SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended October 31, 1998.
/ / 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 Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
3600 South Lake Drive, St. Francis, Wisconsin 53235-3716
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(414) 486-6400
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
Common Stock, $1 Par Value New York and Pacific Stock Exchanges
Preferred Stock Purchase Rights New York and Pacific Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of Registrant's Common Stock held by
non-affiliates, as of December 23, 1998, based on a closing price of $8.50, was
approximately $396.0 million.
The number of shares outstanding of Registrant's Common Stock, as of
December 23, 1998, was 47,349,089.
DOCUMENTS INCORPORATED BY REFERENCE
Management's Discussion and Analysis of Financial Statements, Consolidated
Financial Statements, Notes to Consolidated Financial Statements, Report of
Independent Accountants and Five-Year Review of Financial Data of Registrant.
Registrant's proxy statement for the 1999 annual meeting of stockholders to be
filed within 120 days of the end of the Registrant's fiscal year.
HARNISCHFEGER INDUSTRIES, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended October 31, 1998
Page
Part I
Item 1. Business.................................................
Item 2. Properties...............................................
Item 3. Legal Proceedings........................................
Item 4. Submission of Matters to a Vote of Security Holders......
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters......................................
Item 6. Selected Financial Data..................................
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................
Item 8. Financial Statements and Supplementary Data..............
Item 9. Changes in and disagreements with Accountants on Accounting
and Financial Disclosure.............................
Part III
Item 10. Directors and Executive Officers of the Registrant.......
Item 11. Executive Compensation...................................
Item 12. Security Ownership of Certain Beneficial Owners and
Management.............................................
Item 13. Certain Relationships and Related Transactions...........
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................
Signatures .........................................................
PART I
Item 1. Business
SEGMENTS OF BUSINESS
Harnischfeger Industries, Inc. ("Harnischfeger" or the "Company") is a
holding company for subsidiaries involved in the worldwide manufacture and
distribution of surface mining equipment (P&H Mining Equipment); underground
mining equipment (Joy Mining Machinery); and pulp and papermaking machinery
(Beloit Corporation).
Harnischfeger is the direct successor to a business begun over 100
years ago which, at October 31, 1998, through its subsidiaries, manufactures and
markets products classified into two industry segments: Mining Equipment and
Pulp and Papermaking Machinery.
In early fiscal 1996, the Company completed the acquisition of Dobson
Park ("Dobson"). The Company has substantially integrated Longwall
International's ("Longwall") (one of the main subsidiaries of Dobson)
operations, into Joy Mining Machinery ("Joy"), thus enabling Joy to offer
integrated underground longwall mining systems to the worldwide mining industry.
As a result of this integration, the Company 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 $71.0 million. As of October 31,
1998, all activity related to this integration was substantially completed.
The following discussion and the portions of the Company's 1998 Annual
Report to the shareholders incorporated herein by reference contains forward
looking statements. Terms such as "anticipate", "believe", "estimate", "expect",
"indicate", "may be", "objective", "plan", "predict", "project", 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 predicted. See "Cautionary Factors" at the end
of this Item 1.
MINING EQUIPMENT
P&H Mining Equipment ("P&H") is the world's largest producer of electric
mining shovels and walking draglines. In addition, P&H is a significant producer
of draglines, blasthole drills, and dredge and dragline bucket products.
Electric mining shovels range in capacity from 18 to 80 cubic yards, crawler
draglines from 10 to 20 cubic yards and hydraulic mining excavators from 12 to
27 cubic yards. Capacities for walking draglines range from 20 to 150 cubic
yards. Blasthole drill models have drilling diameters ranging from 9 to 22
inches and bit load capacities from 70,000 to 150,000 pounds.
The products of P&H are used in mines, quarries and earth-moving operations
in the digging and loading of such minerals and other ores such as: coal,
copper, gold, iron ore, lead, zinc, bauxite, uranium, phosphate, stone and clay.
P&H has a relationship in the mining shovel business with Kobe Steel, Ltd.
("Kobe"), pursuant to which P&H licenses Kobe to manufacture certain electric
mining shovels and related replacement parts in Japan. P&H has the exclusive
right to market Kobe-manufactured mining shovels and parts outside Japan (except
in the case of certain government sales). In addition, P&H is party to an
agreement with a corporate unit of the People's Republic of China licensing the
manufacture and sale of two models of electric mining shovels and related
components. This relationship provides P&H with an opportunity to sell component
parts for shovels built in China.
Joy, a world leader in underground mining equipment, manufactures and
services mining equipment for the underground extraction of coal and other
bedded materials and has significant facilities in Australia, South Africa, the
United Kingdom and the United States, as well as sales offices in Poland, India,
Russia, and the People's Republic of China. Joy designs, manufactures and
distributes various equipment for use in underground mining, including
continuous miners; longwall shearers; roof supports; armored face conveyors;
shuttle cars; continuous haulage systems; entry drivers and sump shearers. Joy
products are not sold into the general construction industry and demand for them
is not tied to cycles in that industry. Joy also maintains an extensive network
of service and replacement parts distribution centers to rebuild and service
equipment and to sell replacement parts in support of its installed base. This
network includes six service centers in the United States and five outside of
the United States, all of which are strategically located in major underground
mining regions.
In early fiscal 1996, the Company completed the acquisition of Dobson
for a purchase price of approximately $330 million including acquisition costs
plus the assumption of net debt of approximately $40 million. Longwall was
engaged in the manufacture, sale and service of underground mining equipment for
the international coal mining industry. Its products include electronically
controlled roof support systems, armored face conveyors, pumps and systems. The
Company has substantially integrated Longwall's operations into Joy, thus
enabling Joy to offer integrated underground longwall mining systems to the
worldwide mining industry. Activities related to the integration of Longwall
into Joy have been substantially completed. Several of Longwall's non-mining
businesses were designated as businesses held for sale. At October 31, 1998, all
of these businesses had been sold for slightly more than $100 million, the
original value established for these businesses.
Financial information with respect to the acquisition of Dobson is
presented in Note 2 - Acquisitions to the Consolidated Financial Statements of
the 1998 report to the shareholders which is incorporated by reference in Item 8
of this report.
PULP AND PAPER MACHINERY
The Pulp and Papermaking Machinery Segment is comprised of the Company's
80% interest in Beloit Corporation ("Beloit"). Mitsubishi Heavy Industries, Ltd.
("Mitsubishi") is the owner of the other 20% interest in Beloit. The Company and
Mitsubishi have entered into certain agreements that provide Mitsubishi with the
right to designate one of Beloit's five directors. These agreements also place
certain restrictions on the transfer of Beloit stock. In the event of change in
control of the Company to someoneone engaged in the pulp and papermaking
machinery business, Mitsubishi has the right to sell its 20% interest back to
the Company for the greater of $60 million or the book value of its equity
interest.
Beloit is a leader in the design and manufacture of pulp and paper
machinery and related products used in the pulp and papermaking industries.
Beloit operates on a global basis with major manufacturing facilities in ten
countries and sales and service offices located throughout the world. In
addition, licensing arrangements exist with several major foreign companies.
Beloit's activities are divided into the following categories: complete
installations involving the design, manufacture and installation of integrated
pulp and papermaking machinery; major rebuilds and servicing of existing
systems; and the sale of ancillary equipment and replacement parts. This
machinery is custom designed to meet the specific needs of each customer. In
connection with complete installations and major rebuilds, Beloit associates
with construction engineering firms in "engineer, procure and construct"
contracts which often involve complex long-term construction projects, sometimes
in relatively undeveloped parts of the world. There are special design,
construction, project management, financing and performance risks associated
with these projects and other large Beloit pulp and papermaking machinery sales.
Whenever these projects involve plant or equipment other than pulp and paper
machines, Beloit seeks a partner to take the "engineer, procure and construct"
risks. On March 27, 1996, the Company purchased the assets of the pulp machinery
division of Ingersoll-Rand Company ("IMPCO") for $119.2 million, including
acquisition costs, which significantly strengthened Beloit's pulping equipment
offerings. The acquisition was accounted for as a purchase transaction with the
purchase price allocated to specific assets acquired and liabilities assumed.
Resultant goodwill is being amortized over 40 years.
Beloit is known for the quality and dependability of its products and is a
leader in product innovation and development. Beloit has made a continuous
commitment to research and development activities and has been granted numerous
patents on its designs. Beloit systems and equipment are used by a substantial
number of paper producers, both domestic and foreign.
A major factor in Beloit's success in the pulp and paper machinery industry
has been its international manufacturing operations. Beloit's overseas
facilities have been used to support both domestic and foreign sales and have
provided Beloit with the flexibility to shift its manufacturing to more
favorable locations as appropriate. Beloit's manufacturing facilities are
supported by a domestic and international marketing network staffed by
experienced sales engineers.
In the second quarter of fiscal 1998, Beloit recorded a $65.0 million
restructuring charge ($31.9 million after tax and minority interest.) The charge
includes costs related to severance for approximately 1,000 people worldwide,
facility closures, and disposal of machinery and equipment. Closure of a
pulping-related manufacturing facility in Sherbrooke, Quebec, Canada has been
completed, and closure of a similar facility in Dalton, Massachusetts will be
complete in the first quarter of fiscal 1999. The paper-related manufacturing
facility in the United Kingdom is being converted to a center of excellence
responsible for rolls, while the Italian operation is expected to be converted
from a full-line manufacturing operation to a Millpro(R) aftermarket center for
central and southern Europe. The cash and noncash elements of the restructuring
charge approximated $32.5 million and $32.5 million, respectively. Management
anticipates that the reserves will be substantially utilized within the next
year. As of October 31, 1998, approximately 670 employees have been terminated
in accordance with this plan. Further information on this restructuring is
presented in Notes to the Consolidated Financial Statements of the 1998 report
to shareholders, Note 3 - Restructuring Charge, incorporated by reference in
Item 8 of this report.
In the fourth quarter of fiscal 1996, Beloit recorded a $43.0 million
pre-tax restructuring charge. The restructuring was designed to provide for
severance of approximately 500 employees worldwide, disposition of machinery and
equipment, closure of certain facilities and the sale of certain intensive
businesses. At October 31, 1998, all activity related to this restructuring was
substantially completed.
DISCONTINUED OPERATIONS
On March 30, 1998, the Company completed the sale of approximately 80%
of the common stock of the Company's P&H Material Handling ("Material Handling")
segment to Chartwell Investments, Inc. in a leveraged recapitalization
transaction. As such, the financial statements incorporated in item 8 of this
report have been reclassified to reflect Material Handling as a discontinued
operation. The Company retained approximately 20% of the outstanding common
stock and 11% of the outstanding voting securities of Material Handling and
holds one board of director's seat in the new company. In addition, the Company
has licensed Material Handling to use the "P&H" trademark on existing Material
Handling-produced products on a worldwide basis for periods specified in the
agreement for a royalty fee payable over a ten year period. The Company reported
a $151.5 million after-tax gain on the sale of this discontinued operation in
the second quarter of fiscal 1998. Proceeds consisted of $341.0 million in cash
and $4.8 million in preferred stock with a 12.25% payment-in-kind dividend; $7.2
million in common stock was not reflected in the Company's balance sheet or gain
calculations due to the nature of the leveraged recapitalization transaction.
Taxes on the sale amounted to $45.0 million. Net assets disposed of in the sale
aggregated $139.3 million.
INTERNATIONAL OPERATIONS
Foreign sales of the Mining Equipment segment generated approximately 53%
of the segment's consolidated net sales in 1998, 59% in 1997, 58% in 1996.
In 1998, 1997 and 1996, Beloit's foreign sales amounted to 52%, 57% and
53%, respectively, of Beloit's consolidated net sales.
Beloit has granted licensing agreements to serve certain foreign
markets to companies located in Australia, Japan and Spain. Beloit maintains
sales and service offices throughout the world.
Harnischfeger's international operations are subject to certain risks not
generally applicable to its domestic businesses, including currency
fluctuations, changes in tariff restrictions, restrictive regulations of foreign
governments (including price and exchange controls), and other governmental
actions. Harnischfeger has entered into various foreign currency exchange
contracts with major international financial institutions designed to minimize
its exposure to exchange rate fluctuations on foreign currency transactions. See
"Cautionary Factors" for additional risks associated with international
operations.
GENERAL
Seasonality
No significant portion of Harnischfeger's business is subject to or
influenced by seasonal factors; however, the Harnischfeger business is
influenced by the cyclical nature of the paper, mining and capital goods
industries.
Distribution
P&H and Joy sales are made mostly through the segments' headquarters and
sales offices located around the world. Joy's worldwide sales forces have
marketing responsibility for new machine sales, as well as for parts, components
and rebuild services provided to customers. A segment of the sales force in the
United States is dedicated to operating a fleet of trucks which visit customer
sites on a regular basis in order to deliver components and parts.
Sales of Beloit products are principally made directly to end users. Beloit
maintains a worldwide marketing group to coordinate and support worldwide
facilities in marketing strategies, technical sales support and participation in
major projects including interface with engineering firms and financial
institutions. Beloit offers systems and turnkey alternatives to assist in
related business development throughout the world. Agents are used in certain
foreign countries to augment Beloit's sales force stationed in the segment's
manufacturing facilities and in sales offices worldwide.
The manufacture and sale of repair and replacement parts and the servicing
of equipment are important and growing aspects of each of the Company's
businesses.
Competition
Harnischfeger conducts its domestic and foreign operations under highly
competitive market conditions, requiring that its products and services be
competitive in price, quality, service and delivery.
P&H's principal competitor in electric mining shovels is Bucyrus
International, Inc. Harnischfeger believes P&H is the leading participant in
this market. In draglines, the main competitor is Bucyrus International, Inc.
The P&H main competitors in drills are Ingersoll-Rand, Driltech and Bucyrus
International, Inc.
In the underground coal mining industry, Joy competes primarily on the
basis of the quality and reliability of its products and its ability to provide
timely, extensive and cost-effective repair and rebuild services and replacement
parts. Joy's primary competitors in continuous mining machinery are Tamrock
Corporation, Simmons-Rand Company(a subsidiary of Long-Airdox Company) and
Jeffrey. In the longwall shearers, Joy competes primarily with Anderson Longwall
(a subsidiary of Long-Airdox Company), Eickhoff Corporation, and Mitsui Miike
Machinery Company, Ltd. In continuous haulage equipment, Joy competes with
Long-Airdox Company, Fairchild International, Eimco, Stamler Corporation and
Jeffrey. In roof supports and armored face conveyors, Joy primarily competes
with DBT, Long-Airdox Company and several regional suppliers. In the sale of
replacement parts for Joy's equipment, Joy competes with various suppliers.
The pulp and papermaking capital machinery market is globally competitive;
Beloit's two major paper machinery competitors are foreign-owned companies. The
principal competitors are Valmet Corporation, Finland and Voith Sulzer
Papiertechnik GMBH, with headquarters in Germany. The principal competitors in
pulp machinery are Sunds Defibrator, Ahlstrom-Kvaerner and Andritz. In the
aftermarket area, Beloit competes with various suppliers.
Customers
Sales to a Pacific Rim customer in the Pulp and Papermaking Machinery
Segment approximated 5% and 15% of the Company's consolidated net sales for
fiscal 1998 and 1997, respectively. The related accounts receivable from this
customer approximated 26% and 25% of consolidated accounts receivable at October
31, 1998 and October 31, 1997, respectively.
Backlog
Backlog by business segment for the Company's continuing operations (in
thousands of dollars) as of the end of fiscal years 1998 and 1997 was as
follows:
October 31,
-------------------------------
1998 1997
---- ----
Mining Equipment...................... $386,006 $358,340
Pulp and Papermaking Machinery.. ..... 637,224 776,618
--------------------------------
$1,023,230 $1,134,958
================================
Supply of Materials and Purchased Components
P&H manufactures machines and heat-treated gears, pinions, shafts,
structural fabrications, electrical motors, generators and other electrical
parts. It purchases raw and semi-processed steel, castings, forgings, copper and
other materials for these parts and components from approximately 400 suppliers.
In addition, component parts, such as engines, bearings, controls, hydraulic
components, and a wide variety of mechanical and electrical items are purchased
from approximately 1,500 suppliers. Purchases of materials and components are
made on a competitive basis with no single source being dominant.
Joy purchases electric motors, gears, hydraulic parts, electronic
components, forgings, steel, clutches and other components and raw materials
from outside suppliers. Although Joy purchases certain components and raw
materials from a single supplier, alternative sources of supply are available
for all such items. Joy believes that it has adequate sources of suppliers of
component parts and raw materials for its manufacturing requirements. No single
source is dominant.
Beloit purchases raw materials used in its products which include
plates, sheets, shapes, carbon and alloy steel, stainless steel, brass and
bronze, nickel alloy, and aluminum. Purchases of semi-processed and component
parts include castings, valves, filters, pumps, dryers, electrical equipment,
and various vacuum, drying, hydraulic, combustion, material-handling and
temperature control systems. Beloit has approximately 5,300 suppliers, of which
approximately 1,600 are most commonly used. No single source is dominant.
Patents and Licenses
Joy and P&H and their respective subsidiaries own numerous patents and
trademarks and have patent licenses from others relating to their respective
products and manufacturing methods. Also, patent licenses are granted to others
throughout the world and royalties are received under most of these licenses.
While they do not consider any particular patent or license or group of patents
or licenses to be essential to their respective business as a whole, they
consider their patents and licenses significant to the conduct of its business
in certain product areas.
Beloit and other pulp and papermaking machinery manufacturers have made
extensive use of patents. Beloit has been granted numerous patents on its
designs and more are pending. Most are registered in all of the major countries
into which Beloit and its licensees sell. In the first quarter of fiscal 1998,
Beloit and Valmet Corporation signed an agreement which provides for an end to
ongoing patent disputes worldwide and the cessation of the assertion of rights
under their respective patents against each other on current and future patents
relating to the pulp and papermaking industry. The agreement is limited to
patent rights and does not include the transfer of technology. There are no
limitations on competition between the companies.
Research and Development
Harnischfeger maintains a strong commitment to research and development
with engineering staffs that are engaged in full-time research and development
of new products, and improvement of existing products. Beloit maintains research
and development facilities in Rockton, Illinois; Pittsfield, Massachusetts;
Bolton, England; Clarks Summit, Pennsylvania; and Portland, Oregon. P&H
maintains a research and development facility in Milwaukee, Wisconsin. Joy
pursues technological development through the engineering of new products,
systems and applications; the improvement and enhancement of licensed
technology; and synergistic acquisitions of technology. Research and development
expenses were $49.1 million in 1998, $38.7 million in 1997, $34.2 million in
1996.
Environmental and Health and Safety Matters
The activities of the Company are regulated by federal, state and local
statutes, regulations and ordinances relating to both environmental protection
and worker health and safety. These laws govern current operations, require
remediation of environmental impacts associated with past or current operations,
and under certain circumstances provide for civil and criminal penalties and
fines, as well as injunctive and remedial relief. The Company's foreign
operations are subject to similar requirements as established by their
respective countries.
The Company has expended substantial managerial and financial resources in
developing and implementing actions for continued compliance with these
requirements. The Company believes that it has substantially satisfied these
diverse requirements. However, because these requirements are complex and, in
many areas, rapidly evolving, there can be no guarantee against the possibility
of sizeable additional costs for compliance in the future. These same
requirements must also be met by the Company's competitors and, therefore, the
costs for present and future compliance with these laws should not create a
competitive disadvantage. Further, these laws have not had, and are not
presently expected to have, a material adverse effect on the Company.
The Company's operations or facilities have been and may become the subject
of formal or informal enforcement actions or proceedings for alleged
noncompliance with either environmental or worker health and safety laws or
regulations. Such matters have typically been resolved through direct
negotiations with the regulatory agency and have typically resulted in
corrective actions or abatement programs. However, in some cases, fines or other
penalties have been paid. Historically, neither such commitments nor such
penalties have been material.
Employees
As of October 31, 1998, Harnischfeger Industries employed approximately
13,700 people, of which approximately 7,500 were employed in the United States.
Approximately 3,000 of the U. S. employees are represented by local unions under
collective bargaining agreements. Harnischfeger believes that it maintains
generally good relationships with its employees.
Financial Information about Industry Segments
The financial information on industry segments is presented in Note-15
Segment Information to the Consolidated Financial Statements incorporated by
reference in Item 8 of this report.
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 October 31, 1998, the Company had repurchased 1,772,900 shares
through open-market transactions at a cost of approximately $68.3 million. No
shares were repurchased under this program during the latter part of fiscal
1998.
Euro
The Company is addressing the issues related to the conversion to the
Euro on January 1, 1999 and does not anticipate significant issues.
OTHER
Year 2000 Readiness Disclosure
The Year 2000 issue concerns the ability of information systems to properly
recognize and process date-sensitive information beyond December 31, 1999. To
address this problem, the Company is in the process of implementing its Year
2000 readiness plan for information technology ("IT") systems and non-IT
equipment, facilities and systems.
The primary IT strategy for attaining Year 2000 readiness within the operating
units is the successful implementation of Year 2000-ready business processing
software. Joy has successfully implemented SAP R/3. P&H is in the process of
various remediation efforts and system upgrades. Beloit is in the process of a
worldwide implementation of MAPICS. All business segments anticipate its Year
2000 IT efforts to be substantially completed by June 1999.
The Company relies on third party suppliers for key materials and services.
Efforts have been initiated to evaluate the status of suppliers' efforts and to
determine alternatives and contingency plan requirements. These activities are
intended to provide a means of managing risk, but cannot eliminate the potential
for disruption due to third party failure.
Facilities and office equipment such as machine tools, material distribution
equipment, telephone switches, and other common devices may be affected by the
Year 2000 problem. Mission- critical systems are scheduled to be Year 2000
compliant by June 1999.
The Company is in the process of identifying product-related Year 2000 problems
and is working with customers to assist in their Year 2000 readiness efforts. It
is not possible to determine with complete certainty that all Year 2000 problems
have been identified or corrected due to testing limitations, complexity and
application of these products.
Total expenses on the project through October 31, 1998 were approximately $2.9
million and were related to expenses for repair or replacement of software and
hardware related problems, expenses associated with facilities, products and
supplier reviews and project management expenses. Expected incremental expenses
related to Year 2000 are not expected to be material to the Company's financial
position. The costs of implementing SAP and MAPICS are excluded as these system
implementations were undertaken primarily to improve business processes.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Contingency plans will be developed as final evaluations of risks
are completed.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of third-party suppliers
and customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company.
The Company believes that the implementation of new business systems and the
completion of the readiness plan as scheduled will reduce the possibility of
significant interruptions of normal operations.
Other Matters
In the fourth quarter of 1998, as a result of the ongoing market
weaknesses affecting each of its businesses, the Company announced its intention
to reduce expenses through cost-reduction initiatives encompassing $110 million
in projected annual savings and includes the reduction of 3,100 employees from
October 31, 1997 levels. As of October 31, 1998, approximately 80% of the
planned headcount and cost reductions had taken place with the remainder
expected to be completed by the end of the first quarter of fiscal 1999.
Beloit APP Contracts
In fiscal 1997 and 1996, Beloit received orders for four fine paper
machines from Asia Pulp & Paper Co. Ltd. ("APP") for a total of approximately
$600 million. During the second quarter of fiscal 1998, the Company identified
$155 million of additional estimated contract costs at Beloit related to these
contracts. The additional costs primarily related to non-proprietary equipment,
installation and erection, freight and other site construction costs, and
overruns resulting from changes in estimates of costs to complete related to
these complex, large-scale projects.
Based on its review of the $155 million, Harnischfeger, with the
assistance of its outside auditors, determined that $27.6 million of this charge
was properly allocated to the fourth quarter of fiscal 1997 as it related to
isolated costs for piping which were inadvertently overlooked. Income for that
period and the full fiscal year of 1997 was restated to reflect this charge.
The first two machines have been substantially paid for and installed
at the APP facilities in Indonesia. The Company has sold approximately $44
million of its receivables from APP on these first two machines to a financial
institution. The machines are currently in the start-up/optimization phase and
are required to meet certain contractual performance tests. The contracts call
for the potential of liquidated damages, including performance damages, in
certain circumstances. The Company is currently in negotiation with APP on
certain claims and back charges on the first two machines.
The two remaining machines have been substantially manufactured, are in
Beloit's possession and are carried on the Consolidated Balance Sheet at October
31, 1998 as unbilled receivables approximating $180 million. This amount has
been reduced by a $46 million down payment received from APP and $19 million of
receivables that were sold to a financial institution. The Company has issued
letters-of-credit in the amount of the initial down payment. To date, APP has
been unable to secure financing for these two machines.
On December 15, 1998, the Company declared APP in default on the
contracts for the two remaining machines, concluding that APP has not acted in
good faith and is unwilling to pay its obligations or is incapable of securing
financing for these two paper machines. Consequently, on December 15, 1998, the
Company filed for arbitration in Singapore for the full payment from APP for the
second two machines as well as at least $125 million in damages and delay costs.
On December 16, 1998, APP filed a notice of arbitration in Singapore
against Beloit seeking a full refund of approximately $46 million paid to Beloit
for the second two machines claiming that Beloit breached an obligation under
the purchase contracts to secure financing, thus resulting in termination. APP
also seeks recovery of other damages alleged by APP, caused by Beloit's claimed
breaches. In addition, APP seeks a declaration in the arbitration that it has no
liability under certain promissory notes. The Company will vigorously defend
against all of APP's assertions that it is entitled to a return of payments
under the contracts and also will proceed without delay to mitigate APP's
obligations for damages by finding other customers for these world-class
machines.
The Company intends to vigorously pursue its rights under the contracts
and expects to be fully compensated for these two machines from APP. However, in
the event that the Company is unsuccessful in arbitration and to mitigate APP's
damages, the Company is pursuing selling these two machines to other customers.
See Note 18 - Beloit APP Contracts to the Consolidated Financial Statements of
the 1998 report to the shareholders which is incorporated by reference in Item 8
of this report.
Proceeds from the ultimate sale of these paper machines, if required,
are expected to be sufficient to substantially recover the carrying value of the
receivable. In the event the Company is unsuccessful in arbitration and/or is
unable to sell these paper machines to another customer, it may have a
materially adverse effect on its consoidated financial position or results of
operations.
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, pulp and 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 acceptance 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, pulp, paper mills and other facilities
that use these machines. The Company's success in obtaining and managing a
relatively small number of sales opportunities, including warranties and
guarantees associated therewith, 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 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 and other
commodities; the cash flows of customers; the cost and availability of financing
to customers and the ability of customers to obtain regulatory approval for
investments in mining, pulp, papermaking and other heavy industrial projects;
the ages, efficiencies and utilization rates of existing equipment: the
development of new technologies; the availability of used or alternative
equipment; consolidations among cutomers; work stoppages at customers or
providers of transportation; and the timing, severity and duration of customer
buying cycles.
* 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; the existence of
patents protecting or restricting the Company's ability to offer features
requested by customers; whether the Company has successful reference
installations to show 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; the availability of manufacturing capacity at
the Company's factories; and whether the Company can offer the complete package
of products and services sought by its customers.
* 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 Company's 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 or economic
turmoil and economic growth in major markets such as the United States, Canada,
Europe, the Pacific Rim, South Africa, Australia and Chile; environmental and
trade regulations; and the stability and ease of exchange of currencies.
Item 2. Properties
As of October 31, 1998, the following principal properties were owned,
except as indicated. All of these plants are generally suitable for operations.
Harnischfeger owns a 94,000 square foot office building in St. Francis,
Wisconsin, which is used as its worldwide corporate headquarters.
<TABLE>
<CAPTION>
MINING EQUIPMENT LOCATIONS
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- ------------------------- ----------- --------- ----------------------------
<S> <C> <C> <C>
Milwaukee, Wisconsin..... 1,067,000 46 Electric mining shovels, electric and
diesel-electric draglines and large
rotary blasthole drills.
Milwaukee, Wisconsin..... 180,000 13 Electrical products.
Cleveland, Ohio.......... 270,000 8 Gearing manufacturing.
Cleveland, Ohio.......... 70,000(1) 2 Rebuild service center.
Franklin, Pennsylvania... 714,640 63 Underground coal mining machinery,
components and parts.
Reno, Pennsylvania....... 121,400 22 Components and parts for mining
machinery.
Brookpark, Ohio.......... 85,000 4 Components and parts for mining
machinery.
Solon, Ohio.............. 96,800 14 Components and parts for mining
machinery.
Abingdon, Virginia....... 63,400 22 Underground coal mining machinery and
components.
Bluefield, Virginia...... 102,160 15
Duffield, Virginia....... 72,000 11
Homer City, Pennsylvania. 79,500 10 Mining machinery rebuild,
Meadowlands, Pennsylvania 118,316 13 service and parts sales.
Mt. Vernon, Illinois..... 107,130 12
Price, Utah.............. 44,200 6
Gillette, Wyoming 29,500(2) 3 Electrical products and components for
mining shovels.
Mesa, Arizona............ 17,000 5 Components and parts for mining
machinery.
Bassendean, Australia.... 72,500 5 Components and parts for mining
machinery.
Mt. Thorley, Australia... 81,800 11 Components and parts for mining
machinery.
Kurri Kurri, Australia....... 61,000 7 Mining machinery rebuild, service and
parts sales.
Mackay, Australia........ 35,500 3 Components and parts for mining
machinery.
Vale Road, Australia..... 107,000 18 Underground coal mining machinery,
components and parts.
McCourt Road, Australia.. 101,450 33 Underground coal mining machinery,
components and parts.
Parkhurst, Australia..... 33,500 15 Rebuild service center.
Rockhampton, Australia... 8,000 3 Sales.
Johannesburg, So.Africa.... 44,000(3) 1 Electrical products and components for
mining shovels.
Steeledale, South Africa. 557,400 15 Underground coal mining machinery,
components and parts.
Wadeville, South Africa 154,000 34 Coal mining machinery assembly and
service.
Belo Horizonte, Brazil... 37,700 1 Components and parts for mining shovels.
Santiago, Chile.......... 6,800 1
Antofagasta, Chile....... 21,000 1 Electrical and mechanical repairs.
Calama, Chile............ 5,500 1
Pinxton, England......... 76,000 10 Fabrication.
Wigan, England........... 337,000 27 Mining machinery, components and parts.
Worcester, England....... 100,000 9 Mining machinery, components and parts.
Bestwood, England........ 190,000(4) 16 Service and rebuilds.
- -------------------------
</TABLE>
(1) Under a lease expiring in 2002.
(2) Under a lease expiring in 2000.
(3) Under a lease expiring in 2005.
(4) Under a lease expiring in 1999.
The mining equipment segment operates warehouses in Casper, Gillette and
Green River, Wyoming; Cleveland, Ohio; Hibbing, Minnesota; Charleston and
Pineville, West Virginia; Milwaukee, Wisconsin; Mesa, Arizona; Elco, Nevada;
Birmingham, Alabama; Carlsbad, New Mexico; Norton, Virginia; Lovely and
Henderson, Kentucky; Hinton, Sparwood, Cornwall and Vancouver, Canada; Cardiff,
Bayswater, Mt. Thorley, Gracemere, Rockhampton, Emerald, Kurri Kurri and
Litigow, Australia; Belo Horizonte, Brazil; Santiago, Iquique and Calama, Chile;
Johannesburg, Wadeville and Hendrina, South Africa; Stobswood and Bestwood,
England and Puerto Ordaz, Venezuela. The warehouses in Casper, Hibbing,
Milwaukee, Mt. Thorley, Belo Horizonte and Johannesburg are owned; the others
are leased. In addition, the segment leases sales offices throughout the United
States and in principal locations in other countries.
<TABLE>
<CAPTION>
PULP AND PAPERMAKING MACHINERY LOCATIONS
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- -------------------------- ----------- --------- ------------------------------------
<S> <C> <C> <C>
Beloit, Wisconsin......... 928,000 40 Papermaking machinery and finished
product processing equipment.
Rockton, Illinois......... 469,000 203 Papermaking machinery, finished
product processing equipment and R&D
center.
Dalton, Massachusetts..... 277,000 55 Stock and pulp preparation
equipment and specialized processing
systems.
Lenox, Massachusetts...... 127,000 19 Winders.
Pittsfield, Massachusetts.. 36,000 30 Research and development facility and
pilot plant for process simulation.
Aiken, South Carolina..... 127,000 17
Columbus, Mississippi..... 133,000 22 Rubber and polymeric covers
for rolls;
Federal Way, Washington... 55,000 3 Rubber blankets; rubber linings and
metal roll repairs.
Neenah, Wisconsin......... 77,000 10
Clarks Summit, Pennsylvania 99,800 10
Renfrew, Canada........... 145,000 22
Hattiesburg, Mississippi.. 100,000 15 Component parts and repair of stock
and pulp preparation equipment,
papermaking machinery and finished
product processing equipment.
Otsego, Michigan.......... 23,500 1 Filled rolls for supercalenders and
specialty rolls.
Portland, Oregon.......... 41,000 5 Bulk materials handling and drying
systems.
Rochester, New Hampshire.. 15,650 5 Specialty services provided
principally to the paper industry.
Nashua, New Hampshire..... 425,000 63 Stock and pulp preparation equipment
and specialized processing systems.
Pensacola, Florida........ 7,250 2 Specialty services provided
principally to the paper industry.
Sandusky, Ohio............ 254,000 13 Centrifugal castings.
Glenrothes, Scotland...... 56,000 8
Campinas, Brazil.......... 202,000 33 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment;
woodyard and pulp plant equipment.
Bolton, England........... 465,400 73 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment.
Pinerolo, Italy........... 517,400 18 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment.
Jelenia Gora, Poland...... 271,500 28 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment.
Swiecie, Poland........... 37,000 (1) 4 Components and parts for papermaking
machinery equipment.
Tullins, France........... 145,000 9 Roll repair facility and other general
maintenance.
Cernay, France............ 35,200 15 Roll-covering service.
- -------------------------
</TABLE>
(1) Under a lease expiring in 2019.
The Pulp and Papermaking Machinery business has warehouse space at the
above facilities and in addition maintains leased facilities in Memphis,
Tennessee; Swiecie, Poland; and Montreal, Canada. Sales offices are also
maintained at various locations throughout the world.
Item 3. Legal Proceedings
The Company is 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 resolutions 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, 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
million failed to perform satisfactorily. In June, 1997, a Lewiston, Idaho jury
awarded Potlatch $95 million in damages in the case which, together with fees,
costs and interest to October 31, 1998, approximate $116 million. Beloit has
appealed this award to the Idaho Supreme Court. The appeal was heard by the
Court on September 10, 1998 with a decision anticipated in the first half of
fiscal 1999. The Company considers the eventual outcome of the Potlatch case not
to be estimable. Reserves in the October 31, 1998 Consolidated Balance Sheet are
less than the sales price of the washers. The possible ultimate cost to the
Company of this case could be materially higher than the reserves. In the event
the Company is unsuccessful in its request for a new trial in this matter, it
may have a material adverse effect on its consolidated financial position or
results of operations.
The Company and certain of its senior executives have been named as
defendants in three purported class action suits, entitled Great Neck Capital
Appreciation Investment Partnership, L.P. v. Jeffery T. Grade, et al., C.
William Carter v. Harnischfeger Industries, Inc. et al., and Norman Ellison v.
Jeffery T. Grade, et al., filed on June 5, 1998, June 11, 1998 and July 21,
1998, respectively, in the United States District Court for the Eastern District
of Wisconsin. These actions, which have now been consolidated, seek damages in
an unspecified amount on behalf of an alleged class of purchasers of the
Company's common stock, based principally on allegations that the Company's
disclosures with respect to the Indonesian contracts of Beloit discussed in Note
18 - Beloit APP Contracts incorporated by reference in Item 8 of this report,
violated the federal securities laws.
The Company's ability to realize the unbilled receivables is discussed in
Notes to Consolidated Financial Statements, Note 18 - Beloit APP Contracts. 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.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
Executive Officers of the Registrant
The following table sets forth, through the date of filing this form 10-K
report, the executive officers of Harnischfeger Industries, their ages, their
offices with Harnischfeger and the period during which they have held such
offices.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Current Office and Principle Occupation Years as
Officer
Jeffery T. Grade..... 55 Chairman of the Board and Chief Executive Officer since 1993; Chief 16
Executive Officer since 1992;
President and Chief Operating
Officer from 1986 to 1995;
Director since 1983; Senior Vice
President, Finance and
Administration and Chief
Financial Officer from 1983 to
1986.
John Nils Hanson..... 57 Vice Chairman since August, 1998; President and Chief Operating
Officer since July 1, 1995; President and Chief Executive Officer 3
of Joy 1990 to July, 1995. Director since 1996.
Francis M. Corby, Jr. 54 Executive Vice President for Finance and 13
Administration since December 1994; Senior Vice President, Finance
and Chief Financial Officer from 1986 to December, 1994. Director
since 1996.
