows for each of the three years in the period ended February
25, 1994. These financial statements (not included herein) are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Joy Technologies Inc. and subsidiaries as of February
25, 1994 and February 26, 1993 and the results of their
operations and their cash flows for each of the three years in
the period ended February 25, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements,
the Company changed its method of accounting for postretirement
benefits other than pensions.
ARTHUR ANDERSEN & CO.
Pittsburgh, Pennsylvania
March 25, 1994
<TABLE>
Statement of Income
Year Ended October 31,(Dollar amounts in thousands except
per share amounts)
<CAPTION>
Years ended October 31,
-----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Net sales $1,682,742 $1,570,320 $1,750,132
Other income 29,906 10,248 20,214
--------- --------- ---------
1,712,648 1,580,568 1,770,346
Cost of Sales 1,307,542 1,224,351 1,300,594
Product Development, Selling
and Administrative Expenses 307,691 299,906 298,647
Restructuring Charges 1,830 67,348 -
Nonrecurring Charge - 8,000 -
--------- --------- ---------
Operating Income (Loss) 95,585 (19,037) 171,105
Interest (Expense)-Net (47,366) (48,313) (53,216)
--------- --------- ---------
Income (Loss) before
Provision (Credit) for
Income Taxes and Minority
Interest 48,219 (67,350) 117,889
Provision (Credit) for Income
Taxes 12,377 (23,008) 44,669
--------- --------- ---------
35,842 (44,342) 73,220
Minority Interest (2,224) 4,799 (9,277)
--------- --------- ---------
Income (Loss) from Continuing
Operations 33,618 (39,543) 63,943
Income (Loss) from Discontinued
Operations, net of applicable
income taxes (1,007) 3,680 5,686
Gain (Loss) on Sale of Discontinued
Operations, net of applicable
income taxes - 16,173 -
Extraordinary Loss on Retirement of
Debt, net of applicable
income taxes (4,827) - (22,816)
Cumulative Effect of Accounting Change,
net of applicable income taxes and
minority interest (81,696) - -
--------- -------- --------
Net Income (Loss) $(53,912) $(19,690) $46,813
Prefered stock dividend
requirements - - (10,866)
--------- -------- --------
Net Income (Loss)applicable to
common stock $(53,912) $(19,690) $35,947
========= ======== ========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $ 0.77 $(0.89) $1.26
Income (loss) from discontinued
operations (0.02) 0.08 0.14
Gain on sale of discontinued
operation - 0.37 -
Extraordinary loss on retirement of
debt (0.11) - (0.54)
Cumulative effect of accounting
change (1.87) - -
------- ------ ------
Net Income (Loss)Per Share $(1.23) $(0.44) $ 0.86
======== ======== ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements
<TABLE>
Balance Sheet
October 31,(Dollar amounts in thousands)
<CAPTION>
October 31,
---------------------------
1994 1993
---------- ----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 196,455 $ 165,074
Accounts receivable-net 421,871 387,948
Inventories 357,847 370,287
Net current assets of discontinued operations 20,047 -
Other current assets 47,181 59,729
--------- ---------
1,043,401 983,038
Property, Plant and Equipment:
Land and improvements 31,999 29,452
Buildings 235,708 230,901
Machinery and equipment 633,975 620,996
--------- --------
901,682 881,349
Accumulated depreciation (411,445) (375,937)
--------- ---------
490,237 505,412
Investments and Other Assets:
Investment in Measurex Corporation 66,347 66,563
Goodwill 143,899 177,760
Intangible assets 69,729 64,369
Other assets 125,089 111,108
Noncurrent assets of discontinued operations 43,251 -
--------- ---------
448,315 419,800
--------- ---------
$1,981,953 $1,908,250
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current portion of
long-term obligations $ 16,540 $ 98,855
Trade accounts payable 237,618 166,235
Employee compensation and benefits 75,679 68,892
Advance payments and progress billings 121,212 68,739
Accrued warranties 33,529 37,998
Other current liabilities 127,498 167,083
--------- ---------
612,076 607,802
Long-term Obligations 568,933 528,739
Other Liabilities:
Liability for postretirement benefits 118,610 -
Accrued pension and related costs 55,409 50,101
Other liabilities 18,239 20,409
Deferred income taxes 20,751 100,920
--------- ---------
213,009 171,430
Minority Interest 85,570 89,110
Shareholders' Equity:
Common stock (issued 50,506,471 shares and
50,574,958 shares, respectively) 50,506 50,575
Capital in excess of par value 576,886 560,178
Retained earnings 19,936 85,227
Cumulative translation adjustments (39,194) (40,566)
--------- --------
608,134 655,414
Less: Stock Employee Compensation Trust
(2,150,416 shares and 2,526,553
shares, respectively) at market (53,760) (55,900)
Treasury Stock (2,852,604 shares
and 4,847,729 shares,
respectively) at cost (52,009) (88,345)
--------- ---------
502,365 511,169
--------- ----------
$1,981,953 $1,908,250
========== ==========
<TABLE/>
The Accompanying Notes are an Integral Part of the Financial Statements.
</TABLE>
<TABLE>
Statement of Cash Flows
Year Ended October 31,(Dollar amounts in thousands)
<CAPTION>
Years ended October 31,
------------------------------
1994
---------
<S> <C>
Operating Activities
Net income (loss) $(53,912)
Add(deduct)-Items not affecting cash:
Restructuring charges 1,830
Nonrecurring charge -
Extraordinary loss on retirement of debt,
net of income taxes 4,827
Cumulative effect of accounting change, net of
income taxes and minority interest 81,696
Gain on sale of discontinued operation -
Depreciation and amortization 73,243
Minority interest, net of dividends paid 571
Deferred income taxes-net (12,743)
Other-net (15,042)
Changes in working capital
(Increase) decrease in accounts receivable-net (18,009)
(Increase) decrease in inventories 21,126
(Increase) in net current assets of discontinued
operations (20,047)
(Increase) decrease in other current assets (4,610)
Increase (decrease) in trade accounts payable 54,187
(Decrease) in employee compensation and benefits (6,420)
Increase (decrease) in advance payments and
progress billings 45,870
(Decrease) in other current liabilities (36,043)
--------
Net cash provided by
operating activities 116,524
--------
Investment and Other Transactions
Acquisition of Morris Mechanical Handling Limited (24,890)
Proceeds from sale of discontinued operation
Acquisition of J&L Fiber Services -
Acquisition of and investment in Beloit Poland -
Property, plant and equipment-net (46,789)
Other-net (1,664)
--------
Net cash (applied to) investment and
other transactions (73,343)
--------
Financing Activities
Sale of treasury stock 46,760
Purchase of stock for Stock Employee Compensation Trust -
Purchase of treasury stock (124)
Dividends paid (10,477)
Exercise of stock options 2,983
Issuance of stock -
Redemption of preferred stock -
Issuance of long-term obligations 203,882
Redemption of long-term obligations (193,212)
Payments related to debt refinancing (2,138)
Capitalized financing costs (6,471)
(Decrease) increase in short-term notes payable (52,917)
--------
Net cash (applied to) provided by
financing activities (11,714)
--------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (86)
--------
Increase (decrease) in Cash and Cash Equivalents 31,381
Cash and Cash Equivalents at Beginning of Year 165,074
--------
Cash and Cash Equivalents at End of Year $196,455
========
</TABLE>
The Accompanying Notes are an Integral Part of the
Financial Statements
<TABLE>
Statement of Cash Flows
Year Ended October 31,(Dollar amounts in thousands)
<CAPTION>
Years ended October 31,
-----------------------------
1993
-------
<S> <C>
Operating Activities
Net income (loss) $ (19,690)
Add(deduct)-Items not affecting cash:
Restructuring charges 67,348
Nonrecurring charge 8,000
Extraordinary loss on retirement of debt,
net of income taxes -
Cumulative effect of accounting change, net of
income taxes and minority interest -
Gain on sale of discontinued operation (16,173)
Depreciation and amortization 72,629
Minority interest, net of dividends paid (7,956)
Deferred income taxes-net (28,268)
Other-net (1,588)
Changes in working capital
(Increase) decrease in accounts receivable-net 64,946
(Increase) decrease in inventories (9,132)
(Increase) in net current assets of discontinued
operations -
(Increase) decrease in other current assets 9,091
Increase (decrease) in trade accounts payable (7,803)
(Decrease) in employee compensation and benefits (24,138)
Increase (decrease) in advance payments and
progress billings 7,271
(Decrease) in other current liabilities (52,060)
--------
Net cash provided by
operating activities 62,477
--------
Investment and Other Transactions
Acquisition of Morris Mechanical Handling Limited -
Proceeds from sale of discontinued operation 23,219
Acquisition of J&L Fiber Services (410)
Acquisition of and investment in Beloit Poland -
Property, plant and equipment-net (70,361)
Other-net (2,028)
--------
Net cash (applied to) investment and
other transactions (49,580)
--------
Financing Activities
Sale of treasury stock -
Purchase of stock for Stock Employee Compensation Trust (49,431)
Purchase of treasury stock (1,381)
Dividends paid (10,669)
Exercise of stock options 266
Issuance of stock -
Redemption of preferred stock -
Issuance of long-term obligations 2,116
Redemption of long-term obligations (49,972)
Payments related to debt refinancing -
Capitalized financing costs (1,773)
(Decrease) increase in short-term notes payable 20,620
---------
Net cash (applied to) provided by
financing activities (90,224)
---------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (8,855)
---------
Increase (decrease) in Cash and Cash Equivalents (86,182)
Cash and Cash Equivalents at Beginning of Year 251,256
--------
Cash and Cash Equivalents at End of Year $165,074
=========
</TABLE>
The Accompanying Notes are an Integral Part of the
Financial Statements
<TABLE>
Statement of Cash Flows
<CAPTION>
Years ended October 31,
------------------------------
1992
-------
<S> <C>
Operating Activities
Net income (loss) $46,813
Add(deduct)-Items not affecting cash:
Restructuring charges -
Nonrecurring charge -
Extraordinary loss on retirement of debt,
net of income taxes 22,816
Cumulative effect of accounting change, net of
income taxes and minority interest -
