SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM 10-Q/A
---------
AMENDMENT NO. 1
TO
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
X FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1995
- ----- ----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ------ OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO ______
- ------
COMMISSION FILE NUMBER 1-9299
-----------------------------
HARNISCHFEGER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 39-1566457
-------------------- ------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
13400 Bishops Lane, Brookfield, Wisconsin 53005
- ------------------------------------------------
(414) 671-4400
- ------------------------------------------------
(Address & telephone number of principal executive offices)
Indicate by checkmark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
---- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 15, 1995
- --------------------------- ------------------------------
Common Stock, $1 par value 47,710,989 shares
HARNISCHFEGER INDUSTRIES, INC.
FORM 10-Q/A
AMENDMENT NO. 1
TO
JANUARY 31, 1995 QUARTERLY REPORT ON FORM 10-Q
The undersigned registrant hereby amends its
Quarterly Report on Form 10-Q for the first
quarterly period ended January 31, 1995, as
follows:
Part I
1) Note (g) "Long-Term Obligations" is amended to
revise the classification of certain long-term
obligations, and
2) "Liquidity and Cash Flows" on page 13 of
Management's Discussion and Analysis is amended to
present a revised calculation of the debt to
capitalization ratio.
The remainder of the January 31, 1995 Quarterly
Report on Form 10-Q is unchanged.
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has duly
caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
(Registrant)
By /s/ Francis M. Corby, Jr.
----------------------------
Francis M. Corby, Jr.
Executive Vice President for
Finance and Administration
and Chief Financial Officer
Date: March 20, 1995 /s/ James C. Benjamin
----------------------------
James C. Benjamin
Vice President and Controller
and Chief Accounting Officer
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
FORM 10-Q/A
JANUARY 31, 1995
INDEX
-----
Page No.
--------
PART I. Financial Information:
Statement of Income - 1
Three Months Ended
January 31, 1995 and 1994
Balance Sheet - 2-3
January 31, 1995 and
October 31, 1994
Statement of Cash Flows - 4
Three Months Ended
January 31, 1995 and 1994
Statement of Shareholders' Equity - 5
Three Months Ended
January 31, 1995 and 1994
Notes to Financial Statements 6-9
Management's Discussion and Analysis
of Results of Operations and
Financial Condition 10-15
PART II. Other Information 16-17
Signatures 18
Page No. 1
----------
PART I. FINANCIAL INFORMATION
------------------------------
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
<TABLE>
STATEMENT OF INCOME
(Amounts in thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
January 31,
---------------------
1995 1994
-------- ---------
<S> <C> <C>
Revenues
Net Sales $467,719 $369,243
Other Income 9,329 9,125
--------- ---------
477,048 378,368
Cost of Sales 367,973 288,772
Product Development, Selling
and Administrative Expenses 75,996 73,036
--------- ---------
Operating Income 33,079 16,560
Interest Expense - Net (11,492) (11,187)
---------- ---------
Income Before Joy Merger Costs, Provision
for Income Taxes and Minority Interest 21,587 5,373
Joy Merger Costs (17,459) -
---------- ---------
4,128 5,373
Provision for Income Taxes (including
credit of $6,075 relating to Joy
Joy merger costs) (1,475) (1,432)
Minority Interest (146) (328)
---------- ---------
Income From Continuing Operations
(after deducting $11,384, net of
applicable income taxes, related
to Joy merger costs) 2,507 3,613
Income From and Net Loss on Sale of
Discontinued Operation, net of
applicable income taxes (21,948) 431
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes (3,481) -
Cumulative Effect of Accounting Change,
net of applicable income taxes and
minority interest - (81,696)
--------- ----------
Net (Loss) $(22,922) $(77,652)
========= ==========
Earnings (Loss) Per Share
Income from continuing operations
(after deducting $0.24 per share
related to Joy merger costs) $ .06 $ 0.08
Income from and net loss on sale of
discontinued operation (0.48) 0.01
Extraordinary loss on retirement of debt (0.08) -
Cumulative effect of accounting change - (1.88)
-------- ---------
Net (loss) $(0.50) $(1.79)
======== =========
</TABLE>
See accompanying notes to financial statements.
Page No. 2
----------
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
BALANCE SHEET
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
January 31, October 31,
1995 1994
-------------- -------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 118,063 $ 196,455
Accounts receivable 427,847 429,101
Allowance for doubtful accounts (7,157) (7,230)
Inventories 413,715 357,847
Net current assets of discontinued operations 45,000 20,047
Other current assets 54,056 47,181
-------------- -------------
1,051,524 1,043,401
Property, Plant and Equipment:
Land and improvements 31,487 31,999
Buildings 233,294 235,708
Machinery and equipment 636,401 633,975
-------------- -------------
901,182 901,682
Accumulated depreciation (422,342) (411,445)
-------------- -------------
478,840 490,237
Investments and Other Assets:
Investment in Measurex Corporation 29,402 66,347
Goodwill 150,473 143,899
Intangible assets 71,622 69,729
Noncurrent assets of discontinued operations - 43,251
Other assets 112,921 125,089
-------------- ------------
364,418 448,315
-------------- ------------
$1,894,782 $1,981,953
============= ============
</TABLE>
See accompanying notes to financial statements.