James A. Chokey...... 55 Executive Vice President for Law and Government Affairs since July 1
1997; Senior Vice President, Law and Corporate Development of Beloit
from 1996 to July, 1997.
Wayne Hunnell........ 52 Senior Vice President since February, 1998; President and Chief -
Operating Officer of Joy since August, 1998; Vice President and
controller of Joy from 1995 to 1998. Vice President and Controller
of P&H from 1993 to 1995; Various other positions with Joy and
Harnischfeger from 1978 to 1993.
Robert W. Hale.... 52 Senior Vice President since August, 1997; 1
President of P&H Mining Equipment since December 1994; Vice
President of P&H Material Handling from 1988 to 1994.
Mark Readinger...... 45 Senior Vice President since August, 1997; President of Beloit 1
Corporation since February, 1998; President and Chief Operating
Officer of Joy from 1996 to 1998; Senior Vice President of Marketing
and General Manager of the Joy North American Aftermarket Operations
from 1994 to 1996.
</TABLE>
The business address of each such person is 3600 South Lake Drive, St.
Francis, Wisconsin 53235-3716. All officers listed above are citizens of the
United States of America. Officers are elected annually but may be removed at
any time at the discretion of the Board of Directors. There are no family
relationships between the foregoing officers.
PART II
The information required by Items 6 through 8 is incorporated by reference from
the 1998 Annual Report to Shareholders
Form 10-K
Item Number
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters (see also information filed in this report on
Form 10-K)
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial
Disclosure: None
PART III
All information required by Items 10 through 13 of Part III, with the
exception of information on the Executive Officers which appears in Part I of
this report, is incorporated by reference from the Company's Proxy Statement for
its 1999 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission within 120 days after the close of the fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.*
(a) The following documents are filed as part of this report:
(1) Financial Statements
Consolidated Statement of Income for the years ended October 31, 1998,
1997 and 1996 Consolidated Balance Sheet at October 31, 1998 and 1997
Consolidated Statement of Cash Flow for the years ended October 31,
1998, 1997 and 1996 Consolidated Statement of Shareholders' Equity for
the years ended October 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Report of Independent Accountants
* Incorporated by reference from the 1998 Annual Report to Shareholders
(2) Financial Statement Schedule
Report of Independent Accountants on Financial Statement
Schedule For the Years Ended October 31, 1998, 1997, and 1996:
II. Valuation and Qualifying Accounts
All other schedules are omitted because they are either not
applicable or the required information is shown in the financial statements or
notes thereto.
Financial statements of less than 50% owned companies have been omitted
because the proportionate share of their profit before income taxes and total
assets are less than 20% of the respective consolidated amounts and investments
in such companies are less than 20% of consolidated total assets.
(3)Exhibit
Number Exhibit
- ------- --------------------------------------------------------------------
3(a) Restated Certificate of Incorporation of Harnischfeger Industries, Inc.
(incorporated by reference to Exhibit 3(a) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter ended April 30, 1997).
(b) Bylaws of Harnischfeger Industries, Inc., as amended December 7, 1998.
(c) Certificate of Designations of Preferred Stock, Series D (incorporated by
reference to Exhibit 28.1(b) to Registrant's Current Report on Form 8-K
dated March 25, 1992).
4(a) 9.1% Series A Senior Note Agreement dated as of September 15, 1989
(incorporated by reference to Exhibit 4(b) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File
No.1-9299).
(b) 9.1% Series B Senior Note Agreement dated as of October 15,
1989(incorporated by reference to Exhibit 4(c) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File
No.1-9299).
(c) 8.95% Series C Senior Note Agreement dated as of February 15, 1991
(incorporated by reference to Exhibit 4(d) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File No.
1-9299).
(d) 8.9% Series D Senior Note Agreement dated as of October 1, 1991
(incorporated by reference to Exhibit 4(e) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File No.
1-9299).
(e) Indenture for Debentures between Harnischfeger Industries, Inc. and
Continental Bank, National Association, Trustee, dated March 1, 1992
(incorporated by reference to Exhibit 4(f) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992, File No.
1-9299).
(f) First Supplemental Indenture for Debentures between Harnischfeger
Industries, Inc. and Continental Bank, National Association, Trustee, dated
June 12, 1992 (incorporated by reference to Exhibit 4(g) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October 31,
1992, File No. 1-9299).
(g) Registration Statement filed on Form S-3, for issuance of Debt Securities
of up to $200,000,000 dated April 10, 1996, File No. 333-2401.
(h) Registration Statement filed on Form S-3, for issuance of Debt Securities
of up to $200,000,000 dated February 23, 1998, File No. 333-46429
(i) Rights Agreement dated as of February 8, 1989 between the Registrant and
the First National Bank of Boston, as Rights Agent, which includes as
Exhibit A the Certificate of Designations of Preferred Stock, Series D,
setting forth the terms of the Preferred Stock, Series D; as Exhibit B the
Form of Rights Certificate; and as Exhibit C the Summary of Rights to
Purchase Preferred Stock, Series D (Incorporated by reference to Exhibit 1
to Registrant's Registration Statement on Form 8-A filed on February 9,
1989).
(j) Amendment No. 1 to the Rights Agreement dated as of October 9, 1995
(incorporated by reference to Exhibit 4(j) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1997, File No.
1-9299.
(k) Amendment No. 2 to the Rights Agreement dated as of September 15, 1998.
(l) Harnischfeger Industries, Inc. Stock Employee Compensation Trust Agreement
effective as of March 23, 1993 (incorporated by reference to Exhibit 4(k)
to Report of Harnischfeger Industries, Inc. on Form 10-K for the year ended
October 31, 1993, File No.1-9299).*
(m) Amendment One to Harnischfeger Industries, Inc. Stock Employee Compensation
Trust Agreement dated January 1, 1994.(incorporated by reference to Exhibit
4(j) to Report of Harnischfeger Industries, Inc. on Form 10-K for the year
ended October 31, 1995, File No. 1-9299).*
(n) Amendment Two to Harnischfeger Industries, Inc. Stock Employee Compensation
Trust Agreement dated May 6, 1995 (incorporated by reference to Exhibit
4(k) to Report of Harnischfeger Industries, Inc. on Form 10-K for the year
ended October 31, 1995, File No. 1-9299).*
(o) $500,000,000 Credit Agreement dated as of October 17, 1997 among
Harnischfeger Industries, Inc. as borrower and each other financial
institution which from time to time thereto as lenders, Chase Manhattan
Bank as Administrative Agent, First Chicago Markets, Inc. as Syndication
Agent and Royal Bank of Canada as Documentaion Agent incorporated by
reference to Exhibit 4(n) to Report of Harnischfeger Industries, Inc. on
Form 10-K for the year ended October 31, 1997, File No. 1-9299).
10(a)Harnischfeger Industries, Inc. 1988 Incentive Stock Plan, as amended on
March 6, 1995 (incorporated by reference to Exhibit 10(a) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October 31,
1995, File No. 01-9299).*
(b) Harnischfeger Industries, Inc. Stock Incentive Plan as amended and restated
as of September 12, 1998.*
(c) Harnischfeger Industries, Inc. Executive Incentive Plan, as amended and
restated as of September 9, 1998.*
(d) Long-Term Compensation Plan for Key Executives, as amended and restated as
of September 12, 1998.*
(e) Harnischfeger Industries, Inc. Supplemental Retirement and Stock Funding
Plan, as amended and restated as of September 12, 1998.*
(f) Directors Stock Compensation Plan, as amended and restated as of August 24,
1998.*
(g) Service Compensation Agreement for Directors effective as of June 1, 1992
(incorporated by reference to Exhibit 10(g) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992, File
No.1-9299).*
(h) Long-Term Compensation Plan for Directors, as amended and restated as of
August 24, 1998*
(i) Joy Technologies Inc. 1991 Stock Option and Equity Incentive Plan dated
November 12, 1991 (incorporated by reference to Exhibit 99-1999.1 to
Registration Statement on For S-8, File No. 33-57209).*
(j) Amendment to Joy Technologies Inc. 1991 Stock Option and Equity Incentive
Plan dated November 29, 1994 (incorporated by reference to Exhibit
99-1999.2 to Registration Statement on Form S-8, File No. 33-57209).*
(k) Harnischfeger Industries Deferred Compensation Trust as amended and
restated as of October 9, 1995 (incorporated by reference to exhibit 10 to
Report of Harnischfeger Industries, Inc. on Form 10-Q for the quarter ended
January 31, 1995, File No. O1-9299).*
(l) Amendment No. 1 to Harnischfeger Industries Deferred Compensation Trust as
amended and restated as of October 9, 1995 (incorporated by reference to
Exhibit 10(j) to Report of Harnischfeger Industries, Inc. on Form 10-K for
the year ended October 31, 1996, File No. 01-9299).*
(m) Amended and Restated Grant Letter dated September 12, 1998, issued on June
8, 1997 to Jeffery T. Grade.*
(n) Amended and Restated Grant Letter dated September 12, 1998, issued on June
8, 1997 to Francis M. Corby, Jr.*
11 Statement Re: Computation of Earnings Per Share, filed herewith.
13 1998 Annual Report to Shareholders
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP
24 Powers of Attorney.
27 Financial Data Schedule
* Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Harnischfeger Indutries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated December 8, 1998, except as to Note 18, which is as of December 16,
1998 appearing in the 1998 Annual Report to Shareholders of Harnischfeger
Industries, Inc.(which report and consolidated finacial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/S/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 8, 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of St.
Francis, Wisconsin, on the 23rd day of December, 1998.
HARNISCHFEGER INDUSTRIES, INC.
(Registrant)
/s/FRANCIS M. CORBY, JR.
Francis M. Corby, Jr.
Executive Vice President for
Finance and Administration
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amended and restated report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on December 23, 1998.
Signature Title
/s/JEFFERY T. GRADE Chairman and Chief Executive
Jeffery T. Grade Officer
/s/JOHN NILS HANSON Vice Chairman, Director and President and
John Nils Hanson Chief Operating Officer
/s/FRANCIS M. CORBY, JR. Director and Executive Vice President for
Francis M. Corby, Jr. Finance and Administration
/s/JAMES C. BENJAMIN Vice President and Controller
James C. Benjamin
(1) Director
Donna M. Alvarado
(1) Director
Larry D. Brady
(1) Director
John D. Correnti
(1) Director
Harry L. Davis
(1) Director
Robert M. Gerrity
(1) Director
Robert B. Hoffman
(1) Director
Ralph C. Joynes
(1) Director
Jean-Pierre Labruyere
(1) Director
L. Donald LaTorre
(1) Director
Stephen M. Peck
(1) Director
Leonard E. Redon
(1) Jeffery T. Grade, by signing his name hereto, does hereby sign and execute
this amended and restated report on behalf of each of the above-named
Directors of Harnischfeger Industries, Inc. pursuant to powers of attorney
executed by each of such Directors and filed with the Securities and
Exchange Commission as an exhibit to this report.
December 23, 1998
By: /s/JEFFERY T. GRADE
Jeffery T. Grade, Attorney-in-fact
<PAGE>
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Annual Meeting
The annual meeting of the shareholders of Harnischfeger Industries,
Inc. is scheduled to be held on February 23, 1999 at 10:00 a.m.
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
CALCULATIONS OF EARNINGS (LOSS) PER SHARE
(Dollar amounts in thousands except per share amounts)
Balance at Additions Additions Currency Balance at
Beginning by Charged Translation Discontinued at End
Classification of Year Acquisition to Expense Deductions (1) Effects Operations of Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1998
Doubtful accounts $8,319 $350 $4,311 ($1,374) ($22) ($1,695) $9,889
For the year ended October 31, 1997
Doubtful accounts $8,612 $158 $2,604 ($3,006) ($291) $242 $8,319
For the year ended October 31, 1996
Doubtful accounts $7,604 $2,240 $4,278 ($4,381) ($1,117) ($12) $8,612
(1) Represents write-off of bad debts, net of recoveries.
Allowance Deducted in Balance Sheet from Deferred Tax Assets:
Balance at Additions/ Balance at
Beginning Deductions- at end
of Year Net of Year
-----------------------------------------------
For the year ended October 31, 1998 $34,895 $12,143 $47,038
For the year ended October 31, 1997 $44,968 ($10,073) $34,895
For the year ended October 31, 1996 $18,256 $26,712 $44,968
</TABLE>
Exhibit 3(b)
B Y L A W S
OF
HARNISCHFEGER INDUSTRIES, INC.
ARTICLE I
OFFICES
The initial registered office of the corporation required by
the Delaware General Corporation Law shall be 100 West Tenth Street, City of
Wilmington, County of New Castle, State of Delaware, and the address of the
registered office may be changed from time to time by the Board of Directors.
The principal business office of the corporation shall be
located in the City of St. Francis, County of Milwaukee, State of Wisconsin. The
corporation may have such other offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the
Wisconsin Business Corporation Law may be, but need not be, the same as its
place of business in the State of Wisconsin, and the address of the registered
office may be changed from time to time by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 1. Annual Meeting. The annual meeting of stockholders
shall be held at a time and on a date in the month of February designated by
resolution adopted by the Board of Directors for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
state where the meeting is to be held, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for the annual meeting of the stockholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as is convenient.
SECTION 2. Special Meeting. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the Chief Executive Officer or by the Board of
Directors.
SECTION 3. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of Delaware, as the
place of meeting for any annual meeting or for any special meeting called by the
Board of Directors. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal business office of
the corporation in the State of Wisconsin.
SECTION 4. Notice of Meeting. Written notice stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten days nor more than sixty days before the date of the meeting, either
personally or by mail, by or at the direction of the Chief Executive Officer, or
the Secretary, or the officer or persons calling the meeting, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail, addressed
to the stockholder at the stockholder's address as it appears on the records of
the corporation, with postage thereon prepaid. Any previously scheduled meeting
of the stockholders may be postponed, and any special meeting of the
stockholders may be cancelled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting of
stockholders.
SECTION 5. Fixing of Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors of the corporation may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be not more than sixty days and, in case of a meeting of
stockholders, not less than ten days prior to the date on which the particular
action, requiring such determination of stockholders, is to be taken. If no
record date is fixed for the determination of stockholders entitled to notice of
or to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the close of business on the date next preceding the date
on which notice of the meeting is mailed or the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof; provided, however, that the Board of Directors may fix a
new record date for the adjourned meeting.
SECTION 6. Voting Lists. The officer or agent having charge of
the stock ledger of the corporation shall make, at least ten days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, or any adjournment thereof, arranged in alphabetical order, with
the address of and the number of shares held by each; which list, for a period
of ten days prior to such meeting, shall be kept at the place where the meeting
is to be held, or at another place within the city where the meeting is to be
held, which other place shall be specified in the notice of meeting and the list
shall be subject to inspection by any stockholder for any purpose germane to the
meeting, at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any stockholder during the whole time of the meeting. The
original stock ledger shall be prima facie evidence as to who are the
stockholders entitled to examine such list or ledger or to vote at any meeting
of stockholders. Failure to comply with the requirements of this section will
not affect the validity of any action taken at such meeting.
SECTION 7. Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
stockholders. If a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, unless the vote of a greater number or
voting by classes is required by Delaware law, the Articles of Incorporation, or
these Bylaws. If less than a majority of the outstanding shares are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. Any stockholders' meeting, annual or
special, whether or not a quorum is present, may be adjourned from time to time
by the Chairman of the meeting without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 8. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stockholder or by the
stockholder's duly authorized attorney in fact. Such proxy shall be filed with
the Secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after three years from the date of its execution, unless
otherwise provided in the proxy.
SECTION 9. Voting of Shares. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of stockholders, except to the extent that the voting rights
of any class or classes are enlarged, limited or denied by the Articles of
Incorporation or in the manner therein provided.
SECTION 10. Voting of Shares by Certain Holders. Neither
treasury shares nor shares of the corporation held by another corporation, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the corporation, shall be
entitled to vote or to be counted for quorum purposes. Nothing in this paragraph
shall be construed as limiting the right of the corporation to vote its own
stock held by it in a fiduciary capacity.
Shares standing in the name of another corporation, domestic
or foreign, may be voted in the name of such corporation by its President or
such other officer as the President may appoint or pursuant to any proxy
executed in the name of such corporation by its President or such other officer
as the President may appoint in the absence of express written notice filed with
the Secretary that such President or other officer has no authority to vote such
shares.
Shares held by an administrator, executor, guardian,
conservator, trustee in bankruptcy, receiver or assignee for creditors may be
voted by such administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver or assignee for creditors, either in person or by proxy,
without a transfer of such shares into the name of such administrator, executor,
guardian, conservator, trustee in bankruptcy, receiver or assignee for
creditors. Shares standing in the name of a fiduciary may be voted by such
fiduciary, either in person or by proxy.
A stockholder whose shares are pledged shall be entitled to
vote such shares unless in the transfer by the pledgor on the books of the
corporation the pledgor has expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or the pledgee's proxy, may represent such stock
and vote thereon.
SECTION 11. Stockholder Proposals. No proposal for a
stockholder vote shall be submitted by a stockholder (a "Stockholder Proposal")
to the corporation's stockholders unless thestockholder submitting such proposal
(the "Proponent") shall have filed a written notice setting forth with
particularity (i) the names and business addresses of the Proponent and all
Persons acting in concert with the Proponent (ii) the name and address of the
Proponent and the Persons identified in clause (i), as they appear on the
corporation's books (if they so appear), (iii) the class and number of shares of
the corporation beneficially owned by the Proponent and the Persons identified
in clause (i); (iv) a description of the Stockholder Proposal containing all
material information relating thereto; and (v) whether the Proponent or any
Person identified in clause (i) intends to solicit proxies from holders of a
majority of shares of the corporation entitled to vote on the Stockholder
Proposal. The Proponent shall also submit such other information as the Board of
Directors reasonably determines is necessary or appropriate to enable the Board
of Directors and stockholders to consider the Stockholder Proposal. As used in
this Section, the term "Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity.
The presiding officer at any stockholders' meeting may
determine that any Stockholder Proposal was not made in accordance with the
procedures prescribed in these Bylaws or is otherwise not in accordance with
law, and if it is so determined, such officer shall so declare at the meeting
and the Stockholder Proposal shall be disregarded.
The notice required by these Bylaws to be delivered by the
Proponent shall be delivered to the Secretary at the principal executive office
of the corporation (i) not less than ninety (90) days before nor more than one
hundred twenty (120) days before the first anniversary of the preceding date of
the previous year's annual meeting of stockholders if such Stockholder Proposal
is to be submitted at an annual stockholders' meeting (provided, however, that
in the event that the date of the annual meeting is more than thirty (30) days
before or more than sixty (60) days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the one hundred twentieth (120th) day prior to such annual meeting
and not later than the close of business on the later of the ninetieth (90th)
day prior to such annual meeting or the tenth (10th) day following the day on
which public announcement of the date of such annual meeting is first made by
the corporation) and (ii) no later than the close of business on the fifteenth
(15th) day following the day on which notice of the date of a special meeting of
stockholders was given if the Stockholder Proposal is to be submitted at a
special stockholders' meeting (provided, however, if notice of the date of the
special meeting of stockholders was given less than twenty (20) days before the
date of the special meeting of stockholders, the notice required by these Bylaws
to be given by the Proponent shall be delivered no later than the close of
business on the fifth (5th) day following the day on which notice of the special
stockholder's meeting was given). In no event shall the public announcement of
an adjournment of an annual or special meeting commence a new time period forthe
giving of a stockholder's notice as described above.
SECTION 12. Inspectors of Election; Opening and Closing the
Polls. The Board of Directors by resolution shall appoint one or more
inspectors, which inspector or inspectors may include individuals who serve the
corporation in other capacities, including without limitation, as officers,
employees, agents or representatives, to act at the meetings of stockholders and
make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act or is able to act at a meeting of
stockholders, the Chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspector shall have the duties prescribed by law. The Chairman of the meeting
shall fix and announce at the meeting the date and time of the opening and
closing of the polls for each matter upon which the stockholders will vote at a
meeting.
SECTION 13. Stockholder Consent Procedures. (a) Record Date
for Action by Written Consent. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which date shall not be more than 10 days after
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by written notice
to the Secretary, request the Board of Directors to fix a record date. The Board
of Directors shall promptly, but in all events within 10 days after the date on
which such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within 10 days after the
date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business or to any officer or agent of the corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by applicable law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
(b) Inspectors of Written Consent. In the event of the
delivery, in the manner provided by Section 13(a), to the corporation of the
requisite written consent or consents to take corporate action and/or any
related revocation or revocations, the corporation shall engage nationally
recognized independent inspectors of elections for the purpose of promptly
performing a ministerial review of the validity of the consents and revocations.
For the purpose of permitting the inspectors to perform such review, no action
by written consent without a meeting shall be effective until such date as the
independent inspectors certify to the corporation that the consents delivered to
the corporation in accordance with Section 13(a) represent at least the minimum
number of votes that would be necessary to take the corporate action. Nothing
contained in this paragraph shall in any way be construed to suggest or imply
that the Board of Directors or any stockholder shall not be entitled to test the
validity of any consent or revocation thereof, whether before or after such
certification by the independent inspectors, or to take any other action
(including, without limitation, the commencement, prosecution or defense of any
litigation with respect thereto, and the seeking of injunctive relief in such
litigation).
(c) Effectiveness of Written Consent. Every written consent
shall bear the signature of each stockholder who signs the consent and no
written consent shall be effective to take the corporate action referred to
therein unless, within 60 days of the date the earliest dated written consent
was received in accordance with Section 13(a), a written consent or consents
signed by a sufficient number of holders to take such action are delivered to
the Corporation in the manner prescribed in Section 13(a).
Exhibit 4(k)
SECOND AMENDMENT TO RIGHTS AGREEMENT
SECOND AMENDMENT, dated as of September 15, 1998 to the Rights
Agreement, dated as of February 8, 1989 and amended as of October 9, 1995 (as so
amended, the "Rights Agreement"), between Harnischfeger Industries, Inc., a
Delaware corporation (the "Company"), and BankBoston, N.A., formerly known as
the First National Bank of Boston, as Rights Agent (the "Rights Agent"). All
capitalized terms not defined herein shall have the meanings ascribed to them in
the Rights Agreement.
The Company and the Rights Agent have heretofore executed and entered
into the Rights Agreement. Pursuant to Section 26 of the Rights Agreement, the
Company and the Rights Agent may from time to time supplement or amend the
Rights Agreement in accordance with the provisions of Section 26 thereof. All
acts and things necessary to make this Amendment a valid agreement, enforceable
according to its terms, have been done and performed, and the execution and
delivery of this Amendment by the Company and the Rights Agent have been in all
respects duly authorized by the Company and the Rights Agent.
In consideration of the foregoing and the mutual agreements set forth
herein, the parties agree as follows:
1. The references to "20%" set forth in the first and third sentences
of Section 1 (a) of the Rights Agreement shall be deleted and replaced with
"15%".
2. The reference to "20%" set forth in Section 1 (k) of the Rights
Agreement shall be deleted and replaced with "15%".
3. Section 1 (o) of the Rights Agreement is hereby modified and amended
to read in its entirety as follows:
(o) "Expiration Date" shall mean the Close of Business on
February 17, 2009.
4. The Rights Agreement and the Exhibits thereto may be restated to
reflect this Amendment to the Rights Agreement, including all necessary
conforming changes.
5. This Amendment to the Rights Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and for all
purposes shall be governed by and construed with the laws of such State
applicable to contracts to be made and performed entirely within such State.
6. This Amendment to the Rights Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
an original and all such counterparts shall together constitute but one and the
same instrument. Terms not defined herein shall, unless the context otherwise
requires, have the meanings to such terms in the Rights Agreement.
7. Except as expressly noted herein, this Amendment to the Rights
Agreement shall not by implication or otherwise alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Rights Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
8. If any term, provision, covenant or restriction of this Amendment to
the Rights Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment to the Rights
Agreement, and of the Rights Agreement, shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
9. This Amendment and the Rights Agreement constitute the entire
agreement among the parties with respect to the subject matter thereof and
supersedes all prior agreements and understandings, both oral and written, among
the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and attested, all as of the date and year first written above.
Attest: HARNISCHFEGER INDUSTRIES, INC.
By: By:
Attest: BANKBOSTON, N.A. FORMERLY KNOWN AS
THE FIRST NATIONAL BANK OF BOSTON
By: By:
12/7/98
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
corporation shall be managed by its Board of Directors.
SECTION 2. Number. Tenure and Qualifications. The number of
directors of the corporation shall be fourteen. Two of the three classes of
Directors established by the corporation's Certificate of Incorporation shall
consist of five members and the third class shall consist of four members. Each
director shall hold office for the term provided in the Certificate of
Incorporation and until such director's successor shall have been elected and
qualified, or until such director's earlier death or resignation. No director
shall be or be deemed to be removed from office prior to the expiration of such
director's term in office by virtue of a reduction in the number of directors.
Directors need not be residents of the State of Delaware or stockholders of the
corporation.
SECTION 3. Annual Meetings. An annual meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the Annual Meeting of Stockholders.
SECTION 4. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman or any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be
given at least 48 hours previous thereto by written notice delivered personally
or mailed to each director at such director's business address, or by telegram.
If mailed, such notice shall be deemed to be given when deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be given when the telegram is delivered
to the telegraph company. Any director may waive notice of any meeting. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting and objects thereat to
the transaction of any business because of the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors fixed
by Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 8. Nomination of Directors; Vacancies. Candidates for
director shall be nominated either (i) by the Board of Directors or a committee
appointed by the Board of Directors or (ii) by nomination at any stockholders'
meeting by or on behalf of any stockholder entitled to vote at such meeting
provided that written notice of such stockholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the secretary of the corporation not
later than (1) with respect to an election to be held at an annual meeting of
stockholders, ninety (90) days in advance of such meeting, and (2) with respect
to an election to be held at a special meeting of stockholders for the election
of directors, the close of business on the tenth (10th) day following the date
on which notice of such meeting is first given to stockholders. Each such notice
shall set forth: (a) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the corporation if
so elected. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
Any vacancy occurring in the Board of Directors, including a vacancy
created by an increase in the number of directors, may be filled for the
remainder of the unexpired term by the affirmative vote of a majority of the
directors then in office although less than a quorum.
SECTION 9. Action by Directors Without a Meeting. Any action
required to be taken at a meeting of directors, or at a meeting of a committee
of directors, or any other action which may be taken at a meeting, may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by all of the directors or members of the committee thereof
entitled to vote with respect to the subject matter thereof and such consent
shall have the same force and effect as a unanimous vote.
SECTION 10. Participation in a Meeting by Telephone. Members
of the Board of Directors or any committee of directors may participate in a
meeting of such Board or committee by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participating in a meeting pursuant to this
section 10 shall constitute presence in person at such meeting.
SECTION 11. Compensation. The Board of Directors, by majority
vote of the directors then in office and irrespective of any personal interest
of any of its members, shall have authority to establish reasonable compensation
of all directors for services to the corporation as directors, officers or
otherwise, or to delegate such authority to an appropriate committee. The Board
of Directors also shall have authority to provide for reasonable pensions,
disability or death benefits, and other benefits or payments, to directors,
officers and employees and to their estates, families, dependents and
beneficiaries on account of prior services rendered by such directors, officers
and employees to the corporation. The Board of Directors may be paid their
expenses, if any, of attendance at each such meeting of the Board.
SECTION 12. Presumption of Assent. A director of the
corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless such director's dissent is entered in the minutes of the
meeting or unless such director files a written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
forwards such dissent by registered mail to the Secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
SECTION 13. Validity of Contracts. No contract or other
transaction entered into by the corporation shall be affected by the fact that a
director or officer of the corporation is in any way interested in or connected
with any party to such contract or transaction, or is a party to such contract
or transaction, even though in the case of a director the vote of the director
having such interest or connection shall have been necessary to obligate the
corporation upon such contract or transaction; provided, however, that in any
such case (i) the material facts of such interest are known or disclosed to the
directors or stockholders and the contract or transaction is authorized or
approved in good faith by the stockholders or by the Board of Directors or a
committee thereof through the affirmative vote of a majority of the
disinterested directors (even though not a quorum), or (ii) the contract or
transaction is fair to the corporation as of the time it is authorized, approved
or ratified by the stockholders, or by the Board of Directors, or by a committee
thereof.
SECTION 14. Indemnification and Insurance. Each person who was
or is made a party or is threatened to be made a party to or is involved in any
action, suit, arbitration, mediation or proceeding, whether civil, criminal,
administrative or investigative, whether domestic or foreign (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the corporation to the fullest extent
not prohibited by the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
with respect to alleged action or inaction occurring prior to such amendment,
only to the extent that such amendment permits the corporation to provide
broader indemnification rights than said law permitted the corporation to
provide prior to such amendment), against all expense, liability and loss
(including without limitation attorneys' fees and expenses, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith. Such
indemnification as to such alleged action or inaction shall continue as to a
person who has ceased after such alleged action or inaction to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in the
following paragraph, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board unless such proceeding (or part thereof) is a counter claim, cross-claim,
third party claim or appeal brought by such person in any proceeding. The right
to indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further appeal that such director or
officer is not entitled to be indemnified for such expenses under this Section
or otherwise. The corporation may, by action of the Board, provide
indemnification to an employee or agent of the corporation or to a director,
trustee, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise of which the corporation owns fifty
percent or more with the same scope and effect as the foregoing indemnification
of directors and officers or such lesser scope and effect as shall be determined
by action of the Board.
If a claim under the preceding paragraph is not paid in full by the
corporation within thirty days after a written claim has been received by the
corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part in any such claim or suit, or in a claim or suit brought by the
corporation to recover an advancement of expenses under this paragraph, the
claimant shall be entitled to be paid also the expense of prosecuting or
defending any such claim or suit. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the corporation) that the
claimant has not met the applicable standard of conduct which make it
permissible under the General Corporation Law of the State of Delaware for the
corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, shall
be a defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct. In any suit brought by such person to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the corporation to recover an advancement of expenses hereunder, the
burden of proving that such person is not entitled to be indemnified, or to have
or retain such advancement of expenses, shall be on the corporation.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-law, agreement, vote of stockholders or disinterested
directors or otherwise.
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
In the event that any of the provisions of this Section 14 (including
any provision within a single section, paragraph or sentence) is held by a court
of competent jurisdiction to be invalid, void or otherwise unenforceable, the
remaining provisions are severable and shall remain enforceable to the full
extent permitted by law.
SECTION 15. Committees of Directors. The Board of Directors
may, by resolution passed by a majority of the whole Board, designate one or
more committees, each committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
committee members, who may replace any absent or disqualified member at any
committee meeting. In the absence or disqualification of a committee member, the
member or members present at any meeting and not disqualified from voting,
whether such member or members constitute a quorum, may unanimously appoint
another director to act at the meeting in place of the absent or disqualified
member. Any such committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution(s)
providing for the issuance of shares of stock adopted by the Board, fix any of
the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
Bylaws of the corporation; and, unless the resolution expressly so provides, no
such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger.
ARTICLE IV
OFFICERS
SECTION 1. Number. The officers of the corporation shall be a
Chairman of the Board (who must be a member of the Board of Directors and who
also may be an employee of the corporation), a Chief Executive Officer, a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, a Treasurer and a Controller, each of whom
shall be elected by the Board of Directors. The Board of Directors may also
elect a Vice Chairman of the Board, a Chief Operating Officer and one or more
Group Presidents and may designate one or more of the Vice Presidents as
Executive Vice Presidents or Senior Vice Presidents. Such other officers and
assistant officers and agents as may be deemed necessary may be elected or
appointed by the Board of Directors. Any two or more offices may be held by the
same person, except the offices of President and Secretary, and the offices of
President and Vice President.
SECTION 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Each officer shall
hold office until such officer's successor shall have been duly elected or until
such officer's death or until such officer shall resign or shall have been
removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors whenever in
its judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment shall not of itself create contract
rights.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the Board of Directors and stockholders.
SECTION 6. Vice Chairman of the Board. The Vice Chairman of
the Board shall preside at all meetings of the Board of Directors and
stockholders in the absence of the Chairman of the Board.
SECTION 7. Chief Executive Officer. The Chief Executive
Officer shall be the principal executive officer of the corporation and, subject
to the control of the Board of Directors, shall supervise and control all of the
business and affairs of the corporation, and establish current and long-range
objectives, plans and policies. The Chief Executive Officer shall have
authority, subject to such rules as may be prescribed by the Board of Directors,
to appoint such agents and employees of the corporation as the Chief Executive
Officer shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents and employees shall
hold office at the discretion of the Chief Executive Officer. The Chief
Executive Officer shall have authority to sign, execute and acknowledge, on
behalf of the corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other documents or instruments necessary or
proper to be executed in the course of the corporation's regular business or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or the Board of Directors, the Chief Executive
Officer may authorize the President, an Executive Vice President, Senior Vice
President, or other officer or agent of the corporation to sign, execute and
acknowledge such documents or instruments in the Chief Executive Officer's place
and stead. In general, the Chief Executive Officer shall perform all duties
incident to the office of Chief Executive Officer and such other duties as may
be prescribed by the Board of Directors from time to time. In the absence of the
Chairman of the Board and, if any, the Vice Chairman of the Board, the Chief
Executive Officer shall, when present, preside at all meetings of the
stockholders and the Board of
SECTION 8. President. The President shall direct, administer
and coordinate the activities of the corporation in accordance with policies,
goals and objectives established by the Chief Executive Officer and the Board of
Directors. The President shall also assist the Chief Executive Officer in the
development of corporate policies and goals. In the absence of the Chairman of
the Board, the Vice Chairman of the Board, if any, and the Chief Executive
Officer, the President shall, when present, preside at all meetings of the
stockholders and the Board of Directors.
SECTION 9. The Chief Operating Officer, Group Presidents and
the Vice Presidents. In the absence of the President or in the event of the
President's death, inability or refusal to act, the Chief Operating Officer, the
Group Presidents and the Executive Vice Presidents in the order designated at
the time of their election, or, in the absence of any designation, then in the
order of their election (or in the event there be no Chief Operating Officer,
Group Presidents or Executive Vice Presidents or they are incapable of acting,
the Senior Vice Presidents in the order designated at the time of their
election, or, in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. The Board of Directors may designate certain Vice Presidents as being
in charge of designated divisions, plants, or functions of the corporation's
business and add appropriate description to their title. Any Chief Operating
Officer, Group President or Vice President may sign, with the Secretary or an
Assistant Secretary, certificates for shares of the corporation; and shall
perform such other duties as from time to time may be assigned to such Chief
Operating Officer, Group President or Vice President by the Chief Executive
Officer or by the Board of Directors.
SECTION 10. The Secretary. The Secretary shall: (a) keep the minutes
of the stockholders' and of the Board of Directors' meetings in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation is affixed to all documents, the execution of
which on behalf of the corporation under its seal is duly authorized; (d) keep
or cause to be kept a register of the post office address of each stockholder
which shall be furnished to the Secretary by such stockholder; (e) sign with the
Chief Executive Officer, President, or any Vice President, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general, perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to the Secretary by the Chief Executive Officer or by the Board
of Directors.
SECTION 11. The Treasurer. The Treasurer shall give a bond for
the faithful discharge of the Treasurer's duties in such sum and with such
surety or sureties as the Board of Directors shall determine. The Treasurer
shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for monies due and
payable to the corporation from any source whatsoever, and deposit all such
monies in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article
VI of these Bylaws; and (b) in general, perform all of the duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to the Treasurer by the Chief Executive Officer or by the Board of
Directors.
SECTION 12. The Controller. The Controller shall: (a) keep, or
cause to be kept, correct and complete books and records of account, including
full and accurate accounts of receipts and disbursements in books belonging to
the corporation; and (b) in general, perform all duties incident to the office
of Controller and such other duties as from time to time may be assigned to the
Controller by the Chief Executive Officer or by the Board of Directors.
SECTION 13. Assistant Secretaries and Assistant Treasurers.
The Assistant Secretaries may sign with the President, or any Vice President,
certificates for shares of the corporation, the issuance of which shall have
been authorized by a resolution of the Board of Directors. Assistant Treasurers
shall respectively give bonds for the faithful discharge of their duties in such
sums and with such sureties as the Board of Directors shall determine. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the Chief Executive Officer or the Board of Directors.
SECTION 14. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that such officer is
also a director of the corporation.
ARTICLE V
APPOINTED EXECUTIVES
SECTION 1. Vice Presidents. The Chief Executive Officer may
appoint, from time to time, as the Chief Executive Officer may see fit, and fix
the compensation of, one or more Vice Presidents whose title will include words
describing the function of such Vice President's office and the group, division
or other unit of the Company in which such Vice President's office is located.
Each of such appointed Vice Presidents shall hold office during the pleasure of
the Chief Executive Officer, shall perform such duties as the Chief Executive
Officer may assign, and shall exercise the authority set forth in the Chief
Executive Officer's letter appointing such Vice President.