Gain on sale of discontinued operation -
Depreciation and amortization 67,251
Minority interest, net of dividends paid 5,118
Deferred income taxes-net (6,833)
Other-net (4,206)
Changes in working capital
(Increase) decrease in accounts receivable-net 18,187
(Increase) decrease in inventories 13,709
(Increase) in net current assets of discontinued
operations -
(Increase) decrease in other current assets (6,494)
Increase (decrease) in trade accounts payable 3,638
(Decrease) in employee compensation and benefits (21,857)
Increase (decrease) in advance payments and
progress billings (65,141)
(Decrease) in other current liabilities (52,522)
--------
Net cash provided by
operating activities 20,479
--------
Investment and Other Transactions
Acquisition of Morris Mechanical Handling Limited -
Proceeds from sale of discontinued operation -
Acquisition of J&L Fiber Services (46,206)
Acquisition of and investment in Beloit Poland (5,676)
Property, plant and equipment-net (62,351)
Other-net 12,645
--------
Net cash (applied to) investment and
other transactions (101,588)
--------
Financing Activities
Sale of treasury stock -
Purchase of stock for Stock Employee
Compensation Trust -
Purchase of treasury stock (38,344)
Dividends paid (11,611)
Exercise of stock options 296
Issuance of stock 156,812
Redemption of preferred stock (82,017)
Issuance of long-term obligations 405,590
Redemption of long-term obligations (337,683)
Payments related to debt refinancing (27,800)
Capitalized financing costs (10,708)
(Decrease) increase in short-term notes payable 8,230
--------
Net cash (applied to) provided by
financing activities 62,765
--------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (5,530)
--------
Increase (decrease) in Cash and Cash Equivalents (23,874)
Cash and Cash Equivalents at Beginning of Year 275,130
--------
Cash and Cash Equivalents at End of Year $251,256
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
Statement of Shareholders' Equity
(Dollar amounts in thousands)
<CAPTION>
Capital in
Common Excess of Retained
Stock Par Value Earnings
------- --------- --------
<S> <C> <C> <C>
Balance at
October 31, 1991 43,888 400,365 104,965
Net income 46,813
Exercise of stock
options 19 277
Issuance of
restricted stock 14 171
Dividends paid on
Common Stock (11,611)
Dividends paid on
Preferred Stock (21,477)
Translation adjustments
2,060,000 shares
acquired as
Treasury stock
Sale of 5,595,480
shares of Common Stock5,595 151,217
Other activity - net 1,080 1,768 (2,596)
----- ------- -------
Balance at October
31, 1992 50,596 553,798 116,094
Net loss (19,690)
Exercise of stock
options 3 49
Issuance of
restricted stock 11 132
Dividends paid (11,177)
Dividends on
shares held
by SECT 508
Establishment of SECT
Adjust SECT shares to
market value 6,277
Translation adjustments
2,577,500 shares
acquired as
Treasury stock
Purchase of shares
by employee benefit
plans
Other activity - net (35) (586)
------ ------- -------
Balance at October
31, 1993 50,575 560,178 85,227
Net loss (53,912)
Exercise of stock
options 3 (963)
Issuance of
restricted stock (120)
Dividends paid (11,379)
Dividends on
shares held
by SECT 902
Adjust SECT shares to
market value 6,496
Translation adjustments
4,875 shares acquired
as Treasury stock
Sale of 2,000,000 shares of
Treasury stock 10,300
Purchase of shares
by employee benefit
plans
Other activity - net (72) 93
------ ------- -------
Balance at October
31, 1994 $50,506 $576,886 $19,936
======= ======= ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
Statement of Shareholders' Equity
(Dollar amounts in thousands)
<CAPTION>
Cumulative
Translation Treasury
Adjustments SECT Stock
----------- ------ ---------
<S> <C> <C> <C>
Balance at
October 31, 1991 (7,118) - (49,189)
Net income
Exercise of stock
options
Issuance of
restricted stock
Dividends paid on
Common Stock
Dividends paid on
Preferred Stock
Translation
adjustments (15,765)
2,060,000 shares
acquired as
Treasury stock (38,344)
Sale of 5,595,480
shares of Common Stock
Other activity - net
------- ------- -------
Balance at October
31, 1992 (22,883) - (87,533)
Net loss
Exercise of stock
options 214
Issuance of
restricted stock
Dividends paid
Dividends on
shares held
by SECT
Establishment of SECT (50,000) 50,000
Adjust SECT shares to
market value (6,277)
Translation
adjustments (17,683)
2,577,500 shares
acquired as
Treasury stock (50,812)
Purchase of shares
by employee benefit
plans 163
Other activity - net
--------- ------- ---------
Balance at October
31, 1993 (40,566) (55,900) (88,345)
Net loss
Exercise of stock
options 3,943
Issuance of
restricted stock 262
Dividends paid
Dividends on
shares held
by SECT
Adjust SECT shares to
market value (6,496)
Translation
adjustments 1,372
4,875 shares acquired
as Treasury stock (124)
Sale of 2,000,000 shares of
Treasury stock 36,460
Purchase of shares
by employee benefit
plans 4,431
Other activity - net
--------- ------- -------
Balance at October
31, 1994 $(39,194) $(53,760) $(52,009)
========= ========= =========
</TABLE>
<TABLE>
Statement of Shareholders' Equity
(Dollar amounts in thousands)
<CAPTION>
Junior
Preferred
Stock Total
--------- ---------
<S> <C> <C>
Balance at
October 31, 1991 13 492,924
Net income 46,813
Exercise of stock
options 296
Issuance of
restricted stock 185
Dividends paid on
Common Stock (11,611)
Dividends paid on
Preferred Stock (21,477)
Translation
adjustments (15,765)
2,060,000 shares
acquired as
Treasury stock (38,344)
Sale of 5,595,480
shares of Common Stock 156,812
Other activity - net (13) 239
------- ----------
Balance at October
31, 1992 - 610,072
Net loss (19,690)
Exercise of stock
options 266
Issuance of
restricted stock 143
Dividends paid (11,177)
Dividends on
shares held
by SECT 508
Establishment of SECT0 -
Adjust SECT shares to
market value -
Translation
adjustments (17,683)
2,577,500 shares
acquired as
Treasury stock (50,812)
Purchase of shares
by employee benefit
plans 163
Other activity - net (621)
------- ----------
Balance at October
31, 1993 - 511,169
Net loss (53,912)
Exercise of stock
options 2,983
Issuance of
restricted stock 142
Dividends paid (11,379)
Dividends on
shares held
by SECT 902
Adjust SECT shares to
market value -
Translation
adjustments 1,372
4,875 shares acquired
as Treasury stock (124)
Sale of 2,000,000 shares of
Treasury stock 46,760
Purchase of shares
by employee benefit
plans 4,431
Other activity - net 21
------- --------------
Balance at October
31, 1994 - $502,365
========= ================
</TABLE>
Notes to Consolidated Financial Statements
(Dollar amounts in thousands unless indicated.)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The consolidated financial
statements and related notes give retroactive effect to the
merger with Joy Technologies Inc. ("Joy") for all periods
presented, accounted for as a pooling of interests. The
consolidated balance sheets as of October 31, 1994 and 1993
include the accounts of Joy as of February 25, 1994 and
February 26, 1993, respectively, and the consolidated
statements of income and of cash flows for each of the
three years in the period ended October 31, 1994 include
the results of Joy for the years ended February 25, 1994,
February 26, 1993 and February 28, 1992, respectively. See
Note 17 - Acquisition of Joy Technologies Inc. The
"Company" as used in these consolidated financial
statements refers to Harnischfeger Industries, Inc. and its
subsidiaries, including Joy.
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of all majority-owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
INVENTORIES - Inventories are stated at the lower of cost
or market value. Cost is determined by the last-in,
first-out (LIFO) method for substantially all domestic
inventories and by the first-in, first-out (FIFO) method
for the majority of inventories of foreign subsidiaries.
REVENUE RECOGNITION - Revenue on long-term contracts is
generally recorded using the percentage-of-completion
method for financial reporting purposes. Such contracts
include contracts for papermaking machinery, certain mining
equipment, custom-engineered cranes and systems
engineering. Revenue on cost-plus-fee contracts is
recognized to the extent of costs incurred plus a
proportionate amount of fees earned. Losses, if any, are
recognized in full as soon as identified. Sales of other
products and services are recorded as products are shipped
or services are rendered.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and
equipment are stated at historical cost. Expenditures for
major renewals and improvements are capitalized, while
maintenance and repairs which do not significantly improve
the related asset or extend its useful life are charged to
expense as incurred.
For financial reporting purposes, plant and equipment are
depreciated primarily by the straight-line method over the
estimated useful lives of the assets. Depreciation claimed
for income tax purposes is computed by accelerated methods.
CASH EQUIVALENTS - The Company considers all highly liquid
debt instruments with a maturity of three months or less at
the date of purchase to be cash equivalents.
FOREIGN EXCHANGE CONTRACTS - Any gain or loss on forward
contracts designated as hedges of commitments is deferred
and included in the measurement of the related foreign
currency transaction, except that permanent losses are
recognized immediately and unrealized gains and losses on
firm commitments for working capital borrowings by foreign
subsidiaries are deferred and amortized over the life of
the contract.
FOREIGN CURRENCY TRANSLATION - The majority of the assets
and liabilities of the Company's international operations
are translated at year-end exchange rates; income and
expenses are translated at average exchange rates
prevailing
during the year.
For operations whose functional currency is the local
currency, translation adjustments are accumulated in a
separate section of shareholders' equity. Transaction
gains and losses, as well as translation adjustments
relating to
operations whose functional currency is the U.S. dollar,
are reflected in income. Pre-tax foreign exchange losses
included in operating income were $1,589 in 1994. Pre-tax
foreign exchange gains included in operating income in 1993
and 1992 were $2,970 and $6,462, respectively.
