SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM 10-Q/A
---------
(MARK ONE)
Amendment Number One and Restatement of:
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
_____ OF THE SECURITIES EXCHANGE ACT OF 1934
X FOR THE QUARTERLY PERIOD ENDED January 31, 1998
_____ ----------------
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.)
3600 South Lake Drive, St. Francis, Wisconsin
- ---------------------------------------------
(Address of principal executive offices)
53235-3716
- ----------
(Zip Code)
(414)486-6400
- --------------------------------------------------
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------ -------
Indicate 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 12, 1998
- -------------------------- ------------------------------
Common Stock, $1 par value 47,799,592 shares
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
FORM 10-Q/A
----------
JANUARY 31, 1998
-----------------
INDEX
------
Page No.
--------
PART I. Financial Information:
Consolidated Statement of Income - 1
Three Months Ended
January 31, 1998 and 1997
Consolidated Balance Sheet - 2-3
January 31, 1998 and
October 31, 1997
Consolidated Statement of
Cash Flows - 4
Three Months Ended
January 31, 1998 and 1997
Consolidated Statement of
Shareholders' Equity - 5
Three Months Ended
January 31, 1998 and 1997
Notes to Consolidated
Financial Statements 6-11
Management's Discussion and
Analysis of Results of
Operations and Financial
Condition 12-16
PART II. Other Information 16-18
Signatures 19
The registrant hereby amends Part I and Item 6 of its
Quarterly Report for the period ended January 31, 1998, on
Form 10-Q and restates such report in its entirety.<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------
(Amounts in thousands except per share amounts)
(Unaudited)
Three Months Ended
January 31,
--------------------
1998 1997
----- -----
<S> <C> <C>
Revenues
Net Sales $634,327 $699,411
Other Income 10,158 8,760
-------- --------
644,485 708,171
Cost of Sales, including anticipated
losses on contracts 561,253 527,637
Product Development, Selling
and Administrative Expenses 112,181 113,034
--------- --------
Operating Income (Loss) (28,949) 67,500
Interest Expense - Net (18,772) (16,497)
--------- --------
Income (Loss) Before Provision (Benefit)
for Income Taxes and Minority Interest (47,721) 51,003
(Provision) Benefit for Income Taxes 16,230 (17,850)
Minority Interest 9,924 (2,295)
--------- --------
Net Income (Loss) $ (21,567) $ 30,858
========= ========
Earnings Per Share
Basic $ (0.46) $ 0.65
====== ======
Diluted $ (0.46) $ 0.64
====== ======
</TABLE>
See accompanying notes to financial statements.<PAGE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED BALANCE SHEET
- ------------------------------
(Dollar amounts in thousands)
January 31, October 31,
1998 1997
- ------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 18,065 $ 29,383
Accounts receivable-net 885,623 836,169
Inventories 623,160 594,761
Other current assets 133,303 119,076
Businesses held for sale 9,576 9,323
------------ -----------
1,669,727 1,588,712
Property, Plant and Equipment:
Land and improvements 60,196 60,724
Buildings 290,123 293,501
Machinery and equipment 805,489 821,479
- ----------- ----------
1,155,808 1,175,704
Accumulated depreciation (516,366) (518,604)
- ----------- ----------
639,442 657,100
Investments and Other Assets:
Goodwill 478,310 508,634
Intangible assets 28,649 33,027
Other assets 138,098 137,062
---------- -----------
645,057 678,723
- ---------- -----------
$2,954,226 $2,924,535
========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED BALANCE SHEET
- --------------------------
(Dollar amounts in thousands)
January 31, October 31,
1998 1997
- ------------- -------------
<S> <C> <C>
(Unaudited)
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 136,624 $ 225,853
Trade accounts payable 409,430 460,689
Employee compensation and benefits 114,166 132,268
Advance payments and progress billings 119,647 85,680
Accrued warranties 61,087 47,753
Other current liabilities 260,686 228,254
---------- ----------
1,101,640 1,180,497
Long-term Obligations 895,011 713,466
Other Liabilities:
Liability for postretirement benefits 50,952 56,202
Accrued pension costs 36,047 36,707
Other liabilities 10,994 11,608
Deferred income taxes 84,589 78,671
--------- ---------
182,582 183,188
Minority Interest 87,042 97,724
Shareholders' Equity:
Common stock (issued 51,609,991 and
51,607,172 shares, respectively) 51,610 51,607
Capital in excess of par value 621,205 625,358
Retained earnings 227,371 253,727
Cumulative translation adjustments (57,377) (41,440)
Less: Stock Employee Compensation
Trust (1,433,147 and 1,433,147
shares, respectively) at market (50,160) (56,430)
Treasury Stock (3,714,654 and
3,127,697 shares, respectively)
at cost (104,698) (83,162)
----------- -----------
687,951 749,660
----------- -----------
$2,954,226 $2,924,535
</TABLE>
See accompanying notes to financial statements.<PAGE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Three Months Ended
January 31,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Operating Activities
Net income (loss) $ (21,567) $ 30,858
Add (deduct) - Items not affecting cash:
Depreciation and amortization 23,581 25,079 Minority interest (9,924) 2,295
Other - net 2,762 (3,941)
Changes in working capital, exclusive of
acquisition and divestiture of businesses
(Increase) in accounts receivable - net (64,543) (7,896)
(Increase) in inventories (44,655) (3,573)
(Increase) in other current assets (25,178) (3,800)
(Decrease) increase in trade accounts payable (46,526) 8,271
(Decrease) in employee compensation
and benefits (17,676) (25,082)
Increase (decrease) in advance payments and
progress billings 36,148 (7,619)
Increase (decrease) in other current liabilities 11,116 (13,078)
--------- ----------