Page No. 3
----------
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
BALANCE SHEET
-----------------------------
Dollar amounts in thousands)
(Unaudited)
<CAPTION>
January 31, October 31,
1995 1994
---------- ------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 54,977 $ 16,540
Trade accounts payable 220,924 237,618
Employee compensation and benefits 79,985 75,679
Advance payments and progress billings 148,352 121,212
Accrued warranties 30,994 33,529
Other current liabilities 119,202 127,498
------------ ------------
654,434 612,076
Long-term Obligations 465,158 568,933
Other Liabilities:
Liability for postretirement benefits 114,608 118,610
Accrued pension costs 54,913 55,409
Other liabilities 20,184 18,239
Deferred income taxes 18,515 20,751
------------ -------------
208,220 213,009
Minority Interest 86,291 85,570
Shareholders' Equity:
Common stock (issued 50,529,036 and
50,506,471 shares, respectively) 50,529 50,506
Capital in excess of par value 580,265 576,886
Retained earnings (12,328) 19,936
Cumulative translation adjustments (40,207) (39,194)
------------ -------------
578,259 608,134
Less: Stock Employee Compensation
Trust (1,711,569 and 2,150,416
shares, respectively) at market (45,571) (53,760)
Treasury stock (2,852,604 and
2,852,604 shares, respectively)
at cost (52,009) (52,009)
------------ -------------
480,679 502,365
------------ -------------
$1,894,782 $1,981,953
============ =============
</TABLE>
See accompanying notes to financial statements.
Page No. 4
----------
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
STATEMENT OF CASH FLOWS
------------------------------
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
January 31,
-----------------------
1995 1994
----- --------
<S> <C> <C>
Operating Activities
Net income (loss) $(22,922) $ (77,652)
Add (deduct) - Items not affecting cash:
Income From and Net Loss on sale of
discontinued operation 21,948 (431)
Extraordinary loss on retirement of debt 3,481 -
Cumulative effect of accounting change,
net of applicable income taxes and
minority interest - 81,696
Depreciation and amortization 18,286 19,453
Minority interest, net of dividends paid 146 328
Other - net 2,030 (2,511)
Changes in working capital
Decrease in accounts receivable - net 6,245 19,211
(Increase) in inventories (24,999) (855)
(Increase) in other current assets (8,965) (9,231)
(Decrease) in trade accounts payable (28,300) (27,353)
(Decrease) in employee compensation
and benefits (639) (9,983)
Increase in advance payments and progress
billings 27,315 28,331
(Decrease) in other current liabilities (13,366) (15,297)
---------- ------------
Net cash (applied to)provided by
operating activities (19,740) 5,706
---------- ------------
Investment and Other Transactions
Sale of stock in Measurex Corporation 43,578 -
Property, plant and equipment - net (10,262) (9,759)
Other - net (3,718) (3,335)
---------- -----------
Net cash provided to (applied to)
investment and other transactions 29,598 (13,094)
Financing Activities
Dividends paid (4,583) (2,564)
Exercise of stock options 952 1,115
Purchase of treasury stock - (124)
Redemption of long-term obligations (95,458) (9,871)
Increase (decrease) in short-term notes payable 34,487 (3,687)
----------- -----------
Net cash (applied to) financing activities (64,602) (15,131)
----------- -----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 58 (392)
----------- -----------
(Decrease) in Cash and Cash Equivalents (54,686) (22,911)
(Use) of Cash by Joy Technologies from
February 26, 1994 to October 31, 1994 (23,706) -
Cash and Cash Equivalents at Beginning of Period 196,455 165,074
----------- ------------
Cash and Cash Equivalents at End of Period $ 118,063 $142,163
=========== ============
</TABLE>
<TABLE>
See accompanying notes to financial statements.