GOODWILL AND INTANGIBLE ASSETS - Goodwill represents the
excess of the purchase price over the fair value of
identifiable net assets of acquired companies and is
amortized on a straight-line basis over periods ranging
from 25 to 40 years. The Company assesses the carrying
value of goodwill at each balance sheet date. Consistent
with the November, 1993 FASB Exposure Draft "Accounting for
the Impairment of Long-Lived Assets," such assessments
include a comparison of (a) the estimated future
nondiscounted cash flows anticipated to be generated during
the remaining amortization period of the goodwill to (b)
the net carrying value of goodwill. The Company recognizes
diminution in value of goodwill, if any, on a current
basis. Other intangible assets are amortized over the
shorter of their legal or economic useful lives ranging
from 5 to 20 years. Accumulated amortization was $76,480
and $68,814 at October 31, 1994 and 1993, respectively.
INCOME TAXES - The Company has adopted Statement of
Financial Accounting Standard (SFAS) No. 109, "Accounting
for Income Taxes" (SFAS 109). Under SFAS 109, deferred
income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of
existing assets and liabilities, and for tax basis
carryforwards. A valuation allowance is provided for
deferred tax assets where it is considered more likely than
not that the Company will not realize the benefit of such
assets. The consolidated financial statements for each
year presented take into account the effects of SFAS 109.
See Note 6-Income Taxes.
RESEARCH AND DEVELOPMENT EXPENSES - Research and
development costs are expensed as incurred. Such costs
incurred in the development of new products or significant
improvements to existing products amounted to $30,092,
$28,172, and $28,141 in 1994, 1993 and 1992, respectively.
Certain capital expenditures used in research activities,
such as the construction of a new pilot paper machine to be
used in research and for customer tests, are capitalized
and depreciated over their expected useful lives.
EARNINGS PER SHARE - Earnings per share are based upon the
weighted average number of common shares outstanding during
the year. The number of shares used in the computation
were 43,716,464 in 1994, 44,393,043 in 1993, and 42,044,307
in 1992. Common stock equivalents were not significant in
any of the years presented. Shares in the Stock Employee
Compensation Trust ("SECT") are not considered outstanding
for computing earnings per share. For fiscal 1992, in
computing earnings per share, net income was adjusted to
reflect declared and cumulative preferred stock dividends
of $8,434 and $2,432 for the Senior and Junior Preferred
Stock, respectively, of Joy.
NOTE 2
ACQUISITIONS
In September, 1994, the Company completed the acquisition
of all of the outstanding shares of MMH (Holdings) Limited,
a holding company for Morris Mechanical Handling Limited
("Morris") and related companies for $24,890. Morris is a
manufacturer of a broad line of cranes, hoists, and other
lifting equipment and has an extensive service organization
that provides after-market services for a broad spectrum of
lifting equipment. Morris is headquartered in Great
Britain, and also has operations in the United States, the
Far East and South Africa, and is a unit of the Material
Handling Equipment segment.
The acquisition was accounted for as a purchase
transaction. The purchase price was allocated to the
specific net assets acquired based upon a recently
completed independent appraisal. The results of Morris for
the month of October were included in the Company's
consolidated operating results.
In addition, the Company completed two smaller niche
acquisitions during 1994. In July, 1994, the Company
acquired a Mexican company, Hercules, S.A. de C.V., for
$2,589. Hercules, a manufacturer of overhead cranes and
hoists serving the Mexican and South American markets, is
also a unit of the Material Handling Equipment segment.
The acquisition was accounted for as a purchase.
The Company's Beloit Corporation subsidiary acquired
substantially all of the common shares of OASIS (Optical
Alignment Systems and Inspection Services, Inc.) for $7,000
in September, 1994. The transaction was accounted for as a
purchase. The New Hampshire-based company provides
specialty services principally to the paper industry.
In July, 1992, the Company completed the acquisition of
certain assets and liabilities of the J&L Plate ("J&L")
refiner plate manufacturing and Gartland foundry facilities
of Sullivan Corporation, for a total purchase price of
$46,616. The acquisition was accounted for as a purchase
transaction. J&L has focused on custom refiner plates
suitable for a variety of pulp and paper applications.
In 1990, the Company entered into an agreement with
Measurex Corporation ("Measurex") pursuant to which the
Company could purchase up to 20% of Measurex's outstanding
common stock in open market transactions. As of October
31, 1994, the Company's total investment in Measurex,
including related expenses, equity income (loss) and net of
dividends received, amounted to $66,347, representing
3,640,000 shares or a 20% interest. The Company accounts
for this investment using the equity method and includes
its equity income (loss) in its Papermaking Machinery and
Systems segment ("Paper Group"). The excess purchase price
over the Company's proportionate share of the underlying
equity in net assets is being amortized on a straight-line
basis over 40 years. Also, see Note 14-Transactions with
Affiliated Companies.
NOTE 3
RESTRUCTURING AND NONRECURRING CHARGES
In fiscal 1993, the Company recorded a restructuring charge
to strengthen and streamline its papermaking machinery and
mining equipment businesses. The total estimated cost of
the restructuring activities reduced pre-tax income by
$67,000. Of the total, $40,000 related to the Paper Group,
which was primarily for the closure of its Canadian
papermaking machinery manufacturing facilities and
consolidation of North American papermaking machine
manufacturing in Beloit, Wisconsin. The $25,500 charge for
Harnischfeger Corporation's Mining Equipment Division
related principally to its plans to reduce worldwide
inventories and to enhance manufacturing and repair parts
capabilities. Other elements in the restructuring charge
provided for refocusing manufacturing and marketing efforts
(to reduce non-value-added activities, to reduce
nonoperating assets and to focus on capital carrying costs)
as well as employee severance costs. Substantially all of
the restructuring reserve was used by the end of fiscal
1994. The remaining reserves at October 31, 1994 of $7,746
relate primarily to the Paper Group.
Also during 1993, the Environmental Group recorded a net
charge of $348 which included a $2,559 provision for the
estimated expenses for the relocation of operations from
Monrovia, California to Houston, Texas. Offsetting this
provision was a net pre-tax gain of $2,211 reflecting the
sale of the condenser and damper businesses.
In addition, the Company recorded a charge in fiscal 1993
resulting from the reestimation of certain warranty
reserves carried by the Mining Equipment Division of
Harnischfeger Corporation. The charge reduced pre-tax
income by $8,000. This nonrecurring charge was the result
of a much deeper analysis of open warranty claims and
customer requests, field experience on new products and
additional analytical data provided by new systems which
has since resulted in engineering, design and manufacturing
changes. The Company's warranty methodology, while
long-established, is by its very nature based on
management's judgement and is not mathematically precise or
actuarially based. The resultant warranty reserves are
reevaluated periodically and reflect refinements of
estimated warranty exposure on evolving product lines.
This additional warranty reserve was used primarily during
fiscal 1994.
NOTE 4
ACCOUNTS RECEIVABLE
<TABLE>
Accounts receivable at October 31 consisted of the
following:
<CAPTION>
(in thousands)
1994 1993
----- ----
<S> <C> <C>
Trade receivables $329,263 $312,133
Unbilled receivables 99,838 88,297
Allowance for doubtful accounts and
contract losses (7,230) (12,482)
-------- --------
$421,871 $387,948
======== ========
</TABLE>
The amount of accounts receivable due beyond one year is not
significant.
NOTE 5
INVENTORIES
<TABLE>
Inventories at October 31 consisted of the following:
<CAPTION>
(in thousands)
1994 1993
---- ----
<S> <C> <C>
Finished goods $182,084 $180,268
Work in process and purchased parts 158,038 186,978
Raw materials 79,766 64,667
-------- ---------
419,888 431,913
Less excess of current cost over
stated LIFO value (62,041) (61,626)
-------- ---------
$357,847 $370,287
========= =========
</TABLE>
Inventories valued using the LIFO method represented
approximately 81% and 86% of consolidated inventories at
October 31, 1994 and 1993, respectively.
The Company has reduced inventory by $3,739 and $8,125 at
October 31, 1994 and 1993, respectively, for progress
payments received on contracts accounted for on the
completed contract method.