Net cash (applied to) provided by
operating activities (156,462) 1,514
--------- ----------
Investment and Other Transactions
Proceeds from sale of J&L Fiber Services 108,000 -
Other acquisitions, net of cash acquired - (5,325)
Property, plant and equipment acquired (30,214) (31,604)
Property, plant and equipment retired 957 21,295
Other - net 1,934 (1,394)
--------- ----------
Net cash provided by (applied to)
investment and other transactions 80,677 (17,028)
--------- ----------
Financing Activities
Dividends paid (4,646) (4,781)
Exercise of stock options 63 2,479
Purchase of treasury stock (23,878) -
Issuance of long-term obligations 181,786 439
Redemption of long-term obligations (352) (289)
(Decrease) increase in short-term notes payable (88,191) 875
--------- ----------
Net cash provided by (applied to)
financing activities 64,782 (1,277)
--------- ----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (315) 692
--------- ----------
(Decrease) in Cash and Cash Equivalents (11,318) (16,099)
Cash and Cash Equivalents at Beginning of Period 29,383 36,936
--------- ----------
Cash and Cash Equivalents at End of Period $ 18,065 $ 20,837
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- -----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Capital in
Common Excess of
Stock Par Value
-------- -----------
<S> <C> <C>
Three Months Ended January 31, 1998
- -----------------------------------
Balance at October 31, 1997 $51,607 $625,358
Net Loss
Translation adjustments
Exercise of 2,819 stock options 3 60
Dividends paid ($.10 per share)
Dividends on shares held by SECT 143
Adjust SECT shares to market value (6,270)
83,043 shares purchased by employee
benefit plans 1,739
670,000 shares acquired as treasury stock
Amortization of unearned compensation on
restricted stock 175
-------- ----------
Balance at January 31, 1998 $51,610 $621,205
======== ==========
Three Months Ended January 31, 1997
- -----------------------------------
Balance at October 31, 1996 $51,407 $615,089
Net income
Translation adjustments
Exercise of 124,624 stock options 39 753
Dividends paid ($.10 per share)
Dividends on shares held by SECT 148
Adjust SECT shares to market value 4,584
130,000 shares purchased by
employee benefit plans 2,484
Amortization of unearned compensation on
restricted stock 203
-------- ----------
Balance at January 31, 1997 $51,446 $623,261
======== ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Cumulative
Retained Translation
Earnings Adjustments
---------- -----------
<S> <C> <C>
Three Months Ended January 31, 1998
- -----------------------------------
Balance at October 31, 1997 $253,727 $(41,440)
Net loss (21,567)
Translation adjustments (15,937)
Exercise of 2,819 stock options
Dividends paid ($.10 per share) (4,789)
Dividends on shares held by SECT
Adjust SECT shares to market value
83,043 shares purchased by employee
benefit plans
670,000 shares acquired as treasury stock
Amortization of unearned compensation on
restricted stock
-------- ---------
Balance at January 31, 1998 $227,371 $(57,377)
======== =========
Three Months Ended January 31, 1997
- -----------------------------------
Balance at October 31, 1996 $148,175 $(37,584)
Net income 30,858
Translation adjustments 11,577
Exercise of 124,624 stock options
Dividends paid ($.10 per share) (4,929)
Dividends on shares held by SECT
Adjust SECT shares to market value
130,000 shares purchased by
employee benefit plans
Amortization of unearned compensation on
restricted stock
--------- ----------
Balance at January 31, 1997 $174,104 $(26,007)
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- -----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Treasury
SECT Stock
----------- ----------
<S> <C> <C>
Three Months Ended January 31, 1998
Balance at October 31, 1997 $(56,430) $(83,162)
Net Loss
Translation adjustments
Exercise of 2,819 stock options
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value 6,270
83,043 shares purchased by employee
benefit plans 2,342
670,000 shares acquired as treasury stock (23,878)
Amortization of unearned compensation on
restricted stock ---------- -----------
Balance at January 31, 1998 $(50,160) $(104,698)
========== ===========
Three Months Ended January 31, 1997
- -----------------------------------
Balance at October 31, 1996 $(61,360) $(42,242)
Net income
Translation adjustments
Exercise of 124,624 stock options 1,687
Dividends paid ($.10 per share)
Dividends on shares held by SECT
Adjust SECT shares to market value (4,584)
130,000 shares purchased by
employee benefit plans 2,414
Amortization of unearned compensation on
restricted stock
--------- ----------
Balance at January 31, 1997 $(64,257) $(39,828)
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
Total
----------
<S> <C>
Three Months Ended January 31, 1998
- -----------------------------------
Balance at October 31, 1997 $749,660
Net Loss (21,567)
Translation adjustments (15,937)
Exercise of 2,819 stock options 63
Dividends paid ($.10 per share) (4,789)
Dividends on shares held by SECT 143
Adjust SECT shares to market value -
83,043 shares purchased by employee
benefit plans 4,081
670,000 shares acquired as treasury stock (23,878)
Amortization of unearned compensation on
restricted stock 175
--------
Balance at January 31, 1998 $687,951
========
Three Months Ended January 31, 1997
- -----------------------------------
Balance at October 31, 1996 $673,485
Net income 30,858
Translation adjustments 11,577
Exercise of 124,624 stock options 2,479
Dividends paid ($.10 per share) (4,929)
Dividends on shares held by SECT 148
Adjust SECT shares to market value -
130,000 shares purchased by
employee benefit plans 4,898
Amortization of unearned compensation on
restricted stock 203
--------
Balance at January 31, 1997 $718,719
========
</TABLE>
See accompanying notes to financial statements.