SECTION 2. Assistants. The Chief Executive Officer may
appoint, from time to time, as the Chief Executive Officer may see fit, and
fix the compensation of,
one or more Assistants to the Chairman, one or more Assistants to the President,
and one or more Assistants
to the Vice Presidents, each of whom shall hold office during the pleasure of
the Chief Executive Officer, and shall perform such duties as the Chief
Executive Officer may assign.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of
the corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority may
be general or confined to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers,
agent or agents, of the corporation and in such manner as shall from time to
time be determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the Board of
Directors may select.
ARTICLE VII
CERTIFICATE FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chief Executive Officer,
President, or any Vice President and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if such person were such officer, transfer agent, or registrar at
the date of issue. All certificates for shares shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock ledger of the corporation.
All certificates surrendered to the corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the
corporation shall be made only on the stock ledger of the corporation by the
holder of record thereof or by such person's legal representative, who shall, if
so required, furnish proper evidence of authority to transfer, or by such
person's attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation, and on surrender for cancellation
of the certificate for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first
day of November and end on the thirty-first day of October in each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and by the Articles of Incorporation.
ARTICLE X
SEAL
The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
corporation and the state of incorporation and the words "Corporate Seal".
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given to any stockholder
or director of the corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
Delaware General Corporation Law, a waiver thereof in writing, signed at any
time by the person or persons entitled to such notice of the meeting, shall be
deemed equivalent to the giving of such notice.
ARTICLE XII
AMENDMENTS
These Bylaws may be amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting thereof only
with the affirmative vote of at least 80% of the total number of Directors.
Exhibit 10(b)
HARNISCHFEGER INDUSTRIES, INC. STOCK INCENTIVE PLAN
Section 1. Purpose; Definitions
The purpose of the Plan is to give the Corporation and its Affiliates a
competitive advantage in attracting, retaining and motivating officers and
employees and to provide the Corporation and its Affiliates with the ability to
provide incentives more directly linked to the performance of the Corporation's
businesses and increases in economic value and shareholder value. For purposes
of the Plan, the following terms are defined as set forth below:
(a) "Affiliate" means:
(i) a corporation at least fifty percent of the common stock or voting power of
which is owned, directly or indirectly by the Corporation, and
(ii) any other corporation or other entity controlled by the Corporation and
designated by the Committee from time to time as such.
(b)"Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock or Performance Unit.
(c) "Award Cycle" shall mean a period of consecutive fiscal years or portions
thereof designated by the Committee over which Performance Units are to be
earned.
(d) "Board" means the Board of Directors of the Corporation.
(e) "Cause" means:
(i) willful and continued failure to substantially perform the reasonably
assigned duties with the Corporation which are consistent with the participant's
position and, in the event of a Change in Control, those duties assigned prior
to the Change in Control, other than any such failure resulting from incapacity
due to physical or mental illness, or
(ii) participant's willful engagement in illegal conduct which is materially and
demonstratably injurious to the Corporation. For purposes of this definition, no
act, or failure to act, on participant's part shall be considered "willful"
unless done, or omitted to be done, in knowing bad faith and without reasonable
belief that the action or omission was in, or not opposed to, the best interests
of the Corporation. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the advice of
counsel for the Corporation shall be conclusively presumed to be done, or
omitted to be done, in good faith and in the best interests of the Corporation.
(f) "Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 10(b) and (c), respectively.
(g) "Code" means the Internal Revenue Code of l986, as amended from time to
time, and any successor thereto.
(h) "Commission" means the Securities and Exchange Commission or any successor
agency.
(i) "Committee" means the Committee referred to in Section 2.
(j) "Common Stock" means common stock, par value $1.00 per share, of the
Corporation.
(k) "Corporation" means Harnischfeger Industries, Inc., a Delaware
corporation.
(l) "Covered Employee" shall mean a participant designated prior to the grant of
shares of Restricted Stock or Performance Units by the Committee who is or may
be a "covered employee" within the meaning of Section 162(m)(3) of the Code in
the year in which Restricted Stock or Performance Units are taxable to such
participant.
(m) "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
(n) "Disinterested Person" shall mean a member of the Board who qualifies as a
Non-Employee Director as defined in Rule 16b-3(b)(3), as promulgated by the
Commission under the Exchange Act, or any successor definition adopted by the
Commission, and as an "outside director" for purposes of Section 162(m) of the
Code.
(o) "Early Retirement" of an employee means Termination of Employment with the
Corporation or an Affiliate at a time when the employee is entitled to early
retirement benefits pursuant to the early retirement provisions of the
applicable pension plan of such employer.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor thereto.
(q) "Fair Market Value" means, except as provided in Sections 5(j) and
6(b)(ii)(2), as of any given date, the mean between the highest and lowest
reported sales prices of the Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or on NASDAQ. If there
is no regular public trading market for such Common Stock, the Fair Market Value
of the Common Stock shall be determined by the Committee in good faith.
(r) "Incentive Stock Option" means any Stock Option designated as, and qualified
as, an "incentive stock option" within the meaning of Section 422 of the Code.
(s) "Non-Qualified Stock Option" means any Stock Option that is not an Incentive
Stock Option.
(t) "Normal Retirement" of an employee means retirement from active employment
with the Corporation or Affiliate at or after age 65.
u) "Performance Goals" means the performance goals established in writing by the
Committee prior to the grant of Restricted Stock or Performance Units. Such
Performance Goals may comprise one or any combination of the following:
specified levels of economic value added, earnings per share from continuing
operations, operating income, revenues, cash flow, retained earnings, return on
assets, return on invested capital, return on sales, market share, equity
growth, net worth growth, achieving strategic objectives, customer satisfaction,
product quality, project milestones, shareholder return (measured in terms of
stock price appreciation) and/or total shareholder return (measured in terms of
stock price appreciation and/or dividend growth), return on equity, and
individual performance measures. Such Performance Goals also may be based upon
the attainment of specified levels of performance of the Corporation or one or
more Affiliates under one or more of the measures described above relative to
the performance of other corporations. With respect to Covered Employees, all
Performance Goals shall be objective performance goals satisfying the
requirements for "performance-based compensation" within the meaning of Section
162(m)(4) of the Code, and shall be set by the Committee within the time period
prescribed by Section 162(m) of the Code and related regulations.
(v) "Performance Unit" means an award made pursuant to Section 8.
(w) "Plan" means the Harnischfeger Industries, Inc. Stock Incentive Plan, as set
forth herein and as hereinafter amended from time to time.
(x) "Restricted Stock" means an award granted under Section 7.
(y) "Retirement" means Normal or Early Retirement.
(z) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
(aa) "Stock Appreciation Right" means a right granted under Section 6.
(bb) "Stock Option" means an option granted under Section 5.
(cc) "Termination of Employment" means the termination of the participant's
employment with the Corporation and any Affiliate. A participant employed by an
Affiliate shall also be deemed to incur a Termination of Employment if the
Affiliate ceases to be an Affiliate and the participant does not immediately
thereafter become an employee of the Corporation or another Affiliate.
In addition, certain other terms used herein have definitions given to them in
the first place in which they are used.
Section 2. Administration. The Plan shall be administered by the Human
Resources Committee of the Board or such other committee of the Board, as the
Board may from time to time determine, which, following abstention or recusal of
all members who are not Disinterested Persons, is composed solely of not less
than two Disinterested Persons, each of whom shall be appointed by and serve at
the pleasure of the Board. The Committee shall have full authority to grant
Awards pursuant to the terms of the Plan to officers and employees of the
Corporation and its Affiliates. Among other things, the Committee shall have the
authority, subject to the terms of the Plan:
(a) to select the officers and employees to whom Awards may from time to time
be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Units or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any
vesting condition, restriction or limitation (which may be related to the
performance of the participant, the Corporation or any Affiliate) and any
vesting acceleration or forfeiture waiver regarding any Award and the shares of
Common Stock relating thereto, based on such factors as the Committee shall
determine;
(e) to modify, amend or adjust the terms and conditions of any Award, at any
time or from time to time, including but not limited to Performance Goals;
provided, however, that the Committee may not adjust upwards the amount payable
to a designated Covered Employee with respect to a particular Award upon the
satisfaction of applicable Performance Goals;
(f) to determine to what extent and under what circumstances Common Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) to determine under what circumstances an Award may be settled in cash or
Common Stock under Sections 5(j) and 8(b)(i).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan. The Committee may act
only by a majority of its members then in office, except that the members
thereof may (i) delegate to an officer of the Corporation the authority to make
decisions pursuant to paragraphs (c), (f), (g), (h) and (i) of Section 5
(provided that no such delegation may be made that would cause Awards or other
transactions under the Plan to cease to be exempt from Section 16(b) of the
Exchange Act) and (ii) authorize any one or more of their number or any officer
of the Corporation to execute and deliver documents on behalf of the Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Award shall be made
in the sole discretion of the Committee or such delegate at the time of the
grant of the Award or, unless in contravention of any express term of the Plan,
at any time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Corporation and its Affiliates and Plan
participants.
Section 3. Common Stock Subject to Plan; Other Limitations. The total
number of shares of Common Stock reserved and available for issuance under the
Plan shall be 2,000,000, but no more than 250,000 shares of Common Stock may be
issued as Restricted Stock. Shares subject to an Award under the Plan may be
authorized and unissued shares or may be treasury shares. No participant may be
granted Performance Units in any one calendar year payable in cash in an amount
that would exceed $1,000,000. Subject to Section 7(c)(iv), if any shares of
Restricted Stock are forfeited for which the participant did not receive any
benefits of ownership (as such phrase is construed by the Commission or its
staff), or if any Stock Option (and related Stock Appreciation Right, if any)
terminates without being exercised, or if any Stock Appreciation Right is
exercised for cash, shares subject to such Awards shall again be available for
use in connection with Awards under the Plan. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Corporation, any reorganization
(whether or not such reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete liquidation of the
Corporation, the Committee or Board may make such substitution or adjustments in
the aggregate number and kind of shares reserved for issuance under the Plan, in
the number, kind and option price of shares subject to outstanding Stock Options
and Stock Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other equitable
substitution or adjustments as it may determine to be appropriate in its sole
discretion; provided, however, that Awards previously made shall not be reduced
or eliminated and the number of shares subject to any Award shall always be a
whole number. Such adjusted option price shall also be used to determine the
amount payable by the Corporation upon the exercise of any Stock Appreciation
Right associated with a Stock Option.
Section 4. Eligibility. Officers and salaried employees of the Corporation
and its Affiliates who are responsible for or contribute to the management,
growth and profitability of the business of the Corporation and its Affiliates
are eligible to be granted Awards under the Plan. No grant shall be made under
this Plan to a director who is not an officer or a salaried employee of the
Corporation or an Affiliate.
Section 5. Stock Options. Stock Options may be granted alone or in addition
to other Awards granted under the Plan and may be of two types: Incentive Stock
Options and Nonqualified Stock Options. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve. The
Committee shall have the authority to grant any optionee Incentive Stock
Options, Nonqualified Stock Options or both types of Stock Options (in each case
with or without Stock Appreciation Rights); provided, however, that grants
hereunder are subject to the aggregate limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted only
to employees of the Corporation and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Nonqualified Stock
Option. Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it isintended to be an agreement for an Incentive Stock Option or a
Nonqualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Common Stock to be
subject to such Stock Option to be granted to such individual and specifies the
terms and provisions of the Stock Option. The Corporation shall notify a
participant of any grant of a Stock Option, and a written option agreement or
agreements shall be duly executed and delivered by the Corporation to the
participant. Such agreement or agreements shall become effective upon execution
by the Corporation and the participant. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered nor shall any discretion or authority granted
under the Plan be exercised so as to disqualify the Plan under Section 422 of
the Code or, without the consent of the optionee affected, to disqualify any
Incentive Stock Option under such Section 422. Stock Options granted under the
Plan shall be subject to the following terms and conditions and shall contain
such additional terms and conditions as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common Stock purchasable under a
Stock Option shall be determined by the Committee and set forth in the option
agreement, and shall not be less than the Fair Market Value of the Common Stock
subject to the Stock Option on the date of grant.
(b) Option Term. The term of each Stock Option shall be fixed by the Committee,
but no Incentive Stock Option shall be exercisable more than 10 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may at any time waive
such installment exercise provisions, in whole or in part, based on such factors
as the Committee may determine. In addition, the Committee may at any time
accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5, Stock
Options may be exercised, in whole or in part, at any time during the option
term by giving written notice of exercise to the Corporation specifying the
number of shares of Common Stock subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase price by
certified or bank check or such other instrument as the Corporation may accept.
If approved by the Committee, payment in full or in part may also be made in the
form of unrestricted Common Stock already owned by the optionee of the same
class as the Common Stock subject to the Stock Option and, in the case of the
exercise of a Nonqualified Stock Option, Restricted Stock subject to an Award
hereunder which is of the same class as the Common Stock subject to the Stock
Option (based, in each case, on the Fair Market Value of the Common Stock on the
date the Stock Option is exercised); provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is granted. If
payment of the option exercise price of a Nonqualified Stock Option is made in
whole or in part in the form of Restricted Stock, the number of shares of Common
Stock to be received upon such exercise equal to the number of shares of
Restricted Stock used for payment of the option exercise price shall be subject
to the same forfeiture restrictions to which such Restricted Stock was subject,
unless otherwise determined by the Committee. In the discretion of the
Committee, payment for any shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the Corporation, together with
a copy of irrevocable instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds to pay the purchase price, and,
if requested by the Corporation, the amount of any federal, state, local or
foreign withholding taxes. To facilitate the foregoing, the Corporation may
enter into agreements for coordinated procedures with one or more brokerage
firms. In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Committee to
withhold a number of such shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price of such Stock Option. No shares
of Common Stock shall be issued until full payment therefor has been made.
Subject to any forfeiture restrictions that may apply if a Stock Option is
exercised using Restricted Stock, an optionee shall have all of the rights of a
shareholder of the Corporation holding the class or series of Common Stock that
is subject to such Stock Option (including, if applicable, the right to vote the
shares and the right to receive dividends), when the optionee has given written
notice of exercise, has paid in full for such shares and, if requested, has
given the representation described in Section 14(a).
(e) Nontransferability of Stock Options. No Stock Option shall be transferable
by the optionee other than:
(i ) by will or by the laws of descent and distribution or
(ii) in the case of a Nonqualified Stock Option, pursuant to (a) a qualified
domestic relations order (as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder) or
(b) a gift to such optionee's children, whether directly or indirectly or by
means of a trust or partnership or otherwise, if expressly permitted under the
applicable option agreement. All Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee or, in the case of a Nonqualified Stock Option,
its alternative payee pursuant to a qualified domestic relations order or a gift
permitted under the applicable option agreement, it being understood that the
terms "holder" and "optionee" include the guardian and legal representative of
the optionee named in the option agreement and any person to whom an option is
transferred by will or the laws of descent and distribution or, in the case of a
Nonqualified Stock Option, pursuant to a qualified domestic relations order or a
gift permitted under the applicable option agreement.
(f) Termination by Death. Unless otherwise determined by the Committee, if an
optionee's employment terminates by reason of death, any Stock Option held by
such optionee may thereafter be exercised, to the extent then exercisable, or on
such accelerated basis as the Committee may determine, for a period of one year
(or such other period as the Committee may specify in the option agreement) from
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of Disability, any
Stock Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of termination, or on such
accelerated basis as the Committee may determine, for a period of three years
(or such shorter period as the Committee may specify in the option agreement)
from the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that if the optionee dies within such three-year period (or such
shorter period), any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such three-year (or such shorter) period,
continue to be exercisable to the extent to which it was exercisable at the time
of death for a period of one year from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability, if
an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Nonqualified Stock Option.
(h) Termination by Reason of Retirement. Unless otherwise determined by the
Committee, if an optionee's employment terminates by reason of Retirement, any
Stock Option held by such optionee may thereafter be exercised by the optionee,
to the extent it was exercisable at the time of such Retirement, or on such
accelerated basis as the Committee may determine, for a period of three years
(or such shorter period as the Committee may specify in the option agreement)
from the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that if the optionee dies within such three-year (or such shorter)
period any unexercised Stock Option held by such optionee shall, notwithstanding
the expiration of such three-year (or such shorter) period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of one year from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter. In the event
of termination of employment by reason of Retirement, if an Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Nonqualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if an
optionee incurs a Termination of Employment for any reason other than death,
Disability or Retirement, any Stock Option held by such optionee shall thereupon
terminate, except that such Stock Option, to the extent then exercisable, or on
such accelerated basis as the Committee may determine, may be exercised for the
lesser of three months from the date of such Termination of Employment or the
balance of such Stock Option's stated term if such Termination of Employment of
the optionee is involuntary; provided, however, that if the optionee dies within
such three-month period, any unexercised Stock Option held by such optionee
shall, notwithstanding the expiration of such three-month period, continue to be
exercisable to the extent to which it was exercisable at the time of death for a
period of one year from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
Notwithstanding the foregoing, if an optionee incurs a Termination of Employment
at or after a Change in Control (as defined in Section 10(b)), other than by
reason of death, Disability or Retirement, any Stock Option held by such
optionee shall be exercisable for the lesser of (1) six months and one day from
the date of such Termination of Employment, and (2) the balance of such Stock
Option's stated term. In the event of Termination of Employment, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, such Stock Option will thereafter
be treated as a Nonqualified Stock Option.
(j) Cashing Out of Stock Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of the shares of
Common Stock for which a Stock Option is being exercised by paying the optionee
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock over the option price times the number of shares of Common
Stock for which the Option is being cashed out on the effective date of such
cashout.
(k) Change in Control Cash-Out. Notwithstanding any other provision of the Plan,
during the 90-day period from and after a Change in Control (the "Exercise
Period"), unless the Committee shall determine otherwise at the time of grant,
an optionee shall have the right, whether or not the Stock Option is fully
exercisable and in lieu of the payment of the exercise price for the shares of
Common Stock being purchased under the Stock Option and by giving notice to the
Corporation, to elect (within the Exercise Period) to surrender all or part of
the Stock Option to the Corporation and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change in Control Price
per share of Common Stock shall exceed the exercise price per share of Common
Stock under the Stock Option (the "Spread") multiplied by the number of shares
of Common Stock granted under the Stock Option as to which the right granted
under this Section 5(k) shall have been exercised
Section 6. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In the case of a
Nonqualified Stock Option, such rights may be granted either at or after the
time of grant of such Stock Option. Stock Appreciation Rights also may be
granted with respect to options (other than options intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code) granted
under the Harnischfeger Industries, Inc. 1988 Incentive Stock Plan (the "Old
Plan") ("Old Options"). In the case of an Incentive Stock Option, such rights
may be granted only at the time of grant of such Stock Option. A Stock
Appreciation Right shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option. A Stock Appreciation Right
may be exercised by an optionee in accordance with Section 6(b) by surrendering
the applicable portion of the related Stock Option or Old Option in accordance
with procedures established by the Committee. Upon such exercise and surrender,
the optionee shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b). Stock Options and Old Options which have been so
surrendered shall no longer be exercisable to the extent the related Stock
Appreciation Rights have been exercised.
b) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time or times
and to the extent that the Stock Options and Old Options to which they relate
are exercisable in accordance with the provisions of Section 5 and this Section
6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive an amount in cash, shares of Common Stock or both equal in
value to the excess of the Fair Market Value of one share of Common Stock over
the option price per share specified in the related Stock Option or Old Option
multiplied by the number of shares in respect of which the Stock Appreciation
Right shall have been exercised, with the Committee having the right to
determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to permitted
transferees of the underlying Stock Option in accordance with Section 5(e) or
the underlying Old Option in accordance with the provisions of the Old Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or Old
Option or part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised for the purpose of the limitation set forth in
Section 3 on the number of shares of Common Stock to be issued under the Plan,
but only to the extent of the number of shares as to which the Stock
Appreciation Right is exercised at the time of exercise.
Section 7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the officers and employees to whom and the time or times at which grants of
Restricted Stock will be awarded, the number of shares to be awarded to any
participant (subject to the aggregate limit on grants to individual participants
set forth in Section 3), the conditions for vesting, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards, in addition to those contained in Section 7(c). The
Committee shall in the case of Covered Employees, and may in the case of other
participants, condition the vesting of Restricted Stock upon the attainment of
Performance Goals established before or at the time of grant. The Committee may,
in addition to requiring satisfaction of any applicable Performance Goals, also
condition vesting upon the continued service of the participant. The provisions
of Restricted Stock Awards (including the applicable Performance Goals) need not
be the same with respect to each recipient.
(b) Awards and Certificates. Shares of Restricted Stock shall be evidenced in
such manner as the Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the name
of such participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form: "The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Harnischfeger Industries, Inc. Stock Incentive Plan and a
Restricted Stock Agreement. Copies of such Plan and Agreement are on file at the
offices of Harnischfeger Industries, Inc. at 3600 S. Lake Dr., St. Francis,
Wisconsin 53235". The Committee may require that the certificates evidencing
such shares be held in custody by the Corporation until the restrictions thereon
shall have lapsed and that, as a condition of any Award of Restricted Stock, the
participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan (including Section 5(d)) and the
Restricted Stock Agreement referred to in Section 7(c)(vi), during the period,
if any, set by the Committee, commencing with the date of such Award for which
such participant's continued service is required (the "Restriction Period"), and
until the later of (i) the expiration of the Restriction Period and (ii) the
date the applicable Performance Goals (if any) are satisfied, the participant
shall not be permitted to sell, assign, transfer, pledge or otherwise encumber
shares of Restricted Stock; provided that the foregoing shall not prevent a
participant from pledging Restricted Stock as security for a loan, the sole
purpose of which is to provide funds to pay the option price for Stock Options.
Within these limits, the Committee may provide for the lapse of restrictions
based upon period of service in installments or otherwise and may accelerate or
waive, in whole or in part, restrictions based upon period of service or upon
performance; provided, however, that in the case of Restricted Stock with
respect to which a participant is a Covered Employee, any applicable Performance
Goals have been satisfied.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i) and the
Restricted Stock Agreement, the participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a shareholder of the
Corporation holding the class or series of Common Stock that is the subject of
the Restricted Stock, including, if applicable, the right to vote the shares and
the right to receive any cash dividends. If so determined by the Committee in
the applicable Restricted Stock Agreement and subject to Section 14(f) of the
Plan, (1) cash dividends on the class or series of Common Stock that is the
subject of the Restricted Stock Award shall be automatically deferred and
reinvested in additional Restricted Stock, held subject to the vesting of the
underlying Restricted Stock, or held subject to meeting Performance Goals
applicable only to dividends, and (2) dividends payable in Common Stock shall be
paid in the form of Restricted Stock of the same class as the Common Stock with
which such dividend was paid, held subject to the vesting of the underlying
Restricted Stock, or held subject to meeting Performance Goals applicable only
to dividends.
(iii) Except to the extent otherwise provided in the applicable Restricted
Stock Agreement, any applicable employment agreement and Sections 7(c)(i),
7(c)(iv) and 10(a)(ii), upon a participant's Termination of Employment for
any reason during the Restriction Period or before the applicable
Performance Goals are satisfied, all shares still subject to restriction
shall be forfeited by the participant.
(iv) Except to the extent otherwise provided in Section 10(a)(ii) or any
applicable written employment agreement, in the event that a participant
retires or such participant's employment is involuntarily terminated (other
than for Cause), the Committee shall have the discretion to waive in whole
or in part any or all remaining restrictions (other than, in the case of
Restricted Stock with respect to which a participant is a Covered Employee,
satisfaction of the applicable Performance Goals unless the participant's
employment is terminated by reason of death or Disability) with respect to
any or all of such participant's shares of Restricted Stock.
(v) If and when the applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted
Stock, unlegended certificates for such shares shall be delivered to the
participant upon surrender of the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to the terms of, a
Restricted Stock Agreement.
Section 8. Performance Units.
(a) Administration. Performance Units may be awarded either alone or in addition
to other Awards granted under the Plan. Performance Units may be denominated in
shares of Common Stock or cash, or may represent the right to receive dividend
equivalents with respect to shares of Common Stock, as the Committee shall
determine. The Committee shall determine the officers and employees to whom and
the time or times at which Performance Units shall be awarded, the form and
number of Performance Units to be awarded to any participant (subject to the
aggregate limit on grants to individual participants set forth in Section 3),
the duration of the Award Cycle and any other terms and conditions of the Award,
in addition to those contained in Section 8(b). The Committee shall condition
the settlement of Performance Units upon the continued service of the
participant, attainment of Performance Goals, or both. The provisions of such
Awards (including the applicable Performance Goals) need not be the same with
respect to each recipient.
(b) Terms and Conditions. Performance Units Awards shall be subject to the
following terms and conditions:
(i) Subject to the provisions of the Plan and the Performance Unit
Agreement referred to in Section 8(b)(vi), Performance Units may not be
sold, assigned, transferred, pledged or otherwise encumbered during the
Award Cycle. At the expiration of the Award Cycle, the Committee shall
evaluate actual performance in light of the Performance Goals for such
Award and shall determine the number of Performance Units granted to the
participant which have been earned and the Committee may then elect to
deliver cash, shares of Common Stock, or a combination thereof, in
settlement of the earned Performance Units, in accordance with the terms
thereof.
(ii) Except to the extent otherwise provided in the applicable Performance
Unit Agreement and Sections 8(b)(iii) and 10(a)(iii) or any applicable
written employment agreement, upon a participant's Termination of
Employment for any reason during the Award Cycle or before the applicable
Performance Goals are satisfied, the rights to the shares still covered by
the Performance Units Award shall be forfeited by the participant.
(iii) Except to the extent otherwise provided in Section 10(a)(iii) or any
applicable written employment agreement, in the event that a participant's
employment is involuntarily terminated (other than for Cause), or in the
event a participant retires, the Committee shall have the discretion to
waive in whole or in part any or all remaining payment limitations (other
than, in the case of Performance Units with respect to which a participant
is a Covered Employee, satisfaction of the applicable Performance Goals
unless the participant's employment is terminated by reason of death or
Disability) with respect to any or all of such participant's Performance
Units.
(iv) A participant may elect to further defer receipt of the Performance
Units payable under an Award (or an installment of an Award) for a
specified period or until a specified event, subject in each case to the
Committee's approval and to such terms as are determined by the Committee
(the "Elective Deferral Period"). Subject to any exceptions adopted by the
Committee, such election must generally be made prior to commencement of
the Award Cycle for the Award (or for such installment of an Award).
(v) If and when the applicable Performance Goals are satisfied and the
Elective Deferral Period expires without a prior forfeiture of the
Performance Units, payment in accordance with Section 8(b)(i) hereof shall
be made to the participant.
(vi) Each Award shall be confirmed by, and be subject to the terms of, a
Performance Unit Agreement.
Section 9. Tax Offset Bonuses At the time an Award is made hereunder or at
any time thereafter, the Committee may grant to the participant receiving
such Award the right to receive a cash payment in an amount specified by
the Committee, to be paid at such time or times (if ever) as the Award
results in compensation income to the participant, for the purpose of
assisting the participant to pay the resulting taxes, all as determined by
the Committee and on such other terms and conditions as the Committee shall
determine.
Section 10. Change in Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred and not then
exercisable and vested shall become fully exercisable and vested to the
full extent of the original grant.
(ii) The restrictions applicable to any Restricted Stock shall lapse, and
such Restricted Stock shall become free of all restrictions and become
fully vested and transferable to the full extent of the original grant.
(iii) All Performance Units shall be considered to be earned and payable in
full and any deferral or other restriction shall lapse and such Performance
Units shall be settled in cash as promptly as is practicable.
(b) Definition of Change in Control. For purposes of the Plan, a "Change in
Control" shall mean:
(i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Corporation (the "Outstanding Corporation Common
Stock") or (2) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities"); provided,
however, that for purposes of this subparagraph (i), the following
acquisitions shall not constitute a Change in Control: (x) any acquisition
by the Corporation, (y) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation or (z) any acquisition by any
corporation pursuant to a transaction which complies with clauses (x), (y)
and (z) of subsection (iii) of this Section 10(b); or
(ii) Individuals who, as of the effective date of the Plan, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the effective date of the Plan whose election, or
nomination for election by the Corporation's stockholders, was approved by
a vote of at least two-thirds (2/3) of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board; but, excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or any other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Incumbent
Board; or
(iii) Consummation of a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless following such
Business Combination, (x) all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more
than 80% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (y) no
Person (excluding any corporation resulting from such Business Combination
or any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (z) at least two-thirds (2/3)
of the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
(c) Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of:
(i) the highest reported sales price, regular way, of a share
of Common Stock in any transaction reported on the New York Stock Exchange
Composite Tape or other national exchange on which such shares are listed or on
NASDAQ during the 60-day period prior to and including the date of a Change in
Control or
(ii) if the Change in Control is the result of a tender or
exchange offer or a Business Combination, the highest price per share of Common
Stock paid in such tender or exchange offer or Business Combination; provided,
however, that (x) in the case of a Stock Option which (A) is held by an optionee
who is an officer or director of the Corporation and is subject to Section 16(b)
of the Exchange Act and (B) was granted within 240 days of the Change in
Control, then the Change in Control Price for such Stock Option shall be the
Fair Market Value of the Common Stock on the date such Stock Option is exercised
or deemed exercised and (y) in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such Incentive Stock Option or Stock Appreciation Right is exercised. To
the extent that the consideration paid in any such transaction described above
consists all or in part of securities or other non-cash consideration, the value
of such securities or other non-cash consideration shall be determined in the
sole discretion of the Incumbent Board.
Section 11. Loans. The Corporation may make loans to a participant in
connection with Awards subject to the following terms and conditions and such
other terms and conditions not inconsistent with the Plan as the Committee shall
impose from time to time, including without limitation the rate of interest, if
any, and whether such loan shall be recourse or non-recourse. No loan made under
the Plan shall exceed the sum of (i) the aggregate price payable with respect to
the Award in relation to which the loan is made, plus (ii) the amount of the
reasonably estimated combined amounts of Federal and state income taxes payable
by the participant. No loan shall have an initial term exceeding ten (10) years;
provided that the loans under the Plan shall be renewable at the discretion of
the Committee; and provided, further, that the indebtedness under each loan
shall become due and payable, as the case may be, on a date no later than (i)
one year after Termination of Employment due to death, Retirement or Disability,
or (ii) the day of Termination of Employment for any reason other than death,
Retirement or Disability. Loans under the Plan may be satisfied by the
participant, as determined by the Committee, in cash or, with the consent of the
Committee, in whole or in part in the form of unrestricted Common Stock already
owned by the participant where such Common Stock shall be valued at Fair Market
Value on the date of such payment. When a loan shall have been made, Common
Stock with a Fair Market Value on the date of such loan equivalent to the amount
of the loan shall be pledged by the participant to the Corporation as security
for payment of the unpaid balance of the loan. Any portions of such Common Stock
may, in the discretion of the Committee, be released from time to time as it
deems not to be needed as security.
The making of any loan is subject to satisfying all applicable laws, as well
as any regulations and rules of the Federal Reserve Board and any other
governmental agency having jurisdiction.
Section 12. Term, Amendment and Termination. The Plan will terminate 10
years after the effective date of the Plan. Under the Plan, Awards outstanding
as of such date shall not be affected or impaired by the termination of the
Plan. The Committee may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award or Performance Unit Award theretofore granted without the
optionees or recipient's consent, except such an amendment made to cause the
Plan to qualify for the exemption provided by Rule 16b-3. In addition, no such
amendment shall be made without the approval of the Corporation's shareholders
to the extent such approval is required by law or agreement. The Committee may
amend the terms of any Stock Option or other Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any holder without the holder's consent except such an amendment made to cause
the Plan or Award to qualify for the exemption provided by Rule 16b-3. Subject
to the above provisions, the Committee shall have authority to amend the Plan to
take into account changes in law and tax and accounting rules, as well as other
developments and to grant Awards which qualify for beneficial treatment under
such rules without shareholder approval.
Section 13. Unfunded Status of Plan. It is presently intended that the
Plan constitute an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
Section 14. General Provisions.
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Corporation in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer. Notwithstanding any other provision of the Plan or agreements
made pursuant thereto, the Corporation shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock under
the Plan prior to fulfillment of all of the following conditions:
(i) The listing or approval for listing upon notice of issuance, of
such shares on the New York Stock Exchange, Inc., or such other securities
exchange or market system as may at the time be the principal market for
the Common Stock;
(ii) Any registration or other qualification of such shares of the
Corporation under any state or federal law or regulation, or the
maintaining in effect of any such registration or other qualification which
the Committee shall, in its absolute discretion upon the advice of counsel,
deem necessary or advisable; and
(iii) The obtaining of any other consent, approval, or permit from any
state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Corporation or any
Affiliate from adopting other or additional compensation arrangements for
its employees.
(c) The adoption of the Plan shall not confer upon any employee any right to
continued employment nor shall it interfere in any way with the right of
the Corporation or any Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes includible in
the gross income of the participant for federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the
Corporation, or make arrangements satisfactory to the Corporation regarding
the payment of, any federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such amount. Unless
otherwise determined by the Corporation, withholding obligations may be
settled with Common Stock, including Common Stock that is part of the Award
that gives rise to the withholding requirement. The obligations of the
Corporation under the Plan shall be conditional on such payment or
arrangements, and the Corporation and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the participant. The Committee may establish such
procedures as it deems appropriate, including the making of irrevocable
elections, for the settlement of withholding obligations with Common Stock.
(e) At the time of Award, the Committee may provide in connection with any
Award that any shares of Common Stock received as a result of such Award
shall be subject to a right of first refusal pursuant to which the
participant shall be required to offer to the Corporation any shares that
the participant wishes to sell at the then Fair Market Value of the Common
Stock, subject to such other terms and conditions as the Committee may
specify at the time of Award.
(f) The reinvestment of dividends in additional Restricted Stock at the time of
any dividend payment shall only be permissible if sufficient shares of
Common Stock are available under Section 3 for such reinvestment (taking
into account then outstanding Stock Options and other Awards).
(g) The Committee shall establish such procedures as it deems appropriate for a
participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom any rights of
the participant, after the participant's death, may be exercised.
(h) In the case of a grant of an Award to any employee of an Affiliate, the
Corporation may, if the Committee so directs, issue or transfer the shares
of Common Stock, if any, covered by the Award to the Affiliate, for such
lawful consideration as the Committee may specify, upon the condition or
understanding that the Affiliate will transfer the shares of Common Stock
to the employee in accordance with the terms of the Award specified by the
Committee pursuant to the provisions of the Plan.
(i) Notwithstanding any other provision of the Plan, if any right granted
pursuant to this Plan would make a Change in Control transaction ineligible
for pooling of interests accounting under APB No. 16 that but for the
nature of such grant would otherwise be eligible for such accounting
treatment, the Committee may, at its discretion, but shall not be required
to, substitute for the cash payable pursuant to such grant Common Stock (or
the common stock of the issuer for which the Common Stock is being
exchanged in such Change in Control transaction) with a Fair Market Value
equal to the cash that would otherwise be payable hereunder.
(j) The Plan and all Awards made and actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.
Section 15. Effective Date of Plan. The Plan shall be effective as of
the date it is approved by the affirmative votes of the holders of a majority of
the Common Stock present, or represented, and entitled to vote at a meeting duly
held in accordance with the applicable laws of the State of Delaware (provided,
that the total vote cast represents 50% of the voting power of all the shares of
Common Stock entitled to vote).
Exhibit 10(c)
HARNISCHFEGER INDUSTRIES, INC.
EXECUTIVE INCENTIVE PLAN
(as amended and restated September 12, 1998)
1. Purpose. Harnischfeger Industries, Inc. Executive Incentive Plan (the
"Plan") was established by Harnischfeger Industries, Inc. (the "Company")
effective as of October 30, 1990 to provide as an incentive the possibility
of payment of additional compensation to or on behalf of the key officers
of the Company and its subsidiaries who contribute materially to the
success and profitability of the Company and who become participants in the
Plan. 2. Administration. The Plan will be administered by a committee of
two or more directors constituted to comply with the Non-Employee Director
requirements of Rule 16b-3 promulgated pursuant to the Securities Exchange
Act of 1934 as amended and Securities Exchange Commission interpretations
thereunder (the "Committee"), which Committee from time to time may
delegate the performance of certain of its ministerial duties under the
Plan, such as the keeping of records and participants' accounts, to such
person or persons as it may select. The Plan shall be administered on the
basis of a plan year (the "Plan Year") which coincides with the fiscal year
of the Company, which currently is the 12-month period beginning on
November 1 and ending on the next following October 31. The Company shall
pay the cost of Plan administration. The Committee shall have the power,
right and duty to interpret the provisions of the Plan and may from time to
time adopt rules with respect to the administration of the Plan and the
determination and distribution of benefits under the Plan, and may amend
any and all rules previously established. Any decision made by the
Committee in good faith in connection with its administration of or
responsibilities under the Plan, including the interpretation of any
provision of the Plan, the application of any rule established under the
Plan, any determination as to the officers eligible to participate in the
Plan for any Plan Year, the amount allocated to each for any Plan Year and
the manner, conditions and terms of payment of such amount, shall be
conclusive on all persons.