NOTE 6
INCOME TAXES
The components of income (loss) from continuing operations
before income taxes and minority interest for the Company's
domestic and foreign operations for the years ended October
31 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic $ 22,518 $(48,324) $ 62,740
Foreign 25,701 (19,026) 55,149
-------- ------- -------
Income (loss) from continuing
operations before provision
(credit) for income taxes and
minority interest $ 48,219 $(67,350) $117,889
========= ======= =========
</TABLE>
The consolidated provision (credit) for income taxes
included in the statement of income for the years ended
October 31 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current provision:
Federal $ 11,167 $ 6,111 $ 2,680
State 1,486 2,963 1,382
Foreign 7,080 6,453 32,353
------- ------ -------
Total Current 19,733 15,527 36,415
------- ------- -------
Deferred provision (credit):
Federal (59,840) (22,745) 409
State and foreign (4,180) (2,563) (4,477)
------- ------- -------
Total Deferred (64,020) (25,308) 4,068)
------- ------- -------
Total consolidated income tax
provision (credit) $(44,287) $(9,781) $32,347
======== ======= ========
</TABLE>
Income tax provision (credit) is included in the statement
of income as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Continuing operations $ 12,377 $(23,008) $44,669
Income (loss) from discontinued operations 900 3,816 3,533
Gain on sale of discontinued operation - 9,411 -
Extraordinary item (3,495) - (15,855)
Cumulative effect of accounting change (54,069) - -
-------- --------- -------
$(44,287) $(9,781) $32,347
======== ======== =======
</TABLE>
The difference between the federal statutory tax rate and
the effective tax rate on continuing operations for the
years ended October 31 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate 35.0% (34.8)% 34.0%
Goodwill amortization not
deductible for tax purposes 2.6 1.8 .9
Canadian restructuring (1993) and
other differences in foreign and
U.S. tax rates (0.9) 1.3 5.2
Differences in Foreign Sales
Corporation and U.S. tax rate (4.3) (1.8) (1.5)
State income taxes, net of
federal tax impact (1.4) 1.4 1.9
General business and other credits utilized (4.2) (.4) -
Resolution of certain prior
years' tax exposures - - (1.7)
Other items-net (1.1) (1.7) (0.9)
------- ------ -----
Effective tax rate 25.7% (34.2)% 37.9%
======= ====== =====
</TABLE>
Temporary differences and carryforwards which gave rise to
the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
October 31,(in thousands) 1994 1993
---------- -----------
<S> <C> <C>
Differences in revenue recognition
for book and tax purposes $ 1,033 $(3,935)
Inventories (26,554) (25,721)
Accrued expenses not currently
deductible 17,791 17,672
Provisions for restructuring not
currently deductible 4,551 22,867
Other - net 4,654 5,230
------- --------
Total deferred income taxes included
in net current assets $ 1,475 $16,113
======= =======
Depreciation and amortization in
excess of book expense $(78,999) $(92,647)
Employee benefit related items 34,507 (10,581)
Tax credit carryforwards 40,497 29,628
Tax loss carryforwards 37,426 30,546
Other accruals and reserves in
excess of tax expense (19,393) (27,209)
State taxes (5,483) (8,143)
Other - net (15,100) (10,093)
-------- -------
(6,545) (88,499)
Valuation allowance (14,206) (12,421)
--------- --------
Total deferred income taxes $(20,751) $(100,920)
========= =========
Net deferred tax liability $(19,276) $(84,807)
========= =========
</TABLE>
At October 31, 1994, the Company had foreign tax credit
carryforwards of $14,357 expiring in 1995, 1998 and 1999,
general business tax credits of $18,914 expiring in 2003-
2009, and alternative minimum tax credit carryforwards of
$7,226 which do not expire. In addition, tax loss
carryforwards consisted of foreign loss carryforwards of
$25,064 with various expiration dates, and domestic
carryforwards of $13,131 with various states and expiration
dates. The carryforwards will be available for the
reduction of future income tax liabilities.
U.S. income taxes, net of foreign taxes paid or payable,
have been provided on the undistributed profits of foreign
subsidiaries, except in those instances where such profits
are expected to be permanently reinvested. Such unremitted
earnings of subsidiaries which have been or are intended to
be permanently reinvested were $155,691 at October 31, 1994.
If, for some reason not presently contemplated, such profits
were to be remitted or otherwise become subject to U.S.
income tax, the Company expects to incur tax at
substantially less than the U.S. income tax rate as a result
of foreign tax credits that would be available.
Income taxes paid were $16,979, $20,859 and $50,483 for
1994, 1993 and 1992, respectively.
NOTE 7
LONG-TERM OBLIGATIONS, BANK CREDIT FACILITIES AND INTEREST
EXPENSE
Long-term obligations at October 31 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
---- ----
<S> <C> <C>
10 1/4% Senior Notes due 2003 $200,000 $ -
Bank Facility 90,785 213,952
12.3% Junior Subordinated Notes
due 2000 - 67,046
8.9% Debentures, due 2022 75,000 75,000
8.7% Debentures, due 2022 75,000 75,000
Senior Notes, Series A through D, at
interest rates of between 8.9% and 9.1%,
due 1996 to 2006 75,000 75,000
Industrial Revenue Bonds, at
interest rates of between 5.9% and
8.8%, due 1994 to 2017 32,632 33,457
Other 22,637 20,397
--------- ---------
571,054 559,852
Less:
Amounts payable within one year 2,121 31,113
-------- ---------
$568,933 $528,739
======== ========
</TABLE>
The 10 1/4% Senior Notes have a maturity date of September
1, 2003 with semi-annual interest payments due March 1 and
September 1, commencing March 1, 1994. The Company may, at
its option, redeem the Notes in whole or in part at any time
on or after September 1, 1998 at 105.125% of their principal
amount, plus accrued interest, declining to 100% of their
principal amount, plus accrued interest, on or after
September 1, 2000.
The 10 1/4% Senior Notes contain certain restrictive
covenants which are applicable to Joy, the legal issuer. In
addition, upon a change of control, the Company is required
to make an offer to purchase the Notes then outstanding at a
purchase price equal to 101% of the principal amount thereof
plus accrued interest.
During fiscal 1994, the Company recorded an extraordinary
after-tax charge of $4,827 associated with the prepayment of
outstanding Tranche A term loans existing under the Bank
Facility and all of Joy's 12.3% Junior Subordinated Notes.
This charge is comprised of the write-off of the unamortized
discount and unamortized capitalized financing costs, call
premiums and other expenses relating to the prepaid debt.
The $90,785 Tranche B term loan, the remaining borrowings
outstanding under the Bank Facility, was repaid in full on
November 29, 1994, upon the consummation of the Company's
merger with Joy (See Notes 1 and 17). The Tranche A term
loans carried an interest rate of 2.125% above LIBOR, and
the Tranche B term loan had a floating interest rate equal,
at Joy's option, to the base rate plus 2% or to the Euro-
dollar rate plus 3%. The Bank Facility agreement, including
its revolving credit agreement, was terminated following the
merger.
The Company has $150,000 of unsecured debentures
outstanding with interest rates ranging from 8.7% to 8.9%
due at maturity in 2022.
The Senior Notes, Series A through D, are privately placed
and unsecured. The terms of the Note Agreements place
limits on the amount of additional long-term debt the
Company may issue and require maintenance of a minimum
consolidated net worth, as defined. Additional funded debt
may be incurred if immediately thereafter consolidated
funded debt does not exceed 50% of consolidated total
tangible assets, as defined.
The Series D Notes provide for eleven equal annual
repayments beginning in 1996; Series A through C Notes are
due at maturity in 1999, 1999 and 2001, respectively.
In 1992, the Company filed a shelf registration with the
Securities and Exchange Commission for the proposed sale of
up to $150,000 of additional debt securities. To date, no
securities covered by the registration have been offered for
sale.
In November, 1993, the Company entered into a four-year
Revolving Credit Facility Agreement between the Company and
certain domestic and foreign financial institutions that
allowed for borrowings of up to $150,000 at rates expressed
in relation to LIBOR and other rates. In November, 1994,
the facility was increased to $240,000 and was extended to
November, 1998. A facility fee is payable on the Revolving
Credit Facility.
The Industrial Revenue Bonds are secured by certain assets
of the Company's domestic operations.
Installments payable to holders of the outstanding
long-term obligations of the Company are due as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995. . . . . . . . . . . . . . . . . .$ 2,121
1996. . . . . . . . . . . . . . . . . . 19,176
1997. . . . . . . . . . . . . . . . . . 3,452
1998. . . . . . . . . . . . . . . . . . 7,139
1999. . . . . . . . . . . . . . . . . . 37,611
At October 31, 1994, short-term bank credit lines of
foreign subsidiaries were approximately $85,913. The
outstanding borrowings were $14,419 with a weighted average
interest rate of 19.6%, reflecting higher rates in Poland
and South Africa. There were no compensating balance
requirements under these lines of credit.
Net interest (expense) income consisted of the following:
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,(in thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income (1) $ 7,138 $ 7,856 $ 16,243
Interest expense (54,504) (56,169) (69,459)
-------- -------- -------
Interest (expense)-net $(47,366) $(48,313) $(53,216)
======== ======== =======
</TABLE>
(1) The Company reflected $1,546 and $2,200 of interest
income in 1993 and 1992, respectively, as a result of the
resolution of certain prior years' tax issues.
Interest paid was $45,547, $57,496 and $69,798 in 1994,
1993 and 1992, respectively.
NOTE 8
PENSIONS AND OTHER EMPLOYEE BENEFITS
The Company and its subsidiaries have a number of defined
benefit, defined contribution and government mandated
pension plans covering substantially all employees.
Benefits from these plans are based on factors which include
various combinations of years of service, fixed monetary
amounts per year of service, employee compensation during
the last years of employment and the recipient's social
security benefit. The Company's funding policy with respect
to its qualified plans is to contribute annually not less
than the minimum required by applicable law and regulation
nor more than the amount which can be deducted for income
tax purposes. The Company also has a nonqualified senior
executive supplemental pension plan, funded by Company
stock, which is based on credited years of service and
compensation during the last years of employment.
Certain foreign plans, which supplement or are coordinated
with government plans, many of which require funding through
mandatory government retirement plans or insurance company
plans, have pension funds or balance sheet accruals which
approximate the actuarially computed value of accumulated
plan benefits as of October 31, 1994 and 1993.
The Company recorded an additional minimum pension
liability and intangible asset of $23,645 and $20,754 in
1994 and 1993, respectively, to recognize the unfunded
accumulated benefit obligation of certain domestic plans.
Pension expense for all plans of the Company was $18,521
in 1994, $20,248 in 1993 and $21,900 in 1992. Net periodic
pension costs for U.S. plans and plans of subsidiaries
outside the United States for which SFAS No. 87 ("Employers'
Accounting for Pensions") has been adopted included the
following components:
<TABLE>
<CAPTION>
Year Ended October 31,(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 16,075 $ 15,457 $ 15,092
Interest cost on projected
benefit obligation 29,523 27,297 27,486
Actual gain on plan assets (14,035) (38,656) (23,599)
Net amortization and deferral (14,255) 14,355 1,610
-------- -------- --------
Net periodic pension cost $ 17,308 $ 18,453 $ 20,589
======== ======== ========
</TABLE>
The discount rate used for U.S. plans ranged from 7.9%-
8.0% in 1994, and 8.5%-8.75% in 1993 and 1992, and for
non-U.S. plans ranged from 6.5% to 16.0%. The assumed rate
of increase in future compensation of U.S. salaried
employees ranged from 4.5%-5.0% in 1994 and from 5.0%-5.5%
in 1993 and 1992, and for non-U.S. salaried employees ranged
from 4.0% to 14.5%. Benefits under the hourly employee
plans are generally not based on wages. The expected
long-term rate of return on assets for U.S. plans ranged
from 9.5% to 10% and for non-U.S. plans ranged from 6.5% to
16.0%. The assumptions for non-U.S. plans were developed on
a basis consistent with that for U.S. plans, adjusted to
reflect prevailing economic conditions and interest rate
environments.