HARNISCHFEGER INDUSTRIES, INC.
-------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
(Amounts in thousands unless indicated)
(a) Basis of Presentation
---------------------
In the opinion of management, all adjustments necessary
for the fair presentation of the results of operations
for the three months ended January 31, 1998 and 1997,
cash flows for the three months ended January 31, 1998
and 1997, and financial position at January 31, 1998
have been made. All adjustments made are of a normal
recurring nature except for the Company's Beloit
Corporation ("Beloit") anticipated losses associated
with Indonesian contracts discussed in note (k)
Subsequent Event-Restatement of Operating Results. See
note (b) for discussion regarding acquisitions.
These financial statements should be read in conjunction
with the financial statements and the notes thereto
included in the Harnischfeger Industries, Inc. amended
and restated Annual Report on Form 10-K/A for the year
ended October 31, 1997.
The results of operations for any interim period are not
necessarily indicative of the results to be expected for
the full year.
(b) Acquisitions
------------
The Company completed the acquisition of Dobson Park
Industries plc ("Dobson") in 1996 for a purchase price
of approximately $330,000 including acquisition costs,
plus the assumption of net debt of approximately
$40,000.
The Company is fully integrating Longwall's (the main
subsidiary of Dobson) operations into its wholly owned
subsidiary, Joy Technologies Inc. ("Joy"); thus enabling
Joy to offer integrated underground longwall mining
systems to the worldwide mining industry. As a result
of this integration, the Company has established
purchase accounting reserves to provide for the
estimated costs of this effort. The reserves related
primarily to the closure of selected manufacturing and
service facilities, severance and relocation costs
approximated $71,000. As of January 31, 1998,
approximately $47,300 of these reserves had been used.
It is anticipated that the remaining reserves will be
substantially utilized in fiscal 1998.
(c) Restructuring Charge
--------------------
In the fourth quarter of fiscal 1996, the Company's
Beloit Corporation subsidiary recorded a restructuring
charge. The focus of the restructuring is to better
serve its customers and strengthen its market position
in the worldwide pulp and paper industry. The
restructuring is consistent with the Company's policy to
generate positive Economic Value Added ("EVA"). The
restructuring initiative involves organizing engineering
and manufacturing operations into Centers of Excellence
and expanding the aftermarket capabilities of the
subsidiary. The total estimated cost of the
restructuring activities reduced fiscal 1996 pre-tax
income by $43,000 ($21,830 after tax and minority
interest, or $0.46 per share). Included in the charge
are costs related to severance for approximately 500
employees worldwide, the disposition of machinery and
equipment, closure of certain facilities and the sale of
businesses. As of January 31, 1998, $30,200 had been
charged against the reserve and 466 employees had been
terminated in accordance with the plan. The remaining
reserves are expected to be substantially utilized
during fiscal 1998.
(d) Inventories
-----------
<TABLE>
<CAPTION>
Consolidated inventories consisted of the following:
January 31, October 31,
1998 1997
------------ -----------
<S> <C> <C>
Finished goods $270,771 $274,391
Work in process and purchased parts 280,830 247,568
Raw materials 131,768 132,980
-------- --------
683,369 654,939
Less excess of current cost over stated
LIFO value (60,209) (60,178)
--------- --------
$623,160 $594,761
========= ========
</TABLE>
Inventories valued using the LIFO method represented
approximately 56% and 54% of consolidated inventories at
January 31, 1998 and October 31, 1997, respectively.
(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 $10,417 and $10,141 for the three months
ended January 31, 1998 and 1997, respectively. Certain
capital expenditures used in research activities are
capitalized and depreciated over their expected useful
lives.