Page No. 5
----------
<table
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY
---------------------------------
(Dollar amounts in thousands)
(Unaudited)
<CAPTION>
Capital in
Common Excess of Retained
Stock Par Value Earnings
<S> <C> <C> <C>
Three Months Ended January 31, 1995
- -----------------------------------
Balance at October 31, 1994 $50,506 $576,886 $19,936
Adjustments related to Joy February 26, 1994-
October 31, 1994 13 182 (4,575)
-------- ------ ---------
Adjusted Balance at November 1, 1994 50,519 577,068 15,361
Net loss (22,922)
Translation adjustments
Exercise of 50,580 stock options 10 (133)
Dividends paid ($.10 per share) (4,767)
Dividends on shares held by SECT 184
Adjust SECT shares to market value 3,146
398,497 shares purchased by employee
benefit plans
--------- --------- ---------
Balance at January 31, 1995 $50,529 $580,265 $(12,328)
========= ========= ==========
Three Months Ended January 31, 1994
- -----------------------------------
Balance at October 31, 1993 $50,575 $560,178 $85,227
Net income (77,652)
Translation adjustments
Exercise of stock options (386)
Issuance of restricted stock (120)
4,875 shares acquired as
treasury stock
Dividends paid ($.10 per share) (2,795)
Dividends on shares held by SECT 231
Adjust SECT shares to market value 4,539
185,873 shares purchased by
employee benefit plans
Other activity - net (7)
------- -------- -------
Balance at January 31, 1994 $50,575 $564,435 $ 4,780
======= ======== ========
</TABLE>
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY
- ---------------------------------
(Dollar amounts in thousands)
(unaudited)
<CAPTION>
Cumulative
Translation Treasury
Adjustments SECT Stock
<S> <C> <C> <C>
Three Months Ended January 31, 1995
- -----------------------------------
Balance at October 31, 1994 $(39,194) $(53,760) $(52,009)
Adjustments related to Joy February 26, 1994-
October 31, 1994 1,742 - -
------- ------- -------
Adjusted Balance at November 1, 1994 (37,452) (53,760) (52,009)
Net loss
Translation adjustments (2,755)
Exercise of 50,580 stock options 1,075
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value (3,146)
398,497 shares purchased by employee
benefit plans 10,260
-------- --------- --------
Balance at January 31, 1995 $(40,207) $(45,571) $(52,009)
======== ========= ========
Three Months Ended January 31, 1994
- ------------------------------------
Balance at October 31, 1993 $(40,566) $(55,900) $(88,345)
Net income
Translation adjustments 868
Exercise of stock options 1,501
Issuance of restricted stock 262
4,875 shares acquired as
treasury stock (124)
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value (4,539)
185,873 shares purchased by
employee benefit plans 4,048
Other activity - net
---------- --------- ---------
Balance at January 31, 1994 $(39,698) $(54,628) $(88,469)
=========== ========= ==========
</TABLE>
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY
---------------------------------
(Dollar amounts in thousands)
(unaudited)
<CAPTION>
Total
<S> <C>
Three Months Ended January 31, 1995
- -----------------------------------
Balance at October 31, 1994 $502,365
Adjustments related to Joy February 26, 1994-
October 31, 1994 (2,638)
--------
Adjusted Balance at November 1, 1994 499,727
Net loss (22,922)
Translation adjustments (2,755)
Exercise of 50,580 stock options 952
Dividends paid ($.10 per share) (4,767)
Dividends on shares held by SECT 184
Adjust SECT shares to market value -
398,497 shares purchased by employee
benefit plans 10,260
--------
Balance at January 31, 1995 $480,679
=========
Three Months Ended January 31, 1994
- -----------------------------------
Balance at October 31, 1993 $511,169
Net income (77,652)
Translation adjustments 868
Exercise of stock options 1,115
Issuance of restricted stock 142
4,875 shares acquired as
treasury stock (124)
Dividends paid ($.10 per share) (2,795)
Dividends on shares held by SECT 231
Adjust SECT shares to market value -
185,873 shares purchased by
employee benefit plans 4,048
Other activity - net (7)
--------
Balance at January 31, 1994 $436,995
========
See accompanying notes to financial statements.
</TABLE>
Page No. 6
----------
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------
JANUARY 31, 1995
(Amounts in thousands unless indicated.)
(a)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 January
31, 1995 and October 31, 1994 include the accounts of Joy as
of January 31, 1995 and February 25, 1994, respectively, and
the consolidated statements of income and of cash flows for
the three month period ended January 31, 1995 and January 31,
1994 include the results of Joy for the three month period
ended January 31, 1995 and the three month period ended May
28, 1993 respectively. See Note (b) - Acquisition of Joy
Technologies Inc. The "Company" as used in these consolidated
financial statements refers to Harnischfeger Industries, Inc.
and its subsidiaries, including Joy.
In the opinion of management, all adjustments necessary for
the fair presentation of the results of operations for the
three months ended January 31, 1995 and 1994, cash flows for
the three months ended January 31, 1995 and 1994, and
financial position at January 31, 1995 have been made. All
adjustments made are of a normal recurring nature. The Joy
merger costs, loss on sale of discontinued operation and
extraordinary loss on retirement of debt, are discussed in
Notes b, c, and g, respectively.
These financial statements should be read in conjunction
with the financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for 1994 and in
conjunction with the 1994 financial statements and notes
thereto restated to give effect to the merger filed on a
Current Report on Form 8-K dated March 13, 1995.
The results of operations for any interim period are not
necessarily indicative of the results to be expected for the
full year.
(b) Acquisition of Joy Technologies Inc.
On November 29, 1994, the Company completed the acquisition of
Joy Technologies Inc. ("Joy") through a stock-for-stock merger
following approval of the merger by shareholders of each
company. Under the terms of the acquisition, accounted for as
a pooling of interests, the Company exchanged 17,720,750
shares of Company common stock for all of Joy's 31,353,000
outstanding shares of common stock, at an exchange ratio of
.5652 of a share of the Company's common stock for each share
of Joy common stock.
Joy's Mining Group is a leader in the worldwide development,
manufacture, distribution and servicing of underground mining
equipment for the extraction of coal and other bedded
materials. In addition, Joy's Environmental Group is a
supplier of air pollution and ash handling equipment for
electric utilities and
Page No. 7
----------
other industrial operations.