Primarily as a result of the sale of Harnischfeger
Engineers, Inc.("HEI") in 1993 (see Note 16 - Discontinued
Operations), a curtailment occurred within the Harnischfeger
Salaried Pension Plan. Curtailment gains of $4,527 were
recorded in 1993, $3,969 of which was included in the gain
on sale of discontinued operations.
The following table sets forth the plans' funded status at
October 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994
------------------------
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
----------- ---------
<S> <C> <C>
Actuarial present value of:
Vested benefits $184,537 $148,757
Accumulated benefits 197,680 166,980
Projected benefits 247,219 186,763
Net assets available for benefits 264,717 128,542
--------- --------
Plans' assets greater (less) than projected benefits 17,498 (58,221)
Unrecognized (asset) obligation existing at adoption (10,695) 5,012
Unrecognized prior service cost 6,642 14,390
Unrecognized net (gain) loss (1,797) 20,379
--------- --------
Net pension asset (liability) $ 11,648 $(18,440)
========= =========
</TABLE>
<TABLE>
<CAPTION>
1993
-------------------------
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
---------- ----------
<S> <C> <C>
Actuarial present value of:
Vested benefits $186,220 $125,228
Accumulated benefits 199,087 135,525
Projected benefits 257,326 139,685
Net assets available for benefits 265,078 94,196
--------- ---------
Plans' assets greater (less) than projected benefits 7,752 (45,489)
Unrecognized (asset) obligation existing at adoption (11,002) 5,607
Unrecognized prior service cost 8,227 12,007
Unrecognized net (gain) loss (3,468) 6,852
--------- ---------
Net pension asset (liability) $ 1,509 $(21,023)
========= =========
</TABLE>
Pension plan assets consist primarily of trust funds with
diversified portfolios of primarily equity and fixed income
investments.
The Company has a qualified profit sharing plan which
covers substantially all domestic employees except employees
covered by collective bargaining agreements and employees of
subsidiaries with separate defined contribution plans.
Contributions to the plan are based on the Company's
consolidated Economic Value Added (EVA) performance. Profit
sharing expense was $3,300 in 1994. The Company made no
profit sharing contribution in 1993. Profit sharing expense
was $629 in 1992.
The Financial Accounting Standards Board has issued SFAS
No. 112 "Employers' Accounting for Postretirement Benefits"
(SFAS 112) which was implemented by the Company in the first
quarter of fiscal 1995. The impact upon adoption of SFAS
112 on the Company's results of operations and financial
position was not material.
NOTE 9
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company generally provides certain health care and life
insurance benefits under various plan for U.S. employees who
retire after attaining early retirements eligibility.
During the first quarter of fiscal 1994, the Company
adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106),
through the immediate recognition of the obligation. Under
SFAS 106, the costs of retiree health care and life
insurance benefits are accrued over relevant employee
service periods. Previously, these costs were charged to
expense as claims were paid. The cumulative effect of the
accounting change required by this standard was a one time
pre-tax charge of $136,291 ($81,696 or $1.87 per share after
taxes and minority interest). The discount rate used in
determining the liability as of the date of adoption was
8.2% and as of October 31, 1994 the discount rate was 7.9%.
The following table sets forth the plans' funded status
and amounts recognized in the Company's balance sheet as of
October 31, 1994:
<TABLE>
<CAPTION>
(in thousands) 1994
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 73,424
Fully eligible active plan participants 7,722
Other active plan participants 20,416
---------
Total 101,562
Plan assets at fair value 0
---------
Accumulated postretirement benefit obligation
in excess of plan assets 101,562
Unrecognized transition obligation 0
Unrecognized prior service credit 21,305
Unrecognized gain 12,840
---------
Accrued postretirement benefit liability 135,707
Less: Current portion 17,097
---------
$118,610
=========
</TABLE>
Net periodic postretirement benefit cost for fiscal year
1994 includes the following components:
<TABLE>
<CAPTION>
(in thousands) 1994
------
<S> <C>
Service cost $ 974
Interest cost on accumulated postretirement benefit
obligation 8,808
Actual return on plan assets 0
Amortization of prior service cost(credit) (2,995)
Net amortization and deferral (237)
------
Net periodic postretirement benefit cost $6,550
======
</TABLE>
For measurement purposes, with the exception of plans
sponsored by Joy, a 13.0% annual rate of increase in the per
capita cost of covered health care benefits for non-medicare
eligible participants was assumed for 1994 (11.0% used for
medicare eligible participants); the rate was assumed to
decrease gradually to 5.0% for all participants by 2001 and
remain at that level thereafter. For plans sponsored by
Joy, the assumed medical cost trend rates for retirees who
have not yet reached age 65 is 7% in 1994, decreasing to a
rate of 4% in 2001 and continuing at that level into the
future. The health care cost trend rate assumption has an
effect on the amounts reported. A one percentage point
increase in the assumed health care cost trend rates each
year would increase the accumulated postretirement benefit
obligation as of October 31, 1994 by $5,151 and the
aggregate service cost and interest cost components of the
net periodic postretirement benefit cost for the year by
$781. Postretirement life insurance benefits have a minimal
effect on the total benefit obligation.
The cost of providing these benefits to retirees was
$12,414 in 1993 and $11,608 in 1992.
In 1993, the Board of Directors of the Company approved a
general approach that would culminate in the elimination of
all Company contributions towards postretirement health care
benefits. Increases in costs paid by the Company were
capped for certain plans beginning in 1994 extending through
1998 and Company contributions will be eliminated on January
1, 1999 for most employee groups, excluding Joy. For Joy,
based upon existing plan terms, future eligible retirees
will participate in a premium cost-sharing arrangement which
is based upon age as of March 1, 1993 and position at the
time of retirement. Active employees under age 45 as of
March 1, 1993 and any new hires after April 1, 1993 will be
required to pay 100% of the applicable premium.
The initial one-time pre-tax charge reflected all plan
terms and amendments in place on November 1, 1993. Negative
plan amendments made subsequent to November 1, 1993 are
being amortized from the date of amendment to January 1,
1999. Amortization of negative plan amendments in 1994
amounted to $2,995, which reduced reported net periodic
postretirement benefit cost.
NOTE 10
SHAREHOLDERS' EQUITY AND STOCK OPTIONS
The Statement of Shareholders' Equity has been retroactively
restated for all years presented to give effect to the
acquisition on November 29, 1994 of Joy through a stock-for-
stock merger with an exchange ratio of .5652 of a share of
Company Common Stock for each share of Joy common stock (see
Note 17-Acquisition of Joy Technologies Inc.). In connection
with the acquisition, the Company's authorized Common Stock
was increased to 100,000,000 shares.
Joy's employee stock option plan is being administered by
the Company subsequent to the merger. All outstanding Joy
options were converted into options to purchase Company
Common Stock and adjusted to give effect to the .5652
exchange ratio.
A Preferred Stock Purchase Right is attached to each share
of Common Stock which entitles a shareholder to exercise
certain rights in the event a person or group acquires or
seeks to acquire 20% or more of the outstanding Common
Stock of the Company.
The Company's Incentive Stock Plan, as amended, provides
for the granting, up to January 31, 1998, of qualified and
non-qualified options, stock appreciation rights and
restricted stock to key employees for not more than
2,400,000 shares of Common Stock (increased to 3,600,000 as
of March 6, 1995). At October 31, 1994, 1,923,384 shares
were reserved for future stock options and restricted stock.
Since the inception of the Incentive Stock Plan and Joy's
employee stock option plan, options for the purchase of
2,922,375 shares have been granted, at prices ranging from
$6.75 to $27.00 per share. At October 31, 1994, 1,819,319
of the options were outstanding, 405,466 had been exercised
and 697,589 had expired. Generally, the options granted
under the Incentive Stock Plan become exercisable in
cumulative installments of one-fourth of the shares in each
year beginning six months from the date of the grant. In
addition, 63,000 shares were reserved for restricted stock
in 1990. In 1994, 10,875 of the reserved restricted shares
were issued. The recipients of restricted stock have the
right to receive dividends and vote but such shares cannot
be transferred until they become fully vested. The shares
generally will become unrestricted following the end of
fiscal 1995. Compensation expense related to restricted
stock is included in income and amounted to $100 in 1994,
$170 in 1993 and $438 in 1992.
Certain information regarding stock options, including Joy
options under the Joy stock option plan, is as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
--------- ----------------
<S> <C> <C>
Outstanding at October 31, 1991 1,097,475 $14.38 to 27.00
Granted 355,000 17.25 to 20.63
Exercised (18,475) 14.38 to 19.63
Canceled or expired (205,875) 14.38 to 24.63
---------- ----------------
Outstanding at October 31, 1992 1,228,125 14.38 to 27.00
Granted 866,226 15.92 to 22.12
Exercised (16,875) 14.38 to 19.25
Canceled or expired (46,175) 14.38 to 24.63
---------- ----------------
Outstanding at October 31, 1993 2,031,301 14.38 to 27.00
Granted 188,349 15.70 to 26.50
Exercised (166,041) 14.38 to 24.63
Canceled or expired (234,290) 14.38 to 24.63
---------- ----------------
Outstanding at October 31, 1994 1,819,319 14.38 to 27.00
---------- ----------------
Exercisable at October 31, 1994 850,181 $14.38 to 27.00
========== ================
</TABLE>
In September, 1994, the Company sold 2,000,000 shares of
Common Stock in a private transaction. The Common Stock
sold has not been registered under the Securities Act of
1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from
registration requirements. This sale of stock satisfied the
requirements under the pooling of interests accounting rules
to replace shares repurchased during the two years prior to
the announcement of the Company's merger with Joy. The
shares were sold from treasury stock.
Following a "Dutch auction" self-tender offer in May,
1993, the Company purchased for cash 2,500,000 shares of
Common Stock, or approximately 9% of shares of Common Stock
outstanding at that time, at $19-5/8 per share, in
conjunction with the establishment of the Harnischfeger
Industries, Inc. Stock Employee Compensation Trust ("SECT").