3. Participation: Prior to October 1 of each Plan Year, the Committee shall
select those executives who will be participants in the Plan for the
following Plan Year. The inclusion or selection of any executive as a
participant in the Plan (a "Participant") for any Plan Year shall not
require the inclusion or selection of such person as a Participant for any
subsequent Plan Year, or, if such person is subsequently so included or
selected, shall not require the same benefit provided the Participant under
the Plan for an earlier Plan Year be provided such Participant for the
subsequent Plan Year.
4. Performance Goals. On or after September 15 of each Plan Year, the Chief
Executive Officer of the Company shall recommend to the Committee
performance goals for the Company and each of its divisions and
subsidiaries for the following Plan Year. Prior to October 15 of each Plan
Year, the Committee shall either approve the Chief Executive Officer's
recommended performance goals for the following Plan Year, or in the
Committee's sole discretion, shall establish the performance goals for that
Plan Year at such levels as it considers appropriate. The Committee shall
also establish, by October 15 of each Plan Year, threshold performance
levels for the year for the Company and each of its divisions and
subsidiaries, over and under performance levels and percentages for the
year for the Company and each of its divisions and subsidiaries, and other
features of the incentive compensation program for the following Plan Year.
If the business unit fails to meet the established threshold performance
level for a Plan Year, no amount will be awarded to Participants in that
business unit's Plan for that year.
5. Target Incentive Percentage. As of the date that the Committee
determines the executives who shall be eligible to participate in the Plan
for a Plan Year, the Committee also shall establish with respect to each
Participant a "target incentive percentage", which percentage shall be
based upon the appropriate performance goals referred to in Section 4 as
well as the Participant's responsibility level as determined by the
Committee. For each Plan Year that the threshold performance level has been
achieved, the target incentive percentage for each Participant (adjusted
for any under or over performance or other features of the incentive
compensation program as provided in Section 4) shall be multiplied by his
base salary earned in the fiscal year. The resulting amount with respect to
each Participant for a Plan Year is his "Incentive Award" for that year.
6. Source, Time and Manner of Payment. Each Participant's Incentive Award
for a Plan Year shall be paid from the general assets of the Company, in
accordance with the following:
(a) All of a Participant's Incentive Award for a Plan Year shall be
payable, without interest, on or before the January 10 next following the
end of that Plan Year except for such portion of said Incentive Award that
such Participant shall have previously elected to have deferred in
accordance with Section 6 (b).
(b) Each Participant may elect to defer the payment of up to 100% of the
Incentive Award payable to such Participant pursuant to Section 6 (a), in
accordance with the provisions of Section 7 hereof.
7. Election of Stock in Lieu of Pay. Each Participant (other than a
Non-Consenting Participant, as hereinafter defined) shall have the right to
elect to have up to 100% of the Incentive Award payable to such Participant
in accordance with Section 6 hereof reflected as shares of the Company's
common stock ("Stock") in a bookkeeping account maintained in the
Participant's name (the AAccount@) subject to the terms hereinafter set
forth:
(a) A Participant in the Plan for any Plan Year may by written notice filed
with the Company before the beginning of such Plan Year elect to have up to
100% of his Incentive Award for that Plan Year reflected in his Account as
an equivalent number of shares of Stock. Such election shall be
irrevocable.
(b) Each electing Participant's Account shall be credited to reflect shares of
Stock equal to the number (rounded to the nearest integer) derived by
dividing seventy five percent (75%) of the average closing price of the
Stock on the New York Stock Exchange Composite Tape for the month of
December immediately following end of the Plan Year into the amount of
Incentive Award that such Participant has elected to have reflected in his
Account as Stock. The Company shall deliver to the Harnischfeger Industries
Deferred Compensation Trust (the ARabbi Trust@) shares of Stock equal in
number to the shares credited to the Accounts of all Participants who make
an election under this Section 7. Shares transferred to the Rabbi Trust
shall be registered by the Company in the name of the Rabbi Trust. The
Company may direct the trustee of the Rabbi Trust (the "Trustee") to use
for this purpose shares of Stock previously delivered by the Company to the
Rabbi Trust to the extent the assets of the Rabbi Trust exceed the
Company's aggregate obligation under all Plans associated with the Rabbi
Trust. The aforesaid calculation and stock transfer shall take place as
soon as practical after the January 1 immediately following the end of each
such Plan Year beginning with the Plan Year ending October 31, 1990. The
Stock transferred to the Rabbi Trust pursuant hereto may at the Company's
option be acquired through open market purchases or may be either treasury
shares or newly issued shares provided that any treasury or newly issued
shares are duly registered pursuant to applicable federal and state
securities laws and stock exchange regulations. Although the Company
intends to exert its best efforts so that the shares transferred to the
Rabbi Trust or distributed to Participants hereunder will be registered
under, or exempt from the registration requirements of, the Securities Act
of 1933 (the "Securities Act") and any applicable state securities laws, if
the allocation or distribution would otherwise result in the violation by
the Company of any provision of the Securities Act or of any state
securities law, the Company may require that such allocation or
distribution be deferred until the Company has taken appropriate action to
avoid any such violation.
(c) Each Participant's Account shall be credited to reflect all dividends,
stock splits and other distributions with respect to shares reflected in
his Account. All cash distributions with respect to Stock shall be
reflected in the Participant's Account as an equivalent number of shares of
Company stock; provided, however, that the number of shares credited to
each Participant's Account in respect of each cash distribution will be the
same as if the cash distribution were used to purchase shares of Stock at
75% of the average price paid by the Trustee for Stock purchased when it
reinvests such cash dividends in Stock as provided in Paragraph 4.1 of the
Rabbi Trust. The Company shall from time to time as needed make available
to the Trustee sufficient shares of Stock in connection with such
discounted purchase of Stock with cash dividends. Each Participant's
Account shall be charged with any distribution made to a Participant when
made.
(d) Shares of Stock equal in number to the shares credited to a Participant's
Account shall be distributed to him (or to his beneficiary in the event of
his death) promptly (but not sooner than fifteen (15) days) following his
termination of employment with the Company or its subsidiaries; provided,
however, that a Participant may upon written notice to the Committee given
at least one year prior to his termination of employment, elect an annual
distribution of such Stock over a period of time of up to ten (10) years
(e.g. if a ten year election, one tenth of the Account balance at the time
of the first distribution, one ninth at the time of the second
distribution, etc.) and provided further that a Participant may upon
written notice to the Committee given at least one year prior to his
termination of employment elect to delay until the next calendar year
following his termination of employment either the distribution of or, if
the Participant has elected annual distributions over a period of time, the
initial distribution from his account.
(e) Participants as of September 12, 1998, who consent to the 1998 Amendments
(as herein defined) in the manner specified by the Company shall be known
as AConsenting Participants@ and Participants as of September 12, 1998 who
do not consent to the 1998 Amendments in the manner specified by the
Company shall be known as ANon-Consenting Participants@. Notwithstanding
Section 7(d), shares of Stock equal in number to the shares credited to a
Consenting Participant's Account, less the number of shares the Committee
determines are required for purposes of complying with tax withholding
provisions, shall be distributed to such Consenting Participant (or to such
Consenting Participant's beneficiary in the event of such Consenting
Participant's death) on a date between September 30, 1998 and December 30,
1998, as determined by the Management Policy Committee of the Company. The
amendments to the Plan adopted by the Committee on September 12, 1998,
eliminating rights to receive distributions in other than Stock and
providing for the distribution during 1998 of accounts to Consenting
Participants shall be know as the A1998 Amendments@. During the first ten
(10) days following a Non-Consenting Participant's termination of
employment, the Non-Consenting Participant (or the Non-Consenting
Participant's beneficiary in the event of the Non-Consenting Participant's
death) shall have the right to elect to have the Non-Consenting
Participant's benefit distributed in cash, Stock or a combination of cash
and Stock. Upon receipt of a written request from a Non-Consenting
Participant that a part or all of the distribution be made in cash, the
Company shall credit such Non-Consenting Participant's Account with an
amount (the "Cash Portion") equal to the product of the number of shares of
Stock then credited to such Non-Consenting Participant's Account necessary
to comply with the request (the "Diversified Shares") and the closing price
of the Stock on the New York Stock Exchange Composite Tape as of the date
the request is received by the Company. Thereafter, such Non-Consenting
Participant's Account shall be kept as if the Cash Portion were invested in
cash, cash equivalents, mutual funds or marketable securities as directed
by the Committee from time to time and as if the Diversified Shares had
been sold.
(f) Notwithstanding anything else in this Plan to the contrary, promptly (but
not later than fifteen (15) days) following a "Change in Control" of the
Company (as defined in the Rabbi Trust), (A) shares of Stock equal in
number to the shares credited to a Consenting Participant's Account shall
be distributed to such Consenting Participant in lieu of any distributions
described in Sections 7(e) and 7(d); and (B) an amount of cash equal to (i)
the number of shares of Stock credited to each Non-Consenting Participant's
Account (ii) multiplied by the Change in Control Price as defined below
shall be paid by the Company to each Non-Consenting Participant in lieu of
any distribution described in Section 7 (d) or payment/distribution
described in Section 7(). If the Company chooses not to make such payment
directly to a Non-Consenting Participant or Participants, the Company shall
within such fifteen (15) day period purchase for cash, at the Change in
Control Price, from the Rabbi Trust a sufficient number of shares of Stock
to provide the full cash payment and the Trustee is directed to sell such
shares upon such terms. As used herein, "Change in Control Price" means the
higher of (i) the highest reported sales price, regular way, of a share of
Stock in any transaction reported on the New York Stock Exchange Composite
Tape or other national securities exchange on which such shares are listed
or on NASDAQ, as applicable, during the sixty (60)-day period prior to and
including the date of a Change in Control and (ii) if the Change in Control
is the result of a tender or exchange offer or a Business Combination (as
defined in the Rabbi Trust), the highest price per share of Stock paid in
such tender or exchange offer or Business Combination. To the extent that
the consideration paid in any such transaction described above consists all
or in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined by the
Incumbent Board (as defined in the Rabbi Trust).
(g) In the event that the Committee determines that the laws of a country in
which a Participant resides make it impracticable for the Participant to
participate in the Plan, the election of having his Incentive Award
reflected as Stock in lieu of pay pursuant to this Section 7 shall not be
available to such Participant. However, at the discretion of the Committee,
the Participant may be placed in another plan (the AOther Plan@) which will
provide deferred compensation in the same manner and amounts as would have
been provided under this Plan except that the Other Plan will not be in any
way associated with the Rabbi Trust. Notwithstanding the foregoing, in the
event of a Change in Control, the Participant's benefit under the Other
Plan shall be distributed in cash to the Participant in a manner similar to
that described in Section 7(f) above.
(h) Participants shall not be eligible to elect to receive Stock in lieu of pay
pursuant to this Section 7 for a period of twelve (12) months following the
receipt of a hardship distribution from any cash or deferred compensation
plan of the Company maintained pursuant to Section 401(k) of the Internal
Revenue Code.
8. Designation of Beneficiaries. Each Participant from time to time may name any
person or persons (who may be named concurrently, contingently or successively)
to whom his benefits under the Plan are to be paid if he dies before he receives
his Incentive Award or the proceeds of his Rabbi Trust account. Each such
beneficiary designation will revoke all prior designations by the Participant,
shall not require the consent of any previously named beneficiary, shall be in a
form prescribed by the Committee, and will be effective only when filed with the
Committee during the Participant's lifetime. If a Participant fails to designate
a beneficiary before his death, the beneficiary shall be the Participant's
estate.
9. General. No Participant or other person shall have any right, title or
interest in any amount awarded under this Plan prior to the payment thereof to
such person or in any property of the Company. Neither the establishment nor
continuance of this Plan shall affect or enlarge the employment rights of any
Participant or constitute a contract of employment with any Participant. Neither
the Company nor any Committee member shall be personally liable for any act done
or omitted to be done in good faith in the administration of the Plan. Except as
provided in Section 7 hereof, nothing herein shall require the Company to
segregate or set aside any funds or other property for the purpose of paying any
amounts, the payment of which has been deferred under the Plan.
10. Facility of Payment. When a person entitled to benefits under the Plan is
under legal disability, or, in the Committee's opinion, is in any way
incapacitated so as to be unable to manage his affairs, the Committee may direct
the payment of benefits to such person's legal representative, or to a relative
or friend of such person for such person's benefit, or the Committee may direct
the application of such benefits for the benefit of such person. Any payments
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such payment under the Plan.
11. Withholding for Taxes. Notwithstanding any other provision of the Plan, the
Committee may on behalf of the Participant withhold or direct the Trustee to
withhold from any payment to be made under the Plan, whether in the form of cash
or shares of Stock, such amount or amounts as may be required for purposes of
complying with appropriate federal, state or foreign tax withholding provisions.
Subject to the discretion of the Committee, no distribution will be made to the
Participant until all tax withholding obligations have been satisfied.
12. Benefit Statements. The Company shall provide statements of account to
Participants on a periodic basis but not less than annually in such form and at
such time as it deems appropriate.
13. Amendment and Termination. Because unforeseen circumstances may make it
undesirable to continue the Plan in any form, or to continue it without change,
the Committee must necessarily reserve and hereby has reserved the right to
amend the Plan from time to time and to terminate the Plan at any time, except
that no such amendment or any termination of the Plan shall change the terms and
conditions of payment of any Incentive Award theretofore awarded to a
Participant without the consent of the Participant concerned, nor shall any
termination of the Plan eliminate any obligations of the Company which
theretofore shall have arisen under the Plan.
16. Controlling Law. The laws of Wisconsin shall be controlling in all matters
relating to the Plan.
17. Gender and Number. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
Exhibit 10(d)
HARNISCHFEGER INDUSTRIES, INC.
LONG-TERM COMPENSATION PLAN FOR KEY EXECUTIVES
(as amended and restated September 12, 1998)
1. Purpose. The Harnischfeger Industries, Inc. Long-Term Compensation Plan for
Key Executives (the "Plan"), established effective as of September 8, 1997 by
Harnischfeger Industries, Inc. (the "Company"), is intended to provide certain
key officers of the Company a one-time grant of long-term compensation
incentives directly linked to achieving high performance for Company
shareholders.
2. Administration. The Plan will be administered by the Human Resources
Committee of the Board of Directors of the Company or such other committee of
two or more directors constituted to comply with the Non-Employee Director
requirements of Rule 16b-3 promulgated pursuant to the Securities Exchange Act
of 1934 as amended and Securities Exchange Commission interpretations thereunder
as the Board of Directors may designate from time to time (the "Committee"),
which Committee from time to time may delegate the performance of certain of its
ministerial duties under the Plan, such as the keeping of records and
participants' accounts, to such person or persons as it may select.
Awards under the Plan shall be granted on the basis of five consecutive years
(each a "Plan Year" and, individually, Plan Years 1, 2, 3, 4 and 5,
respectively) consisting of the five 12-month periods beginning on September 8,
1997 and ending on September 7, 2002. The Company shall pay the cost of Plan
administration. The Committee shall have the power, right and duty to interpret
the provisions of the Plan and may from time to time adopt procedures with
respect to the administration of the Plan. Any decision made by the Committee in
good faith in connection with its administration of or responsibilities under
the Plan shall be conclusive on all persons.
3. Participation. Each executive of the Company listed on Schedule I shall be a
participant in the Plan (a "Participant").
4. Shares. The total number of shares of the Company's common stock ("Stock")
(other than Dividend Shares (as defined below) and Stock awarded through the
reinvestment of cash distributions as provided in paragraph 6(b) hereof) on
which the value of a Participant's award under the Plan is based (the "Total
Share Award") is listed on Schedule I. As share awards are earned by a
Participant pursuant to Section 6, a bookkeeping account maintained on behalf of
the Participant (the "Account") shall be credited to reflect the earned awards.
5. Stock Price Targets. The Stock prices at which awards are made under the Plan
(the "Stock Price Targets") and corresponding proportions of Total Share Awards
to be granted under the Plan (the AProportion of Total Share Award") for each
Plan Year are listed on Schedule II. The Stock prices at which awards are made
upon a "Trigger Event" (as defined in Section 18) under the Plan (the "Trigger
Event Stock Price Targets"), and the corresponding proportions of Total Share
Awards to be earned under the Plan (the "Trigger Event Proportion of Total Share
Award") are listed on Schedule III.
6. Awards. If at any time during a Plan Year the average closing price of the
Stock on the New York Stock Exchange Composite Tape for twenty (20) consecutive
trading days equals or exceeds a Stock Price Target for such Plan Year, each
Participant who is then employed by the Company shall earn (for purposes of
crediting the Participant's Account (i) an amount measured by a number of shares
of Stock (a "Stock Award") which together with all previous Stock Awards equals
the Total Share Award for such Participant multiplied by the Proportion of Total
Share Award corresponding to such Stock Price Target and (ii) an additional
amount (the "Dividend Shares") equal to the number of shares of Stock (rounded
to the nearest whole number of shares) that would have been credited to the
Participant's Account as the result of the reinvestment of cash distributions in
the manner and at the prices specified in paragraph 6(b) below had such Stock
Award been made on September 8, 1997. Any Participant whose employment with the
Company terminates for any reason prior to September 8, 2002 shall not be
eligible for additional Stock Awards under the Plan following the date of such
termination of employment. Except as provided herein, on the date a Participant
earns a Stock Award, the Company shall deliver into the Harnischfeger Industries
Deferred Compensation Trust ("Rabbi Trust") a number of shares of Stock equal to
the Stock Award and Dividend Shares corresponding to such Stock Award to be held
under the terms of the Rabbi Trust subject to the terms hereinafter set forth:
(a) Shares of Stock required to be delivered to the Rabbi Trust by the Company
shall be registered by the Company in the name of the Rabbi Trust,
provided, however, that the Company may direct the trustee of the Rabbi
Trust (the "Trustee") to use for this purpose shares of Stock previously
delivered by the Company to the Rabbi Trust to the extent shares held in
the Rabbi Trust exceed the Company's aggregate obligations under all plans
covered by the Rabbi Trust. The Stock transferred to the Rabbi Trust
hereunder may at the Company's option be acquired through open market
purchases or may be treasury shares provided that any such shares are duly
registered or exempted from registration pursuant to applicable federal and
state securities laws. Although the Company intends to exert its best
efforts so that the shares transferred to the Rabbi Trust or distributed to
Participants or their beneficiaries hereunder will be registered under, or
exempt from the registration requirements of, the Securities Act of 1933
(the "Securities Act") and any applicable state securities laws, if the
allocation or distribution would otherwise result in the violation by the
Company of any provision of the Securities Act or of any state securities
law, the Company may require that such transfer or distribution be deferred
until the Company has taken appropriate action to avoid any such violation.
(b) Each Participant's Account shall be credited to reflect all dividends,
stock splits and other distributions with respect to such shares. The
number of shares credited to each Participant's Account in respect of each
cash distribution with respect to Stock transferred to the Rabbi Trust
hereunder will be the same as if the cash distribution were used to
purchase shares of Stock at 75% of the average price paid by the Trustee
for Stock purchased when it reinvests such cash dividends in Stock as
provided in Paragraph 4.1 of the Rabbi Trust. The Company shall from time
to time as needed make available to the Trustee sufficient shares of Stock
in connection with such discounted purchase of Stock with cash dividends.
Each Participant's Account shall be debited to reflect any distributions
made to a Participant when made.
(c) Stock equal to the number of shares credited to a Participant's Account
shall be distributed to him (or to his beneficiary in the event of his
death) promptly (but not sooner than fifteen (15) days) following his
termination of employment with the Company and its subsidiaries
("termination of employment"); provided, however, that a Participant may
upon written notice to the Committee given at least one year prior to his
termination of employment, elect an annual distribution of such Stock over
a period of time of up to ten (10) years (e.g. if a ten year election, one
tenth of the balance at the time of the first distribution, one ninth of
the balance at the time of the second distribution, etc.) and provided
further that a Participant may upon written notice to the Committee given
at least one year prior to his termination of employment elect to delay
until the next calendar year following his termination of employment either
the distribution of or, if the Participant has elected annual distributions
over a period of time, the initial distribution from his Account. During
the first ten (10) days following a Participant's termination of
employment, the Participant (or the Participant's beneficiary in the event
of the Participant's death) shall have the right to elect to receive
payment hereunder in cash, Stock or a combination of cash and Stock. Upon
receipt of a written request from a Participant that a part or all of the
distribution be made in cash, the Company shall direct the Trustee to
credit such Participant's Account with an amount (the "Cash Portion") equal
to the product of the number of shares of Stock then credited to
Participant's Account necessary to comply with the request (the
"Diversified Shares") and the closing price of the Stock on the New York
Stock Exchange Composite Tape as of the date the request is received by the
Company. Thereafter, the Trustee shall adjust such Participant's Account as
if the Cash Portion were invested in cash, cash equivalents, mutual funds
or marketable securities as directed by the Committee from time to time and
as if the Diversified Shares had been sold.
(d) Except as provided in Section 17, notwithstanding the foregoing, promptly
(but not later than fifteen (15) days) following a "Change in Control" of
the Company, an amount of cash equal to (i) the number of shares of Stock
credited to each Participant's Account, (ii) multiplied by the Change in
Control Price as defined below shall be paid by the Company to each
Participant in lieu of any payment described in Section 6(c). If the
Company chooses not to make such payment directly to a Participant or
Participants, the Company shall within such fifteen (15) day period
purchase for cash, at the Change in Control Price, from the Rabbi Trust a
sufficient number of shares of Stock to provide the full cash payment and
the Trustee is directed to sell such shares upon such terms. As used
herein, "Change in Control Price" means the highest of (i) $25.00, and (ii)
the highest reported sales price, regular way, of a share of Stock in any
transaction reported on the New York Stock Exchange Composite Tape or other
national securities exchange on which such shares are listed or on NASDAQ,
as applicable, during the sixty (60)-day period prior to and including the
date of a Change in Control, and (iii) if the Change in Control is the
result of a tender or exchange offer or a Business Combination (as defined
in the Section 19(c)), the highest price per share of Stock paid in such
tender or exchange offer or Business Combination. To the extent that the
consideration paid in any such transaction described above consists all or
in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined by the
Incumbent Board (as defined in the Rabbi Trust).
7. Designation of Beneficiaries. Each Participant from time to time may name any
person or persons (who may be named concurrently, contingently or successively)
to whom his benefits under the Plan are to be paid if he dies before he receives
his full benefits hereunder. Each such beneficiary designation will revoke all
prior designations by the Participant, shall not require the consent of any
previously named beneficiary, shall be in a form prescribed by the Committee,
and will be effective only when filed with the Committee during the
Participant's lifetime. If a Participant fails to designate a beneficiary before
his death, the beneficiary shall be the Participant's estate.
8. General. No Participant or other person shall have any right, title or
interest in any property of the Company as a result of an award under the Plan.
No rights or interests of Participants under this Plan shall be assignable
either voluntarily or involuntarily nor shall the establishment nor continuance
of this Plan affect or enlarge the employment rights of any Participant or
constitute a contract of employment with any Participant. No Committee member
shall be personally liable for any act done or omitted to be done in good faith
in the administration of the Plan. Except as provided in Section 6 hereof,
nothing herein shall require the Company to segregate or set aside any funds or
other property for the purpose of paying any amounts, the payment of which has
been deferred under the Plan.
9. Facility of Payment. When a person entitled to benefits under the Plan is
under legal disability, or, in the Committee's opinion, is in any way
incapacitated so as to be unable to manage his affairs, the Committee may direct
the payment of benefits to such person's legal representative, or to a relative
or friend of such person for such person's benefit, or the Committee may direct
the application of such benefits for the benefit of such person. Any payments
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such payment under the Plan.
10. Withholding for Taxes. Notwithstanding any other provision of the Plan, the
Committee may on behalf of the Participant withhold or direct the Trustee to
withhold from any payment to be made under the Plan, whether in the form of cash
or shares of Stock, such amount or amounts as may be required for purposes of
complying with appropriate federal, state or foreign tax withholding provisions.
Subject to the discretion of the Committee, no distribution will be made to the
Participant until all tax withholding obligations have been satisfied.
11. Benefit Statements. The Company shall provide statements of their Accounts
to Participants on a periodic basis but not less than annually in such form and
at such time as it deems appropriate.
12. Amendment and Termination. The Company may not amend or terminate the Plan
without the express written consent of each Participant who is affected by such
amendment or termination.
13. Controlling Law. The laws of Wisconsin shall be controlling in all matters
relating to the Plan.
14. Gender and Number. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
15. Gross-Up Payments. Subject to Participants complying with the requirements
of this Section 15, in the event it shall be determined that any payment or
distribution under the Plan to or for the benefit of a Participant, determined
without regard to any additional payments required by this first paragraph of
this Section 15 (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties are incurred by a Participant with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Participant
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Participant of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest or penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
Subject to the provisions of the third paragraph of this Section 15,
all determinations required to be made under this Section 15, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by PricewaterhouseCoopers LLP or any successor thereto (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and Participants within thirty (30) business days of the receipt of notice from
a Participant that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payments, as determined pursuant to
this Section 15, shall be paid by the Company to Participants within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and Participants. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to the
third paragraph of this Section 15 and the Participant thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Participant.
Participants shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than thirty (30) business days after the Participant is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Participant shall not pay such claim prior to the expiration of the thirty
(30)-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Participant in
writing prior to the expiration of such period that it desires to contest such
claim, the Participant shall: (i) give the Company any information reasonably
requested by the Company relating to such claim; (ii) take such action in
connection with contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company; (iii) cooperate with the Company in good faith in order effectively
to contest such claim; and (iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Participant harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this third paragraph of Section 15, the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Participant to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Participant shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Participant to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Participant, on an
interest-free basis and shall indemnify and hold the Participant harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Participant with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Participant shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
If, after the receipt by the Participant of an amount advanced by the
Company pursuant to the third paragraph of this Section 15, the Participant
becomes entitled to receive any refund with respect to such claim, the
Participant shall (subject to the Company's complying with the requirements of
the third paragraph of this Section 15) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Participant of an amount
advanced by the Company pursuant to the third paragraph of this Section 15, a
determination is made that the Participant shall not be entitled to any refund
with respect to such claim and the Company does not notify the Participant in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
16. Capitalization Adjustment. In the event of any change in corporate
capitalization, such as a stock split or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property (without regard to the payment of any cash dividends by the
Company in the ordinary course) of the Company, any reorganization (whether or
not such reorganization comes within the defini tion of such term in Section 368
of the Code) or any partial or complete liquidation of the Company, the
Committee shall make such substitution or adjustments in the aggregate number
and kind of Total Share Awards under the Plan, in the Stock Price Targets
(including Trigger Event Stock Price Targets) of Total Share Awards, and in the
number and kind of shares subject to Total Share Awards granted under the Plan,
and such other equitable substitution or adjustments as is appropriate to
preserve the value of Total Share Awards; provided, however, that the number of
shares subject to any Award shall always be a whole number.
17. Trigger Event Payments. Notwithstanding anything in this Plan to the
contrary, in the event of the occurrence of a "Trigger Event" (as defined below)
with respect to a Participant on or prior to September 8, 2000, a Participant
will earn (i) a Stock Award which together with all previous Stock Awards equals
(a) the Total Share Award, multiplied by (b) the Trigger Event Proportion of
Total Share Award corresponding to the Trigger Event Stock Price Target equal to
(1) the Change in Control Price, in the event of a Trigger Event under Section
18(a) or (2) the closing price of the Stock on the New York Stock Exchange
Composite Tape on the last trading date for the Stock immediately preceding the
date on which the Trigger Event occurs, in the event of a Trigger Event under
Section 18(b) and (ii) an additional amount equal to the number of additional
shares of Stock (rounded to the nearest whole number of shares) that would have
been received by the Participant as a result of the reinvestment of cash
distributions in the manner and at the prices described in paragraph 6(b), had
such Stock Award been made and the underlying shares of Stock been held by the
Participant from September 8, 1997. For purposes of clause (b) (2) above, in the
event the closing price of the Stock is below $25.00, no payment shall be made
with respect to such Trigger Event. Upon a Trigger Event with respect to a
Participant, an amount of cash equal to the number of shares of Stock earned
pursuant to the Trigger Event, multiplied by (x) the Change in Control Price, in
the event of a Trigger Event under Section 18(a) or (y) the closing price of the
Stock on the New York Stock Exchange Composite Tape on the last trading date for
the Stock immediately preceding the date on which the Trigger Event occurs, in
the event of a Trigger Event under Section 18(b) and shall be distributed to the
Participant (or to his beneficiary in the event of his death following the
Trigger Event) promptly (but no later than five (5) days) following the Trigger
Event.
18. Trigger Event Defined. For purposes of this Plan, a "Trigger Event" shall
mean either: (a) with respect to all Participants, a Change in Control of the
Company, or (b) with respect to any individual Participant, the involuntary
termination of such Participant's employment by the Company (other than for
"Cause" or "Disability"), or such Participant's termination of employment for
"Good Reason." Once a Trigger Event occurs with respect to a Participant, no
further Stock Awards may be earned by such Participant hereunder.
19. Change in Control Defined. For purposes of this Plan, "Change in Control"
means:
(a) The acquisition by an individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or
more of either (i) the then outstanding shares of Stock (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(iv) any acquisition pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (c) of this Section 19; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Consummation by the Company of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination,
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 15% or
more of, respectively, the then outstanding share of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
20. Disability Defined. For purposes of this Plan, "Disability," with respect to
a Participant, means that (i) the Participant has been unable, for a period of
180 consecutive business days, to perform the Participant's duties of
employment, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Participant or the Participant's legal representative, has determined that the
Participant's incapacity is total and permanent. A termination of the
Participant's employment by the Company for Disability shall be communicated to
the Participant by written notice, and shall be effective on the 30th day after
receipt of such notice by the Participant (the "Disability Effective Date"),
unless the Participant returns to full-time performance of the Participant's
duties before the Disability Effective Date.
21. Cause Defined. For purposes of this Plan, "Cause," with respect to a
Participant means:
(a) the willful and continued failure of the Participant substantially to
perform the Participant's duties of employment (other than as a result of
physical or mental illness or injury), after the Board of Directors of the
Company or the Chief Executive Officer of the Company delivers to the
Participant a written demand for substantial performance that specifically
identifies the manner in which the Board or the Chief Executive Officer
believes that the Participant has not substantially performed the
Participant's duties of employment; or
(b) willful illegal conduct or gross misconduct by the Participant, that
results in material and demonstrable damage to the business or reputation
of the Company or its subsidiaries; or
(c) the Executive's conviction of, or plea of guilty or nolo contendere to, a
felony. No act or failure to act on the part of the Participant shall be
considered "willful" unless it is done, or omitted to be done, by the
Participant in bad faith or without reasonable belief that the
Participant's action or omission was in the best interests of the Company.
Any act or failure to act that is based upon authority given pursuant to a
resolution duly adopted by the Board, the instruction of the Chief
Executive Officer or a senior officer of the Company, or the advice of
counsel for the Company, shall be conclusively presumed to be done, or
omitted to be done, by the Participant in good faith and in the best
interests of the Company.
22. Good Reason Defined. For purposes of this Plan, "Good Reason" means, with
respect to a Participant, without the Participant's express written consent:
(a) the assignment to the Participant of any duties inconsistent in any
material and adverse respect with the duties assigned to the Participant by
the Company as of July 17, 1998, or any other action by the Company that
results in a material diminution in the Participant's position, authority,
duties or responsibilities from those held, exercised and/or assigned to
the Participant as of July 17, 1998, other than an isolated, insubstantial
and inadvertent action that is not taken in bad faith and is remedied by
the Company promptly after receipt of notice thereof from the Participant;
or
(b) any reduction in the Participant's base salary or a material reduction in
the Participant's bonus opportunity or other material employee benefits
from the levels in effect as of July 17, 1998, other than (i) an isolated,
insubstantial and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof from the
Participant, (ii) any modification to the Company's employee benefits in
conjunction with establishment of a substitute or replacement employee
benefit plan providing substantially similar employee benefits, or (iii)
the Company's modifications to its retiree medical programs; or
(c) any requirement by the Company that the Participant's services be rendered
primarily at a location or locations more than 35 miles from the
Participant's employment location as of July 17, 1998, other than for
reasonable travel obligations in connection with the Participant's duties
of employment.
Exhibit 10(e)
HARNISCHFEGER INDUSTRIES, INC.
SUPPLEMENTAL RETIREMENT AND STOCK FUNDING PLAN
(as amended and restated September 12, 1998)
SECTION 1: Introduction
1.1 The Plan and its Effective Date. Harnischfeger Industries, Inc.
Supplemental Retirement and Stock Funding Plan (the "Supplemental Plan") is the
amendment and restatement effective as of October 1, 1990 of the plan that was
originally established by Harnischfeger Industries, Inc., a Delaware corporation
(the "Company"), effective March 1, 1987 as the Harnischfeger Industries, Inc.
Supplemental Retirement Plan.
1.2 Purpose. The Company maintains a Harnischfeger Salaried Employees'
Retirement Plan (the "Retirement Plan"), which is intended to meet the
requirements of a "qualified plan" under the Internal Revenue Code of 1986, as
amended (the "Code").
While the Code and the Employee Retirement Income Security Act of 1974, as
amended (the "Act"), place limitations on the benefits which may be paid from a
qualified plan, the Code and the Act permit the payment under a non-qualified
supplemental retirement plan of the benefits which may not be paid under the
qualified plan because of such limitations. The purposes of this Supplemental
Plan are (i) to provide benefits which may not be provided under the Retirement
Plan because of limitations imposed by the Code or the Act, including those
relating to nondiscrimination and maximum benefit limitations, elections to
defer compensation made by the participants, and the granting of past service
credits and (ii) to provide the opportunity for qualified executives to have
their supplemental benefits converted into shares of the Company's common stock
upon the terms hereinafter set forth.
SECTION 2: Participation and Benefits
2.1 Eligibility for Benefits Related to Retirement Plan. Subject to the
conditions and limitations hereof, if a participant in the Retirement Plan (i)
has been granted credit for prior service or elected to defer compensation which
may not be taken into account under the Retirement Plan because of applicable
nondiscrimination or other rules, or (ii) has accrued a vested pension benefit
under the Retirement Plan (or would have accrued a vested benefit if his prior
service were taken into account), and such benefit has been limited as a result
of the maximum benefit limitations imposed by Sections 401(a)(17) and 415 of the
Code, he shall be a participant ("Participant") in this Supplemental Plan and
shall be entitled to receive under this Supplemental Plan the portion of his
benefits under the Retirement Plan, determined without regard to the limitations
on the inclusions of prior service or deferred compensation or the maximum
benefit limitations therein, which exceeds the benefits payable to him under the
Retirement Plan after applying such limitations. If a Participant was employed
by another "Harnischfeger Company", as defined in the Retirement Plan, and such
other company also maintains a supplemental plan covering the Participant, the
benefits hereunder and under such other plan shall be limited so as to not be
duplicative and the Participant's benefits hereunder and under such other plan
shall be paid by the Company and such other Harnischfeger Company in such
proportions as the Company shall determine. The term "Company" as hereinafter
used shall be deemed to include a reference to each such other Harnischfeger
Company.
2.2 Payment of Benefits. Except to the extent a Participant becomes
entitled to receive Company common stock ("Stock") as provided in Section 3, his
benefits under this Supplemental Plan shall be paid to him, or in the event of
his death to his beneficiary, at the same time and in the same manner as his
pension benefits under the Retirement Plan.
2.3 Funding. Benefits payable under this Supplemental Plan to a
Participant or his beneficiary shall be paid directly by the Company or at its
discretion through Harnischfeger Industries Deferred Compensation Trust ("Rabbi
Trust"), a grantor trust established by the Company. Prior to a "Change in
Control" of the Company (as hereinafter defined), the Company shall not be
required (but may do so in its discretion) to place assets in the Rabbi Trust
that may be used to provide any benefits under this
Supplemental Plan, except that shares of Stock shall be issued and transferred
to the Rabbi Trust as provided in Section 3.2 and 3.3. Notwithstanding the
above, the Company intends for this Supplemental Plan to constitute an unfunded,
unsecured promise to pay future benefits.