Effective November 1, 1994, the fiscal year of Joy was
conformed to the Company's fiscal year. All periods presented
have been retroactively restated (See Note (a) - Basis of
Presentation). Amounts related to Joy in fiscal 1994 have
been retroactively adjusted to reflect the adoption of
Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," through the immediate recognition of the obligation
as of November 1, 1993 to conform with the Company's adoption.
Joy's operating results for the period February 26, 1994 to
October 31, 1994, a net loss of $(4,575) on net sales of
$372,304, have been reflected as an adjustment to the combined
Company's retained earnings on November 1, 1994.
Transaction costs related to the merger of $17,459 ($11,384
net of tax or $0.24 per share) were charged to income during
the quarter and consisted primarily of investment banker,
attorney and accountant fees, severance and related benefits
and printing, mailing and registration expenses.
(c) Divestitures and Discontinued Operations
----------------------------------------
In the second quarter of fiscal 1994, the Company announced
its decision to divest itself of Syscon Corporation
("Syscon"), the remaining unit in the Company's Systems Group.
Accordingly, the operating results and assets and liabilities
of Syscon were segregated in the consolidated financial
statements and are reflected as net assets and results of
discontinued operations in the Balance Sheet and Statement of
Income, respectively. The Company pursued a plan providing
for the future spin-off of Syscon through a dividend of Syscon
stock to the shareholders of HII and other divestiture
alternatives. On February 16, 1995, the Company completed the
sale of Syscon (announced on January 20, 1995, subject to
closing conditions and regulatory approval) to Logicon, Inc.
for a cash price of $45,000. In connection with this sale,
the Company recorded a loss on sale of discontinued operations
of $(21,948) or $(0.48)per share, net of applicable income
taxes, in the first quarter of 1995.
(d)Inventories
-----------
Consolidated inventories consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1995 1994
---------- -----------
<S> <C> <C>
Finished goods $201,429 $ 182,084
Work in process and purchased parts 191,160 158,038
Raw materials 88,007 79,766
---------- -----------
480,596 419,888
Less excess of current cost over
stated LIFO value (66,881) (62,041)
---------- -----------
$413,715 $357,847
========== ===========
</TABLE>
Inventories valued using the LIFO method represented
approximately 85% and 81% of consolidated inventories at
January 31, 1995 and October 31, 1994, respectively.
Page No. 8
----------
The Company has reduced inventory by $4,778 and $3,739 at
January 31, 1995 and October 31, 1994, respectively, for
progress payments received on contracts accounted for on
the completed contract method.
(e)Research and Development Expense
--------------------------------
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
$7,280 and $8,354 for the three months ended January 31, 1995
and 1994, respectively. Certain capital expenditures used in
research activities, such as the construction of the new pilot
paper machine to be used in research and for customer tests,
are capitalized and depreciated over their expected useful
lives.
(f)Interest Expense - Net
----------------------
Net interest expense consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended
January 31,
---------------------
1995 1994
---------- ---------
<S> <C> <C>
Interest income 1,666 $ 1,785
Interest expense (13,158) (12,972)
---------- ---------
Interest expense - net $(11,492) $(11,187)
========== =========
</TABLE>
(g)Long-Term Obligations
---------------------
Long-term obligations at January 31, 1995 and October 31,
1994 consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1995 1994
---------- -----------
<S> <C> <C>
10 1/4% Senior Notes due 2003 $ 188,650 $ 200,000
Bank Facility - 90,785
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 1995 to 2017 32,428 32,632
Other 21,213 22,637
-------- ---------
467,291 571,054
Less: Amounts payable within one year 2,133 2,121
-------- ---------
$465,158 $568,933
======== =========
</TABLE>
The $90,785 Tranche B term loan, the remaining borrowings
outstanding under the Joy Bank Facility, was repaid in full on
November 29, 1994, upon the consummation of the Company's
merger with Joy. The Bank Facility agreement, including its
revolving credit agreement, was terminated following the
merger. In addition, under Joy's 10 1/4% Senior Notes due
2003, Joy was required upon a change in control to make an
offer to purchase the outstanding Senior Notes at 101% of the
principal amount thereof plus accrued interest. On December
29, 1994, Joy issued an offer to purchase for cash any and all
of its outstanding 10 1/4% Notes. This offer expired on
February 10, 1995 with $270 being redeemed under the offer.
Prior to this tender offer, the Company had purchased $11,350
of outstanding 10 1/4% Senior Notes in unsolicited open market
transactions. As a result of the Bank Facility and 10 1/4%
Senior Note redemptions, the Company recorded an extraordinary
loss on debt retirement, net of applicable income taxes, of
$(3,481) or $(0.08) per share in the first quarter consisting
primarily of unamortized
Page No. 9
-----------
financing costs and redemption premiums.
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 borrowing 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. At January 31, 1995, there were no
outstanding borrowings related to the Revolving Credit
Facility.
(h)Contingent Liabilities
----------------------
At January 31, 1995, the Company was contingently liable to
banks, financial institutions, and others for approximately
$124,000 for outstanding letters of credit securing
performance of sales contracts and other guarantees. 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 the 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.