Concurrent with the purchase, the Company sold 2,547,771
shares of Common Stock held in treasury to the SECT,
amounting to $50,000 at $19-5/8 per share. The purchase of
the treasury shares reduced shareholders' equity. The sale
of the treasury shares to the SECT had no impact on such
equity. Shares in the SECT are being used to provide future
employee benefits under plans that currently require shares
of Company Common Stock.
Shares owned by the SECT are accounted for as treasury
stock until issued to existing benefit plans; they are
reflected as a reduction to shareholders' equity. Shares
owned by the SECT are valued at the closing market price
each period, with corresponding changes in the SECT balance
reflected in capital in excess of par value. Shares in the
SECT are not considered outstanding for computing earnings
per share.
NOTE 11
OPERATING LEASES
The Company leases certain plant, office and warehouse space
as well as machinery, vehicles, data processing and other
equipment.
Certain of the leases have renewal options at reduced
rates and provisions requiring the Company to pay
maintenance, property taxes and insurance.
Generally, all rental payments are fixed. The Company's
assets and obligations under capital lease arrangements are
not significant.
Total rental expense under operating leases, excluding
maintenance, taxes and insurance, was $22,764, $22,508 and
$23,005 in 1994, 1993 and 1992, respectively.
At October 31, 1994, the future payments for all operating
leases with remaining lease terms in excess of one year, and
excluding maintenance, taxes and insurance, were as follows:
<TABLE>
<CAPTION>
(in thousands)
Fiscal Year:
<S> <C>
1995. . . . . . . . . . . . . . . . .$17,670
1996. . . . . . . . . . . . . . . . . 15,001
1997. . . . . . . . . . . . . . . . . 12,796
1998. . . . . . . . . . . . . . . . . 10,069
1999. . . . . . . . . . . . . . . . . 3,663
2000 and thereafter . . . . . . . . . 13,905
</TABLE>
NOTE 12
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET RISKS
At October 31, 1994, the Company was contingently liable to
banks, financial institutions and others for approximately
$113,000 for outstanding letters of credit securing
performance of sales contracts and other guarantees in the
ordinary course of business, excluding the HEI back-up bond
guarantee facility (see Note 16-Discontinued Operations).
The Company may also guarantee performance of its equipment
at levels specified in sales contracts without the
requirement for letters of credit. One such guarantee may
require repayment of a loan to a customer approximating the
value of the related paper machine in the event certain
performance tests are not achieved. Performance guarantees
are a normal part of the Company's business and have not
resulted in significant cash outlays.
Certain sales generated by Joy have been financed by
customers through third-party finance companies. Certain of
these customer notes contain various recourse provisions
against Joy in the event of nonpayment by the customer. The
outstanding balance on such notes for which Joy has a
contingent liability should all the notes become
uncollectible was $10,003 and $5,343 respectively at October
31, 1994 and 1993. In the event that a note should become
uncollectible, Joy can reduce its losses by reselling the
repossessed equipment after rebuilding or refurbishing at
one of its service centers.
The Company is a party to litigation matters and claims
which are normal in the course of its operations and, while
the results of litigation and claims cannot be predicted
with certainty, management believes that the final outcome
of such matters will not have a materially adverse effect on
the Company's consolidated financial position or results of
operations.
The Company is also involved in a number of proceedings
and potential proceedings relating to environmental matters.
Although it is difficult to estimate the potential exposure
to the Company related to these environmental matters, the
Company believes that these matters will not have a
materially adverse effect upon its consolidated financial
position or results of operations.
The Company has entered into various foreign currency
exchange contracts with major international financial
institutions designed to minimize its exposure to exchange
rate fluctuations on foreign currency transactions. These
contracts are used to hedge known cash receipts and
disbursements in the ordinary course of business. At
October 31, 1994, the outstanding net U.S. dollar face
amounts of contracts to cover sales and purchase activity
totaled approximately $14,111. In addition, at October 31,
1994, the Company had outstanding foreign exchange contracts
totalling $31,747 to cover interest and borrowing
obligations. The difference between contract and estimated
fair values at October 31, 1994 was not significant. It is
the Company's policy not to participate in derivative
instruments or transactions.
As a prime contractor and subcontractor with various
agencies of the U.S. Government, principally the Department
of Defense, the Company's Systems Group is subject to strict
procurement regulations, with non-compliance found by any
one agency possibly resulting in fines, penalties, debarment
or suspension from receiving additional contracts with all
agencies. In July, 1993, the U.S. Air Force rescinded a
contract with Syscon Corporation ("Syscon") following a
post-award protest of the contract by another bidder. As a
result of internal reviews, Syscon determined that evidence
exists to indicate that an inaccurate certificate of
compliance may have been submitted in connection with the
contract. The outcome of the government investigation of
this matter is not presently determinable. Management
believes that the final outcome will not have a significant
future effect on the Company's consolidated financial
position or results of operations.
On May 21, 1993, a Federal court jury in Madison,
Wisconsin awarded Beloit Corporation $17,200 following a
patent infringement trial against J.M. Voith GmbH of Germany
and its subsidiary, Voith, Inc. The jury determined that
Beloit's patents on its new Bel-Champ(TM) technology for the
drying section of large paper manufacturing machines were
valid and infringed by Voith in connection with Voith's sale
of a paper machine dryer section. The verdict has been
appealed by Voith. The award has not been recorded in the
Company's financial statements.
In addition, on November 23, 1994, a Federal court jury in
Madison, Wisconsin returned a verdict finding that Valmet
Corporation of Finland infringed a Beloit Corporation patent
on the same Bel-Champ paper machine drying technology. In
connection with this suit, the jury awarded Beloit $7,875 in
damages. It is expected that the verdict in this case will
be appealed by Valmet. The award has not been recorded in
the Company's financial statements.
NOTE 13
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate that value:
Cash and Cash Equivalents: The carrying value approximates
fair value because of the short maturity of those
instruments.
Long-Term Obligations: The fair value of the Company's
long-term obligations have been based on prevailing market
quotations and by discounting cash flows using current
market yields quoted on similar issues.
The estimated fair values of the Company's financial
instruments at October 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994
(in thousands) Carrying Value Fair Value
-------------- ----------
<S> <C> <C>
Cash and Cash Equivalents $ 196,455 $ 196,455
========= =========
Long-Term Obligations (571,054) (567,554)
========= =========
<CAPTION>
<S> <C> <C>
1993
(in thousands) Carrying Value Fair Value
-------------- ----------
Cash and Cash Equivalents $ 165,074 $ 165,074
========== =========
Long-Term Obligations (559,852) (607,863)
========== =========
</TABLE>
NOTE 14
TRANSACTIONS WITH AFFILIATED COMPANIES
Mitsubishi Heavy Industries, Ltd. ("Mitsubishi") owns a 20%
interest in Beloit Corporation. In connection with this
ownership interest, Mitsubishi entered into certain
agreements that provide it with the right to designate one
of Beloit's five directors. The agreements also place
certain restrictions on the transfer of Beloit stock. In
the event of change in control of the Company, Mitsubishi
has the right to sell its 20% interest back to the Company
for the greater of $60,000 or the book value of its equity
interest.
Transactions with Mitsubishi for the years ending October
31, were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Sales $ 487 $ 152 $ 88
Purchases 191 5,352 897
Receivables 2,335 1,712 920
License Income 3,931 3,794 4,800
</TABLE>
The Company believes that its transactions with Mitsubishi
were competitive with alternate sources of supply for each
party involved.
In 1990, the Company entered into an agreement to acquire
up to a 20% interest in Measurex. As part of the agreement,
Measurex elected a nominee selected by the Company to its
Board of Directors. There were no significant transactions
with Measurex in 1994, 1993 or 1992. On December 29, 1994,
Measurex repurchased 2,026,900 shares of its stock which had
been purchased by the Company, reducing the Company's
interest to 10%.
NOTE 15
SEGMENT INFORMATION
The Company designs, manufactures and markets products
structured into four industry segments.
Papermaking Machinery and Systems (Beloit Corporation)
produces and markets papermaking machinery and allied
equipment for the pulp and paper industries. The Company's
investment in Measurex Corporation and related equity income
(loss) are included in this segment's identifiable assets
and operating results.
The P&H(TM) Mining Equipment Division (Harnischfeger
Corporation) designs, manufactures and markets electric
mining shovels, electric and diesel-electric draglines,
buckets, hydraulic mining excavators, large rotary blasthole
drilling equipment and related replacement parts for the
surface mining and quarrying industries. The Joy Mining
Equipment Division (Joy Technologies Inc.) designs,
manufactures and distributes continuous miners, longwall
shearers, shuttle cars and flexible conveyor train
continuous haulage systems for use in the underground
extraction of coal and other minerals. In addition, the
Division engineers, manufactures and markets worldwide a
highwall mining system for the extraction of coal from
exposed surface seams in the walls of surface coal mines,
trenches and mountain side benches. It also rebuilds and
services installed equipment and sells spare parts for the
equipment it manufactures.
The Material Handling Equipment Division (Harnischfeger
Corporation) designs, manufactures, services and markets
overhead cranes, electric wire rope and chain hoists,
engineered products, container cranes and crane
modernizations and electrical products for use in a variety
of industries and applications.
The Environmental Group (Joy Environmental Technologies
Inc.) designs and installs systems for controlling air
pollution generated by electric power plants and industrial
solid-fuel combustion operations. The Group also designs,
fabricates and installs systems for the collection and
removal of particulates and ash accumulated at the bottom of
coal-burning boilers and particulates and fly ash carried up
the exhaust flue of these boilers.
Intersegment sales are not significant. Common operating
plants have been allocated to the respective segments.
Corporate assets include principally cash, cash
equivalents, the investment in HEI in 1994 and 1993, certain
intangibles and administration facilities.