SECTION 3: Conversion of Benefits into Common Stock
3.1 Eligible Stock Participant. As used herein, the term "Eligible
Stock Participant" means each Participant who is an active senior executive of
the Company as of October 1, 1990 (and each Participant designated from time to
time hereafter by the Committee, as defined in Section 4.1 hereof) whose accrued
benefits as of October 1, 1990 under this Supplemental Plan equals or exceeds a
monthly normal retirement annuity of $1,000 per month. Eligible Stock
Participants as of September 12, 1998, who consent to the 1998 Amendments (as
herein defined) in the manner specified by the Company and Participants who are
designated by the Committee as Eligible Stock Participants after September 12,
1998, shall be known as AConsenting Eligible Stock Participants@. Eligible Stock
Participants as of September 12, 1998, who do not consent to the 1998 Amendments
in the manner specified by the Company shall be known as ANon-Consenting
Eligible Stock Participants@. The amendments to the Plan adopted by the
Committee on September 12, 1998, eliminating rights to receive distributions in
other than Stock and providing for the distribution during 1998 of accounts to
Consenting Eligible Stock Participants shall be know as the A1998 Amendments@.
3.2 Initial Stock Funding. Each Eligible Stock Participant shall have
the right to elect to have all benefits payable under this Supplemental Plan
reflected, on the terms hereinafter set forth, as shares of Stock in a
bookkeeping account maintained in the Participant's name (the AAccount@). The
present value of each such electing Participant's prospective supplemental
pension benefits shall be calculated as of October 1, 1990 using the most recent
assumptions adopted by the Company for purposes of calculating the actuarial
present value of the Company's pension obligations, provided, however, that the
discount rate used herein shall be one half percent less than the discount rate
used in such assumptions. An amount equal to the number of shares of Stock
(rounded to the nearest integer) derived by dividing the average closing price
for the Company's common stock reflected on the New York Stock Exchange
Composite Tape for the month of September, 1990 into the aforesaid present value
shall be credited to the Participant's Account. The Company shall deliver into
the Rabbi Trust a number of shares of Stock equal to the amount reflected in all
electing Eligible Stock Participants' Accounts hereunder, and the Company shall
register such shares in the name of the trustee of the Rabbi Trust (the
"Trustee"). The aforesaid calculation and Stock transfer shall take place as
soon as is practicable after October 1, 1990. The shares transferred to the
Rabbi Trust pursuant to Section 3.2 or 3.3 may be either treasury shares or
newly issued shares provided any treasury or newly issued shares are duly
registered pursuant to applicable federal and state securities, and stock
exchange, regulations. Although the Company intends to exert its best efforts so
that the shares transferred to the Rabbi Trust or distributed to Participants
hereunder will be registered under, or exempt from the registration requirements
of, the
Securities Act of 1933 (the "Securities Act") and any applicable state
securities laws, if the allocation or distribution would otherwise result in the
violation by the Company of any provision of the Securities Act or of any state
securities law, the Company may require that such transfer or distribution be
deferred until the Company has taken appropriate action to avoid any such
violation.
3.3 Subsequent Stock Funding. As soon as practicable after November 1st
of each year (beginning with November of 1991), the present value of each
Eligible Stock Participant's prospective supplemental pension benefits payable
hereunder shall be calculated as of such November 1st using the then current
assumptions adopted by the Company for purposes of calculating the actuarial
present value of the Company's pension obligations, provided that the discount
rate used for purposes of such calculation shall be one half percent less than
the rate used in such assumptions. Each Eligible Stock Participant's Account
shall be credited with an amount equal to the number of shares of the Company's
common stock (rounded to the nearest integer) derived by dividing the average
closing price of the Company's common stock on the New York Stock Exchange
Composite Tape for the immediately following month of December into the
difference between the aforesaid present value and the amount of the present
value calculated for the immediately preceding year pursuant to the terms of
this Supplemental Plan (if no previous calculation has been made, a zero value
shall be used for the previous calculation). A number of shares of Stock equal
to the amount reflected in all Eligible Stock Participant's Accounts shall be
registered by the Company in the name of the Trustee and delivered to the Rabbi
Trust (if adequate shares or other consideration have not theretofore been
delivered by the Company to the Rabbi Trust). Stock transferred by the Company
to the Rabbi Trust pursuant hereto may at the Company's option be acquired
through open market purchases or may be either treasury shares or newly issued
shares provided that any treasury or newly issued shares are duly registered
pursuant to applicable federal and state securities laws and stock exchange
regulations. Although the Company intends to exert its best efforts so that the
shares transferred to the Rabbi Trust or distributed to Participants hereunder
will be registered under, or exempt from the registration requirements of, the
Securities Act and any applicable state securities laws, if the allocation or
distribution would otherwise result in the violation by the Company of any
provision of the Securities Act or of any state securities law, the Company may
require that such transfer or distribution be deferred until the Company has
taken appropriate action to avoid any such violation.
3.4 Non-Electing Eligible Stock Participants. If any Eligible Stock
Participant shall elect not to have his supplemental benefits earned prior to
October 1, 1990 reflected as common stock as provided in Section 3.2, such
supplemental benefits shall be calculated and paid under the provisions of the
Supplemental Plan in effect prior to October 1, 1990 as if this Supplemental
Plan had terminated on October 1, 1990. Any supplemental pension benefits
accruing to such Participant after October 1, 1990 shall be converted into
shares of the Company's common stock pursuant to the provisions of Section 3.3
and shall be calculated as if such Participant first became an employee of the
Company on October 1, 1990.
3.5 Participants' Accounts. Each Eligible Stock Participant's Account
shall be credited to reflect all dividends, stock splits and other distributions
with respect to shares of Stock reflected in his Account, and all non-stock
distributions with respect to Stock shall be reflected as shares of the Stock
(for purposes of crediting the Participant's Account), using the last closing
price for the Stock on the New York Stock Exchange Composite Tape immediately
preceding such non-stock distribution. Each Account shall be charged with any
distribution made to a Participant when made. In addition, appropriate plan
records shall be maintained to reflect a Participant's benefits under Section 2
which have not been reflected as shares of Stock, including benefits accrued up
to date of termination.
3.6 Payment of Benefits.
3.6.1 Stock Benefits. As used in this section, the term "Stock
Benefits" shall mean all shares of Stock, and any other amounts reflected in an
Eligible Stock Participant's Account as of the date of such determination,
including the amount of any benefits accrued hereunder that are not reflected as
shares of Stock.
3.6.2 Payments. Stock Benefits shall, at the Company's
discretion, be paid from the Rabbi Trust or paid directly by the Company from
other assets. Notwithstanding Sections 3.6.2.1, 3.6.2.2, and 3.6.2.3, shares of
Stock equal in number to the shares credited to a Consenting Eligible Stock
Participant's Account, less the number of shares the Committee determines are
required for purposes of complying with tax withholding provisions, shall be
distributed to such Consenting Eligible Stock Participant (or the Consenting
Eligible Stock Participant's beneficiary in the event of such Consenting
Eligible Stock Participant's death) on a date between September 30, 1998, and
December 30, 1998, as determined by the Management Policy Committee of the
Company.
3.6.2.1 If a Non-Consenting Eligible Stock Participant voluntarily terminates
his employment with the Company prior to attaining age 55 or if an Eligible
Stock Participant's employment with the Company is terminated with "Cause" (as
hereinafter defined) at any age, all Stock Benefits shall be forfeited and such
Participant shall receive benefits under Section 2 to the same extent as if none
of his benefits had ever been reflected as Stock under Section 3 of this
Supplemental Plan (subject to any prior payments made pursuant to the provisions
of Section 3.4).
3.6.2.2 Subject the Committee's sole discretion to waive the provisions of this
Section, if an Eligible Stock Participant's employment is voluntarily terminated
after the attainment of age 55 and prior to attainment of age 62, his Stock
Benefits shall be reduced in accordance with the early retirement reduction
factors under the Retirement Plan based upon his attained age at his termination
of employment and paid to him in a lump sum; that portion of his Stock Benefits
not paid to him due to such reduction shall be forfeited.
3.6.2.3 If an Eligible Stock Participant's employment is (a) voluntarily
terminated following attainment of age 62 (55 in the event the Committee elects
to waive the provisions of Section 3.6.2.2 hereof) or (b) is involuntarily
terminated at any age without Cause, including termination due to death or
disability, all of his Stock Benefits shall be distributed to him (or to his
beneficiary in the event of his death) promptly (but not sooner than fifteen
(15) days) following his termination of employment with the Company or its
subsidiaries; provided, however, that an Eligible Stock Participant may upon
written notice to the Committee given at least one year (ninety (90) days for
any such notice given prior to January 1, 1995) prior to his termination, elect
an annual distribution of such Stock Benefits over a period of time of up to ten
(10) years (e.g. if a ten year election, one tenth of the Account balance at the
time of the first distribution, one ninth of the Account balance at the time of
the second distribution, etc.) and provided further that an Eligible Stock
Participant may upon written notice to the Committee given at least one year
(ninety (90) days for any such notice given prior to January 1, 1995) prior to
his termination of employment elect to delay until the next calendar year
following his termination of employment either the distribution of or, if the
Eligible Stock Participant has elected annual distributions over a period of
time, the initial distribution of his benefit. During the first ten (10) days
following a Non-Consenting Eligible Stock Participant's termination of
employment, the Non-Consenting Eligible Stock Participant (or the Non-Consenting
Eligible Stock Participant's beneficiary in the event of the Non-Consenting
Eligible Stock Participant's death) shall have the right to elect to have the
Non-Consenting Eligible Stock Participant's Account distributed in cash, Stock
or a combination of cash and Stock. Upon receipt of a written request that a
part or all of the distribution be made in cash, the Company shall direct the
Trustee to credit such Non-Consenting Eligible Participant's Account with an
amount (the "Cash Portion") equal to the product of the number of shares of
Stock then reflected in the Non-Consenting Eligible Stock Participant's Account
necessary to comply with the request (the "Diversified Shares") and the closing
price of the Stock on the New York Stock Exchange Composite Tape as of the date
the request is received by the Company. Thereafter, the Trustee shall keep such
Non-Consenting Eligible Participant's Account as if the Cash Portion were
invested in cash, cash equivalents, mutual funds or marketable securities as
directed by the Committee from time to time and as if the Diversified Shares had
been sold.
3.6.3 Change In Control. Notwithstanding anything else in this
Plan to the contrary, promptly (but not later than fifteen (15) days) following
a "Change in Control" of the Company (as defined in the Rabbi Trust), (A) shares
of Stock equal in number to the shares credited to a Consenting Eligible Stock
Participant's Account shall be distributed to such Consenting Participant in
lieu of any distributions described in Section 3.6.2; and (B) an amount of cash
equal to (i) the number of shares of Stock credited to each Non-Consenting
Eligible Stock Participant's Account multiplied by the Change in Control Price
as defined below (ii) plus the value of any portion of such Non-Consenting
Eligible Stock Participant's Account not reflected in shares of Stock shall be
paid by the Company to each Non-Consenting Eligible Participant in lieu of any
payment described in Section 3.6.2. If the Company chooses not to make such
payment directly to a Non-Consenting Eligible Stock Participant or Participants,
the Company shall within such fifteen (15) day period purchase for cash, at the
Change of Control Price, from the Rabbi Trust sufficient number of shares to
provide the cash payments and the Trustee is directed to sell such shares upon
such terms. As used herein, "Change in Control Price" means the higher of (i)
the highest reported sales price, regular way, of a share of Stock in any
transaction reported on the New York Stock Exchange Composite Tape or other
national securities exchange on which such shares are listed or on NASDAQ, as
applicable, during the 60-day period prior to and including the date of a Change
in Control and (ii) if the Change in Control is the result of a tender or
exchange offer or a Business Combination (as defined in the Rabbi Trust), the
highest price per share of Stock paid in such tender or exchange offer or
Business Combination. To the extent that the consideration paid in any such
transaction described above consists all or in part of securities or other
non-cash consideration, the value of such securities or other non-cash
consideration shall be determined by the Incumbent Board (as defined in the
Rabbi Trust).
3.6.4 Cause. For purposes of this Supplemental Plan, "Cause"
shall mean termination upon (a) Participant's willful and continued failure to
perform substantially the reasonably assigned duties with the Company consistent
with those duties specified pursuant to his contract of employment prior to a
Change in Control of the Company (other than any such failure resulting from
incapacity due to physical or mental illness) after a demand for substantial
performance is delivered to Participant by the Chairman of the Board or Chief
Executive Officer of the Company which specifically identifies the manner in
which such person believes that Participant has not substantially performed such
assigned duties, or (b) Participant's willful engagement in illegal conduct
which is materially and demonstrably injurious to the Company. For purposes of
this Section, no act, or failure to act on Participant's part shall be
considered "willful" unless done, or omitted to be done, in knowing bad faith
and without reasonable belief that the action or omission was in, or not opposed
to, the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, in good faith and in the best interests of the Company.
Notwithstanding the foregoing, Participant shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to Participant and an
opportunity for Participant, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board Participant was
guilty of the conduct set forth above in (a) or (b) of this Section and
specifying the particulars thereof in detail.
3.7 Diversification. After an Non-Consenting Eligible Stock Participant
reaches age 55, he shall have the right, subject to the provisions of this
Section 3.7, to elect to have up to 50% of the value of his Stock Benefits
determined as if such portion were thereafter invested in such investments, and
in such manner, as the Company's Pension and Investment Committee shall from
time to time authorize.
SECTION 4: General Provisions
4.1 Committee. This Supplemental Plan shall be administered by a
committee of two or more directors constituted to comply with the Non-Employee
Director requirements of Rule 16b-3 promulgated pursuant to the Securities
Exchange Act of 1934 as amended and Securities Exchange Commission
interpretations thereunder (the "Committee"), disregarding any changes in the
members of the Committee following a Change in Control of the Company. The
Company shall pay the cost of administration of the Supplemental Plan. The
Committee shall have the power, right and duty to interpret the provisions of
the Supplemental Plan and may from time to time adopt rules with respect to the
administration of the Supplemental Plan and the determination and distribution
of benefits under the Supplemental Plan, and may amend any and all rules
previously established. Any decision made by the Committee in good faith in
connection with its administration of or responsibilities under the Supplemental
Plan, including the interpretation of any provision of the Supplemental Plan,
the application of any rule established under the Supplemental Plan, any
determination as to the officers eligible to participate in the Supplemental
Plan, the amount allocated to each and the manner, conditions and terms of
payment of such amount, shall be conclusive on all persons.
4.2 Beneficiary. A Participant's "beneficiary" under this Supplemental
Plan means any person who becomes entitled to benefits under the Retirement Plan
because of the Participant's death; provided that, if a Participant dies while
his benefits under this Supplemental Plan are payable to him in installments,
his beneficiary under this Supplemental Plan shall be either (i) the person or
persons designated by him by signing and filing with the Committee a form
furnished by the Committee, or (ii) if the Participant failed to designate a
beneficiary in (i) above, or if the beneficiary designated in (i) above dies
before the date of the Participant's death, the Participant's estate.
4.3 Discretion. Notwithstanding any provisions in this Supplemental
Plan to the contrary, the Committee shall have the discretion to allow any
benefits to be paid that would otherwise be forfeited.
4.4 Employment Rights. Establishment of the Supplemental Plan shall not
be construed to give any Participant the right to be retained in the Company's
service or to any benefits not specifically provided by the Supplemental Plan.
4.5 Interests Not Transferable. Except as to withholding of any tax
under the laws of the United States or any state, the interests of the
Participants and their beneficiaries under the Supplemental Plan are not subject
to the claims of their creditors and may not be voluntarily or involuntarily
transferred, assigned, alienated or encumbered, provided, however, that the
Committee shall have discretion to waive this restriction, in whole or in part.
No Participant shall have any right to any benefit payments hereunder prior to
his termination of employment with the Company other than pursuant to Section
3.6.3.
4.6 Payment with Respect to Incapacitated Participants or
Beneficiaries. If any person entitled to benefits under the Supplemental Plan is
under a legal disability or in the Committee's opinion is incapacitated in any
way so as to be unable to manage his financial affairs, the Committee may direct
the payment of all or a portion of such benefits to such person's legal
representative or to a relative or friend of such person for such person's
benefit, or the Committee may direct the application of such benefits for the
benefit of such person in any manner which the Committee may elect that is
consistent with the Supplemental Plan. Any payments made in accordance with the
foregoing provisions of this section shall be a full and complete discharge of
any liability for such payments.
4.7 Limitation of Liability. To the extent permitted by law, no person
(including the Company, its Board of Directors, the Committee, any present or
former member of the Company's Board of Directors or the Committee, and any
present or former officer of the Company) shall be personally liable for any act
done or omitted to be done in good faith in the administration of the
Supplemental Plan.
4.8 Controlling Law. The laws of Wisconsin shall be controlling in
all matters relating to the Supplemental Plan.
4.9 Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine and neuter genders, the plural shall include
the singular and the singular shall include the plural.
4.10 Successor to the Company. The term "Company" as used in the
Supplemental Plan shall include any successor to the Company by reason of
merger, consolidation, the purchase of all or substantially all of the Company's
assets or otherwise.
4.11 Withholding for Taxes. Notwithstanding any other provision of this
Supplemental Plan, the Committee may on behalf of the Participant withhold or
direct the Trustee to withhold from any payment to be made under this
Supplemental Plan, whether in the form of cash or shares of stock, such amount
or amounts as may be required for purposes of complying with appropriate
federal, state or foreign tax withholding provisions. Subject to the discretion
of the Committee, no distribution will be made to the Participant until all tax
withholding obligations have been satisfied.
SECTION 5: Amendment and Termination
5.1 Amendment and Termination. The Committee reserves the right to
amend the Supplemental Plan from time to time or to terminate the Supplemental
Plan at any time, provided that no amendment of the Supplemental Plan nor the
termination of the Supplemental Plan may cause the reduction, forfeiture or
cessation of any benefits that were accrued as of the date of such amendment or
termination and which would otherwise be payable under this Supplemental Plan,
but for such amendment or termination.
Exhibit 10(f)
HARNISCHFEGER INDUSTRIES, INC.
DIRECTORS STOCK COMPENSATION PLAN
(as amended and restated August 24, 1998)
1. Purpose. The Harnischfeger Industries, Inc. Directors Stock
Compensation Plan (the "Plan") has been established effective as of March 2,
1992 by Harnischfeger Industries, Inc., a Delaware corporation (the "Company"),
to provide benefits to certain members of the Board of Directors of the Company
(the "Board") and has been amended effective as of February 10, 1997 to provide
stock based compensation to outside directors as a result of the termination of
the Service Compensation Plan for Directors. The Plan is intended to assist and
enable the Company to attract and retain directors of the highest capabilities
and to facilitate the director's ability to acquire an ownership interest in the
common stock of the Company.
2. Administration. The Plan shall be administered by a committee of two
or more directors constituted to comply with the Non-Employee Director
requirements of Rule 16b-3 promulgated pursuant to the Securities Exchange Act
of 1934 as amended and Securities Exchange Commission interpretations thereunder
(the "Committee"), which Committee from time to time may delegate the
performance of certain of its ministerial duties under the Plan, such as the
keeping of records and participants' accounts, to such person or persons as it
may select. The Plan shall be administered on the basis of a plan year (the
"Plan Year") which coincides with the fiscal year of the Company, which
currently is the 12-month period beginning on November 1 and ending on the next
following October 31. The Company shall pay the cost of Plan administration. The
Committee shall have the power, right and duty to interpret the provisions of
the Plan and may from time to time adopt rules with respect to the
administration of the Plan and the determination and distribution of benefits
under the Plan, and may amend any and all rules previously established. Any
decision made by the Committee in good faith in connection with its
administration of or responsibilities under the Plan, including the
interpretation of any provision of the Plan, the application of any rule
established under the Plan, the amount allocated to each for any Plan Year and
the manner, conditions and terms of payment of such amount, shall be conclusive
on all persons.
3. Participation. Each member of the Board who is not also an employee
of the Company (herein "Director") shall participate in the Plan.
4. Prior Benefits Under Directors Service Plan. Each Director who was a
Director on November 1, 1996 shall have the present value of his accrued
benefits under the Service Compensation Plan for Directors as of October 31,
1996 as set forth in Schedule "A" attached hereto ("Accrued Benefits") reflected
as shares of the Company's common stock ("Stock") in a bookkeeping account
maintained in the Director's name (the AAccount@) and the payment of which will
be deferred pursuant to the provisions of Section 7 hereof. All Accrued Benefits
will be fully vested for all Directors.
5. Performance Goals. The Committee shall set performance goals for the
Company for each Plan Year. These performance goals will be the same as
performance goals set for the Company under the Harnischfeger Industries, Inc.
Executive Incentive Plan.
6. Target Incentive Award; Incentive Compensation. The "Target
Incentive Award" shall be $25,000 or another amount set by the Committee prior
to the beginning of the applicable Plan Year. Subject to the immediately
following two sentences, the amount determined by multiplying the actual
performance of the Company for a Plan Year (expressed as a percentage of the
performance goal) by the Target Incentive Award for such Plan Year shall be the
"Incentive Compensation" for each Director for that Plan Year. A Director who
becomes a Director after November 1 of any Plan Year shall have his Incentive
Compensation for that Plan Year reduced by a fraction that reflects the portion
of the Plan Year he was not a Director. A Director who ceases being a Director
prior to October 31 of any Plan Year shall not receive Incentive Compensation
for that Plan Year.
7. Stock Crediting. The Accrued Benefits specified in Schedule "A" and
Incentive Compensation determined in accordance with Section 6 shall be
reflected as shares of Stock in the Participant's Account. The number of shares
to be reflected shall be determined by (a) dividing the average closing price of
the Stock on the New York Stock Exchange Composite Tape for the month of
October, 1996, into the Accrued Benefits and (b) by dividing the average closing
price of the Stock on the New York Stock Exchange Composite Tape for the month
of December immediately following end of the Plan Year into the amount of
Incentive Compensation. The Company shall transfer shares equal to the aggregate
amount reflected in all Director's Accounts hereunder to the Harnischfeger
Industries, Inc. Deferred Compensation Trust (ARabbi Trust"), subject to the
terms and conditions hereinafter set forth. The transferred shares shall be
registered by the Company in the name of the Rabbi Trust and delivered to the
Rabbi Trust for allocation to such Director's account, provided, however, that
the Company may direct the trustee of the Rabbi Trust (the "Trustee") to use for
this purpose shares of Stock previously delivered by the Company to the Rabbi
Trust to the extent assets held by the Rabbi Trust exceed the Company's
aggregate obligations under all plans associated with the Rabbi Trust. The
aforesaid calculation of Account credits and the transfer of Stock to the Rabbi
Trust shall take place as soon as practical after February 10, 1997 in the case
of Accrued Benefits and the January 1 immediately following the end of each Plan
Year in the case of Incentive Compensation.
8. Stock in Lieu of Fees. Each Director shall have the right to have up
to 100% of such Director's annual retainer and meeting fees (including fees for
committee meetings) (collectively, the "Compensation") payable during each Plan
Year reflected as shares of Stock subject to the following terms:
(a) Written notice shall be given by a Director to the Company
prior to May 1 of each Plan Year stating that such Director elects to
have his Compensation reflected as Stock, and, therefore, elects to
defer receipt of up to 100% of such Director's Compensation payable
during the next Plan Year. Directors who become Directors on or after
May 1 of any Plan Year may by written notice to the Company elect to
have their Compensation reflected as Stock under the Plan effective six
months after the date such notice is delivered to the Company.
(b) As soon as practicable after each date determined by the
Company for payment of Compensation to Directors, the number of shares
of Stock (rounded to the nearest whole share) derived by dividing the
closing price of the Stock on the New York Stock Exchange Composite
Tape on such payment date into the amount of Compensation each Director
has elected to have reflected as Stock shall be credited to the
Directors' Account. The Company shall transfer shares of Stock equal to
the aggregate amount credited to all Director's Accounts to the Rabbi
Trust.
(c) The annual retainer fee for Directors shall be $22,600.00,
the fee for each Board meeting attended shall be $1,250.00 and the fee
for each meeting of a committee or subcommittee of the Board attended
shall be $1,000.00 for regular members and $1,250.00 for committee and
subcommittee chairs, provided that, subject to Section 18 hereof, the
amount of such fees may be changed at the discretion of the Company
from time to time.
9. Source of Stock. The Stock transferred to the Rabbi Trust pursuant
hereto may at the Company's option be acquired through open market purchase, or
may be either treasury shares or newly issued shares; provided that any treasury
or newly issued shares are duly registered pursuant to applicable federal and
state securities laws and stock exchange regulations. The Company may, in lieu
of delivering shares to the Trustee, direct the Trustee to use for the purposes
of this Plan shares of Stock previously delivered by the Company to the Rabbi
Trust to the extent the value of assets held in the Rabbi Trust exceed the
Company's aggregate liability under all plans associated with the Rabbi Trust.
Although the Company intends to exert its best efforts so that the shares
transferred to the Rabbi Trust or distributed to Directors hereunder will be
registered under, or exempt from the registration requirements of, the
Securities Act of 1933 (the "Securities Act") and any applicable state
securities laws, if the allocation or distribution would otherwise result in the
violation by the Company of any provision of the Securities Act or of any state
securities law, the Company may require that such transfer or distribution be
deferred until the Company has taken appropriate action to avoid any such
violation.
10. Participants' Accounts. Each Director's Account shall reflect the
number of shares of Stock which represent his Accrued Benefits and Incentive
Compensation and the Compensation he has elected to have reflected as Stock, and
shall be credited to reflect all dividends, stock splits and other distributions
with respect to such shares. All cash distributions with respect to Stock
reflected in a Participant's Account shall be converted to shares of Stock for
crediting purposes. Each such Account shall be charged with any distribution
made to a Director when made.
11. Distribution of Stock. The Stock in a Director's Account shall be
distributed to him (or to his beneficiary in the event of his death) promptly
(but not sooner than fifteen (15) days) following the termination of his status
as a Director of the Company; provided, however, that a Director may upon
written notice to the Company given one year prior to his termination, request
that the Company approve an annual distribution of such Stock over a period of
time not to exceed ten (10) years (e.g. if a ten year election, one tenth of the
balance at the time of the first distribution, one ninth of the balance at the
time of the second distribution, etc.) and provided further that a Director may
upon written notice to the Company given at least one year prior to termination
of his status as a Director elect to delay until the next calendar year
following termination of his status as a Director either the distribution of or,
if the Director has elected annual distributions over a period of time, the
initial distribution of his benefits hereunder. During the first ten (10) days
following a Director's termination, the Director (or the Director's beneficiary
in the event of the Director's death) shall have the right to elect to have the
Director's Account distributed in cash, stock or a combination of cash and
stock. Upon receipt of a request that a part or all of the distribution be made
in cash, the Company shall direct the Trustee to credit such Director's account
with an amount (the "Cash Portion") equal to the product of the number of shares
of Stock then reflected in the Director's Account necessary to comply with the
request (the "Diversified Shares") and the closing price of the Stock on the New
York Stock Exchange Composite Tape as of the date the request is received by the
Company. Thereafter, the Trustee shall keep such Director's Account as if the
Cash Portion were invested in cash, cash equivalents, mutual funds or marketable
securities as directed by the Committee from time to time and as if the
Diversified Shares had been sold.
12. Change in Control. Notwithstanding the foregoing, promptly (but not
later than fifteen (15) days) following a "Change in Control" of the Company (as
defined in the Rabbi Trust), an amount of cash equal to (i) the number of shares
of Stock credited to each Director's Account (ii) multiplied by the Change in
Control Price as defined below shall be paid by the Company to each Participant
in lieu of any payment under Section 11. If the Company chooses not to make such
payment directly to a Participant or Participants, the Company shall within such
fifteen (15) day period purchase for cash, at the Change in Control Price, from
the Rabbi Trust a sufficient number of shares of Stock to provide the full cash
payment and the Trustee is directed to sell such shares upon such terms. As used
herein, "Change in Control Price" means the higher of (i) the highest reported
sales price, regular way, of a share of Stock in any transaction reported on the
New York Stock Exchange Composite Tape or other national securities exchange on
which such shares are listed or on NASDAQ, as applicable, during the sixty
(60)-day period prior to and including the date of a Change in Control and (ii)
if the Change in Control is the result of a tender or exchange offer or a
Business Combination (as defined in the Rabbi Trust), the highest price per
share of Stock paid in such tender or exchange offer or Business Combination. To
the extent that the consideration paid in any such transaction described above
consists all or in part of securities or other non-cash consideration, the value
of such securities or other non-cash consideration shall be determined by the
Incumbent Board (as defined in the Rabbi Trust).
13. Designation of Beneficiaries. Each Director from time to time may
name any person or persons (who may be named concurrently, contingently or
successively) to whom his benefits under the Plan are to be paid if he dies
before he receives the proceeds of his Plan account. Each such beneficiary
designation will revoke all prior designations by the Director, shall not
require the consent of any previously named beneficiary, shall be in a form
prescribed by the Company, and will be effective only when filed with the
Company during the Director's lifetime. If a Director fails to designate a
beneficiary before his death, as provided above, or if the beneficiary
designated by a Director dies before the date of the Director's death or before
complete payment of the Director's Plan account, the Company, in its discretion,
may pay such benefits to either (i) one or more of the Director's relatives by
blood, adoption or marriage and in such proportions as the Company determines,
or (ii) the legal representative or representatives of the estate of the last to
die of the Director and his designated beneficiary.
14. General. No Director or other person shall have any right, title or
interest in any amount awarded under this Plan prior to the payment thereof to
such person. No rights or interests of Directors under this Plan shall be
assignable either voluntarily or involuntarily. Neither the Company nor any
officer of the Company shall be personally liable for any act done or omitted to
be done in good faith in the administration of the Plan.
15. Facility of Payment. When a person entitled to benefits under the
Plan is under legal disability, or, in the Company's opinion, is in any way
incapacitated so as to be unable to manage his affairs, the Company may direct
the payment of benefits to such person's legal representative, or to a relative
or friend of such person for such person's benefit, or the Company may direct
the application of such benefits for the benefit of such person. Any payments
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such payment under the Plan.
16. Withholding for Taxes. Notwithstanding any other provision of the
Plan, the Company may on behalf of the Directors withhold or direct the Trustee
to withhold from any payment to be made under the Plan, whether in the form of
cash or stock, such amount or amounts as may be required for purposes of
complying with applicable federal, state or foreign tax withholding provisions.
Subject to the discretion of the Company, no distribution will be made to the
Director until all tax withholding obligations have been satisfied.
17. Benefit Statements. The Company shall provide statements of account
to participating Directors on a periodic basis but not less than annually in
such form and at such time as it deems appropriate.
18. Amendment and Termination. The Committee may amend this Plan from
time to time or terminate this Plan at any time, except that no such amendment
or any termination of this Plan shall change the terms and conditions of payment
of any Accrued Benefits, Incentive Compensation or Compensation previously
payable to a Director without the consent of the Director concerned, nor shall
any termination of the Plan eliminate any obligations of the Company which
theretofore shall have arisen under the Plan.
19. Controlling Law. The laws of Wisconsin shall be controlling in all
matters relating to the Plan.
20. Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine and neuter genders, the plural shall include
the singular and the singular shall include the plural.
Exhibit 10(m)
September 12, 1998
AMENDED AND RESTATED GRANT LETTER
This restatement of the Grant Letter issued on June 8, 1997, among other things,
provides for the distribution (with restrictions) during 1998 of Stock credited
to your account. An earlier amendment and restatement dated October 29, 1997,
clarified the distribution provisions of paragraph 1. The Company acknowledges
that the Grant Date applicable to this Grant Letter is July 8, 1997, the date
the notification and stock certificate referenced in the Grant Letter were
received by the Company.
Mr. Jeffery T. Grade
c/o Harnischfeger Industries, Inc.
3600 S. Lake Drive
St. Francis, WI 53235
This Grant Letter is issued to Jeffery T. Grade ("you"). Effective on the date
(the "Grant Date") you notify Harnischfeger Industries, Inc. ("Company") that
you elect to nullify the grant of restricted Company stock made to you on April
8, 1996 and that you surrender to the Company all shares of restricted Company
stock made to you on April 8, 1996, Company grants to you the Benefit defined
below, provided, however, that all rights under this Grant Letter cease unless
such election and delivery occur prior to the date you attain the age of
fifty-four years. This grant is subject to the conditions and restrictions set
forth below, and none other, and you are entitled to the rights and benefits set
forth below, and none other.
1. (a) As used in this grant letter, the term "Benefit" means the contractual
right to receive a distribution on the Payment Date (as defined below) of a
number of shares of common stock of the Company ("Common Stock") equal to the
number of shares of Common Stock which would be in an account if (i) 178,229
shares of Common Stock were placed in such account on the Grant Date and (ii)
such account were credited with additional shares of Common Stock on each date
between the Grant Date and the Payment Date that the Company makes a cash
distribution on Common Stock where the number of shares of Common Stock so
credited is equal to the cash distribution payable on the number of shares of
Common Stock credited to such account as of the record date for such cash
distribution divided by 75% of the closing price of the Common Stock on the New
York Stock Exchange Composite Tape on the payment date of such cash
distribution.
(b) The Company shall maintain a bookkeeping account in your name which will
indicate the number of shares of Common Stock on which your Benefit will be
measured. Promptly following the Grant Date and from time to time thereafter the
Company shall deliver into the Harnischfeger Industries, Inc. Deferred
Compensation Trust ("Rabbi Trust"), subject to the terms and conditions
hereinafter set forth, shares of Common Stock equal to the number of shares
indicated in the bookkeeping account which represents your Benefit. Following
the Payment Date, your bookkeeping account shall be credited to reflect all
dividends, stock splits and other distributions with respect to shares of Common
Stock reflected by such account in the manner and at the rate described in
paragraph 1(a)(ii) above. Your bookkeeping account shall be charged with any
payment made to you when made.
(c) A number of shares of Common Stock equal to the number of shares indicated
by your bookkeeping account shall be distributed to you (or your beneficiary in
the event of your death) promptly (but not sooner than fifteen (15) days)
following the Payment Date, provided, however, that you may, upon written notice
to the Company given one year prior to the Payment Date, request that the
Company approve an annual distribution of the amount of shares indicated by your
bookkeeping account over a period of time not to exceed ten (10) years (e.g. if
a ten-year election, shares representing one-tenth of the balance of your
bookkeeping account at the time of the first distribution, shares representing
one-ninth of the balance of your bookkeeping account at the time of the second
distribution, etc.) and provided further that you may upon written notice to the
Company given at least one year prior to the Payment Date elect to delay until
the next calendar year following the Payment Date either the distribution of or,
if you have elected annual distributions over a period of time, the initial
distribution of shares representing your bookkeeping account.
(d) During the first ten (10) days following the Payment Date, you (or your
beneficiary in the event of your death) shall have the right to elect to receive
payment in cash, Common Stock or a combination of cash and Common Stock. Upon
receipt of a written request from you that a part or all of the distribution be
made in cash, the Company shall credit your bookkeeping account with an amount
(the "Cash Portion") equal to the product of the number of shares of Common
Stock necessary to comply with the request (the "Diversified Shares") and the
closing price of the Common Stock on the New York Stock Exchange Composite Tape
on the Payment Date (or, if the New York Stock Exchange is not open on the
Payment Date, the date next preceding the Payment Date that the New York Stock
Exchange is open). Thereafter, your bookkeeping account shall be kept as if the
Cash Portion were invested in cash, cash equivalents, mutual funds or marketable
securities and as if the Diversified Shares had been sold.
2. The Benefit shall become payable on the date (the "Payment Date") the
earliest of any of the following events occurs: (a) The date on which you retire
from the Company, provided such retirement is not prior to the date you attain
the age of fifty-five years; (b) The occurrence of a Change in Control or
Potential Change in Control (as such terms are respectively defined in the
Company's Deferred Compensation Trust and your prior Executive Employment and
Severance Agreement); (c) Termination of your employment without Cause (as
defined in paragraph 4) or deliberate action by the Company to adversely affect
your employment; (d) Any attempt (other than by you) to challenge or nullify
this grant except as permitted by paragraphs 3(a) and (b) hereof; or (e) Your
death or disability.
3. The Benefit shall not become payable and shall be forfeited if any of the
following events occurs: (a) You unilaterally terminate employment with the
Company prior to the occurrence of any event set forth in paragraphs 2(a)-(e)
hereof; or (b) The Company terminates you as an employee and officer of the
Company for "Cause" (as defined in paragraph 4) prior to the occurrence of any
event set forth in paragraphs 2(a)-(e) hereof.
4. As used in paragraph 3(b) of this grant letter, the term "Cause" shall mean
(a) Your willful and continued failure to substantially perform the reasonably
assigned duties with the Company which are consistent with your current position
and job responsibilities, other than any such failure resulting from incapacity
due to physical or mental illness, after a written demand for substantial
performance is delivered to you by the Board of Directors of the Company which
specifically identifies the manner in which you have not substantially performed
the assigned duties, or (b) Your willful engagement in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph, no act, or failure to act, on your part shall be considered "willful"
unless done, or omitted to be done, in knowing bad faith and without reasonable
belief that the action or omission was in, or not opposed to, the best interests
of the Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board of Directors or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, in good faith and in the best interests of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution, duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board of Directors at a meeting of the Board
called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board of Directors, you were
guilty of the conduct set forth above in paragraph 3(b) and specifying the
particulars thereof in detail.