In addition, in accordance with the terms of the agreement
between the Company and Harnischfeger Engineers, Inc. ("HEI"),
the Company has made available a back-up bonding guarantee
facility for certain bid, performance and other contract bonds
issued by HEI. The amount of guarantees outstanding cannot
exceed $90,000 during fiscal 1995, with the maximum amount
decreasing to zero by November, 1998. Outstanding contract
bonds under the guarantee arrangement totalled approximately
$74,000 at January 31, 1995; HEI typically requires similar
bonds from its major subcontractors. Such guarantees have been
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 is a party to litigation matters, claims and
performance guarantees which are normal in the course of its
operations and, while the results of litigation, claims and
guarantees 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 on its consolidated financial position or
results of operations.
(i) U.S. Patent Infringement Case Jury Award
-----------------------------------------
On November 23, 1994, a Federal court jury in Madison,
Wisconsin returned a verdict finding that Valmet Corporation
of Finland infringed a patent on Bel-Champ(TM) 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.
(j) Sale of Measurex Stock
----------------------
On December 29, 1994, Measurex Corporation ("Measurex")
repurchased for $21.50 per share approximately 2,000 shares of
its stock which had been purchased by the Company. The
transaction reduced the Company's interest in Measurex from
20% to 10%. The Company recorded a gain in Other Income in
the first quarter of fiscal 1995 in connection with the sale
of Measurex shares. Measurex continues to have cooperative
agreements with the Company's Beloit Corporation subsidiary
and the sale of these shares had no impact on the agreements.
Page No. 10
-----------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
THREE MONTHS ENDED JANUARY 31, 1995 AND 1994
---------------------------------------------
(Amounts in thousands unless indicated)
The net (loss) for the three months ended January 31, 1995
amounted to $(22,922), or $(.50) per share as compared to net
loss of $(77,652), or $(1.79) per share, for the three months
ended January 31, 1994. Income from continuing operations in
the first quarter of 1995, before Joy acquisition transaction
costs, improved to $13,891, or $.30 per share as compared to
$3,613, or $.08 per share for the comparable period in 1994.
Net results for the three month period ended January 31, 1995
were reduced by a charge of $(21,948), or $(0.48) per share,
to record a loss on sale of the discontinued operation
(Syscon). Also recorded was a charge of $(3,481), or $(.08)
per share, for the extraordinary loss on retirement of debt
related to the Joy Tranche B term loan and some Joy 10 1/4%
Senior Notes.
Net results for the first quarter ended January 31, 1994, were
reduced by $(81,696), or $(1.88) per share to record the
cumulative effect of the accounting change related to the
adoption of FAS No. 106 ("Employers' Accounting for
Postretirement Benefits Other Than Pensions").
Per share calculations for the first three months of 1995 and
1994 were based on 45,692 and 43,347 average shares
outstanding, respectively. The increase in average shares
outstanding reflects the September 1994 sale of 2,000 shares
of Common Stock in a private transaction. This sale of stock
satisfied the requirements under 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.
Significant factors contributing to the $1,106 decrease in
income from continuing operations for the first three months
of 1995 as compared to 1994 included: (1) a $16,519 increase
in operating income as described in the "Segment Information"
section which follows, (2) a $305 increase in interest expense
resulting from higher interest rates on certain Joy debt as
compared to the 1994 period, and (3) Joy merger transaction
costs of $17,459, consisting primarily of investment banker,
attorney and accountant fees, severance and related benefits
and printing, mailing and registration expenses.
The Company announced its decision in the second quarter of
fiscal 1994 to divest itself of the Systems Group's remaining
subsidiary, Syscon Corporation. The assets and liabilities
and operating results of Syscon were segregated in the
consolidated financial statements and are reflected as net
assets and results of discontinued operations in the Balance
Sheet and Statement of Income, respectively. On February 16,
1995, the Company completed the sale of Syscon (announced on
January 20, 1995, subject to closing conditions and regulatory
approval) to Logicon, Inc. for a cash price of $45,000. In the
first quarter of fiscal 1995, in connection with this sale,
the Company recorded a loss on sale of discontinued operations
of $(21,948), or $(0.48) per share, net of applicable income
taxes.
Page No. 11
<TABLE>
- -------
Segment Information
Operating results of the Company's business segments for the first
quarter of 1995 and 1994 are summarized as follows:
<CAPTION>
Net Sales Operating Income
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter
- -------------
Papermaking Machinery and
Systems $202,332 $146,976 $12,835 $ 6,536
Mining Equipment 192,859 163,216 22,228 12,991*
Material Handling Equipment 47,955 24,060 3,322 1,784
Environmental 24,573 34,991 (620) (205)
---------- -------- --------- --------
Total Business Segments $467,719 $369,243 37,765 21,106
========== ========
Corporate Administration (4,686) (4,546)
--------- --------
Operating Income $ 33,079 $ 16,560
========= ========
</TABLE>
* $3,731 of 1994 Joy Corporate Administration
expenses have been reclassified to the Mining
Equipment segment.