<TABLE>
<CAPTION>
Segments of Business by Industry Total Operating Depreciation and
(in thousands) Sales Income (Loss) Amortization
----- ------------- ---------------
<S> <C> <C> <C>
1994
Papermaking Machinery and Systems $ 712,778 $ 32,195 $ 31,945
Mining Equipment 698,288 80,054 34,570
Material Handling Equipment 109,429 12,094 2,981
Environmental 162,247 (2,090) 2,887
---------- --------- ---------
Total continuing operations 1,682,742 122,253 72,383
Corporate (26,668) 860
Discontinued Operations
---------- --------- ---------
Consolidated total $1,682,742 $ 95,585 $ 73,243
========== ========= =========
1993
Papermaking Machinery and Systems $ 580,421 $ (18,113) $ 30,964
Mining Equipment 682,562 39,664 33,418
Material Handling Equipment 117,032 6,753 2,588
Environmental 190,305 (16,182) 3,854
---------- ---------- ---------
Total continuing operations 1,570,320 12,122 70,824
Corporate (31,159) 1,805
Discontinued Operations
---------- ---------- ---------
Consolidated total $1,570,320 $ (19,037) $ 72,629
========== ========== =========
1992
Papermaking Machinery and Systems $ 699,127 $ 70,860 $ 27,865
Mining Equipment 754,413 106,657 32,078
Material Handling Equipment 113,412 10,343 2,415
Environmental 183,180 6,710 3,499
---------- --------- ---------
Total continuing operations 1,750,132 194,570 65,857
Corporate (23,465) 1,394
Discontinued Operations
---------- --------- ---------
Consolidated total $1,750,132 $ 171,105 $ 67,251
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Segments of Business by Industry Capital Identifiable
(in thousands) Expenditures Assets
------------ -----------
<S> <C> <C>
1994
Papermaking Machinery and Systems $ 27,599 $ 752,999
Mining Equipment 16,853 739,915
Material Handling Equipment 3,935 135,680
Environmental 2,125 125,649
--------- ----------
Total continuing operations 50,512 1,754,243
Corporate 330 164,412
Discontinued Operations 63,298
--------- ----------
Consolidated total $ 50,842 $1,981,953
========= ==========
1993
Papermaking Machinery and Systems $ 44,347 $ 730,955
Mining Equipment 22,947 717,921
Material Handling Equipment 1,419 85,276
Environmental 2,488 122,376
--------- ----------
Total continuing operations 71,201 1,656,528
Corporate 560 154,453
Discontinued Operations 97,269
--------- ----------
Consolidated total $ 71,761 $1,908,250
========= ==========
1992
Papermaking Machinery and Systems $ 27,842 $ 841,983
Mining Equipment 29,817 797,069
Material Handling Equipment 1,502 90,161
Environmental 2,698 140,251
--------- ----------
Total continuing operations 61,859 1,869,464
Corporate 2,111 95,333
Discontinued Operations 144,808
--------- ---------
Consolidated total $ 63,970 $2,109,605
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Geographical Segment Information Total Interarea Sales to Unaffil-
(in thousands) Sales Sales iated Customers
----- --------- ---------------
<S> <C> <C> <C>
1994
United States $1,458,739 $(158,119) $1,300,620
Europe 165,624 (42,111) 123,513
Other Foreign 270,410 (11,801) 258,609
Interarea Eliminations (212,031) 212,031 -
---------- --------- ----------
$1,682,742 $ - $1,682,742
========== ========= ==========
1993
United States $1,261,477 $(121,442) $1,140,035
Europe 162,847 (11,007) 151,840
Other Foreign 294,459 (16,014) 278,445
Interarea Eliminations (148,463) 148,463 -
--------- --------- ----------
$1,570,320 $ - $1,570,320
========== ========= ==========
1992
United States $1,242,018 $(129,535) $1,112,483
Europe 308,807 (20,023) 288,784
Other Foreign 365,351 (16,486) 348,865
Interarea Eliminations (166,044) 166,044 -
---------- --------- ----------
$1,750,132 $ - $1,750,132
========== ========= ==========
</TABLE>
Exports of U.S.-produced products were approximately
$236,000, $173,000 and $218,000 in 1994, 1993 and 1992,
respectively.
<TABLE>
<CAPTION>
Geographical Segment Information Operating Identifiable
(in thousands) Income (Loss) Assets
------------- ------
<S> <C> <C>
1994
United States $ 95,704 $1,333,498
Europe 3,374 265,441
Other Foreign 23,942 201,783
Interarea Eliminations (767) (46,479)
--------- ----------
$ 122,253 $ 1,754,243
========= ==========
1993
United States $ 14,240 $ 1,253,417
Europe 8,684 213,692
Other Foreign (8,607) 237,840
Interarea Eliminations (2,195) (48,421)
--------- ---------
$ 12,122 $ 1,656,528
========= =========
1992
United States $ 145,004 $ 1,333,707
Europe 24,416 306,346
Other Foreign 26,420 275,429
Interarea Eliminations (1,270) (46,018)
--------- ----------
$ 194,570 $1,869,464
========= ==========
</TABLE>
Exports of U.S.-produced products were approximately
$236,000, $173,000 and $218,000 in 1994, 1993 and 1992,
respectively.
Note 16
DISCONTINUED OPERATIONS
In 1993, the Systems Group consisted of two subsidiaries,
HEI and Syscon. The Board of Directors and management of
the Company determined that this segment did not meet the
criteria of a core business. As such, the Board of
Directors determined that retention of the Systems Group was
not consistent with the Company's long-term goals.
On October 29, 1993, the Company completed the sale of HEI
to that unit's senior management and some equity partners.
Proceeds from the sale were $45,219, consisting of $23,219
in cash at closing, $10,000 of preferred stock and a
ten-year subordinated promissory note for $12,000. The
preferred stock is nonvoting and nonconvertible, and carries
a dividend rate increasing from 6% in the first three years
to 8% in years 4-10. Mandatory redemption is scheduled in
year 10. The subordinated promissory note bears interest at
rates ranging from 8% to 16%, quarterly payments starting in
October, 1998 and a final payment of $3,500 in October,
2003. The Company agreed to make available a back-up
bonding guarantee facility for certain bid, performance and
other contract bonds issued by HEI. The maximum amount of
guarantees cannot exceed $100,000 in the first year
subsequent to sale, with the maximum amount decreasing to
zero by November, 2000. Outstanding contract bonds under
the guarantee arrangement totaled approximately $74,000 at
October 31, 1994. HEI typically requires similar bonds from
its major subcontractors. Such guarantees have been a
normal part of HEI's business in the past and have not
resulted in cash outlays. The back-up facility may not be
used for new types of business or for projects outside of
North America, nor does it permit exposure to consequential
damages on commercial contracts.
The Company reported a $16,173 after-tax gain on the sale
of this discontinued operation in 1993.
In the second quarter of fiscal 1994, the Company
announced its decision to divest itself of Syscon, the
remaining unit in the Systems Group. At October 31, 1994,
the Company was pursuing a plan which provided for the spin-
off of Syscon through a dividend of Syscon stock to the
shareholders of Harnischfeger Industries, Inc. The Company
retains the option to pursue other divestiture alternatives.
The divestiture is anticipated to occur in the first half of
1995. The operating results of the Systems Group have been
segregated and are shown separately in the Statement of
Income as results from discontinued operations. Operating
results of discontinued operations as of October 31 were as
follows:
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $132,260 $245,503 $234,308
Income (loss) before income taxes (107) 7,496 9,219
Income taxes 900 3,816 3,533
Income (loss) from discontinued
operations (1,007) 3,680 5,686
</TABLE>
The difference between the federal statutory tax rate and
the effective tax rate relates primarily to non-deductible
goodwill of Syscon.
NOTE 17
ACQUISITION OF JOY TECHNOLOGIES INC.
On November 29, 1994, the Company completed the acquisition
of Joy Technologies Inc. upon the approval of the
shareholders of each company. Under the terms of the
acquisition, accounted for as a pooling of interests, the
Company exchanged 17,720,750 common shares for all of Joy's
31,353,000 outstanding shares, at an exchange ratio of .5652
of a share of the Company's common stock for each of Joy's
common shares.
The fiscal year of Joy has been conformed to the Company's
fiscal year effective November 1, 1994, and all periods
presented have been retroactively restated (See Note 1-
Significant Accounting Policies - Basis of Presentation).
Joy's operating results for the period February 26, 1994 to
October 31, 1994 have been reflected as an adjustment to the
combined Company's retained earnings on November 1, 1994.
Presented below are the separate results of operations of
the Company (HII) and Joy for the three years ended October
31, 1994. Amounts related to Joy have been adjusted to
reflect the adoption of SFAS 106 through the immediate
recognition of the obligation as of November 1, 1993 to
conform with the Company's adoption.