(f) Interest Expense - Net
----------------------
<TABLE>
<CAPTION>
Net interest expense consisted of the following:
Three Months Ended
January 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
Interest income $ 1,524 $ 798
Interest expense (20,296) (17,295)
--------- ---------
Interest expense - net $(18,772) $(16,497)
========= =========
</TABLE>
(g) Long-Term Obligations
---------------------
<TABLE>
<CAPTION>
Long-term obligations at January 31, 1998 and October
31, 1997 consisted of the following:
January 31, October 31,
1998 1997
------------ -----------
<S> <C> <C>
10 1/4% Senior Notes, due 2003 $ 7,730 $ 7,730
8.9% Debentures, due 2022 75,000 75,000
8.7% Debentures, due 2022 75,000 75,000
7 1/4% Debentures, due 2025
(net of discount of $1,244 and 1,247,
respectively) 148,756 148,753
6 7/8% Debentures, due 2027 (net of
discount of $109 and $111,
respectively) 149,891 149,889
Senior Notes, Series A through D, at
interest rates of between 8.9% and
9.1%, due 1998 to 2006 71,364 71,364
Revolving Credit Facility 275,000 150,000
Industrial Revenue Bonds, at interest
rates of between 5.9% and 8.8%,
due 1998 to 2017 33,200 33,400
Other 70,644 14,057
-------- --------
906,585 725,193
Less: Amounts payable within one year 11,574 11,727
--------- --------
$895,011 $713,466
========= =========
</TABLE>
On February 17, 1998, the Company filed a shelf
registration with the Securities and Exchange Commission
for $200,000 of debt securities. To date, no securities
have been issued under this registration.
In 1996, the Company filed a shelf registration with the
Securities and Exchange Commission for the sale of up to
$200,000 of debt securities. On February 25, 1997,
$150,000 of 6 7/8% debentures were issued at 99.925%.
Proceeds were used for repayment of short-term
indebtedness and to increase cash. The debentures will
mature on February 15, 2027, are not redeemable by the
Company prior to maturity and are not subject to any
sinking fund requirements. Each holder of the
debentures has the right to require the Company to repay
the holders, in whole or in part, on February 15, 2007,
at a repayment price equal to 100% of the aggregate
principal amount thereof plus accrued and unpaid
interest. Interest on the debentures is payable
semi-annually on February 15 and August 15 of each year.
The Company maintains a committed five-year Revolving
Credit Facility Agreement with certain domestic and
foreign financial institutions that allows for
borrowings of up to $500,000 at rates expressed in
relation to LIBOR and other rates which expires in
October, 2002. A facility fee is payable on the
Revolving Credit Facility. At January 31, 1998, direct
outstanding borrowings under the facility were $275,000
and commercial paper borrowings, considered a
utilization of the facility, were $75,266.
(h) Contingent Liabilities
----------------------
At January 31, 1998, the Company was contingently liable
to banks, financial institutions, and others for
approximately $440,000 for outstanding letters of credit
securing performance of sales contracts and other
guarantees in the ordinary course of business excluding
the H-K Systems, Inc. back-up bond guarantee facility.
The Company may also guarantee performance of its
equipment at levels specified in sales contracts without
the requirement for letters of credit.
On October 29, 1993, the Company completed the sale of
H-K Systems, Inc. to that unit's senior management and
some equity partners. The Company agreed to make
available a back-up bonding guarantee facility for
certain bid, performance and other contract bonds issued
by H-K Systems, Inc. Outstanding contract bonds under
the guarantee arrangement totaled approximately $14,700
at January 31, 1998. Under the terms of the facility,
no new bonds can be issued during 1998.
The Company is a party to litigation matters and claims
which are normal in the course of its operations. Also,
as a normal part of their operations, the Company's
subsidiaries undertake certain contractual obligations,
warranties and guarantees in connection with the sale of
products or services. Although the outcome of these
matters cannot be predicted with certainty and favorable
or unfavorable resolution may affect income on a
quarter-to-quarter basis, management believes that such
matters will not have a materially adverse effect on the
Company's consolidated financial position. In the case
of Beloit Corporation, certain litigation matters and
claims are currently pending in connection with its
contractual undertakings. Beloit may on occasion enter
into arrangements to participate in the ownership of or
operate pulp or papermaking facilities in order to
satisfy contractual undertakings or resolve disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15,000 failed
to perform satisfactorily. In June, 1997, a Lewiston,
Idaho jury awarded Potlatch $95,000 in damages in the
case. Beloit has appealed this award to the Idaho
Supreme Court. While the eventual outcome of the
Potlatch case cannot be predicted, reserves in the
January 31, 1998 Consolidated Balance Sheet are less
than the full amount of the jury award.
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 annual results of
operations.
(i) Earnings Per Share
------------------
In the first quarter of fiscal 1998, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No.
128, "Earnings Per Share". Following is the
reconciliation of the numerators and denominators used
to calculate the basic and diluted earnings per share
from continuing operations:
<TABLE>
<CAPTION>
For The Three Months Ended
January 31,
-----------------------------
1998 1997
----- -------
<S> <C> <C>
Basic Earnings Per Share
------------------------
Income (loss) available for
common shareholders $(21,567) $30,858
Average common shares outstanding 46,742 47,720
Basic earnings per share $(0.46) $0.65
======= =====
Diluted Earnings Per Share
--------------------------
Income (loss) available for
common shareholders $(21,567) 30,858
Average common shares outstanding
Common stock 46,742 47,720
Assumed exercise of stock options - 538
------- -------
46,742 48,258
Diluted earnings per share $(0.46) $0.64
====== =====
</TABLE>
(j) Common Stock
------------
In September, 1997, the Company announced that the board
of directors had authorized the purchase of up to ten
million shares of the Company's common stock. As of
March 12, 1998, the Company had repurchased 1,676,400
through open-market transactions at a cost of
approximately $65,300.