<TABLE>
Segment Information
- -------------------
Operating results of the Company's business segments for the
first quarter of 1995 and 1994 are summarized as follows:
<CAPTION>
Orders Booked Backlog at
1995 1994 1/95 10/95
------ ------ ------ -------
<S> <C> <C> <C> <C>
First Quarter
- -------------
Papermaking Machinery and
Systems $246,655 $150,311 $678,093 $633,770
Mining Equipment 193,592 147,920 167,560 166,827
Material Handling Equipment 49,489 23,854 108,646 107,112
Environmental 21,574 49,956 89,752 92,751
--------- ------- --------- ----------
Total Business Segments $511,310 $372,041 $1,044,051 $1,000,460
========= ======== ========== ==========
</TABLE>
Page No. 12
-----------
Segment Information - Continuing Operations
- -------------------------------------------
The Papermaking Machinery and Systems segment contributed
sales and operating profit of $202,332 and $12,835,
respectively, for the first three months of 1995, as compared
to net sales of $146,976 and operating profit of $6,536 for
the corresponding period in 1994. Sales increased 37% in
1995 over 1994 due to an increase in sales of papermaking
systems. Aggressive price competition continues to depress
profit margins on new machines and major rebuilds for this
segment in 1995. Operating profit included a gain from the
sale of Measurex stock for the first three months of 1995.
Operating profit in 1994 included income realized from a
favorable settlement of Canadian patent litigation, which
confidential settlement accounted for more than half of
reported income. Bookings for the first three months of 1995
amounted to $246,655 as compared to $150,311 for the same
period in 1994.
Net sales of the Mining Equipment segment amounted to
$192,859 and $163,216 for the first three months of 1995 and
1994, respectively. The sales increase is primarily due to
the Joy Mining Machinery Group's increase in both original
equipment sales and aftermarket sales. P&H(TM) Mining
Machinery Group also experienced increased sales primarily
due to U.S. machine sales increases. Operating profit
increased to $22,228 in the first quarter of 1995 as compared
to $12,991 in 1994. The increase in operating profit is
primarily due to Joy's more profitable aftermarket business,
favorable manufacturing variances and reduced selling,
general and administrative expenses resulting from the
coordination of corporate services. Bookings for the first
three months of 1995 amounted to $193,592 as compared to
$147,920 for the same period in 1994. The increase is due to
improved bookings in the U.S. for surface mining equipment
and increased Joy bookings reflecting higher coal production
rates following the end of UMWA strikes in the U.S and
increased orders in the United Kingdom and in South Africa.
The Material Handling Equipment segment contributed sales and
operating profit of $47,955 and $3,322, respectively, for the
first three months of 1995, as compared to sales of $24,060
and operating profit of $1,784 for the comparable period in
1994. Sales, profitability and bookings increased in the
first quarter of 1995, primarily due to the purchase of
Morris Mechanical Handling Limited in September 1994.
Bookings for the first three months of 1995 and 1994 amounted
to $49,489 and $23,854, respectively.
The Environmental segment's $10,418 first quarter sales
decline over the first quarter of last year is generally the
result of the segment's increased focus on higher-margin
opportunities and extremely competitive markets. Sales
declines occurred primarily in the sale of flue gas
desulfurization (or scrubber) systems and ash handling
systems. In addition, approximately $3,601 of the
Environmental segment's sales decline related to discontinued
medical waste incineration and industrial equipment product
lines. Operating losses for first quarter 1995 and 1994 were
$(620) and $(205), respectively. Bookings were $21,574 and
$49,956 for first quarter 1995 and 1994, respectively. The
decline in bookings reflects a large order in the first
quarter of 1994 for an ash handling system. Since the
Environmental segments' businesses involve large contracts,
timing of a single contract can result in an uneven bookings
pattern.
Segment Information - Discontinued Operations
- ---------------------------------------------
In the second quarter of fiscal 1994, the Company announced
its decision to divest itself of Syscon Corporation, the
remaining unit in the Systems Group. Accordingly, the assets
and liabilities and operating results of Syscon were
segregated in the consolidated financial statements and are
reflected as net assets and results of discontinued
operations in the Balance Sheet and Statement of Income,
respectively. On February 16, 1995, the Company completed
the sale of Syscon (announced on January 20, 1995, subject to
closing conditions and regulatory approval) to Logicon, Inc.
for a cash price of $45,000. In connection with this sale,
the Company recorded a loss on sale of discontinued
operations of $(21,948) or $(0.48) per share, net of
applicable income taxes, in the first quarter of
fiscal 1995.
Page No. 13
-----------
Income Taxes
- ------------
The Company's estimated annual effective tax rate for
continuing operations for the first three months of 1995 was
35.7% compared to a 35% federal statutory tax rate. The
principal reason for the difference between the effective
rate and the statutory rate is certain nondeductible costs
and expenses related to the merger with Joy. See Note (b),
Acquisition of Joy Technologies Inc.
Postretirement Benefits Other Than Pensions
- -------------------------------------------
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
adoption of this standard was a one-time pre-tax charge of
$(136,291) ($(81,696) or $(1.88) per share after taxes and
minority interest).
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 healthcare
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 Joy 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.
The Financial Accounting Standards Board has issued SFAS No.
112 "Employers' Accounting for Postemployment 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.