<TABLE>
<CAPTION>
Years ended October 31,
(in Millions) 1994 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales and other income
HII (as previously reported) $ 1,139.9 $ 997.3 $ 1,155.8
Effect of Joy 572.7 583.3 614.5
---------- --------- ----------
Combined 1,712.6 1,580.6 1,770.3
========== ========= ==========
Income from continuing operations
HII (as previously reported) 19.1 (36.9) 49.8
Effect of Joy 14.5 (2.6) 14.1
---------- --------- ----------
Combined 33.6 (39.5) 63.9
========== ========= ==========
Discontinued operations
HII (as previously reported) (1.0) 19.8 5.7
Extraordinary items
Effect of Joy (4.8) - (22.8)
Cumulative effect of change in
accounting principle
HII (as previously reported) (66.1) - -
Effect of Joy (15.6) - -
Net Income (Loss)
HII (as previously reported) (48.0) (17.1) 55.5
Effect of Joy (5.9) (2.6) (8.7)
---------- ---------- ----------
Combined $ (53.9) $ (19.7) $ 46.8
========== ========== ==========
</TABLE>
NOTE 18 UNAUDITED
QUARTERLY FINANCIAL DATA AND STOCK PRICES
(Dollar amounts in thousands, except per share and market price amounts)
<TABLE>
<CAPTION>
Fiscal Quarter
First Second Third
--------------------------------------------
<S> <C> <C> <C>
Net sales $369,243 $389,933 $424,376
Gross profit 80,471 84,743 93,696
Operating income 16,560 19,570 23,391
Income from continuing operations 3,613 4,632 7,713
Income (loss) from discontinued operations,
net of applicable
income taxes 431 473 99
Extraordinary loss on retirement
of debt, net of applicable
income taxes - - (4,827)
Cumulative effect of accounting
change, net of applicable income
taxes and minority interest (81,696) - -
-------- -------- --------
Net income(loss) $ (77,652) $ 5,105 $ 2,985
======== ======== ========
Earnings (loss) per share (1)
Income from continuing operations $ 0.08 $0.11 $0.18
Income (loss) from discontinued
operations 0.01 0.01 -
Extraordinary loss on retirement of
debt - - (0.11)
Cumulative effect of accounting
change (1.88) - -
--------- -------- --------
Net income(loss)per share $(1.79) $0.12 $0.07
========= ======== ========
Market price of common stock:
High $25 1/2 $25 3/4 $21 3/4
Low 21 1/2 20 1/8 18 1/2
</TABLE>
(Dollar amounts in thousands, except per share and market price amounts)
<TABLE>
<CAPTION>
1994
Fourth Year
----------------------------
<S> <C> <C>
Net sales $499,190 $1,682,742
Gross profit 116,290 375,200
Operating income 36,064 95,585
Income from continuing operations 17,660 33,618
Income (loss) from discontinued operations,
net of applicable
income taxes (2,010) (1,007)
Extraordinary loss on retirement
of debt, net of applicable
income taxes - (4,827)
Cumulative effect of accounting
change, net of applicable income
taxes and minority interest - (81,696)
-------- ----------
Net income(loss) $ 15,650 $ (53,912)
======== ==========
Earnings (loss) per share (1)
Income from continuing operations $0.40 $0.77
Income (loss) from discontinued
operations (0.05) (0.02)
Extraordinary loss on retirement of
debt - (0.11)
Cumulative effect of accounting
change - (1.87)
-------- ----------
Net income(loss)per share $0.35 $(1.23)
======== ==========
Market price of common stock:
High $26 1/2 $26 1/2
Low 20 1/2 18 1/2
(Dollar amounts in thousands, except per share and market price amounts)
</TABLE>
<TABLE>
<CAPTION>
Fiscal Quarter
First Second Third
--------------------------------------------
<S> <C> <C> <C>
Net sales $373,370 $402,066 $384,955
Gross profit 87,455 91,416 84,019
Operating income (loss) 19,362 14,922 (63,869)
Income (loss) from continuing
operations 5,611 1,865 (48,985)
Income from discontinued operations,
net of applicable income taxes 481 775 1,192
Gain on sale of discontinued
operation, net of applicable
income taxes - - -
-------- -------- --------
Net income (loss) $ 6,092 $ 2,640 $(47,793)
======== ======== ==========
Earnings (loss) per share (2)
Income (loss) from continuing
operations $0.12 $0.04 $(1.13)
Income from discontinued operations 0.01 0.02 0.03
Gain on sale of discontinued
operations - - -
-------- -------- ---------
Net income (loss) per share $0.13 $0.06 ($1.10)
========= ======== ==========
Market price of common stock:
High $20 7/8 $19 3/4 $21 3/8
Low 17 1/8 17 1/8 17 5/8
</TABLE>
(Dollar amounts in thousands, except per share and market
price amounts)
<TABLE>
<CAPTION>
1993
Fourth Year
----------------------------
<S> <C> <C>
Net sales $409,929 $1,570,320
Gross profit 83,079 345,969
Operating income (loss) 10,548 (19,037)
Income (loss) from continuing
operations 1,966 (39,543)
Income from discontinued operations,
net of applicable income taxes 1,232 3,680
Gain on sale of discontinued
operation, net of applicable
income taxes 16,173 16,173
-------- ----------
Net income (loss) $ 19,371 $ (19,690)
======== ==========
Earnings (loss) per share (2)
Income (loss) from continuing
operations $0.05 $(0.89)
Income from discontinued operations 0.03 0.08
Gain on sale of discontinued
operations 0.37 0.37
-------- ----------
Net income (loss) per share $0.45 ($0.44)
======== ==========
Market price of common stock:
High $22 3/4 $22 3/4
Low 19 1/8 17 1/8
</TABLE>
(1) Due to the effect of the sale of 2.0 million shares of
treasury stock in September, 1994 and the use of the
weighted average shares outstanding each quarter for
computing earnings (loss) per share, the sum of the
quarterly per share amounts does not equal the per
share amount for the fiscal year.
(2) Due to the effect of purchase of 2.5 million shares
for the Stock Employee Compensation Trust in April,
1993 and the use of the weighted average shares
outstanding each quarter for computing earnings (loss)
per share, the sum of the quarterly per share amounts
does not equal the per share amount for the fiscal
year.
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Balance at Additions Additions
Beginning by Charged
Classification of Year Acquisition to Expense Deductions(1)
- ------------------------------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1994
Doubtful accounts $ 9,795 $ 532 $ 1,458 $ (4,817)
Possible contract losses 2,687 - - -
------ ------ ------ -------
$12,482 $ 532 $ 1,458 $ (4,817)
====== ====== ====== =======
For the year ended October 31, 1993
Doubtful accounts $ 6,227 - $ 7,630 $(3,738)
Possible contract losses 2,890 - - -
------ ------ ------ -------
$ 9,117 - $ 7,630 $(3,738)
====== ====== ====== =======
For the year ended October 31, 1992
Doubtful accounts $ 7,939 - $ 2,605 $(4,332)
Possible contract losses 2,774 - - -
------ ------ ------ -------
$ 10,713 - $ 2,605 $(4,332)
====== ====== ====== =======
<CAPTION>
Transactions
Currency of Balance
Translation Discontinued at End
Classification Effects Operations of Year
- ------------------------------ ---------- ----------- -----------
<S> <C> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1994
Doubtful accounts $ 262 - $ 7,230
Possible contract losses - (2,687) -
------ ------ ------
$ 262 $(2,687) $ 7,230
====== ======= =======
For the year ended October 31, 1993
Doubtful accounts $ (270) $ (54) $ 9,795
Possible contract losses (203) 2,687
------ ------- ------
$ (270) $ (257) $12,482
====== ======= =======
For the year ended October 31, 1992
Doubtful accounts $ 11 $ 4 $ 6,227
Possible contract losses - 116 2,890
------ ------- -------
$ 11 $ 120 $ 9,117
====== ======= =======
</TABLE>
(1) Represents write-off of bad debts, net of recoveries.
<TABLE>
Allowance Deducted in Balance Sheet from Deferred Tax Assets:
<CAPTION>
Balance at Additions Balance
Beginning Charged at end
of Year to Expense of Year
---------- ---------- --------
<S> <C> <C> <C>
For the year ended October 31, 1994 $ 12,421 $ 1,785 $ 14,206
For the year ended October 31, 1993 $ 7,696 $ 4,725 $ 12,421
For the year ended October 31, 1992 $ - $ 7,696 $ 7,696
</TABLE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement
on Form S-3 and in the Registration Statements on Form S-8
listed below of Harnischfeger Industries, Inc. of our report
dated December 5, 1994 which appears in this Current Report
on Form 8-K.
1. Registration Statement on Form S-8 (Registration No. 33-
42833)
2. Registration Statement on Form S-8 (Registration No. 33-
23985)
3. Registration Statement on Form S-8 (Registration No. 33-
18393)
4. Registration Statement on Form S-3 (Registration No. 33-
51436)
5. Registration Statement on Form S-8 (Registration No. 33-
46738)
6. Registration Statement on Form S-8 (Registration No. 33-
46739)
7. Registration Statement on Form S-8 (Registration No. 33-
46740)
8. Registration Statement on Form S-8 (Registration No. 33-
57209)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
March 13, 1995
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in the Prospectus constituting
part of the Registration Statement on Form S-3 File No.
33-57979 and in the Registration Statements on Form S-8
listed below of Harnischfeger Industries, Inc. of our
reports dated March 25, 1994, which are referred to in this
Current Report on Form 8-K.
1. Registration Statement on Form S-8 (Registration No. 33-
42833)
2. Registration Statement on Form S-8 (Registration No. 33-
23985)
3. Registration Statement on Form S-8 (Registration No. 33-
18393)
4. Registration Statement on Form S-3 (Registration No. 33-
51436)
5. Registration Statement on Form S-8 (Registration No. 33-
46738)
6. Registration Statement on Form S-8 (Registration No. 33-
46739)
7. Registration Statement on Form S-8 (Registration No. 33-
46740)
8. Registration Statement on Form S-8 (Registration No. 33-
57209)
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
March 13, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
HARNISCHFEGER INDUSTRIES, INC.
(Registrant)
March 13, 1995 By /s/ James C. Benjamin
-----------------
James C. Benjamin
Vice President,
Controller and
Chief Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 196,455
<SECURITIES> 0
<RECEIVABLES> 429,101
<ALLOWANCES> (7,230)
<INVENTORY> 357,847
<CURRENT-ASSETS> 1,043,401
<PP&E> 901,682
<DEPRECIATION> (411,445)
<TOTAL-ASSETS> 1,981,953
<CURRENT-LIABILITIES> 612,076
<BONDS> 568,933
<COMMON> 50,506
0
0
<OTHER-SE> 451,859
<TOTAL-LIABILITY-AND-EQUITY> 1,981,953
<SALES> 1,682,742
<TOTAL-REVENUES> 1,712,648
<CGS> 1,307,542
<TOTAL-COSTS> 1,617,063
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (47,366)
<INCOME-PRETAX> 48,219
<INCOME-TAX> 12,377
<INCOME-CONTINUING> 33,618
<DISCONTINUED> (1,007)
<EXTRAORDINARY> (4,827)
<CHANGES> (81,696)
<NET-INCOME> (53,912)
<EPS-PRIMARY> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