(k) Subsequent Event - Restatement of Operating Results
---------------------------------------------------
During the second quarter of fiscal 1998, the Company
identified at its Beloit Corporation subsidiary
additional estimated contract costs of approximately
$155,000 related to four, large ongoing Indonesian
projects, with total contract values aggregating
approximately $600,000. At the direction of the
Company's Board of Directors, a special review was
undertaken to assess the reasonableness of the revised
cost estimates and the related financial reporting
implications. The losses primarily relate to non-
proprietary equipment, installation and erection,
freight and other site construction costs, and overruns
due to changes in estimates of costs to complete
relating to these large-scale complex projects. Based
upon the Company's internal review and the results of
the special review by the Board of Directors with
assistance by the Company's outside auditors, it has
been determined that $82,000 of the approximate $155,000
in additional contract costs are more appropriately
included in the fiscal 1998 first quarter cost estimates
on these contracts, and $27,600 are more properly
recorded in the fourth quarter of fiscal 1997. The
remaining $45,400 will be recorded in the Company's
second quarter of fiscal 1998. Accordingly, the
Company's fiscal 1998 first quarter financial statements
have been restated as follows:
<TABLE>
<CAPTION>
As Reported Restated
------------ ---------
<S> <C> <C>
Income (loss) before (provision)
benefit for income taxes and
minority interest $ 34,279 $ (47,721)
(Provision) benefit for income taxes (11,650) 16,230
Minority Interest (900) 9,924
----------- -----------
Net Income (loss) $ 21,729 $ (21,567)
=========== ===========
Earnings per share
Basic $ 0.46 $(0.46)
====== =======
Diluted 0.46 (0.46)
====== =======
</TABLE>
The additional estimated contract losses of
approximately $155,000 on these Indonesian contracts are
based upon the Company's best estimate at this time of
the total estimated costs to complete these contracts.
The detailed review ordered by the Company's Board of
Directors confirmed the reasonableness of the $155,000
additional cost estimate. The actual costs may vary
significantly from these estimates based upon numerous
factors, including the volatility of the Indonesian
political and economic situation and delivery,
performance and other risks and uncertainties inherent
in executing these large, complex projects. These
factors cannot be predicted with certainty and may
effect income on a quarter-to-quarter basis.
The detailed review has not revealed the existence of
any accounting irregularities.
(l) Other
-----
On January 28, 1998, the Company announced the sale of
80 percent of the Company's P&H Material Handling unit
for approximately $340,000 in cash at closing in a
transaction with Chartwell Investments, Inc. In
addition, the Company will receive preferred stock and
royalty payments from the new company for 10 years. The
1998 after-tax cash proceeds from the transaction are
expected to total approximately $300,000.
The transaction is expected to close in the second
quarter, subject to completion of Chartwell's financing
arrangements. Chartwell is a private investment firm
based in New York City that controls businesses in
distribution and services with over $1 billion in sales.
The Company expects to use the proceeds of the sale to
pay down debt and to buy back stock as part of the
Company's previously announced intent to repurchase up
to 10 million shares.<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
--------------------------------------------
(Amounts in thousands unless indicated)
The discussion in Management's Discussion and Analysis
contains forward-looking statements. When used in this
document, terms such as "anticipate", "believe", "estimate",
"expect", "indicate", "may be", "objective", "plan",
"predict", and "will be" are intended to identify such
statements. Forward-looking statements are subject to certain
risks, uncertainties and assumptions which could cause actual
results to differ materially from those projected, including
those described in Item 5. Other Information - "Cautionary
Factors" in Part II of this report.
Net loss for the three months ended January 31, 1998 amounted
to $(21,567), or $(0.46) per basic share as compared to net
income of $30,858, or $0.65 per basic share, for the three
months ended January 31, 1997.
Basic earnings per share calculations for the first three
months of 1998 and 1997 were based on 46,742 and 47,720
average shares outstanding, respectively, and diluted earnings
per share for the first three months of 1998 and 1997 were
based on 46,742 and 48,258 average shares outstanding,
respectively.
Significant factors contributing to the $52,425 decrease in
net income for the first three months of 1998 as compared to
1997 included: (1) $96,449 decrease in operating income in
1998 compared with 1997 in the Segment Information
-------------------
section which follows, including $82,000 of anticipated losses
associated with certain Beloit Corporation contracts in
Indonesia, and (2) a $2,275 increase in interest expense in
1998, offset by (3) a $34,080 decrease in income taxes in 1998
primarily due to lower pre-tax income.