5. In the event (a) the number of shares of Common Stock is increased or
decreased at any time prior to the Benefit becoming fully vested and
non-forfeitable, by stock split, by declaration by the Board of Directors of a
dividend payable only in shares of such stock, or by any other extraordinary
distribution of shares or (b) any merger, consolidation, or reorganization, or
other change in corporate structure materially changes the terms or value of the
Common Stock, the amount and/or terms of your Benefit shall be adjusted in such
manner as to fully protect your rights and the relative value of the Benefit.
6. Any notice to be given by you to the Company pursuant hereto shall be
addressed to the Company in care of the Secretary at the Company's principal
place of business or shall be delivered to the Company. Such notice shall be
deemed to be delivered to the Company when deposited in the mail or physically
delivered to the Company. Any notice to be given to you shall be addressed to
you at the address shown below, or at such other address as you may direct in
writing. Any such notice shall be deemed to be delivered to you when you
actually receive such notice.
7. Notwithstanding anything in this Amended and Restated Grant Letter to the
contrary, if you sign this Amended and Restated Grant Letter and deliver the
signed Amended and Restated Grant Letter to the Company's Secretary before
September 30, 1998, shares of Stock equal to the number of the shares indicated
by your bookkeeping account, less the number of shares the Company determines
are required for purposes of complying with tax withholding provisions, shall be
distributed to you (or your beneficiary in the event of your death) on a date
between September 30, 1998, and December 30, 1998, as determined by the
Management Policy Committee of the Company. Shares to be distributed to you
pursuant to the immediately preceding sentence are referred to herein as
ADistributed Shares@. You agree that Distributed Shares shall be subject to the
restriction that you shall not have the right to sell, transfer, pledge, or
otherwise dispose of Distributed Shares prior to a Payment Date. Upon
distribution to you of the Distributed Shares, you shall be entitle to no
further rights or benefits under this Amended and Restated Grant Letter. If you
do not sign and deliver this Amended and Restated Grant Letter to the Company's
Secretary before September 30, 1998, you will not receive the Distributed Shares
and you shall be entitled to the rights and benefits of this Amended and
Restated Grant Letter without reference to the provisions of the preceding
sentences of this Paragraph 7. This Amended and Restated Grant Letter supersedes
the Grant Letter dated June 7, 1997 and the Amended and Restated Grant Letter
dated October 29, 1997. The Grant Letter was effective June 8, 1997, the date it
was signed by you and on behalf of the Company. This Amended and Restated Grant
Letter shall be effective when signed by you and by the representative of the
Company identified below.
Harnischfeger Industries, Inc.
Name: Jeffery T. Grade By:
Executive Vice President
Address:
Date:
Date received by the Company's Secretary: _________
Exhibit 10(n)
September 12, 1998
AMENDED AND RESTATED GRANT LETTER
This restatement of the Grant Letter issued on June 8, 1997, among other things,
provides for the distribution (with restrictions) during 1998 of Stock credited
to your account. An earlier amendment and restatement dated October 29, 1997,
clarified the distribution provisions of paragraph 1. The Company acknowledges
that the Grant Date applicable to this Grant Letter is July 8, 1997, the date
the notification and stock certificate referenced in the Grant Letter were
received by the Company.
Mr. Francis M. Corby, Jr.
c/o Harnischfeger Industries, Inc.
3600 S. Lake Drive
St. Francis, WI 53235
This Grant Letter is issued to Francis M. Corby, Jr. ("you"). Effective on the
date (the "Grant Date") you notify Harnischfeger Industries, Inc. ("Company")
that you elect to nullify the grant of restricted Company stock made to you on
April 8, 1996 and that you surrender to the Company all shares of restricted
Company stock made to you on April 8, 1996, Company grants to you the Benefit
defined below, provided, however, that all rights under this Grant Letter cease
unless such election and delivery occur prior to the date you attain the age of
fifty-four years. This grant is subject to the conditions and restrictions set
forth below, and none other, and you are entitled to the rights and benefits set
forth below, and none other.
1. (a) As used in this grant letter, the term "Benefit" means the contractual
right to receive a distribution on the Payment Date (as defined below) of a
number of shares of common stock of the Company ("Common Stock") equal to the
number of shares of Common Stock which would be in an account if (i) 95,571
shares of Common Stock were placed in such account on the Grant Date and (ii)
such account were credited with additional shares of Common Stock on each date
between the Grant Date and the Payment Date that the Company makes a cash
distribution on Common Stock where the number of shares of Common Stock so
credited is equal to the cash distribution payable on the number of shares of
Common Stock credited to such account as of the record date for such cash
distribution divided by 75% of the closing price of the Common Stock on the New
York Stock Exchange Composite Tape on the payment date of such cash
distribution.
(b) The Company shall maintain a bookkeeping account in your name which will
indicate the number of shares of Common Stock on which your Benefit will be
measured. Promptly following the Grant Date and from time to time thereafter the
Company shall deliver into the Harnischfeger Industries, Inc. Deferred
Compensation Trust ("Rabbi Trust"), subject to the terms and conditions
hereinafter set forth, shares of Common Stock equal to the number of shares
indicated in the bookkeeping account which represents your Benefit. Following
the Payment Date, your bookkeeping account shall be credited to reflect all
dividends, stock splits and other distributions with respect to shares of Common
Stock reflected by such account in the manner and at the rate described in
paragraph 1(a)(ii) above. Your bookkeeping account shall be charged with any
payment made to you when made.
(c) A number of shares of Common Stock equal to the number of shares indicated
by your bookkeeping account shall be distributed to you (or your beneficiary in
the event of your death) promptly (but not sooner than fifteen (15) days)
following the Payment Date, provided, however, that you may, upon written notice
to the Company given one year prior to the Payment Date, request that the
Company approve an annual distribution of the amount of shares indicated by your
bookkeeping account over a period of time not to exceed ten (10) years (e.g. if
a ten-year election, shares representing one-tenth of the balance of your
bookkeeping account at the time of the first distribution, shares representing
one-ninth of the balance of your bookkeeping account at the time of the second
distribution, etc.) and provided further that you may upon written notice to the
Company given at least one year prior to the Payment Date elect to delay until
the next calendar year following the Payment Date either the distribution of or,
if you have elected annual distributions over a period of time, the initial
distribution of shares representing your bookkeeping account.
(d) During the first ten (10) days following the Payment Date, you (or your
beneficiary in the event of your death) shall have the right to elect to receive
payment in cash, Common Stock or a combination of cash and Common Stock. Upon
receipt of a written request from you that a part or all of the distribution be
made in cash, the Company shall credit your bookkeeping account with an amount
(the "Cash Portion") equal to the product of the number of shares of Common
Stock necessary to comply with the request (the "Diversified Shares") and the
closing price of the Common Stock on the New York Stock Exchange Composite Tape
on the Payment Date (or, if the New York Stock Exchange is not open on the
Payment Date, the date next preceding the Payment Date that the New York Stock
Exchange is open). Thereafter, your bookkeeping account shall be kept as if the
Cash Portion were invested in cash, cash equivalents, mutual funds or marketable
securities and as if the Diversified Shares had been sold.
2. The Benefit shall become payable on the date (the "Payment Date") the
earliest of any of the following events occurs: (a) The date on which you retire
from the Company, provided such retirement is not prior to the date you attain
the age of fifty-five years; (b) The occurrence of a Change in Control or
Potential Change in Control (as such terms are respectively defined in the
Company's Deferred Compensation Trust and your prior Executive Employment and
Severance Agreement); (c) Termination of your employment without Cause (as
defined in paragraph 4) or deliberate action by the Company to adversely affect
your employment; (d) Any attempt (other than by you) to challenge or nullify
this grant except as permitted by paragraphs 3(a) and (b) hereof; or (e) Your
death or disability.
3. The Benefit shall not become payable and shall be forfeited if any of the
following events occurs: (a) You unilaterally terminate employment with the
Company prior to the occurrence of any event set forth in paragraphs 2(a)-(e)
hereof; or (b) The Company terminates you as an employee and officer of the
Company for "Cause" (as defined in paragraph 4) prior to the occurrence of any
event set forth in paragraphs 2(a)-(e) hereof.
4. As used in paragraph 3(b) of this grant letter, the term "Cause" shall mean
(a) Your willful and continued failure to substantially perform the reasonably
assigned duties with the Company which are consistent with your current position
and job responsibilities, other than any such failure resulting from incapacity
due to physical or mental illness, after a written demand for substantial
performance is delivered to you by the Board of Directors of the Company which
specifically identifies the manner in which you have not substantially performed
the assigned duties, or (b) Your willful engagement in illegal conduct which is
materially and demonstrably injurious to the Company. For purposes of this
paragraph, no act, or failure to act, on your part shall be considered "willful"
unless done, or omitted to be done, in knowing bad faith and without reasonable
belief that the action or omission was in, or not opposed to, the best interests
of the Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board of Directors or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, in good faith and in the best interests of the Company.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution, duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board of Directors at a meeting of the Board
called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board of Directors, you were
guilty of the conduct set forth above in paragraph 3(b) and specifying the
particulars thereof in detail.
5. In the event (a) the number of shares of Common Stock is increased or
decreased at any time prior to the Benefit becoming fully vested and
non-forfeitable, by stock split, by declaration by the Board of Directors of a
dividend payable only in shares of such stock, or by any other extraordinary
distribution of shares or (b) any merger, consolidation, or reorganization, or
other change in corporate structure materially changes the terms or value of the
Common Stock, the amount and/or terms of your Benefit shall be adjusted in such
manner as to fully protect your rights and the relative value of the Benefit.
6. Any notice to be given by you to the Company pursuant hereto shall be
addressed to the Company in care of the Secretary at the Company's principal
place of business or shall be delivered to the Company. Such notice shall be
deemed to be delivered to the Company when deposited in the mail or physically
delivered to the Company. Any notice to be given to you shall be addressed to
you at the address shown below, or at such other address as you may direct in
writing. Any such notice shall be deemed to be delivered to you when you
actually receive such notice.
7. Notwithstanding anything in this Amended and Restated Grant Letter to the
contrary, if you sign this Amended and Restated Grant Letter and deliver the
signed Amended and Restated Grant Letter to the Company's Secretary before
September 30, 1998, shares of Stock equal to the number of the shares indicated
by your bookkeeping account, less the number of shares the Company determines
are required for purposes of complying with tax withholding provisions, shall be
distributed to you (or your beneficiary in the event of your death) on a date
between September 30, 1998, and December 30, 1998, as determined by the
Management Policy Committee of the Company. Shares to be distributed to you
pursuant to the immediately preceding sentence are referred to herein as
ADistributed Shares@. You agree that Distributed Shares shall be subject to the
restriction that you shall not have the right to sell, transfer, pledge, or
otherwise dispose of Distributed Shares prior to a Payment Date. Upon
distribution to you of the Distributed Shares, you shall be entitle to no
further rights or benefits under this Amended and Restated Grant Letter. If you
do not sign and deliver this Amended and Restated Grant Letter to the Company's
Secretary before September 30, 1998, you will not receive the Distributed Shares
and you shall be entitled to the rights and benefits of this Amended and
Restated Grant Letter without reference to the provisions of the preceding
sentences of this Paragraph 7. This Amended and Restated Grant Letter supersedes
the Grant Letter dated June 7, 1997 and the Amended and Restated Grant Letter
dated October 29, 1997. The Grant Letter was effective June 8, 1997, the date it
was signed by you and on behalf of the Company. This Amended and Restated Grant
Letter shall be effective when signed by you and by the representative of the
Company identified below.
Harnischfeger Industries, Inc.
Name: Francis M. Corby, Jr. By:
Executive Vice President
Address:
Date:
Date received by the Company's Secretary: _______
EXHIBIT 11
HARNISCHFEGER INDUSTRIES, INC.
Statement Re: Computation of Earnings Per Share
(Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
1998 1997 1996
-----------------------------------------------------
<S> <C> <C> <C>
Determination of Number of Shares
- --------------------------------------------------
Average shares outstanding 46,444,717 47,826,813 47,196,388
=====================================================
Net Income (Loss)
- --------------------------------------------------
Income (Loss) from Continuing Operations....... $ (174,409) $113,217 $ 92,902
Income from and Net Gain on Sale of Discontinued
Operation, net of applicable income taxes........ 155,876 25,063 21,315
Extraordinary Loss on Retirement of Debt, net of
applicable income taxes................ - (12,999) -
=====================================================
Net Income (Loss).................. $(18,533) $125,281 $114,217
=====================================================
Earnings (Loss) Per Share - Basic
- --------------------------------------------------
Income (loss) from continuing operations............. $ (3.75) $ 2.37 $ 1.97
Income from and net gain on sale of
discontinued operation.............................. 3.35 0.52 0.45
Extraordinary loss on retirement of debt............. - (0.27) -
=====================================================
Net income (loss) per share.......................... $ (0.40) $ 2.62 $ 2.42
=====================================================
Earnings (Loss) Per Share - Diluted
- --------------------------------------------------
Income (loss) from continuing operations............. $ (3.75) $ 2.35 $ 1.95
Income from and net gain on sale of
discontinued operation.............................. 3.35 0.51 0.45
Extraordinary loss on retirement of debt............. - (0.27) -
=====================================================
Net income (loss) per share.......................... $ (0.40) $ 2.59 $ 2.40
=====================================================
</TABLE>
EXHIBIT 13
Management's Discussion & Analysis of Financial Statements
Overview
1998 represented a challenging financial year. The Company reported a loss from
continuing operations of $(174.4) million, or $(3.75) per basic share, on
consolidated net sales of $2,042.1 million. Included in the loss from continuing
operations was a $127.4 million charge for anticipated losses associated with
certain Beloit Corporation ("Beloit") contracts in Indonesia, a $37.0 million
charge for settlement of a contract dispute at Beloit, and a $65.0 million
restructuring charge for Beloit. See Notes to Consolidated Financial Statements
(Note 18 - "Beloit APP Contracts.) This compares with income from continuing
operations of $113.2 million, or $2.37 per basic share, in 1997 on sales of
$2,735.2 million. Net loss for 1998 was $(18.5) million, or $(0.40) per basic
share, including $155.9 million of net income and net gain on sale of
discontinued operation or $3.35 per basic share. See "Acquisitions and
Discontinued Operations" for further discussion. In addition, bookings of
$1,997.0 million were below 1997 bookings of $2,762.2 million.
The Pulp and Paper Machinery segment reported net sales of $829.8 million,
down 35% from 1997 levels, reflecting the economic collapse across the Pacific
Rim and the very depressed and cyclical pulp and paper industry. Operating
income decreased from $104.1 million in 1997 to $(139.3) million in 1998,
excluding the restructuring charge and anticipated losses on contracts,
primarily due to decreased sales and lower margins. These changes are more fully
described in the Operating Results by Business Segment section which follows.
The Mining Equipment segment, which includes P&H Mining Equipment and Joy
Mining Machinery ("Joy"), also reported reduced results with net sales of
$1,212.3 million, down 17% from 1997 and operating income of $82.0 million, down
59% from 1997. The decreases are due to a decline in original equipment sales
and the negative impact of a strike of the United Steelworkers Local 1114 at P&H
Mining Equipment. These changes are more fully described in the Operating
Results by Business Segment section which follows.
In the fiscal fourth quarter of 1998, as a result of the ongoing market
weaknesses affecting each of its businesses, the Company announced its intention
to reduce expenses through cost-reduction initiatives encompassing $110 million
in projected annual savings and includes the reduction of 3,100 employees from
October 31, 1997 levels. As of October 31, 1998, approximately 80% of the
planned headcount and cost reductions have taken place with the remainder
expected to be completed by the end of the first quarter of fiscal 1999.
The strategy of focusing on the five characteristics required of a core
business -- a global marketplace, leadership positions in the industries served,
strong aftermarket sales potential, technological superiority and the ability to
earn positive Economic Value Added ("EVA") -- continued to steer the actions of
the Company in fiscal 1998. The Company continues to use EVA for purposes of
management incentive compensation. EVA, which measures operating results after
taxes in excess of the after-tax cost of capital, has helped to minimize capital
employed.
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", "project", 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. See Cautionary Factors.
Acquisitions and Discontinued Operations
On March 30, 1998, the Company completed the sale of approximately 80% of the
common stock of the Company's P&H Material Handling ("Material Handling")
segment to Chartwell Investments, Inc. in a leveraged recapitalization
transaction. As such, the accompanying financial statements have been
reclassified to reflect Material Handling as a discontinued operation. The
Company retained approximately 20% of the outstanding common stock and 11% of
the outstanding voting securities of Material Handling and holds one board of
director seat in the new company. In addition, the Company has licensed Material
Handling to use the "P&H" trademark on existing Material Handling-produced
products on a worldwide basis for periods specified in the agreement for a
royalty fee payable over a ten year period. The Company reported a $151.5
million after-tax gain on the sale of this discontinued operation in the second
quarter of fiscal 1998. Proceeds consisted of $341.0 million in cash and $4.8
million in preferred stock with a 12.25% Payment-in-Kind ("PIK") dividend; $7.2
million in common stock was not reflected in the Company's balance sheet or gain
calculations due to the nature of the leveraged recapitalization transaction.
Taxes on the sale amounted to $45.0 million. Net assets disposed of in the sale
aggregated $139.3 million.
Each of the Company's business segments made strategic acquisitions in
fiscal 1997. The acquisitions enhanced the businesses' positions in each of
their markets. All acquisitions were accounted for as purchase transactions with
resultant goodwill being amortized over a 40-year period. In addition, the
Company divested of a few smaller business divisions to enable the segments to
focus on core competencies.
In early fiscal 1996, the Company completed the acquisition of Dobson Park
("Dobson") for a purchase price of approximately $330 million, including
acquisition costs, plus the assumption of net debt of approximately $40 million.
The Company has substantially integrated Longwall's (the main subsidiary of
Dobson) operations into Joy, thus enabling Joy to offer integrated underground
longwall mining systems to the worldwide mining industry. As a result of this
integration, the Company 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 $71.0 million.
As a part of the Dobson acquisition, several non-mining businesses were
designated as businesses held for sale. At October 31, 1998, all of the
businesses had been sold for slightly more than $100 million, the original value
established for these businesses.
On March 27, 1996, Beloit purchased the assets of the Pulp Machinery
Division of Ingersoll-Rand Company ("IMPCO") for $119.2 million, including
acquisition costs. The acquisition was accounted for as a purchase transaction
with the purchase price allocated to specific assets acquired and liabilities
assumed. Resultant goodwill is being amortized over 40 years. With this
acquisition, Beloit now offers a full line of pulping machinery and systems.
In addition, during fiscal years 1996 through 1998, the Company made
several smaller acquisitions in each of its business segments. All acquisitions
were accounted for as purchase transactions. Resultant goodwill is being
amortized over a 40-year period.
Results of Operations -- Consolidated
Sales: Worldwide sales in fiscal 1998 amounted to $2,042.1 million representing
a decrease of 25% below 1997 sales of $2,735.2 million. The Pulp and Paper
Machinery segment reported a decrease in sales of 35% from 1997 and the Mining
Equipment segment sales decreased 17% from 1997 which are more fully described
in the Operating Results by Business Segment section.
Sales for fiscal 1997 of $2,735.2 million were 8% greater than 1996 sales
of $2,540.7 million, led by an increase in the Pulp and Paper Machinery segment
of 12%. Sales for the Mining Equipment segment rose 4%.
Cost and Expenses: Cost of sales decreased 12% to $1,849.5 million in 1998 from
$2,107.9 million in 1997. Decreases in sales volume, a $127.4 million charge for
anticipated losses associated with certain Beloit contracts in Indonesia and a
$37.0 million charge for settlement of a contract dispute at Beloit were the
primary reasons for the decrease in gross margin. Product development, selling
and administrative expenses as a percent of sales were 21.9% in 1998 and 14.7%
in 1997. The increase as a percentage of sales was caused by the significant
decrease in sales levels, the increase in infrastructure spending to build the
aftermarket model in each of the businesses and the spending necessary to
implement the cost-reduction initiatives.
Cost of sales for 1997 increased 10% to $2,107.9 million from $1,919.4
million in 1996. This increase is consistent with the 8% increase in sales for
the same period. Product development, selling and administrative expenses as a
percent of sales decreased to 14.7% from 15.3% in 1996.
Operating Results from Continuing Operations:
The Company reported a loss from continuing operations of
$(174.4) million in 1998 ($3.75 per basic share) after a $127.4 million charge
for anticipated losses associated with certain Beloit contracts in Indonesia, a
$37.0 million charge for settlement of a contract dispute, and a $65.0 million
restructuring charge for Beloit compared to income from continuing operations of
$113.2 million in 1997 ($2.37 per basic share) and $92.9 million ($1.97 per
basic share) in 1996. Other reasons for the 1998 decrease include lower sales
and margins, as more fully described in the Operating Results by Business
Segment Section which follows.
1998 Restructuring Actions
In the second quarter of fiscal 1998, Beloit recorded a
$65.0 million restructuring charge ($31.9 million after tax and minority
interest). The charge includes costs related to severance for approximately
1,000 people worldwide, facility closures, and disposal of machinery and
equipment. Closure of a pulping-related manufacturing facility in Sherbrooke,
Quebec, Canada has been completed, and closure of a similar facility in Dalton,
Massachusetts will be complete in the first quarter of fiscal 1999. The
paper-related manufacturing facility in the United Kingdom is being converted to
a center of excellence responsible for rolls, while the Italian operation is
expected to be converted from a full-line manufacturing operation to a
Millpro(SM) aftermarket center for central and southern Europe. The cash and
noncash elements of the restructuring charge approximated $32.5 million and
$32.5 million, respectively. Management anticipates that the reserves will be
substantially utilized within the next year. As of October 31, 1998,
approximately 670 employees have been terminated in accordance with this plan.
Details regarding specific restructuring actions are as follows:
Original Reserve 10/31/98
In Thousands Reserve Utilized Reserve
- --------------------------------------------------------------------------------
Employee severance $25,800 $(10,486) $15,314
Facility closures 33,300 (12,477) 20,823
Machinery and equipment dispositions 5,900 (2,512) 3,388
- --------------------------------------------------------------------------------
Pre-tax charge $65,000 $(25,475) $39,525
================================================================================
In the fourth quarter of fiscal 1996, Beloit recorded a restructuring charge of
$43.0 million ($21.8 million after tax and minority interest.) The focus of the
restructuring was to improve financial returns and increase customer
satisfaction while significantly reducing costs and cycle times. At October 31,
1998, all activity related to this restructuring was substantially completed.
Additional details are discussed in the "Operating Results by Business
Segment" section which follows and in the Notes to Consolidated Financial
Statements (Note 3 -- Restructuring Charge.)
Income Taxes
The Company's effective tax rate from continuing operations was a benefit of
41.2% in 1998 and a charge of 34.0% in 1997 and 35.0% in 1996. The effective tax
rate in 1998 differed from the federal statutory rate of 35.0% due primarily to
the resolution of various tax audits and to a $17.6 million one-time tax benefit
in the fourth quarter.
A more detailed discussion of income taxes can be found in the Notes to
Consolidated Financial Statements (Note 6 -- Income Taxes.)
Adoption of New Accounting Standards
In 1993, the Board of Directors of the Company approved a
general approach that would culminate in the elimination of all Company
contributions toward postretirement health care benefits. Increases in costs
paid by the Company were capped for certain plans beginning in 1994 extending
through 1998 and Company contributions will be eliminated on January 1, 1999 for
most employee groups, excluding Joy. For Joy, based upon existing plan terms,
future eligible retirees will participate in a premium cost-sharing arrangement
which is based on 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 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 have been fully amortized. Postretirement benefit expense recognized for
1998, 1997 and 1996 was reduced by $11.9 million, $12.8 million and $10.8
million, respectively, for amortization of negative plan amendments.
In the first quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 128, "Earnings per Share." This
statement establishes revised standards for computing and presenting earnings
per share. All prior periods were restated. See Notes to Consolidated Financial
Statements (Note 17 -- Earnings Per Share.)
In June, 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income". The standard requires that
certain items recognized under accounting principles as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company will adopt the
standard in fiscal 1999.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
An Enterprise and Related Information". This standard establishes new
requirements for the reporting of segment information by public entities. All
prior periods will be required to be restated. The Company will adopt this
standard in fiscal 1999.
In February, 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". This standard's objective is
to improve pension and other postretirement benefits disclosure. The Company
will adopt the standard in fiscal 1999.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This standard addresses the accounting for
derivative instruments including certain derivative instruments embedded in
other contracts and hedging activities. The Company will adopt this standard in
fiscal 2000.
It is not expected that SFAS No. 130, 131, 132, or 133 will result in
significant changes to the Company's disclosures or financial results.
Bookings and Backlog
Backlog at October 31, 1998, 1997 and 1996 by business segment was as follows:
In Thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Mining Equipment $386,006 $358,340 $453,480
Pulp and Paper Machinery 637,224 776,618 846,137
- --------------------------------------------------------------------------------
$1,023,230 $1,134,958 $1,299,617
================================================================================
Bookings were $1,997.0 million in 1998, $2,762.2 million in 1997 and $2,675.9
million in 1996. A discussion of changes in bookings by segment is presented in
the "Operating Results by Business Segment" section which follows.
The 1998 backlog for Pulp and Paper Machinery was reduced by $2.7 million
due to a divestiture and $64.0 million due to the cancellation of two orders.
Mining Equipment backlog was reduced by $18.0 million in fiscal 1997 due to
divestitures. The 1997 backlog for Pulp and Paper Machinery was reduced by
$170.0 million due to change of scope and indefinite deferments on certain
contracts booked in prior years and $3.8 million due to divestitures.
Liquidity and Capital Resources
The Company's capital structure at October 31, 1998 and 1997 was as follows:
In Thousands 1998 1997
- --------------------------------------------------------------------------------
Short-term notes payable $117,607 $214,126
Long-term obligations, including current portion 1,001,573 725,193
- --------------------------------------------------------------------------------
1,119,180 939,319
Minority interest 43,838 97,724
Shareholders' equity 666,850 749,660
- --------------------------------------------------------------------------------
Total capitalization $1,829,868 $1,786,703
- --------------------------------------------------------------------------------
Debt to capitalization ratio 61.2% 52.6%
================================================================================
Cash flow used by operating activities was $429.1 million in 1998 compared to
cash flow used by operating activities of $92.6 million in 1997 and cash
provided by operating activities of $63.6 million in 1996. The decrease in cash
flow between 1998 and 1997 resulted primarily from the decrease in operating
income and trade accounts payable partially offset by a decrease in accounts
receivable.
Net working capital of $436.9 million at October 31, 1998 increased $28.7
million from the October 31, 1997 level of $408.2 million. The change was
primarily due to a decrease in trade accounts payable and short-term notes
payable, offset by a decrease in accounts receivable.
Net working capital increased $75.1 million in 1997 from $333.1 million in
1996, due to increases in accounts receivable and inventories and a decrease in
other current liabilities, offset by an increase in accounts payable.
Cash provided by investing activities in 1998 was $289.8 million, primarily
resulting from proceeds from the sale of businesses offset by additional
investments in property, plant and equipment. Cash used by investing activities
in 1997 was $84.4 million, primarily caused by net capital expenditures for
property, plant and equipment in 1997 of $95.1 million compared with $59.7
million in 1996. Depreciation and amortization was $86.8 million and $87.5
million in 1998 and 1997, respectively.
The $142.8 million of cash provided by financing activities in 1998 was
primarily due to lower redemption of long-term obligations. Redemptions in 1998
totaled $11.8 million as compared with 1997 redemptions of $198.1 million. In
1997, cash provided by financing activities of $172.2 million was primarily due
to the issuance of $150.0 million, 6 7/8% debentures on February 25, 1997 and
increases in borrowings against the Revolving Credit Facility, offset by the
repurchase of the 10 1/4% Senior Notes and a buyback of common stock. Cash
provided by financing activities in 1996 of $139.5 million was primarily from
the issuance of debt related to the Dobson acquisition offset by a decrease in
short-term notes payable.
The Company completed the acquisition of Dobson in early fiscal 1996 for a
purchase price of approximately $330.0 million, including acquisition costs. The
transaction was funded via a short-term bridge financing facility arranged
specifically for this acquisition, issuance of commercial paper, other
short-term facilities and available cash. The short-term facilities were
replaced with $150.0 million, 7 1/4% debentures issued on December 19, 1995, at
99.153%.
Beloit purchased the assets of IMPCO on March 27, 1996 for a purchase price
of $119.2 million, including acquisition costs. The acquisition of IMPCO was
funded via short-term bridge loans and the Revolving Credit Facility.
On October 7, 1997, Joy Technologies Inc. offered to purchase for cash
any and all of its
outstanding 10 1/4% Senior Notes in a fixed-spread tender offer. This offer
expired on October 21, 1997, with $180.7 million being repurchased. As a result
of the Senior Note repurchases, the Company recorded an extraordinary loss on
debt retirement, net of applicable income taxes, of $(13.0) million, or $(0.27)
per basic share, consisting primarily of unamortized financing costs and
purchase premiums. The remaining Senior Notes were redeemed in September, 1998
for $7.7 million plus interest and premium of $0.8 million.
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 October 31, 1998, the Company had repurchased 1,772,900 shares
through open-market transactions at a cost of $68.3 million. No shares were
repurchased under this program during the latter part of fiscal 1998.
The Company maintains the ability to expand its borrowings in the following
ways:
(1) In February, 1998, the Company filed a shelf registration with the
Securities and Exchange Commission for $200.0 million of debt securities.
To date, no securities have been issued under this registration. The
Company also has $50.0 million of debt securities remaining from a shelf
registration filed in 1996.
(2) A Revolving Credit Facility Agreement expiring October, 2002, between the
Company and certain domestic and foreign financial institutions that allows
for borrowings of up to $500.0 million at rates expressed in relation to
LIBOR and other rates. At October 31, 1998, there were direct outstanding
borrowings of $375.0 million under the facility. Commercial paper
borrowings, considered a utilization of the facility, were $5.6 million.
(3) At October 31, 1998, various domestic uncommitted credit facilities of
approximately $40 million, to further supplement short-term working capital
requirements. At October 31, 1998, there was $36 million being utilized
under these facilities. Short-term bank credit lines of foreign
subsidiaries were approximately $164 million, of which approximately $52
million was outstanding at October 31, 1998.
Increases in receivables and inventories have reduced the Company's cash
reserves and available credit lines. Subject to market conditions, the Company
currently expects to increase liquidity through the issuance of an additional
short-term facility, additional long-term debt or minority interest financing.
An adverse outcome of the Potlatch matter discussed in the section "Litigation"
which follows or other requirements for a significant amount of cash may cause
the Company to further increase borrowing facilities.
The Company had no significant capital commitments as of October 31, 1998;
any future commitments are expected to be funded through cash flow from
operations or from available lines of credit.
It is the Company's policy not to enter into highly leveraged transactions.
Hedging of specific foreign exchange transaction exposures does occur.
Market Risk
Volatility in interest rates and
foreign exchange rates can impact the Company's earnings, equity, and cash flow.
From time to time the Company will undertake transactions to hedge this impact.
The instrument will be effective if it offsets partially or completely the
impact on earnings, equity, and cash flow of this rate volatility on the
Company's underlying interest rate and foreign exchange rate exposures. In
accordance with the Company's policy, at no time will the Company execute
derivatives that are speculative, or that increase the Company's risk from
interest rate or foreign exchange rate fluctuations. At October 31, 1998, there
were no interest rate derivatives. Foreign exchange derivatives at that date
were exclusively in the form of forward exchange contracts executed
over-the-counter with several commercial banks, all of which held investment
grade credit ratings. The outstanding value of these forward contracts at
October 31, 1998, in absolute dollar terms for all currencies, was $308.5
million.
The accounting policy for recording gains and losses from forward exchange
contracts complies with SFAS No. 52. See Notes to Consolidated Financial
Statements (Note 1 -- Significant Accounting Policies.)
The Company has adopted a Foreign Exchange Risk Management Policy. It is a
risk-averse policy in which most of the foreign exchange exposures that impact
earnings and cash flow are fully hedged, subject to a net $5 million
self-insurance threshhold of permitted exposures per currency. Exposures that
impact only equity or that do not have a cash flow impact are generally not
hedged with derivatives. There are two categories of foreign exchange exposure
that are hedged: assets and liabilities denominated in a foreign currency and
future receipts or payments denominated in a foreign currency. These exposures
normally arise from imports and exports of goods and from intercompany lending
activity.
The fair value of the Company's forward exchange contracts at October 31, 1998
is presented in the following table:
In Thousands Maturing in 1999 Maturing in 2000
- --------------------------------------------------------------------------------
Austrian Schilling 1,846 --
Australian Dollar $32,070 $651
Canadian Dollar 20,325 --
Italian Lira 52,640 --
So. African Rand 32,102 --
U.K. Pound 103,797 --
U.S. Dollar 65,745 --
- --------------------------------------------------------------------------------
Operating Results by Business Segment
Mining Equipment:
In Thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Net sales $1,212,307 $1,467,341 $1,405,936
Operating income 81,984 201,803 183,141
Bookings 1,239,973 1,390,161 1,406,381
- --------------------------------------------------------------------------------
The Mining Equipment segment reported net sales of $1,212.3 million in 1998, a
17% decrease from 1997 sales of $1,467.3 million. The sales decrease resulted
from market softness for original equipment. In particular, the 33% decrease in
capital sales was caused by decreases in sales of electric mining shovels to the
copper mining industry and by decreases in underground mining equipment,
particularly continuous miners and factored product. Aftermarket sales were
steady as were margins achieved. Sales decreases also reduced absorption.
Operating income was $82.0 million or 6.8% of sales, compared to operating
income of $201.8 million or 13.8% of sales in 1997. Net sales and operating
income amounted to $1,405.9 million and $183.1 million, respectively, in 1996.
The 1998 decrease in operating income is primarily due to decreased sales
of original equipment and the negative impact of the United Steelworkers Local
1114 strike at P&H Mining Equipment, which reduced operating income for the
segment by approximately $15 million. Foreign sales of the Mining Equipment
segment amounted to 53% of total sales in 1998, 59% in 1997 and 58% in 1996.
Bookings amounted to $1,240.0 million in 1998 compared to $1,390.2 million
in 1997. The decrease is the result of market softness for original equipment.
Pulp and Paper Machinery:
In Thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Net sales $829,753 $1,267,847 $1,134,779
Operating income (loss) before charges (139,289) 104,085 91,511
Anticipated losses on contracts (164,400 (27,600) --
Restructuring charge (65,000) -- (43,000)
- --------------------------------------------------------------------------------
Operating income (loss) (368,689) 76,485 48,511
Bookings 757,062 1,372,085 1,269,507
- --------------------------------------------------------------------------------
The Pulp and Paper Machinery segment for 1998 reported sales of $829.8 million
an operating loss of $(368.7) million, after a $65.0 million restructuring
charge, a $127.4 million charge for anticipated losses associated with certain
contracts in Indonesia and a $37.0 million charge for settlement of a contract
dispute. Sales volume in 1998 was 35% lower than the prior year's level of
$1,267.8 million, reflecting market softness in the worldwide pulp and paper
industry's spending for original equipment and commodity price reductions for
pulp and paper. Machine sales decreased 45% in the year, while aftermarket sales
were steady after excluding the impact of acquisitions and divestitures. Foreign
sales for this segment amounted to 52% of total sales in 1998, 57% in 1997 and
53% in 1996.
Operating results were impacted significantly by the lower sales and
related margins, lower original equipment margin realization, reduced
manufacturing absorption, and higher spending necessary to build the aftermarket
model and implement the cost-reduction initiatives.
Operating income in 1997 was 6.0% of sales compared to 8.1% in 1996 before
the restructuring charge. Net sales and operating income amounted to $1,134.8
million and $91.5 million before the restructuring charge, respectively, in
1996.
In the second quarter of fiscal 1998, the Pulp and Paper Machinery segment
recorded a $65.0 million restructuring charge. The charge includes costs related
to severance for approximately 1,000 people worldwide, facility closures, and
disposal of machinery and equipment. See Notes to Consolidated Financial
Statements (Note 3 -- Restructuring Charge.)
In the fourth quarter of fiscal 1996, the Pulp and Paper Machinery segment
recorded a restructuring charge of $43.0 million. The charge was primarily
comprised of costs related to severance, machinery and equipment dispositions,
closure of certain facilities and sale of businesses. At October 31, 1998,
activity related to the 1996 restructuring has been substantially completed. See
Notes to Consolidated Financial Statements (Note 3 -- Restructuring Charge.)