Liquidity and Cash Flows
- ------------------------
The Company's capital structure at January 31, 1995 and
October 31, 1994 was as follows:
<TABLE>
<CAPTION>
January 31, October 31,
1995 1994
----------- -----------
<S> <C> <C>
Short-term notes payable $ 52,844 $ 14,419
Long-term obligations, including current portion 467,291 571,054
----------- ----------
520,135 585,473
Minority interest 86,291 85,570
Shareholders' equity, excluding SECT 526,250 556,125
----------- -----------
Total capitalization $1,132,676 $1,227,168
=========== ===========
Debt to capitalization ratio 45.9% 47.7%
====== =======
</TABLE>
Cash Flow from Operating Activities
- -----------------------------------
Cash flow used by operating activities was $19,740 for the
three months ended January 31, 1995 compared to cash flow
provided by operating activities of $5,706 for the comparable
period in 1994. The decrease in cash flows between the
Page No. 14
-----------
periods is primarily due to increased Joy inventory being
built-up to cover stronger anticipated second quarter sales.
Net working capital decreased $34,235 during the three months
ended January 31, 1995 due to increases in short-term notes
payable, advance customer payments, and a decline in cash
and cash equivalents partially offset by an increase in
inventories and net assets of discontinued operations and a
decrease in accounts payable.
Cash Flow from Investment Activities
- ------------------------------------
On December 29, 1994, Measurex Corporation repurchased
approximately 2,000 million shares of its stock from the
Company resulting in an increase in cash flows from investing
activities of $43,578. Net capital expenditures for
property, plant and equipment for the three months ended
January 31, 1995 were $10,262 compared with $9,759 in 1994.
Cash Flow for Financing Activities
- ----------------------------------
The primary reason for the $64,602 use of cash for financing
activities in the first quarter of 1995 was the $95,458
payment for redemption of Joy's Tranche B term loan and
partial redemption of Joy 10 1/4% Senior Notes. This was
offset by an increase of $34,487 in short-term notes payable.
As a result of the redemptions of the term loan and Senior
Notes, the Company recorded an extraordinary loss on debt
retirement, net of applicable income taxes, of $(3,481), or
$(0.08) per share, in the first quarter, consisting primarily
of unamortized financing costs and redemption premiums.
Financing activities for the first quarter of fiscal 1994
used cash of $15,131 for the redemption of the remaining
mortgage balance related to certain U.S. facilities, the
payoff of short-term domestic borrowings and the payment of
a quarterly dividend.
Total obligations outstanding at January 31, 1995 were
$65,338 lower than at October 31, 1994 primarily due to the
redemption of certain Joy debt in the first quarter of fiscal
1995 as discussed above.
The Statement of Cash Flows for the three month period ending
January 31, 1995 has been adjusted to reflect the $23,706 use
of cash by Joy from the period February 26, 1994 to October
31, 1994.
The Company maintains the ability to expand its borrowing in
several ways, including the following:
(1) A shelf registration with the Securities and Exchange
Commission for the proposed sale of up to $150,000 of debt
securities. To date, no securities have been issued under
this registration.
(2) A four-year Revolving Credit Financing Facility Agreement
between the Company and certain domestic and foreign
financial institutions that allows for borrowing of up to
$240,000 at rates expressed in relation to LIBOR and other
rates.
(3) Short-term bank credit lines of foreign subsidiaries of
approximately $52,844 million of which approximately $16,042
million was outstanding at January 31, 1995.
The Company believes its available cash, cash flow provided
by operating activities and committed credit lines provide
adequate liquidity on both a short-
Page No. 15
----------
and long-term basis.
The Company has no significant capital commitments as of
January 31, 1995; any future capital commitments are expected
to be funded through cash flow from operations and, if
necessary, available lines of credit.
The Company intends to continue to expand its businesses,
both internally and through acquisitions. It is expected that
new acquisitions would be financed primarily by internally-
generated funds or additional borrowings.
Acquisition of Joy Technologies Inc.
------------------------------------
On November 29, 1994, the Company completed the acquisition
of Joy Technologies Inc. ("Joy") through a stock-for-stock
merger following approval of the merger by shareholders of
each company. Under the terms of the acquisition, accounted
for as a pooling of interests, the Company exchanged
17,720,750 shares of Company common stock for all of Joy's
31,353,000 outstanding shares of common stock, at an exchange
ratio of .5652 of a share of the Company's common stock for
each share of Joy common stock.
Joy's Mining Group is a leader in the worldwide development,
manufacture, distribution and servicing of underground mining
equipment for the extraction of coal and other bedded
materials. In addition, Joy's Environmental Group is a
supplier of air pollution and ash handling equipment for
electric utilities and other industrial operations.
Effective November 1, 1994, the fiscal year of Joy was
conformed to the Company's fiscal year. All periods
presented have been retroactively restated (See Note (a) -
Basis of Presentation). Amounts related to Joy in fiscal
1994 have been retroactively adjusted to reflect the adoption
of Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," through the immediate recognition of the
obligation as of November 1, 1993 to conform with the
Company's adoption.
Joy's operating results for the period February 26, 1994 to
October 31, 1994, a net loss of $(4,575) on net sales of
$372,304, have been reflected as an adjustment to the
combined Company's retained earnings on November 1, 1994.