Segment Information
- -------------------
<TABLE>
<CAPTION>
Operating results of the Company's business segments for the
first quarter of 1998 and 1997 are summarized as follows:
Net Sales Operating Income
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Mining Equipment $321,122$350,454$38,527 $45,078
Pulp and Paper Machinery 236,722 268,975 14,507 20,874
Anticipated Losses on
Contracts (82,000)
-------- ------------------------
Total Pulp and Paper
Machinery 236,722 268,975(67,493) 20,874
P&H Material Handling 76,483 79,982 5,634 7,196
-------- ------------------------
Total Business Segments $634,327$699,411(23,332) 73,148
======== ========
Corporate Administration (5,617) (5,648)
-------- -------
Operating Income (Loss) $(28,949) $67,500
================
</TABLE>
(A) Backlog has been reduced by $2,703 due to sale of J&L
Fiber Services in November, 1997.
Segment Information
- -------------------
<TABLE>
<CAPTION>
Operating results of the Company's business segments for the
first quarter of 1998 and 1997 are summarized as follows:
Orders Booked Backlog at
1998 1997 1/98 10/97
<S> <C> <C> <C> <C>
Mining Equipment $303,340 $378,417 $ 340,558 $ 358,340
Pulp and Paper Machinery 303,376 403,042 840,569(A) 776,618
Anticipated Losses on
Contracts
-------- -------- --------- ---------
Total Pulp and Paper Machinery 303,376 403,042 840,569 776,618
P&H Material Handling 78,499 59,333 99,759 97,743
-------- -------- ---------- ---------
Total Business Segments $685,215 $840,792 $1,280,886 $1,232,701
======== ======== ========== =========
</TABLE>
(A) Backlog has been reduced by $2,703 due to sale of J&L
Fiber Services in November, 1997.
Segment Information - Continuing Operations
- -------------------------------------------
Net sales of the Mining Equipment segment amounted to $321,122
and $350,454 for the first three months of 1998 and 1997,
respectively, representing an 8% decrease in 1998 as compared
to 1997. Operating profit decreased to $38,527 in the first
quarter of 1998 as compared to $45,078 in 1997. The decrease
in sales and operating profit is primarily due to lower
original equipment sales in underground mining. Bookings for
the first three months of 1998 amounted to $303,340 as
compared to $378,417 for the same period in 1997. The
decrease is due primarily to an original equipment Russian
order in the first quarter of 1997.
The Pulp and Paper Machinery segment contributed sales and
operating profit of $236,722 and $14,507, respectively, for
the first three months of 1998 before the $82,000 of
additional contract costs on the Indonesian contracts (See
note (k) Subsequent Event - Restatement of Operating Results),
as compared to net sales of $268,975 and operating profit of
$20,874 for the corresponding period in 1997. Sales decreased
12% in 1998 over 1997 primarily due to a decrease in sales of
original equipment caused by the weak global pulp and paper
markets and by the stretch-out of production on two large fine
paper machines for the Pacific Rim. Aftermarket sales were
impacted by the previously announced sale of J&L Fiber
Services ("J&L") in November, 1997. Operating results were
adversely impacted by the lower sales levels and benefited
from a $15,000 settlement of certain patent litigation and the
gain on the sale of J&L, both of which were largely offset by
previously capitalized expenses related to the litigation,
additions to warranty reserves and certain non-recurring
charges and adjustments related to customer contracts.
Bookings for the first three months of 1998 amounted to
$303,376 as compared to $403,042 for the same period in 1997,
as 1997 included a $150,000 original equipment order for a
customer in the Pacific Rim.
The Material Handling segment contributed sales and operating
profit of $76,483 and $5,634, respectively, for the first
three months of 1998, as compared to sales of $79,982 and
operating profit of $7,196 for the comparable period in 1997.
Bookings for the first three months of 1998 and 1997 amounted
to $78,499 and $59,333, respectively.
Income Taxes
- ------------
The Company's estimated annual effective tax rate for 1998 was
34% compared to a 35% federal statutory tax rate. The
principal reason for the difference between the effective rate
and the statutory rate is the usage of tax credits.
Liquidity and Cash Flows
- ------------------------
<TABLE>
<CAPTION>
The Company's capital structure at January 31, 1998 and October 31, 1997 was as follows:
January 31, October 31,
1998 1997
- ----------- ------------
<S> <C> <C>
Short-term notes payable $ 125,050 $ 214,126
Long-term obligations,
including current portion 906,585 725,193
---------- ----------
1,031,635 939,319
Minority interest 87,042 97,724
Shareholders' equity 687,951 749,660
- ---------- ----------
Total capitalization $1,806,628 $1,786,703
========== ==========
Debt to capitalization ratio 57.1% 52.6%
===== =====
</TABLE>
Cash Flow from Operating Activities
- -----------------------------------
Cash flow used by operating activities was $156,462 for the
three months ended January 31, 1998 compared to cash flow
provided by operating activities of $1,514 for the comparable
period in 1997. The decrease in cash flows between periods
resulted from an increase in accounts receivable and
inventories and decreases in trade accounts payable.
Cash Flow from Investment Activities
- ------------------------------------
Cash flow provided by investment activities was $80,677 for
the three months ended January 31, 1998 compared to cash flow
applied to investment activities of $17,028 for the comparable
period in 1997. The change is primarily due to proceeds from
the sale of J&L in fiscal 1998.