Bookings activity decreased in 1998 to $757.1 million from $1,372.1 million
in 1997. The 45% decrease reflects reduced bookings in pulp and paper machinery
original equipment, particularly in the Pacific Rim and Latin America. Sales to
its largest customer in Indonesia approximated $105 million in fiscal 1998 and
$411 million in fiscal 1997.
Discontinued Operations
On March 30, 1998, the
Company completed the sale of approximately 80% of the common stock of the
Company's Material Handling segment to Chartwell Investments, Inc. in a
leveraged recapitalization transaction. As such, the accompanying financial
statements have been reclassified to reflect Material Handling as a discontinued
operation. The Company retained approximately 20% of the outstanding common
stock and 11% of the outstanding voting securities of Material Handling and
holds one board of director seat in the new company. In addition, the Company
has licensed Material Handling to use the "P&H" trademark on existing Material
Handling-produced products on a worldwide basis for periods specified in the
agreement for a royalty fee payable over a ten year period. The Company reported
a $151.5 million after-tax gain on the sale of this discontinued operation in
the second quarter of fiscal 1998. Proceeds consisted of $341.0 million in cash
and $4.8 million in preferred stock with a 12.25% PIK dividend: $7.2 million in
common stock was not reflected in the Company's balance sheet or gain
calculations due to the nature of the leveraged recapitalization transaction.
Taxes on the sale amounted to $45.0 million. Net assets disposed of in the sale
aggregated $139.3 million.
Specific financial information is as follows:
5 Months
In Thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Net sales $130,546 $353,350 $323,216
Income before income taxes 6,631 38,001 32,862
Minority interest -- (18) (45)
Income tax provision (2,255) (12,920) (11,502)
- --------------------------------------------------------------------------------
Net income $4,376 $25,063 $21,315
================================================================================
Year 2000 Readiness Disclosure:
The Year 2000 issue concerns the ability of information systems to properly
recognize and process date-sensitive information beyond December 31, 1999. To
address this problem, the Company is in the process of implementing its Year
2000 readiness plan for information technology systems ("IT") and non-IT
equipment, facilities and systems.
The primary IT strategy for attaining Year 2000 readiness within the
operating units is the successful implementation of Year 2000-ready business
processing software. Joy has successfully implemented SAP R/3. P&H Mining
Equipment is in the process of various remediation efforts and system upgrades.
Beloit is in the process of a worldwide implementation of MAPICS. All business
segments anticipate their Year 2000 IT efforts to be substantially completed by
June 1999.
The Company relies on third-party suppliers for key materials and services.
Efforts have been initiated to evaluate the status of suppliers' efforts and to
determine alternatives and contingency plan requirements. These activities are
intended to provide a means of managing risk, but cannot eliminate the potential
for disruption due to third-party failure.
Facilities and office equipment such as machine tools, material
distribution equipment, telephone switches, and other common devices may be
affected by the Year 2000 problem. Mission-critical systems are scheduled to be
Year 2000 compliant by June 1999.
The Company is in the process of identifying product-related Year 2000
problems and is working with customers to assist in their Year 2000 readiness
efforts. It is not possible to determine with complete certainty that all Year
2000 problems have been identified or corrected due to testing limitations,
complexity and application of these products.
Total expenses on the project through October 31, 1998 were approximately
$2.9 million and were related to expenses for repair or replacement of software
and hardware related problems, expenses associated with facilities, products and
supplier reviews and project management expenses. Expected incremental expenses
related to Year 2000 are not expected to be material to the Company's financial
position. The costs of implementing SAP and MAPICS are excluded as these system
implementations were undertaken primarily to improve business processes.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Contingency plans will be developed as final evaluations of risks
are completed.
Due to the general uncertainty inherent in the Year 2000 problem, resulting
in part from the uncertainty of the Year 2000 readiness of third-party suppliers
and customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company.
The Company believes that the implementation of new business systems and the
completion of the readiness plan project as scheduled will reduce the
possibility of significant interruptions of normal operations.
Euro Conversion
The Company is
addressing the issues related to the conversion to the Euro on January 1, 1999
and does not anticipate significant issues.
Litigation
The Company is 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
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, 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
million failed to perform satisfactorily. In June, 1997, a Lewiston, Idaho jury
awarded Potlatch $95 million in damages in the case which, together with fees,
costs and interest to October 31, 1998 approximate $116 million. Beloit has
appealed this award to the Idaho Supreme Court. The appeal was heard by the
Court on September 10, 1998 with a decision anticipated in the first half of
fiscal 1999. The Company considers the eventual outcome in the Potlatch case not
to be estimable. Reserves in the October 31, 1998 Consolidated Balance Sheet are
less than the sales price of the washers. The possible ultimate cost to the
Company of this case could be materially higher than the reserves. In the event
the Company is unsuccessful in its request for a new trial in this matter, it
may have a material adverse effect on its consolidated financial position or
results of operations.
The Company and certain of its senior executives have been named as
defendants in three purported class actions, entitled Great Neck Capital
Appreciation Investment Partnership, L.P. v. Jeffery T. Grade, et al., C.
William Carter v. Harnischfeger Industries, Inc. et al. and Norman Ellison v.
Jeffery T. Grade, et al., filed on June 5, 1998, June 11, 1998 and July 21,1998,
respectively, in the United States District Court for the Eastern District of
Wisconsin. These actions, which have now been consolidated, seek damages in an
unspecified amount on behalf of an alleged class of purchasers of the Company's
common stock, based principally on allegations relating to the Company's
disclosures.
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 matters, the
Company believes that these matters will not have a materially adverse effect on
its consolidated financial position or results of operations.
Beloit APP Contracts
In fiscal 1997 and 1996, Beloit received orders for four fine-paper machines
from Asia Pulp & Paper Co. Ltd. ("APP") for a total of approximately $600
million. During the second quarter of fiscal 1998, the Company identified $155
million of additional estimated contract costs at Beloit related to these
contracts. The additional costs primarily related to non-proprietary equipment,
installation and erection, freight and other site construction costs, and
overruns resulting from changes in estimates of costs to complete related to
these complex, large-scale projects.
Based on its review of the $155 million, the Company, with the assistance
of its outside auditors, determined that $27.6 million of this charge was
properly allocated to the fourth quarter of fiscal 1997 as it related to
isolated costs for piping which were inadvertently overlooked. Income for that
period and the full fiscal year of 1997 was restated to reflect this charge.
The first two machines have been substantially paid for and installed at
the APP facilities in Indonesia. The Company has sold, approximately $44 million
of its receivables from APP on these first two machines to a financial
institution. The machines are currently in the start-up/optimization phase and
are required to meet certain contractual performance tests. The contracts call
for the potential of liquidated damages, including performance damages, in
certain circumstances. The Company is currently in negotiation with APP on
certain claims and back charges on the first two machines.
The two remaining machines have been substantially manufactured, are in
Beloit's possession and are carried on the Consolidated Balance Sheet at October
31, 1998 as unbilled receivables approximating $180 million. This amount has
been reduced by a $46 million down payment received from APP and $19 million of
receivables that were sold to a financial institution. The Company has issued
letters-of-credit in the amount of the initial down payment. To date, APP has
been unable to secure financing for these two machines.
On December 15, 1998, the Company declared APP in default on the contracts
for the two remaining machines, concluding that APP has not acted in good faith
and is unwilling to pay its obligations or is incapable of securing financing
for these two paper machines. Consequently, on December 15, 1998, the Company
filed for arbitration in Singapore for the full payment from APP for the second
two machines as well as at least $125 million in damages and delay costs.
On December 16, 1998, APP filed a notice of arbitration in Singapore
against Beloit seeking a full refund of approximately $46 million paid to Beloit
for the second two machines, claiming that Beloit breached an obligation under
the purchase contracts to secure financing, thus resulting in termination. APP
also seeks recovery of other damages alleged by APP caused by Beloit's claimed
breaches. In addition, APP seeks a declaration in the arbitration that it has no
liability under certain promissory notes. The Company will vigorously defend
against all of APP's assertions that it is entitled to a return of payments
under the contracts and also will proceed without delay to mitigate APP's
obligations for damages by finding other customers for these world-class
machines.
The Company intends to vigorously pursue its rights under the contracts and
expects to be fully compensated for these two machines from APP. However, in the
event that the Company is unsuccessful in arbitration and to mitigate APP's
damages, the Company is pursuing selling these two machines to other customers.
See Notes to Consolidated Financial Statements (Note 18 - Beloit APP Contracts.)
Proceeds from the ultimate sale of these machines, if required, are
expected to be sufficient to substantially recover the carrying value of the
receivable. In the event the Company is unsuccessful in arbitration and/or is
unable to sell these paper machines to another customer, it may have a
materially adverse effect on its consolidated financial position or results of
operations.
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, pulp,
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 acceptance 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, pulp, paper
mills, and other facilities that use these machines. The Company's success in
obtaining and managing a relatively small number of sales opportunities,
including warranties and guarantees associated therewith, 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:
o Factors affecting 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 and other commodities; the cash flows of customers; the cost
and availability of financing to customers and the ability of customers to
obtain regulatory approval for investments in mining, pulp, papermaking and
other heavy industrial projects; the ages, efficiencies and utilization rates
of existing equipment; the development of new technologies; the availability
of used or alternative equipment; consolidations among customers; work
stoppages at customers or providers of transportation; and the timing,
severity and duration of customer buying cycles.
o 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; the existence of
patents protecting or restricting the Company's ability to offer features
requested by customers; whether the Company has successful reference
installations to show 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; the availability of manufacturing
capacity at the Company's factories; and whether the Company can offer the
complete package of products and services sought by its customers.
o 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 Company's 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.
o Factors affecting the Company's general business, such as: unforeseen patent,
tax, product, environmental, employee health or benefit or contractual
liabilities; nonrecurring or restructuring charges; changes in accounting or
tax rules or regulations; and reassessments of asset valuations such as
inventories.
o Factors affecting general business levels, such as: political turmoil and
economic growth in major markets such as the United States, Canada, Europe,
the Pacific Rim, South Africa, Australia and Chile; environmental and trade
regulations; and the stability and ease of exchange of currencies.
<TABLE>
<CAPTION>
Consolidated Statement of Income
(Dollar Amounts in Thousands Except Per Share Amounts)
Years Ended October 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Net Sales $2,042,060 $2,735,188 $2,540,715
Other Income 12,052 27,181 21,026
- -------------------------------------------------------------------------------------------------------------------------
2,054,112 2,762,369 2,561,741
Cost of Sales, including anticipated losses on contracts 1,849,495 2,107,947 1,919,378
Product Development, Selling and Administrative Expenses 446,913 401,149 388,451
Restructuring Charge 65,000 -- 43,000
- -------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) (307,296) 253,273 210,912
Interest Expense-- Net (81,340) (72,145) (62,013)
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before (Provision) Benefit For
Income Taxes and Minority Interest (388,636) 181,128 148,899
(Provision) Benefit for Income Taxes 160,300 (61,555) (52,098)
Minority Interest 53,927 (6,356) (3,899)
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations (174,409) 113,217 92,902
Income from Discontinued Operation,
net of applicable income taxes 4,376 25,063 21,315
Gain on Sale of Discontinued Operation,
net of applicable income taxes 151,500 -- --
Extraordinary Loss on Retirement of Debt,
net of applicable income taxes -- (12,999) --
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $(18,533) $125,281 $114,217
=========================================================================================================================
Earnings Per Share -- Basic
Income (loss) from continuing operations $(3.75) $2.37 $1.97
Income from and net gain on sale of
discontinued operation 3.35 0.52 0.45
Extraordinary loss on retirement of debt -- (0.27) --
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $(0.40) $2.62 $2.42
=========================================================================================================================
Earnings Per Share -- Diluted
Income (loss) from continuing operations $(3.75) $2.35 $1.95
Income from and net gain on sale of
discontinued operation 3.35 0.51 0.45
Extraordinary loss on retirement of debt -- (0.27) --
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $(0.40) $2.59 $2.40
=========================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheet
(Dollar Amounts in Thousands)
Years Ended October 31, 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents
(including cash equivalents of $6,816 and $6,376 in 1998
and 1997, respectively, at cost which approximates market) $30,012 $29,383
Accounts receivable-- net 692,326 836,169
Inventories 610,478 594,761
Other current assets 56,142 85,224
Prepaid income taxes 74,186 33,852
Businesses held for sale -- 9,323
- -------------------------------------------------------------------------------------------------------------------
1,463,144 1,588,712
Property, Plant and Equipment:
Land and improvements 61,454 60,724
Buildings 289,789 293,501
Machinery and equipment 809,969 821,479
- -------------------------------------------------------------------------------------------------------------------
1,161,212 1,175,704
Accumulated depreciation (529,884) (518,604)
- -------------------------------------------------------------------------------------------------------------------
631,328 657,100
Investments and Other Assets:
Goodwill 480,625 508,634
Intangible assets 31,343 33,027
Deferred income taxes 44,781 --
Other assets 136,038 137,062
- -------------------------------------------------------------------------------------------------------------------
692,787 678,723
- -------------------------------------------------------------------------------------------------------------------
$2,787,259 $2,924,535
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $156,383 $225,853
Trade accounts payable 333,624 460,689
Employee compensation and benefits 73,334 132,268
Advance payments and progress billings 115,320 85,680
Accrued warranties 58,053 47,753
Income taxes payable 7,693 17,165
Other current liabilities 281,873 211,089
- -------------------------------------------------------------------------------------------------------------------
1,026,280 1,180,497
Long-Term Obligations 962,797 713,466
Other Liabilities:
Liability for postretirement benefits 34,187 56,202
Accrued pension and related costs 40,812 36,707
Other liabilities 12,495 11,608
Deferred income taxes -- 78,671
- -------------------------------------------------------------------------------------------------------------------
87,494 183,188
Minority Interest 43,838 97,724
Shareholders' Equity:
Common stock (51,668,939 and 51,607,172 shares issued, respectively) 51,669 51,607
Capital in excess of par value 586,509 625,358
Retained earnings 216,065 253,727
Cumulative translation adjustments (60,289) (41,440)
Less: Stock Employee Compensation Trust (1,433,147 and
1,433,147 shares, respectively) at market (13,525) (56,430)
Treasury Stock (4,465,101 and 3,127,697 shares, respectively) at cost (113,579) (83,162)
- -------------------------------------------------------------------------------------------------------------------
666,850 749,660
$2,787,259 $2,924,535
===================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flow
(Dollar Amounts in Thousands)
Years Ended October 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income (loss) $(18,533) $125,281 $114,217
Add (deduct)-- Items not affecting cash:
Income from and gain on discontinued operation,
net of income taxes (155,876) (25,063) (21,315)
Restructuring charge 65,000 -- 43,000
Extraordinary loss on retirement of debt, net of income taxes -- 12,999 --
Depreciation and amortization 86,760 87,461 83,377
Minority interest, net of dividends paid (54,981) 6,130 3,209
Deferred income taxes-- net (201,771) 54,579 18,842
Other-- net (17,735) (11,550) (1,368)
Changes in working capital, excluding the effects of acquisition opening
balance sheets:
Decrease (increase) in accounts receivable-- net 51,590 (195,551) (70,182)
(Increase) in inventories (68,773) (53,633) (17,565)
Decrease (increase) in other current assets 11,958 (23,637) (9,245)
(Decrease) increase in trade accounts payable (97,331) 119,671 14,751
(Decrease) in employee compensation and benefits (36,462) (26,987) (7,666)
Increase (decrease) in advance payments and progress billings 39,950 (55,281) (68,422)
(Decrease) in other current liabilities (32,892) (106,995) (17,991)
- ---------------------------------------------------------------------------------------------------------------------
Net cash (used by) provided by operating activities (429,096) (92,576) 63,642
-------------------------------------------
Investment and Other Transactions
Purchase of Dobson Park Industries plc,
net of cash acquired of $4,631 -- -- (325,369)
Purchase of Pulp Machinery Division of Ingersoll-Rand,
net of cash acquired of $6,858 -- -- (112,372)
Other acquisitions, net of cash acquired (40,192) (5,325) (4,783)
Proceeds from sale of Material Handling 341,000 -- --
Proceeds from sale of J&L Fiber Services 109,445 -- --
Proceeds from sale of New Philadelphia Fan Co. -- 18,051 --
Proceeds from sale of Castings Division -- 7,229 --
Proceeds from sale of Joy Environmental Technologies -- -- 11,651
Proceeds from sale of non-core Dobson Park businesses 9,323 16,829 73,848
Property, plant and equipment acquired (133,925) (126,401) (76,555)
Property, plant and equipment retired 16,893 31,291 16,656
Other-- net (12,700) (26,026) 10,664
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used by)
investment and other transactions 289,844 (84,352) (406,260)
Financing Activities
Purchase of treasury stock (33,154) (40,720) --
Dividends paid (18,556) (19,151) (18,905)
Exercise of stock options 1,318 7,164 6,762
Issuance of long-term obligations 292,300 261,411 197,611
Redemption of long-term obligations (11,763) (198,117) (2,334)
(Decrease) increase in short-term notes payable (87,333) 161,644 (43,664)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 142,812 172,231 139,470
Effect of Exchange Rate Changes on Cash and Cash Equivalents (2,931) (2,856) 1,041
- -------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 629 (7,553) (202,107)
Cash and Cash Equivalents at Beginning of Year 29,383 36,936 239,043
- -------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $30,012 $29,383 $36,936
=========================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Shareholders' Equity
(Dollar Amounts in Thousands)
Capital in Cumulative
Common Excess of Retained Translation Treasury
Stock Par Value Earnings Adjustments SECT Stock Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1995 $51,118 $603,712 $53,560 $(42,118) $(60,483) $(46,513) $559,276
Net income 114,217 114,217
Translation adjustments 4,534 4,534
Exercise of 320,172 stock options 282 5,730 750 6,762
Issuance of restricted stock 7 (11,555) 11,914 366
Dividends paid ($.40 per share) (19,602) (19,602)
Dividends on shares held by SECT 697 697
Adjust SECT shares to market value 13,541 (13,541) --
230,000 shares purchased by
employee benefit plans 2,964 4,271 7,235
- -------------------------------------------------------------------------------------------------------------------------
Balance at October 31, 1996 51,407 615,089 148,175 (37,584) (61,360) (42,242) 673,485
Net income 125,281 125,281
Translation adjustments (3,856) (3,856)
Exercise of 301,072 stock options 200 4,984 1,980 7,164
Dividends paid ($.40 per share) (19,729) (19,729)
Dividends on shares held by SECT 578 578
Adjust SECT shares to market value (2,950) 2,950 --
209,373 shares purchased by
employee and director benefit plans 4,582 3,888 8,470
1,062,457 shares acquired
as treasury stock (44,808) (44,808)
Amortization of unearned
compensation on restricted stock 3,075 3,075
- -------------------------------------------------------------------------------------------------------------------------
Balance at October 31, 1997 51,607 625,358 253,727 (41,440) (56,430) (83,162) 749,660
Net loss (18,533) (18,533)
Translation adjustments (18,849) (18,849)
Exercise of 61,767 stock options 62 1,256 1,318
Dividends paid ($.40 per share) (19,129) (19,129)
Dividends on shares held by SECT 573 573
Adjust SECT shares to market value (42,905) 42,905 --
146,401 shares purchased
by employee and director
benefit plans 1,527 4,108 5,635
1,338,554 shares acquired
as treasury stock (33,154) (33,154)
Rabbi Trust shares (1,371) (1,371)
Amortization of unearned
compensation on restricted stock 700 700
- -------------------------------------------------------------------------------------------------------------------------
Balance at October 31, 1998 $51,669 $586,509 $216,065 $(60,289) $(13,525) $(113,579) $666,850
=========================================================================================================================
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
Notes to Consolidated Financial Statements
(Dollar amounts in thousands unless indicated)
Note 1
Significant Accounting Policies
Basis of Presentation: The consolidated financial statements and related notes
give retroactive effect to the merger on November 29, 1994 with Joy Technologies
Inc. ("JTI") for all periods presented, accounted for as a pooling of interests.
The Consolidated Statement of Income has also been reclassified to reflect the
Company's divestiture in 1998 of the P&H Material Handling ("Material Handling")
segment, and in 1995 of the Systems Group and Joy Environmental Technologies
("JET"), all accounted for as discontinued operations (See Note 16
- --Discontinued Operations.) The term "Company" as used in these consolidated
financial statements refers to Harnischfeger Industries, Inc. and its
subsidiaries.
Principles of Consolidation: The consolidated financial statements include the
accounts of all majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Ultimate realization of assets and
settlement of liabilities in the future could differ from those estimates.
Inventories: Inventories are stated at the lower of cost or market value. Cost
is determined by the last-in, first-out (LIFO) method for substantially all
domestic inventories and by the first-in, first-out (FIFO) method for the
inventories of foreign subsidiaries.
Revenue Recognition: Revenue on long-term contracts is
generally recorded using the percentage-of-completion method for financial
reporting purposes. Contracts for pulp and papermaking machinery and certain
mining equipment are included. Losses, if any, are recognized in full as soon as
identified. Sales of other products and services are recorded as products are
shipped or services are rendered.
Property, Plant and Equipment: Property, plant
and equipment is stated at historical cost. Expenditures for major renewals and
improvements are capitalized, while maintenance and repairs which do not
significantly improve the related asset or extend its useful life are charged to
expense as incurred. For financial reporting purposes, plant and equipment is
depreciated primarily by the straight-line method over the estimated useful
lives of the assets. Depreciation claimed for income tax purposes is computed by
accelerated methods.
Cash Equivalents: The Company considers all highly liquid
debt instruments with a maturity of three months or less at the date of purchase
to be cash equivalents.
Foreign Exchange Contracts: Any gain or loss on forward
contracts designated as hedges of commitments is deferred and included in the
measurement of the related foreign currency transaction, except that permanent
losses are recognized immediately.
Foreign Currency Translation: The majority of the assets and liabilities of the
Company's international operations are translated at year-end exchange rates;
income and expenses are translated at average exchange rates prevailing during
the year.
For operations whose functional currency is the local currency, translation
adjustments are accumulated in a separate section of shareholders' equity.
Transaction gains and losses, as well as translation adjustments relating to
operations whose functional currency is the U.S. dollar, are reflected in
income. Pre-tax foreign exchange losses included in operating income (loss) were
$(2,150), $(811) and $(983) in 1998, 1997 and 1996, respectively.
Goodwill and Intangible Assets: Goodwill represents the excess of the purchase
price over the fair value of identifiable net assets of acquired companies and
is amortized on a straight-line basis over periods ranging up to 40 years.
Consistent with Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", the Company annually evaluates whether the projected earnings
and undiscounted cash flows of the acquired companies are sufficient to recover
the carrying value of the net investment, including goodwill, in order to
determine if an impairment has occurred. Other intangible assets are amortized
over the shorter of their legal or economic useful lives ranging from 5 to 20
years. Accumulated amortization was $100,679 and $95,033 at October 31, 1998 and
1997, respectively.
Income Taxes: Deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities and for tax basis
carryforwards. A valuation allowance is provided for deferred tax assets where
it is considered more likely than not that the Company will not realize the
benefit of such assets (See Note 6 -- Income Taxes.)
Research and Development Expenses: Research and development costs are expensed
as incurred. Such costs incurred in the development of new products or
significant improvements to existing products amounted to $49,131, $38,725 and
$34,152 in 1998, 1997 and 1996, respectively. Certain capital expenditures used
in research activities, such as the construction of a pilot paper machine used
in research and for customer tests, are capitalized and depreciated over their
expected useful lives.
Earnings Per Share: In the first quarter of fiscal 1998, the Company adopted
SFAS No. 128, "Earnings Per Share". This statement establishes revised standards
for computing and presenting earnings per share. All prior periods have been
restated (See Note 17 -- Earnings Per Share.) Shares in the Stock Employee
Compensation Trust ("SECT") are not considered outstanding for purposes of
computing earnings per share.
Future Accounting Changes: In June, 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income".
The standard requires that certain items recognized under accounting principles
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. The Company
will adopt the standard in fiscal 1999.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information". This standard establishes new
requirements for the reporting of segment information by public entities. All
prior periods will be required to be restated. The Company will adopt this
standard in fiscal 1999.
In February, 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits". This standard's objective is
to improve pension and other postretirement benefits disclosure. The Company
will adopt the standard in fiscal 1999.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This standard addresses the accounting for
derivative instruments including certain derivative instruments embedded in
other contracts, and hedging activities. The Company will adopt this standard in
fiscal 2000.
It is not expected that SFAS No. 130, 131, 132, or 133 will result in
significant changes to the Company's disclosures or financial results.
Note 2
Acquisitions
On March 19, 1998, the Company completed the acquisition of Horsburgh & Scott
("H&S") for a purchase price of $40,192. H&S is a manufacturer of gears and gear
cases, and is also involved in the distribution of parts and service to the
mining industry. The acquisition was accounted for as a purchase transaction,
with the purchase price allocated to the fair value of specific assets acquired
and liabilities assumed. Resultant goodwill is being amortized over 40 years.
In fiscal 1996, the Company completed the acquisition of Dobson Park
Industries plc ("Dobson") for a purchase price of approximately $330,000,
including acquisition costs, plus the assumption of net debt of approximately
$40,000.
The Company has substantially integrated Longwall's (the main subsidiary of
Dobson) operations, thus enabling Joy Mining Machinery ("Joy") to offer
integrated underground longwall mining systems to the worldwide mining industry.
As a result of this integration, the Company 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 part of the Dobson acquisition, several non-mining businesses were
designated as businesses held for sale. At October 31, 1998, all of the
businesses had been sold for slightly more than $100,000, the original amount
recorded on the Consolidated Balance Sheet.
On March 27, 1996, Beloit Corporation ("Beloit") purchased the assets of
the Pulp Machinery Division of Ingersoll-Rand Company ("IMPCO") for $119,230,
including acquisition costs. The acquisition was accounted for as a purchase
transaction with the purchase price allocated to the fair value of specific
assets acquired and liabilities assumed. Resultant goodwill is being amortized
over 40 years.
Note 3
Restructuring Charge
In the second quarter of fiscal 1998,
Beloit recorded a $65,000 restructuring charge ($31,900 after tax and minority
interest). The charge includes costs related to severance for approximately
1,000 people worldwide, facility closures, and disposal of machinery and
equipment. Closure of a pulping-related manufacturing facility in Sherbrooke,
Quebec, Canada has been completed, and closure of a similar facility in Dalton,
Massachusetts will be complete in the first quarter of fiscal 1999. The
paper-related manufacturing facility in the United Kingdom is being converted to
a center of excellence responsible for rolls, while the Italian operation is
expected to be converted from a full-line manufacturing operation to a
MillPro(SM) aftermarket center for central and southern Europe. The cash and
noncash elements of the restructuring charge approximated $32,500 and $32,500,
respectively. Management anticipates that the reserves will be substantially
utilized within the next year. As of October 31, 1998, approximately 670
employees have been terminated in accordance with this plan. Details of this
restructuring charge are as follows:
Original Reserve 10/31/98
Reserve Utilized Reserve
- -------------------------------------------------------------------------------
Employee severance $25,800 $(10,486) $15,314
Facility closures 33,300 (12,477) 20,823
Machinery and equipment dispositions 5,900 (2,512) 3,388
- -------------------------------------------------------------------------------
Pre-tax charge $65,000 $(25,475) $39,525
===============================================================================
In the fourth quarter of fiscal 1996, Beloit recorded a restructuring charge of
$43,000 ($21,830 after tax and minority interest.) The restructuring was
designed to provide for severance of approximately 500 employees worldwide,
disposition of machinery and equipment, closure of certain facilities and the
sale of certain capital intensive businesses. At October 31, 1998, all activity
related to this restructuring was substantially completed.
Note 4
Accounts Receivable
Accounts receivable at October 31 consisted of the following:
1998 1997
- -------------------------------------------------------------------------------
Trade receivables $337,003 $438,591
Unbilled receivables 365,212 405,897
Allowance for doubtful accounts and contract losses (9,889) (8,319)
- -------------------------------------------------------------------------------
$692,326 $836,169
===============================================================================
The amount of trade receivables due beyond one year is not significant. (See
Note 18- Beloit APP Contracts.)
Note 5
Inventories at October 31 consisted of the following:
1998 1997
- -------------------------------------------------------------------------------
Finished goods $366,346 $274,391
Work in process and purchased parts 198,765 247,568
Raw materials 96,920 132,980
------------------
662,031 654,939
Less excess of current cost over stated LIFO value (51,553) (60,178)
- -------------------------------------------------------------------------------
$610,478 $594,761
===============================================================================
Inventories valued using the LIFO method represented approximately 66% and 54%
of consolidated inventories at October 31, 1998 and 1997, respectively.
Note 6
Income Taxes
The components of income (loss) for the Company's domestic and foreign
operations for the years ended October 31 were as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Domestic $(343,780) $94,666 $57,189
Foreign (44,856) 86,462 91,710
- --------------------------------------------------------------------------------
Pre-tax income (loss)
from continuing operations $(388,636) $181,128 $148,899
================================================================================
The consolidated provision (benefit) for income taxes included in the
Consolidated Statement of Income for the years ended October 31 consisted of the
following:
1998 1997 1996
- --------------------------------------------------------------------------------
Current provision (benefit):
Federal $2,081 $(5,048) $4,957
State 4,633 1,618 2,288
Foreign 5,998 24,691 36,474
- --------------------------------------------------------------------------------
Total current 12,712 21,261 43,719
Deferred provision (benefit):
Federal (108,564) 44,784 13,409
State and foreign (17,193) (236) 6,472
- --------------------------------------------------------------------------------
Total deferred (125,757) 44,548 19,881
- --------------------------------------------------------------------------------
Total consolidated income tax
provision (benefit) $(113,045) $65,809 $63,600
================================================================================
The income tax provision (benefit) is included in the Consolidated Statement of
Income as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Continuing operations $(160,300) $61,555 $52,098
Income from and net gain on
sale of discontinued operation 47,255 12,920 11,502
Extraordinary item -- retirement of debt -- (8,666) --
- --------------------------------------------------------------------------------
$(113,045) $65,809 $63,600
================================================================================
The difference between the federal statutory tax rate and the effective tax rate
on continuing operations for the years ended October 31 are as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Federal statutory tax rate (35.0)% 35.0% 35.0%
Goodwill amortization not
deductible for tax purposes 0.9 1.9 2.3
Differences in foreign and U.S. tax rates 1.0 11.3 4.2
Differences in Foreign Sales
Corporation and U.S. tax rate (1.0) (0.9) (0.8)
State income taxes, net of federal tax impact 0.7 1.0 2.2
General business and foreign tax credits utilized (1.0) (17.5) (11.1)
Resolution of various tax audits (2.7) -- --
Benefit related to capital transaction (4.5) -- --
Other items-- net 0.4 3.2 3.2
- --------------------------------------------------------------------------------
Effective tax rate (41.2)% 34.0% 35.0%
================================================================================
Temporary differences and carryforwards which gave rise to the net deferred tax
asset (liability) at October 31 are as follows:
1998 1997
- --------------------------------------------------------------------------------
Inventories $(7,021) $(16,788)
Reserves not currently deductible 62,041 5,757
Depreciation and amortization
in excess of book expense (31,422) (41,926)
Employee benefit related items 30,507 15,319
Tax credit carryforwards 41,718 28,300
Tax loss carryforwards 147,845 65,032
Other-- net (77,663) (65,618)
Valuation allowance (47,038) (34,895)
- --------------------------------------------------------------------------------
Net deferred tax asset (liability) $118,967 $(44,819)
================================================================================
This net asset (liability) is included in the Consolidated Balance Sheet in the
following captions:
1998 1997
- --------------------------------------------------------------------------------
Prepaid income taxes $74,186 $33,852
Deferred income taxes 44,781 (78,671)
- --------------------------------------------------------------------------------
$118,967 $(44,819)
================================================================================
At October 31, 1998, the Company had general business tax credits of $23,794
expiring in 2007-2013, foreign tax credit carryforwards of $8,377 expiring in
2002-2003, and alternative minimum tax credit carryforwards of $9,547 which do
not expire. In addition, tax loss carryforwards consisted of foreign
carryforwards of $40,283 with various expiration dates, federal carryforwards of
$78,020 (pre-tax of $222,900) expiring in 2018, and state carryforwards of
$29,542 with various states and expiration dates. The carryforwards will be
available for the reduction of future income tax liabilities; a valuation
allowance has been recorded against certain of these carryforwards for which
utilization is uncertain.
U.S. income taxes, net of foreign taxes paid or payable, have been provided
on the undistributed profits of foreign subsidiaries, except in those instances
where such profits are expected to be permanently reinvested. Such unremitted
earnings of subsidiaries which have been or are intended to be permanently
reinvested were $202,200 at October 31, 1998. If for some reason not presently
contemplated, such profits were to be remitted or otherwise become subject to
U.S. income tax, the Company expects to incur tax at substantially less than the
U.S. income tax rate as a result of foreign tax credits that would be available.
Income taxes paid were $45,039, $11,809 and $30,205 for 1998, 1997 and
1996, respectively.
Note 7
Long-Term Obligations, Bank Credit Facilities and Interest Expense.
Long-term obligations at October 31 consisted of the following:
1998 1997
- --------------------------------------------------------------------------------
10 1/4% Senior Notes, due 2003 $ -- $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 $1,233 and $1,247 148,767 148,753
6 7/8% Debentures, due 2027 (net of discount
of $106 and $111) 149,894 149,889
Senior Notes, Series A through D, at
interest rates of between 8.9% and 9.1%,
due 1999 to 2006 69,546 71,364
Australian Term Loan Facility, due 2000 56,169 --
Revolving Credit Facility 375,000 150,000
Industrial Revenue Bonds, at interest rates
of between 5.9% and 8.8%, due 1999
to 2017 32,820 33,400
Other 19,377 14,057
- --------------------------------------------------------------------------------
1,001,573 725,193
Less: Amounts due within one year (38,776) (11,727)
- --------------------------------------------------------------------------------
$962,797 $713,466
================================================================================
On October 7, 1997, JTI issued a fixed-spread tender offer to purchase any and
all of its 10 1/4% Senior Notes. This offer expired on October 21, 1997 with
$180,650 being repurchased under the offer. In 1997, as a result of the 101/4%
Senior Note repurchases, the Company recorded an extraordinary loss on debt
retirement, net of applicable income taxes, of $(12,999), or $(0.27) per basic
share, consisting primarily of unamortized financing costs and purchase
premiums. Debt purchased was funded through available cash and credit
facilities.
The 10 1/4% Senior Notes were callable on or after September 1, 1998 at
105.125%. The Company called the remaining notes on September 1, 1998 for $7,730
plus interest and premium of $792.
The 7 1/4% debentures were issued on December 19, 1995 at a price of
99.153%. The debentures mature on December 15, 2025, are not redeemable prior to
maturity and are not subject to any sinking fund requirements.
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 a price of
99.925%. Proceeds were used for repayment of short-term indebtedness. The
debentures 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.
The Senior Notes, Series A through D, are privately placed and unsecured.
The Series D Notes provide for eleven equal annual repayments of principal plus
accrued interest beginning in 1996; Series A through C Notes are due at maturity
in 1999, 1999, and 2001, respectively.
One of the Company's Australian subsidiaries maintains a committed
three-year $90,000 Australian dollar ($56,169 U.S. dollar) term loan facility
with a group of four banks at rates expressed in relation to Australian
dollar-denominated Bank Bills of Exchange. A commitment fee is payable on any
unused portions of the loan. As of October 31, 1998, the loan was fully
utilized.
The Company maintains a committed 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 and
which expires in October, 2002. A facility fee is payable on the Revolving
Credit Facility. At October 31, 1998, direct outstanding borrowings under the
facility were $375,000 and commercial paper borrowings, considered a utilization
of the facility, were $5,610.
The terms of certain of the debt agreements place limits on the amount of
additional long-term debt the Company may issue and require maintenance of a
minimum consolidated net worth, as defined. Additional funded debt may be
incurred if immediately thereafter consolidated funded debt does not exceed 50%
of consolidated total tangible assets, as defined.
In February, 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 also has
$50,000 of debt securities remaining from a shelf registration filed in 1996.
Installments payable to holders of the outstanding long-term obligations of the
Company are due as follows:
1999 $38,776
2000 70,805
2001 22,645
2002 383,637
2003 2,437
- --------------------------------------------------------------------------------
At October 31, 1998, short-term bank credit lines of foreign subsidiaries were
approximately $164,173. The outstanding borrowings were $51,937 with a weighted
average interest rate of 12.96%. There were no compensating balance requirements
under these lines of credit. Domestic credit facilities other than the revolving
credit agreement were approximately $40,000 of which $36,000 has been utilized.
The weighted average interest rate for these loans was 6.42%.