Transaction costs related to the merger of $17,459 ($11,384
net of tax or $0.24 per share) were charged to income during
the quarter and consisted primarily of investment banker,
attorney and accountant fees, severance and related benefits
and printing, mailing and registration expenses.
Sale of Measurex Stock
- ----------------------
On December 29, 1994, Measurex Corporation repurchased for
$21.50 per share approximately 2,000 shares of its stock
which had been purchased by the Company. The transaction
reduced the Company's interest in Measurex from 20% to 10%.
The Company recorded a gain in Other Income in the first
quarter of fiscal 1995 in connection with the sale of
Measurex shares. Measurex continues to have cooperative
agreements with the Company's Beloit Corporation subsidiary
and the sale of these shares had no impact on the agreements.
Agreement with Jagenberg AG
Pursuant to a cooperation agreement entered into in August
1994, Beloit Corporation and Jagenberg Ag would cooperate in
the sale of complete systems of paper manufacturing equipment
worldwide and winders in the Americas. The agreement calls
for cross shareholding arrangements between Beloit, Jagenberg
and certain of their subsidiaries. Closing of the
transactions contemplated by the cooperation agreement is
scheduled to occur in the Spring of 1995, subject to the
satisfaction of certain conditions.
Page No. 16
-----------
PART II. OTHER INFORMATION
---------------------------
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The information called for by this Item was
previously reported in response to Item 4 of
Harnischfeger's Annual Report on Form 10-K for the
year ended October 31, 1994.
The following two matters were submitted to a vote
of security holders at the Annual Stockholders'
Meeting held March 6, 1995.
1. Management's nominees were elected as directors.
The number of shares voted for each nominee were:
<TABLE>
<CAPTION>
For Against
--------------- ----------------
<S> <C> <C>
John D. Correnti 41,325,531 127,068
Don H. Davis, Jr. 41,330,055 122,544
Robert B. Hoffman 41,322,513 130,086
Jean-Pierre Labruyere 41,310,071 142,528
</TABLE>
2. A proposal to amend the 1988 Incentive Stock
Plan to increase by 1,200,000 the aggregate number
of shares of Common Stock issuable thereunder and to
limit the number of shares that may be issued to
any participant thereunder was approved. In a
vote to approve the amendment, the following number
of shares of Common Stock were voted.
35,531,198 For
5,772,002 Against
149,349 Abstained
50 Non-Votes
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
11 Statement re: Calculation of Earnings Per
Share
(b) Reports on Form 8-K
(1) Current Report on Form 8-K dated November
29, 1994 relating to the announcement of the
completion of Harnischfeger Industries, Inc.'s
previously announced acquisition of Joy
Technologies Inc. through a stock-for-stock
merger.
(2) Current Report on Form 8-K dated January
16, 1995 relating to the announcement of
financial information on combined sales and net
income of Harnischfeger Industries, Inc. and Joy
Technologies Inc. for more than thirty (30) days
of post-merger combined operations for purposes
of complying with pooling of interests
accounting requirements.
(3) Current Report on Form 8-K/A dated January
20, 1995 relating to the announcement by
Harnischfeger Industries, Inc. that it has
entered into an agreement (subject to closing
conditions and regulatory approval) providing
for the sale of Syscon Corporation to Logicon,
Inc.
(4) Current Report on Form 8-K dated February
17, 1995 announcing that Harnischfeger
Industries, Inc. had completed its sale of
Syscon Corporation to Logicon, Inc.
Page No.17
----------
(5) Current Report on Form 8-K dated March 13,
1995 relating to the restatement of financial
statements for the year ended October 31, 1994
due to the Joy business combination accounted
for as a pooling of interests.
(6) Current Report on Form 8-K dated March 14,
1995 relating to the restated 1994 quarterly
income statements and 1994 quarterly segment
information for the Joy business combination
accounted for as a pooling of interests.
Page No. 18
-----------
FORM 10-Q
- ---------
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 thereunto duly
authorized.
HARNISCHFEGER INDUSTRIES, INC.
----------------------------
(Registrant)
/s/ Francis M. Corby, Jr.
------------------------
Francis M. Corby, Jr.
Executive Vice President for
Finance and Administration
and Chief Financial Officer
/s/ James C. Benjamin
------------------------------
James C. Benjamin
Vice President and Controller
Date March 17, 1995 and Chief Accounting Officer
Exhibit 11
----------
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
CALCULATION OF EARNINGS PER SHARE
----------------------------------
(Amounts in thousands except per share amounts)
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
Average Shares Outstanding 45,692 43,347
Income from Continuing Operations $2,507 $3,613
Income From and Net Loss on Sale
of Discontinued Operation, net
of applicable income taxes (21,948) 431
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes (3,481) -
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest - (81,696)
--------- ---------
Net (Loss) $(22,922) $(77,652)
======= ========
Earnings (Loss) Per Share
Income from continuing operations $ .06 $ .08
Income from and net loss on sale
of discontinued operation (.48) .01
Extraordinary loss on retirement of
debt (.08) -
Cumulative effect of accounting
change - (1.88)
-------- ---------
Net income (loss) $( .50) $(1.79)
======== =========
</TABLE>