Cash Flow for Financing Activities
- ----------------------------------
Cash flow provided by financing activities was $64,782 for the
first quarter of fiscal 1998 compared to cash flow applied to
financing activities of $1,277 for the comparable period in
1997. The change was due to long-term debt issuance of
$181,786 offset by a decrease in short-term notes payable of
$88,191 and the purchase of treasury stock of $23,878 in
fiscal 1998.
The Company maintains the ability to expand its borrowing in
several ways, including the following:
(1) A five-year Revolving Credit Facility Agreement between
the Company and certain domestic and foreign financial
institutions that allows for borrowings of up to $500,000
at rates expressed in relation to LIBOR and other rates.
At January 31, 1998, direct outstanding borrowings
related to the facility were $275,000 and commercial
paper borrowings, considered a utilization of the
facility, were $75,266.
(2) The Company maintains various uncommitted domestic credit
facilities of approximately $80,000 to further supplement
short-term working capital requirements. At January 31,
1998, borrowings under these facilities were $8,000.
Additionally, short-term bank credit lines of foreign
subsidiaries were approximately $193,800 of which
approximately $41,800 was outstanding at January 31,
1998.
(3) In 1996, the Company filed a shelf registration with the
Securities and Exchange Commission for the sale of up to
$200,000 of debt securities. On February 25, 1997,
$150,000 of 6 7/8% debentures were issued at 99.925% and
the proceeds used to reduce short-term debt outstanding
and increase cash. To date, no other securities covered
by the registration have been offered for sale.
(4) On February 17, 1998, the Company filed a shelf
registration with the Securities and Exchange Commission
for $200,000 of debt securities. To date, no securities
have been issued under this registration.
The Company believes its available cash, cash flow provided by
operating activities and committed credit lines provide
adequate liquidity on both a short- and long-term basis.
The Company has no significant capital commitments as of
January 31, 1998; any future capital commitments are expected
to be funded through cash flow from operations and, if
necessary, available lines of credit; however, see discussion
below regarding acquisitions.
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 by additional borrowings.
Acquisitions
- ------------
The Company completed the acquisition of Dobson Park
Industries plc ("Dobson") in 1996 for a purchase price of
approximately $330,000 including acquisition costs, plus the
assumption of net debt of approximately $40,000.
The Company is fully integrating Longwall's (the main
subsidiary of Dobson) operations into its wholly owned
subsidiary, Joy Technologies Inc. ("Joy"); thus enabling Joy
to offer integrated underground longwall mining systems to the
worldwide mining industry. As a result of this integration,
the Company has established purchase accounting reserves to
provide for the estimated costs of this effort. The reserves
related primarily to the closure of selected manufacturing and
service facilities, severance and relocation costs
approximated $71,000. As of January 31, 1998, approximately
$47,300 of these reserves had been used. It is anticipated
that the remaining reserves will be substantially utilized in
fiscal 1998.
Common Stock
- ------------
In September, 1997, the company announced that the board of
directors had authorized the purchase of up to ten million
shares of the Company's common stock. As of March 12, 1998,
the Company had repurchased 1,676,400 shares through
open-market transactions at a cost of approximately $65,300.
Other
- -----
On January 28, 1998, the Company announced the sale of 80
percent of the Company's P&H Material Handling unit for
approximately $340,000 in cash at closing in a transaction
with Chartwell Investments, Inc. In addition, the Company
will receive preferred stock and royalty payments from the new
company for 10 years. The 1998 after-tax cash proceeds from
the transaction are expected to total approximately $300,000.
The transaction is expected to close in the second quarter,
subject to completion of Chartwell's financing arrangements.
Chartwell is a private investment firm based in New York City
that controls businesses in distribution and services with
over $1 billion in sales. The Company expects to use the
proceeds of the sale to pay down debt and to buy back stock as
part of the Company's previously announced intent to
repurchase up to 10 million shares.
PART II. OTHER INFORMATION
----------------------------
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5 Other Information "Cautionary Factors"
-------------------------------------
This report and other documents or oral statements
which have been and will be prepared or made in the
future contain or may contain forward-looking
statements by or on behalf of the Company. Such
statements are based upon management's expectations
at the time they are made. In addition to the
assumptions and other factors referred to
specifically in connection with such statements, the
following factors, among others, could cause actual
results to differ materially from those contemplated.
The Company's principal businesses involve designing,
manufacturing, marketing and servicing large, complex
machines for the mining, papermaking and capital
goods industries. Long periods of time are necessary
to plan, design and build these machines. With
respect to new machines and equipment, there are
risks of customer acceptances and start-up or
performance problems. Large amounts of capital are
required to be devoted by the Company's customers to
purchase these machines and to finance the mines,
paper mills, steel mills and other facilities that
use these machines. The Company's success in
obtaining and managing a relatively small number of
sales opportunities, including the companies' success
in securing payment for such sales and meeting the
requirements of warranties and guarantees associated
with such sales, can affect the Company's financial
performance. In addition, many projects are located
in undeveloped or developing economies where business
conditions are less predictable. In recent years,
more than 50% of the Company's total sales occurred
outside the United States.
Other factors that could cause actual results to
differ materially from those contemplated include:
- Factors affecting customers' purchases of new
equipment, rebuilds, parts and services such as:
production capacity, stockpiles and production
and consumption rates of coal, copper, iron,
gold, fiber, paper/paperboard, recycled paper,
steel and other commodities; the cash flows of
customers; the cost and availability of
financing to customers and quality of financing
to customers and the ability of customers to
obtain regulatory approval for investments in
mining, papermaking, steel making, automotive
manufacturing and other heavy industrial
projects; consolidations among customers; work
stoppages at customers or providers of
transportation; and the timing, severity and
duration of customer buying cycles, particularly
in the paper and mining businesses.
- Factors affecting the Company's ability to
capture available sales opportunities,
including: customers' perceptions of the quality
and value of the Company's products as compared
to competitors' products; whether the Company
has successful reference installations to show
customers, especially for papermaking and mining
equipment; customers' perceptions of the health
and stability of the Company as compared to its
competitors; the Company's ability to assist
with competitive financing programs and the
availability of manufacturing capacity at the
Company's factories.
- Factors affecting the Company's ability to
successfully manage sales it obtains, such as:
the accuracy of the Company's cost and time
estimates for major projects; the adequacy of
the Company's systems to manage major projects
and its success in completing projects on time
and within budget; the Company's success in
recruiting and retaining managers and key
employees; wage stability and cooperative labor
relations; plant capacity and utilization; and
whether acquisitions are assimilated and
divestitures completed without notable surprises
or unexpected difficulties.
- Factors affecting the Company's general
business, such as: unforeseen patent, tax,
product, environmental, employee health or
benefit or contractual liabilities; nonrecurring
restructuring charges; changes in accounting or
tax rules or regulations; and reassessments of
asset valuations such as inventories.
- Factors affecting general business levels, such
as: political turmoil and economic turmoil in
major markets such as the United States, Canada,
Europe, Asia and the Pacific Rim, South Africa,
Australia and Chile; environmental and trade
regulations; and the stability and ease of
exchange of currencies.
Item 6 (a) Exhibits:
10(a)Harnischfeger Industries, Inc. Executive
Incentive Plan, as amended and restated as of
February 9, 1998 (incorporated by reference to
Exhibit 10(a) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter
ended January 31, 1998, File No. 1-9299).
(b)Harnischfeger Industries, Inc. Long-Term
Compensation Plan for Key Executives, as amended
and restated as of February 9, 1998
(incorporated by reference to Exhibit 10(b) to
Report of Harnischfeger Industries, Inc. on Form
10-Q for the quarter ended January 31, 1998,
File No. 1-9299).
(c)Harnischfeger Industries, Inc. Supplemental
Retirement and Stock Funding Plan, as amended
and restated as of February 9, 1998
(incorporated by reference to Exhibit 10(c) to
Report of Harnischfeger Industries, Inc. on Form
10-Q for the quarter ended January 31, 1998,
File No. 1-9299).
(d)Harnischfeger Industries, Inc. Directors
Stock Compensation Plan, as amended and
restated, as of February 9, 1998 (incorporated
by reference to Exhibit 10(d) to Report of
Harnischfeger Industries, Inc. on Form 10-Q for
the quarter ended January 31, 1998, File No. 1-9299).
(e)Harnischfeger Industries, Inc. Long-Term
Compensation Plan for Directors as of
February 9, 1998 (incorporated by reference to
Exhibit 10(e) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter
ended January 31, 1998, File No. 1-9299).
11 Statement re: Calculation of Earnings Per Share, filed herewith
27 Amended Financial Data Schedule, filed herewith
(b) Reports on Form 8-K
NONE
FORM 10-Q/A
- -----------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amended and restated
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
Date June 15, 1998 and Chief Financial Officer
- -------------------
/s/ James C. Benjamin
-----------------------
James C. Benjamin
Vice President and Controller
Date June 15, 1998 and Chief Accounting Officer
- -------------------
Exhibit 11
- -----------
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
- ------------------------------
CALCULATION OF EARNINGS PER SHARE
- ---------------------------------
(Amounts in thousands except per share amounts)
Three Months Ended
January 31,
-------------------------------
1998 1997
-------- -------
<S> <C> <C>
Average Shares Outstanding
Basic 46,742 47,720
====== =======
Diluted 46,742 48,258
====== =======
Net Income (Loss) $(21,567) $30,858
======= =======
Net Income (Loss) per share
Basic $(0.46) $0.65
======= =====
Diluted (0.46) 0.64
======= =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 18,065
<SECURITIES> 0
<RECEIVABLES> 893,278
<ALLOWANCES> 7,655
<INVENTORY> 623,160
<CURRENT-ASSETS> 1,669,727
<PP&E> 1,155,808
<DEPRECIATION> 516,366
<TOTAL-ASSETS> 2,954,226
<CURRENT-LIABILITIES> 1,101,640
<BONDS> 895,011
0
0
<COMMON> 51,610
<OTHER-SE> 636,341
<TOTAL-LIABILITY-AND-EQUITY> 2,954,226
<SALES> 634,327
<TOTAL-REVENUES> 644,485
<CGS> 561,253
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,772
<INCOME-PRETAX> (47,721)
<INCOME-TAX> (16,230)
<INCOME-CONTINUING> (21,567)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,567)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