Net interest expense consisted of the following:
1998 1997 1996
- --------------------------------------------------------------------------------
Interest income $8,509 $3,309 $6,505
Interest expense (89,849) (75,454) (68,518)
- --------------------------------------------------------------------------------
Interest expense-- net $(81,340) $(72,145) $(62,013)
================================================================================
Interest paid was $86,380, $76,378 and $65,161 in 1998, 1997 and 1996,
respectively.
Note 8
Pensions and Other Employee Benefits
The Company and its subsidiaries have a number of defined benefit, defined
contribution and government mandated pension plans covering substantially all
employees. Benefits from these plans are based on factors which include various
combinations of years of service, fixed monetary amounts per year of service,
employee compensation during the last years of employment and the recipient's
social security benefit. The Company's funding policy with respect to its
qualified plans is to contribute annually not less than the minimum required by
applicable law and regulation nor more than the amount which can be deducted for
income tax purposes. The Company also has a nonqualified senior executive
supplemental pension plan, which is based on credited years of service and
compensation during the last years of employment.
Certain foreign plans, which supplement or are coordinated with government
plans, many of which require funding through mandatory government retirement or
insurance company plans, have pension funds or balance sheet accruals which
approximate the actuarially computed value of accumulated plan benefits as of
October 31, 1998 and 1997.
The Company recorded an additional minimum pension liability and intangible
asset of $4,513 and $5,600 in 1998 and 1997, respectively, to recognize the
unfunded accumulated benefit obligation of certain plans. Pension expense for
all plans of the Company was $18,347 in 1998, $20,953 in 1997 and $19,132 in
1996. Net periodic pension costs for U.S. plans and plans of subsidiaries
outside the United States for which SFAS No. 87, "Employers' Accounting for
Pensions," has been adopted included the following components:
1998 1997 1996
- --------------------------------------------------------------------------------
Service cost benefits earned during the year $25,185 $23,602 $22,892
Interest cost on projected benefit obligation 65,038 62,722 56,792
Actual gain on plan assets (77,112) (115,397) (98,003)
Net amortization and deferral (15) 43,277 33,832
- --------------------------------------------------------------------------------
Net periodic pension cost $13,096 $14,204 $15,513
================================================================================
The discount rate used for U.S. plans was 7.0% in 1998, 7.5% in 1997 and 8.0% in
1996 and for non-U.S. plans ranged from 6.0%-15.0%. The assumed rate of increase
in future compensation of U.S. salaried employees was 4.0% in 1998, 4.5% in 1997
and 5.0% in 1996 and for non-U.S. salaried employees ranged from 2.0% to 12.0%.
Benefits under the hourly employee plans are generally not based on wages. The
expected long-term rate of return on assets for U.S. plans was 10.0% and for
non-U.S. plans ranged from 10.0% to 16.0%. The assumptions for non-U.S. plans
were developed on a basis consistent with that for U.S. plans, adjusted to
reflect prevailing economic conditions and interest rate environments.
<TABLE>
<CAPTION>
The following table sets forth the plans' funded status at October 31:
1998 1997
Plans With Plans With Plans With Plans With
Assets Accumulated Assets Accumulated
Exceeding Benefits Exceeding Benefits
Accumulated Exceeding Accumulated Exceeding
Assets Benefits Assets Benefits Benefits
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefits $598,598 $249,612 $715,967 $30,043
Accumulated benefits 634,248 269,288 757,050 35,492
Projected benefits 704,658 277,511 827,474 42,903
Net assets available for benefits 687,058 224,660 864,281 9,836
- ---------------------------------------------------------------------------------------------------------------------------
Plans' assets greater (less) than projected benefits (17,600) (52,851) 36,807 (33,067)
Unrecognized (asset) obligation existing at adoption (6,497) 1,939 (5,328) 663
Unrecognized prior service cost 3,189 44,763 33,657 1,801
Unrecognized net (gain) loss 49,248 2,350 (18,341) 9,272
- ---------------------------------------------------------------------------------------------------------------------------
Net pension asset (liability) $28,340 $(3,799) $46,795 $(21,331)
===========================================================================================================================
</TABLE>
Pension plan assets consist primarily of trust funds with diversified portfolios
of primarily equity and fixed income investments.
The Company has a profit sharing plan which covers substantially all
domestic employees except certain employees covered by collective bargaining
agreements and employees of subsidiaries with separate defined contribution
plans. Payments to the plan are based on the Company's EVA performance. Profit
sharing expense was $0 in 1998, $9,957 in 1997 and $10,783 in 1996.
Note 9
Postretirement Benefits Other Than Pensions
The Company generally provides certain health care and life insurance benefits
under various plans for U.S. employees who retire after attaining early
retirement eligibility, subject to the plan amendments discussed below.
The weighted average discount rate used in determining the postretirement
benefit obligation was 7.0%, 7.5% and 8.0% at October 31, 1998, 1997 and 1996,
respectively.
The following table sets forth the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheet as of October 31:
1998 1997
Accumulated postretirement benefit obligation:
Retirees $45,885 $53,531
Fully eligible active plan participants 1,681 2,052
Other active plan participants 3,164 3,182
- --------------------------------------------------------------------------------
Total 50,730 58,765
Plan assets at fair value -- --
- --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets 50,730 58,765
Unrecognized prior service credit -- 11,903
Unrecognized gain (loss) (11,040) 2,590
- --------------------------------------------------------------------------------
Accrued postretirement benefit liability 39,690 73,258
Less: Current portion 5,503 17,056
- --------------------------------------------------------------------------------
Total $34,187 $56,202
================================================================================
For measurement purposes, an assumed annual rate of increase in the per capita
cost of covered health care benefits ranged from 5.9% to 8.0% for non-Medicare
eligible participants (a range of 5.3% to 7.6% was used for Medicare eligible
participants). These rates were assumed to decrease gradually to 5.0% for most
participants by 2001 and remain at that level thereafter. The health care cost
trend rate assumption has an effect on the amounts reported. A one percentage
point increase in the assumed health care cost trend rates each year would
increase the accumulated postretirement benefit obligation as of October 31,
1998 by $3,900 and the aggregate service cost and interest cost components of
the net periodic postretirement benefit cost for the year by $400.
Postretirement life insurance benefits have a minimal effect on the total
benefit obligation.
In 1993, the board of directors of the Company approved a general approach
that would culminate in the elimination of all Company contributions towards
postretirement health care benefits. Increases in costs paid by the Company were
capped for certain plans beginning in 1994 extending through 1998 and Company
contributions will be eliminated on January 1, 1999 for most employee groups,
excluding Joy. For Joy, based upon existing plan terms, future eligible retirees
will participate in a premium cost-sharing arrangement which is based upon age
as of March 1, 1993 and position at the time of retirement. Active employees
under age 45 as of March 1, 1993 and any new hires after April 1, 1993 will be
required to pay 100% of the applicable premium.
Net periodic postretirement benefit cost includes the following components:
1998 1997 1996
- --------------------------------------------------------------------------------
Service cost $173 $163 $327
Interest cost on accumulated
postretirement benefit obligation 3,850 4,743 5,632
Amortization of prior service (credit) (11,903) (12,810) (10,780)
Net amortization and deferral (6,738) (2,943) (2,624)
- --------------------------------------------------------------------------------
Net periodic postretirement benefit cost $(14,618) $(10,847) $(7,445)
================================================================================
Note 10
Shareholders' Equity and Stock Options
The Company's authorized common stock amounts to 150,000,000 shares. A Preferred
Stock Purchase Right is attached to each share of common stock which entitles a
shareholder to exercise certain rights in the event a person or group acquires
or seeks to acquire 15% or more of the outstanding common stock of the Company.
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 October 31, 1998, the Company had repurchased 1,772,900 shares
through open-market transactions at a cost of approximately $68,263. No shares
were repurchased under this program during the latter part of 1998.
In May, 1998, the Emerging Issues Task Force ("EITF") issued EITF 97-14
which addresses the accounting for deferred compensation arrangements where
amounts earned by an employee are invested in the employer's stock and placed in
a "rabbi trust". In September 1998, 621,149 shares in the Company's Deferred
Compensation Trust were distributed including 479,302 shares distributed to the
Company to fund withholding tax liabilities. Shares not distributed and
remaining in the Company's Deferred Compensation Trust (145,251 shares) relate
to the Directors Plan and to inactive employees and are considered as treasury
stock with an offset to compensation liability. Consistent with the EITF, since
the plan permits diversification for settlement in cash, Company shares or
diversified assets, the Company will mark to market the liability to reflect the
market value of the shares remaining in the trust.
In fiscal 1997, the Company adopted the disclosure requirements of SFAS No.
123, "Accounting for Stock-Based Compensation," but elected to continue to
measure compensation cost using the intrinsic value method, in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, no compensation cost for stock options has been
recognized. If compensation cost had been determined based on the estimated fair
value of options granted in 1996, 1997, and 1998 consistent with the methodology
in SFAS No. 123, the pro forma effects on the Company's net income and earnings
per share would not have been material.
The fair value of each option granted in 1996, 1997 and 1998 was estimated
using the Black-Scholes option-pricing method with the following weighted
average assumptions:
1998 1997 1996
- --------------------------------------------------------------------------------
Expected stock price volatility 30.45% 29.45% 29.45%
Risk-free interest rate 4.6% 6.5% 6.5%
Expected life of options 7 years 7 years 7 years
Expected dividends $0.40 per share $0.40 per share $0.40 per share
- --------------------------------------------------------------------------------
In 1997, the Company established a new long-term incentive compensation plan
which covers a limited number of key senior executives of the Company. The plan,
which replaces traditional stock options for these participants, consists of
awards of up to an aggregate of 1,200,000 shares based upon achievement of
pre-established stock price improvement factors. The base stock price was set at
$40.87 per share. The minimum requirements of the plan call for a portion of the
shares to be awarded if a 30% increase in stock price occurs within three years.
The shares shall be fully awarded if the stock price increases 50% within three
years or 70% within five years. As the stock price has declined since inception
of the plan, no compensation expense was recorded in fiscal 1998 or 1997.
In 1998, addressing concerns expressed by certain shareholders with the
cliff vesting feature of the plan, the Company modified the plan to include a
change-of-control feature. In the event of a change of control, awards would be
made at prices below the minimum prices stated in the plan.
At the April 9, 1996 annual meeting, shareholders approved a new Stock
Incentive Plan. This plan provides for the granting, up to April 9, 2006, of
qualified and non-qualified options, stock appreciation rights, restricted stock
and performance units to key employees for not more than 2,000,000 shares of
common stock. Non-qualified options covering 1,133,302 shares were granted under
the plan in 1998, including 479,302 shares which were granted, in connection
with the EITF 97-14 distribution described above.
The Company's 1988 Incentive Stock Plan provides for the granting of
qualified and non-qualified options, stock appreciation rights and restricted
stock to key employees for not more than 3,600,000 shares of common stock. In
fiscal 1996, non-qualified options and restricted stock covering 4,000 and
347,857 shares, respectively, were granted under this plan. The restricted stock
was issued in connection with the cancellation of the employment contracts of
certain senior executive officers, and provided that shares would be forfeited
if the officer voluntarily terminated employment before age 55. During 1997, the
shares were surrendered in exchange for comparable payment rights based on stock
held in the Company's Deferred Compensation Trust. These shares were distributed
in 1998 in connection with its EITF 97-14 distribution discussed above, subject
to the restriction that the recipients would not sell the shares as long as they
remain employees of the Company. Following shareholder approval of the 1996
Stock Incentive Plan, the 1988 Incentive Stock Plan terminated for the granting
of future awards.
Since the inception of the 1978 and 1988 Incentive Stock Plans and the 1996
Stock Incentive Plan, options for the purchase of 5,293,707 shares have been
granted at prices ranging from $6.75 to $47.00 per share. At October 31, 1998,
2,111,030 of the options were outstanding, 1,962,842 had been exercised and
1,219,835 had expired. Generally, the options become exercisable in cumulative
installments of one-fourth of the shares in each year beginning six months from
the date of the grant.
Certain information regarding stock options is as follows:
Number Weighted Average
of Shares Price Per Share
- --------------------------------------------------------------------------------
Outstanding at October 31, 1995 1,444,286 $23.88
Granted 494,900 37.83
Exercised (320,172) 20.97
Canceled or expired (120,680) 23.86
- --------------------------------------------------------------------------------
Outstanding at October 31, 1996 1,498,334 29.11
Granted 30,000 43.29
Exercised (301,072) 23.80
Canceled or expired (67,491) 30.37
- --------------------------------------------------------------------------------
Outstanding at October 31, 1997 1,159,771 30.78
Granted 1,133,302 17.73
Exercised (61,767) 21.33
Canceled or expired (120,276) 34.52
- --------------------------------------------------------------------------------
Outstanding at October 31, 1998 2,111,030 23.84
- --------------------------------------------------------------------------------
Exercisable at October 31, 1998 1,239,052 $20.76
================================================================================
The weighted average contractual life of options outstanding at October 31, 1998
is 8.41 years with exercise prices ranging from $6.85 to $44.50.
Following a "Dutch auction" self-tender offer in May, 1993, the Company
purchased for cash 2,500,000 shares of common stock, or approximately 9% of
shares of common stock outstanding at that time, at $195/8 per share, in
conjunction with the establishment of the Harnischfeger Industries, Inc. Stock
Employee Compensation Trust ("SECT"). Concurrent with the purchase, the Company
sold 2,547,771 shares of common stock held in treasury to the SECT, amounting to
$50,000 at $195/8 per share. The purchase of the treasury shares reduced
shareholders' equity. The sale of the treasury shares to the SECT had no impact
on such equity. Shares in the SECT are being used to fund future employee
benefit obligations under plans that currently require shares of Company common
stock.
Shares owned by the SECT are accounted for as treasury stock until issued
to existing benefit plans; they are reflected as a reduction to shareholders'
equity. Shares owned by the SECT are valued at the closing market price each
period, with corresponding changes in the SECT balance reflected in capital in
excess of par value. Shares in the SECT are not considered outstanding for
computing earnings per share.
Note 11
Operating Leases
The Company leases certain plant, office and warehouse space as well as
machinery, vehicles, data processing and other equipment. Certain of the leases
have renewal options at reduced rates and provisions requiring the Company to
pay maintenance, property taxes and insurance. Generally, all rental payments
are fixed. The Company's assets and obligations under capital lease arrangements
are not significant.
Total rental expense under operating leases, excluding maintenance, taxes
and insurance, was $24,468, $23,973 and $25,570 in 1998, 1997 and 1996,
respectively.
At October 31, 1998, the future payments for all operating leases with
remaining lease terms in excess of one year, and excluding maintenance, taxes
and insurance, were as follows:
1999 $28,271
2000 20,437
2001 14,478
2002 11,546
2003 10,340
2004 and thereafter 71,823
- --------------------------------------------------------------------------------
Note 12
Commitments, Contingencies and Off-Balance-Sheet Risks
At October 31, 1998, the Company was contingently liable to banks, financial
institutions and others for approximately $479,000 for outstanding letters of
credit securing performance of sales contracts and other guarantees in the
ordinary course of business. The Company may also guarantee performance of its
equipment at levels specified in sales contracts without the requirement of a
letter of credit.
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. 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 (See Note 19 -- Potlatch for additional
information.)
The Company and its senior executives have been named as defendants in
three purported class action suits, entitled Great Neck Capital Appreciation
Investment Partnership, L.P. v. Jeffery T. Grade, et al., C. William Carter v.
Harnischfeger Industries, Inc.et al., and Norman Ellison v. Jeffery T. Grade, et
al., filed on June 5, 1998, June 11, 1998 and July 21, 1998, respectively, in
the United States District Court for the Eastern District of Wisconsin. These
actions, which have now been consolidated, seek damages in an unspecified amount
on behalf of an alleged class of purchasers of the Company's common stock, based
principally on allegations that the Company's disclosures with respect to the
Indonesian contracts of Beloit (discussed in Note 18 -- Beloit APP Contracts)
violated the federal securities laws.
The Company's ability to realize the unbilled receivables that is discussed
in Note 18 -- Beloit APP Contracts.
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.
The Company has entered into various foreign currency exchange contracts
with major international financial institutions designed to minimize its
exposure to exchange rate fluctuations on foreign currency transactions. These
contracts are used to hedge known cash receipts and disbursements in the
ordinary course of business. At October 31, 1998, the outstanding net U.S.
dollar face amounts of contracts to cover sales and purchase activity totaled
approximately $43,000. In addition, at October 31, 1998, the Company had
outstanding foreign exchange contracts totaling $11,785 to cover interest and
borrowing obligations. The difference between contract and estimated fair values
at October 31, 1998 was not significant. It is the Company's policy not to enter
into highly leveraged transactions or other "derivative" instruments.
Note 13
Disclosure About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents: The carrying value approximates fair value
because of the short maturity of those instruments.
Long-Term Obligations: The fair value of the Company's long-term obligations has
been based on prevailing market quotations and by discounting cash flows using
current market yields quoted on similar issues. The estimated fair values of the
Company's financial instruments at October 31, 1998 and 1997 are as follows:
1998 Carrying Value Fair Value
- -------------------------------------------------------
Cash and Cash Equivalents $30,012 $30,012
- -------------------------------------------------------
Long-Term Obligations (1,001,573)(1,042,130)
=======================================================
1997 Carrying Value Fair Value
- -------------------------------------------------------
Cash and Cash Equivalents $29,383 $29,383
=======================================================
Long-Term Obligations (725,193) (769,361)
Note 14
Transactions With Affiliated Companies
Mitsubishi Heavy Industries, Ltd. ("Mitsubishi") owns a 20% interest in Beloit
In connection with this ownership interest, Mitsubishi entered into certain
agreements that provide it with the right to designate one of Beloit's five
directors. The agreements also place certain restrictions on the transfer of
Beloit stock. In the event of change in control of the the company to someone
engaged in the pulp and paper machinery business, Mitsubishi has the right to
sell its 20% interest back to the Company for the greater of $60,000 or the book
value of its equity interest. Transactions with related parties for the years
ending October 31 were as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Sales $3,449 $3,965 $1,267
Purchases 14,091 39,413 223
Receivables 7,017 8,291 6,306
Payables 5,092 18,994 41
License Income 4,666 7,831 7,127
- --------------------------------------------------------------------------------
The Company believes that its transactions with related parties were competitive
with alternate sources of supply for each party involved.
Note 15
Segment Information
The Company designs, manufactures, markets and services products structured into
two industry segments. The "Mining Equipment Segment" consists of P&H Mining
Equipment and Joy. P&H Mining Equipment designs, manufactures and markets
electric mining shovels, electric and diesel-electric draglines, buckets, large
rotary blasthole drilling equipment and related replacement parts for the
surface mining and quarrying industries. Joy designs, manufactures and
distributes continuous miners, longwall shearers, roof supports, face conveyors,
shuttle cars and flexible conveyor train continuous haulage systems for use in
the underground extraction of coal and other minerals. In addition, Joy
engineers, manufactures and markets worldwide a highwall mining system for the
extraction of coal from exposed surface seams in the walls of surface coal
mines, trenches and mountainside benches. It also rebuilds and services
installed equipment and sells spare parts for the equipment it manufactures.
The "Pulp and Paper Machinery Segment" (Beloit Corporation) designs,
manufactures, services and markets papermaking machinery and allied equipment
for the pulp and paper industries. Sales to a Pacific Rim customer in this
segment approximated 5% and 15% of the Company's consolidated net sales for
fiscal 1998 and 1997, respectively, and the related accounts receivable from
this customer approximated 26% and 25% of consolidated accounts receivable at
October 31, 1998 and October 31, 1997, respectively.
Intersegment sales are not significant. Corporate assets include
principally cash, cash equivalents, and administration facilities.
<TABLE>
<CAPTION>
Segments of Business by Industry
Total Operating Depreciation and Capital Identifiable
Sales Income(Loss) Amortization Expenditures Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Mining Equipment $1,212,307 $81,984 $43,015 $53,459 $1,407,193
Pulp and Paper Machinery 829,753 (368,689)(1) 42,371 80,289 1,326,722
- -------------------------------------------------------------------------------------------------------------------------
Total continuing operations 2,042,060 (286,705) 85,386 133,748 2,733,915
Corporate -- (20,591) 1,374 177 53,344
- -------------------------------------------------------------------------------------------------------------------------
Consolidated total $2,042,060 $(307,296) $86,760 $133,925 $2,787,259
=========================================================================================================================
1997
Mining Equipment $1,467,341 $201,803 $41,231 $61,004 $1,371,484
Pulp and Paper Machinery 1,267,847 76,485(2) 45,122 53,616 1,240,764
- -------------------------------------------------------------------------------------------------------------------------
Total continuing operations 2,735,188 278,288 86,353 114,620 2,612,248
Discontinued operation -- -- -- -- 232,559
Corporate -- (25,015) 1,108 11,781 79,728
- -------------------------------------------------------------------------------------------------------------------------
Consolidated total $2,735,188 $253,273 $87,461 $126,401 $2,924,535
=========================================================================================================================
1996
Mining Equipment $1,405,936 $183,141 $44,051 $23,938 $1,362,435
Pulp and Paper Machinery 1,134,779 48,511(3) 38,788 39,769 1,023,819
- -------------------------------------------------------------------------------------------------------------------------
Total continuing operations 2,540,715 231,652 82,839 63,707 2,386,254
Discontinued operation -- -- -- -- 204,412
Corporate -- (20,740) 538 12,848 99,363
- -------------------------------------------------------------------------------------------------------------------------
Consolidated total $2,540,715 $210,912 $83,377 $76,555 $2,690,029
</TABLE>
(1) After anticipated losses on contracts of $127,400, settlement of a contract
dispute of $37,000 and a restructuring charge of $65,000.
(2) After anticipated losses on contracts of $27,600. (3) After restructuring
charge of $43,000.
<TABLE>
<CAPTION>
Geographical Segment Information
Sales to
Total Interarea Unaffiliated Operating Identifiable
Sales Sales Customers Income (Loss) Assets
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
United States $1,555,951 $(400,889) $1,155,062 $(259,319) $2,149,597
Europe 439,286 (137,181) 302,105 (38,941) 615,290
Other Foreign 675,539 (90,646) 584,893 (30,563) 397,881
Interarea Eliminations (628,716) 628,716 -- 42,118 (428,853)
- -------------------------------------------------------------------------------------------------------------------------
$2,042,060 $-- $2,042,060 $(286,705) $2,733,915
=========================================================================================================================
1997
United States $1,915,675 $(280,314) $1,635,361 $187,838 $1,651,129
Europe 661,159 (161,063) 500,096 107,967 632,465
Other Foreign 609,306 (9,575) 599,731 47,787 412,283
Interarea Eliminations (450,952) 450,952 -- (65,304) (83,629)
$2,735,188 $-- $2,735,188 $278,288 $2,612,248
=========================================================================================================================
1996
United States $1,646,964 $(212,543) $1,434,421 $131,377 $1,333,461
Europe 734,780 (155,323) 579,457 78,838 655,073
Other Foreign 551,479 (24,642) 526,837 47,917 442,618
Interarea Eliminations (392,508) 392,508 -- (26,480) (44,898)
- -------------------------------------------------------------------------------------------------------------------------
$2,540,715 $-- $2,540,715 $231,652 $2,386,254
=========================================================================================================================
</TABLE>
Exports of U.S.-produced products were approximately $302,000, $480,000 and
$304,000 in 1998, 1997 and 1996, respectively.
Note 16
Discontinued Operations
On March 30, 1998, the Company completed the sale of approximately 80% of the
common stock of the Company's Material Handling segment to Chartwell
Investments, Inc. in a leveraged recapitalization transaction. As such, the
accompanying financial statements have been reclassified to reflect Material
Handling as a discontinued operation. The Company retained approximately 20% of
the outstanding common stock and 11% of the outstanding voting securities of
Material Handling and holds one board of director seat in the new company. In
addition, the Company has licensed Material Handling to use the "P&H" trademark
on existing Material Handling-produced products on a worldwide basis for periods
specified in the agreement for a royalty fee payable over a ten year period. The
Company reported a $151,500 after-tax gain on the sale of this discontinued
operation in the second quarter of fiscal 1998. Proceeds consisted of $341,000
in cash and $4,800 in preferred stock with a 12.25% Payment-in-Kind dividend;
$7,200 in common stock was not reflected in the Company's balance sheet or gain
calculations due to the nature of the leveraged recapitalization transaction.
Taxes on the sale amounted to $45,000. Net assets disposed of in the sale
aggregated $139,300.
Operating results of the discontinued operation as of October 31 were as
follows:
5 months
1998 1997 1996
- --------------------------------------------------------------------------------
Net sales $130,546 $353,350 $323,216
Income before income taxes 6,631 38,001 32,862
Minority interest -- (18) (45)
Income tax provision (2,255) (12,920) (11,502)
- --------------------------------------------------------------------------------
Net income $4,376 $25,063 $21,315
Note 17
Earnings Per Share
In the first quarter of fiscal 1998, the Company adopted 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:
<TABLE>
<CAPTION>
For the Years Ended October 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic Earnings Per Share
Income (loss) from continuing operations $(174,409) $113,217 $92,902
Income from discontinued operation 4,376 25,063 21,315
Gain on sale of discontinued operation 151,500 -- --
Extraordinary loss on retirement of debt -- (12,999) --
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(18,533) $125,281 $114,217
===========================================================================================================================
Average common shares outstanding 46,445 47,827 47,196
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $(3.75) $2.37 $1.97
Income from and net gain on sale of discontinued operation 3.35 0.52 0.45
Extraordinary loss on retirement of debt -- (0.27) --
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(0.40) $2.62 2.42
===========================================================================================================================
Diluted Earnings Per Share
Income (loss) from continuing operations $(174,409) $113,217 $92,902
Income from discontinued operation 4,376 25,063 21,315
Gain on sale of discontinued operation 151,500 -- --
Extraordinary loss on retirement of debt -- (12,999) --
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(18,533) $125,281 $114,217
===========================================================================================================================
Average common shares outstanding :
Common stock 46,445 47,827 47,196
Options -- 434 369
- ---------------------------------------------------------------------------------------------------------------------------
46,445 48,261 47,565
===========================================================================================================================
Income (loss) from continuing operations $(3.75) $2.35 $1.95
Income from and net gain on sale of discontinued operation 3.35 0.51 0.45
Extraordinary loss on retirement of debt -- (0.27) --
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $(0.40) $2.59 $2.40
</TABLE>
Note 18
================================================================================
Beloit APP Contracts
In fiscal 1997 and 1996, Beloit received orders for four fine paper machines
from Asia Pulp & Paper Co. Ltd. ("APP") for a total of approximately $600,000.
During the second quarter of fiscal 1998, the Company identified $155,000 of
additional estimated contract costs at Beloit related to these contracts. The
additional costs primarily related to non-proprietary equipment, installation
and erection, freight and other site construction costs, and overruns resulting
from changes in estimates of costs to complete related to these complex,
large-scale projects.
Based on its review of the $155,000, the Company, with the assistance of
its outside auditors, determined that $27,600 of this charge was properly
allocated to the fourth quarter of fiscal 1997 as it related to isolated costs
for piping which were inadvertently overlooked. Income for that period and the
full fiscal year of 1997 was restated to reflect this charge.
The first two machines have been substantially paid for and installed at
the APP facilities in Indonesia. The Company has sold approximately $44,000 of
its receivables from APP on these first two machines to a financial institution.
The machines are currently in the start-up/optimization phase and are required
to meet certain contractual performance tests. The contracts call for the
potential of liquidated damages, including performance damages, in certain
circumstances. The Company is currently in negotiation with APP on certain
claims and back charges on the first two machines.
The two remaining machines have been substantially manufactured, are in
Beloit's possession and are carried on the Consolidated Balance Sheet at October
31, 1998 as unbilled receivables approximating $180,000. This amount has been
reduced by a $46,000 down payment received from APP and $19,000 of receivables
that were sold to a financial institution. The Company has issued
letters-of-credit in the amount of the initial down payment. To date, APP has
been unable to secure financing for these two machines.
On December 15, 1998, the Company declared APP in default on the contracts
for the two remaining machines, concluding that APP has not acted in good faith
and is unwilling to pay its obligations or is incapable of securing financing
for these two paper machines. Consequently, on December 15, 1998, the Company
filed for arbitration in Singapore for the full payment from APP for the second
two machines as well as at least $125,000 in damages and delay costs.
On December 16, 1998, APP filed a notice of arbitration in Singapore
against Beloit seeking a full refund of approximately $46,000 paid to Beloit for
the second two machines, claiming that Beloit breached an obligation under the
purchase contracts to secure financing, thus resulting in termination. APP also
seeks recovery of other damages alleged by APP caused by Beloit's claimed
breaches. In addition, APP seeks a declaration in the arbitration that it has no
liability under certain promissory notes. The Company will vigorously defend
against all of APP's assertions that it is entitled to a return of payments
under the contracts and also will proceed without delay to mitigate APP's
obligations for damages by finding other customers for these world-class
machines.
The Company intends to vigorously pursue its rights under the contracts and
expects to be fully compensated for these two machines from APP. However, in the
event that the Company is unsuccessful in arbitration and to mitigate APP's
damages, the Company is pursuing selling these two machines to other customers.
Proceeds from the ultimate sale of these paper machines, if required, are
expected to be sufficient to substantially recover the carrying value of the
receivable. In the event the Company is unsuccessful in arbitration and/or is
unable to sell these paper machines to another customer, it may have a
materially adverse effect on its consolidated financial position or results of
operations.
Note 19 Potlatch
A claim 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 which, together with fees, costs and interest to
October 31, 1998, approximate $116,000. Beloit has appealed this award to the
Idaho Supreme Court. The appeal was heard by the Court on September 10, 1998
with a decision anticipated in the first half of fiscal 1999. The Company
considers the eventual outcome of the Potlatch case not to be estimable.
Reserves in the October 31, 1998 Consolidated Balance Sheet are less than the
sales price of the washers. The possible ultimate cost to the Company of this
case could be materially higher than the reserves. In the event the Company is
unsuccessful in its request for a new trial in this matter, it may have a
material adverse effect on its consolidated financial position or results of
operations.
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices (Dollar amounts in thousands
except per share and market price amounts)
Fiscal Quarter 1998
First Second Third Fourth Year
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $557,844 $477,839 $503,169 $503,208 $2,042,060
Gross Profit 53,244 42,985 59,173 37,163 192,565
Operating (Loss) (34,583) (136,438) (54,311) (81,964) (307,296)
(Loss) from Continuing Operations (24,971) (72,826) (38,604) (38,008) (174,409)
Income from Discontinued Operation 3,404 972 -- -- 4,376
Gain on Sale of Discontinued Operation -- 151,500 -- -- 151,500
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $(21,567) $79,646 $(38,604) $(38,008) $(18,533)
=========================================================================================================================
Earnings Per Share -- Basic
(Loss) from continuing operations $(0.53) $(1.57) $(0.83) $(0.82) $(3.75)
Income from and net gain on sale
of discontinued operation 0.07 3.28 -- -- 3.35
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $(0.46) $1.71 $(0.83) $(0.82) $(0.40)
=========================================================================================================================
Earnings Per Share -- Diluted
(Loss) from continuing operations $(0.53) $(1.57) $(0.83) $(0.82) $(3.75)
Income from and net gain on sale of
discontinued operation 0.07 3.28 -- -- 3.35
Net Income (Loss) $(0.46) $1.71 $(0.83) $(0.82) $(0.40)
=========================================================================================================================
Market price of common stock:
High $40 $35 15/16 $32 $24 7/8 $40
Low 32 5/32 27 24 13/16 6 1/8 6 1/8
Fiscal Quarter 1997
First Second Third Fourth Year
- -------------------------------------------------------------------------------------------------------------------------
Net Sales $619,429 $697,506 $704,212 $714,041 $2,735,188
Gross Profit 152,584 165,524 163,990 145,143 627,241
Operating Income 60,304 80,918 66,586 45,465 253,273
Income from Continuing Operations 26,332 38,128 30,072 18,685 113,217
Income from Discontinued Operation 4,526 6,843 5,818 7,876 25,063
Extraordinary Loss on Retirement of Debt -- -- -- (12,999) (12,999)
- -------------------------------------------------------------------------------------------------------------------------
Net Income $30,858 $44,971 $35,890 $13,562 $125,281
=========================================================================================================================
Earnings Per Share -- Basic
Income from continuing operations $0.55 $0.80 $0.63 $0.39 $2.37
Income from discontinued operation 0.10 0.14 0.12 0.16 0.52
Extraordinary loss on retirement of debt -- -- -- (0.27) (0.27)
Net Income $0.65 $0.94 $0.75 $0.28 $2.62
=========================================================================================================================
Earnings Per Share -- Diluted
Income from continuing operations $0.55 $0.79 $0.62 $0.39 $2.35
Income from discontinued operations 0.09 0.14 0.12 0.16 0.51
Extraordinary loss on retirement of debt -- -- -- (0.27) (0.27)
- -------------------------------------------------------------------------------------------------------------------------
Net Income $0.64 $0.93 $0.74 $0.28 $2.59
=========================================================================================================================
Market price of common stock:
High $50 $49 1/4 $43 7/8 $44 13/16 $50
Low 39 1/2 40 38 7/8 37 15/16 37 15/16
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
(Dollar amounts in thousands except per share amounts)
Years Ended October 31, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Net Sales $2,042,060 $2,735,188 $2,540,715 $1,912,197 $1,442,299
Other Income 12,052 27,181 21,026 28,442 22,678
- -------------------------------------------------------------------------------------------------------------------------
2,054,112 2,762,369 2,561,741 1,940,639 1,464,977
Cost of Sales, including anticipated
losses on contracts 1,849,495 2,107,947 1,919,378 1,488,440 1,115,518
Product Development, Selling
and Administrative Expenses 446,913 401,149 388,451 293,684 261,391
Restructuring Charge 65,000 -- 43,000 -- --
- -------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) (307,296) 253,273 210,912 158,515 88,068
Interest Expense-- Net (81,340) (72,145) (62,013) (40,513) (47,231)
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Joy Merger Costs,
Gain on Sale of Measurex Investment,
(Provision) Benefit For Income
Taxes and Minority Interest (388,636) 181,128 148,899 118,002 40,837
Joy Merger Costs -- -- -- (17,459) --
Gain on Sale of Measurex Investment -- -- -- 29,657 --
(Provision) Benefit for Income Taxes 160,300 (61,555) (52,098) (45,572) (11,599)
Minority Interest 53,927 (6,356) (3,899) (7,230) (2,224)
Income (Loss) from Continuing Operations (174,409) 113,217 92,902 77,398 27,014
Income (Loss) from and Net Gain (Loss)
on Sale of Discontinued Operations,
net of applicable income taxes 155,876 25,063 21,315 (16,513) 5,597
Extraordinary Loss on Retirement of Debt,
net of applicable income taxes -- (12,999) -- (3,481) (4,827)
Cumulative Effect of Accounting Change,
net of applicable income
taxes and minority interest -- -- -- -- 81,696)
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $(18,533) $125,281 $114,217 $57,404 $(53,912)
=========================================================================================================================
Earnings Per Share -- Basic
Income (loss) from continuing operations $(3.75) $2.37 $1.97 $1.67 $0.62
Income (loss) from and net gain (loss)
on sale of discontinued operations 3.35 0.52 0.45 (0.35) 0.13
Extraordinary loss on retirement of debt -- (0.27) -- (0.08) (0.11)
Cumulative effect of accounting change -- -- -- -- (1.87)
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $(0.40) $2.62 $2.42 $1.24 $(1.23)
=========================================================================================================================
Earnings Per Share -- Diluted
Income (loss) from continuing operations $(3.75) $2.35 $1.95 $1.66 $0.62
Income (loss) from and net gain (loss)
on sale of discontinued operations 3.35 0.51 0.45 (0.35) 0.13
Extraordinary loss on retirement of debt -- (0.27) -- (0.08) (0.11)
Cumulative effect of accounting change -- -- -- -- (1.87)
Net income (loss) per common share $(0.40) $2.59 $2.40 $1.23 $(1.23)
=========================================================================================================================
Average Shares Outstanding
Basic 46,445 47,827 47,196 46,218 43,716
Diluted 46,445 48,261 47,565 46,659 43,716
- -------------------------------------------------------------------------------------------------------------------------
Dividends Per Common Share $0.40 $0.40 $0.40 $0.40 $0.40
=========================================================================================================================
Bookings $1,997,035 $2,762,246 $2,675,888 $1,988,692 $1,499,242
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
(Dollar amounts in thousands except per share amounts)
Years Ended October 31, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working Capital:
Current assets $1,463,144 $1,588,712 $1,410,250 $1,213,390 $1,043,401
Current liabilities 1,026,280 1,180,497 1,077,127 723,303 612,076
- -------------------------------------------------------------------------------------------------------------------------
Working capital $436,864 $408,215 $333,123 $490,087 $431,325
Current ratio 1.4 1.3 1.3 1.7 1.7
=========================================================================================================================
Plant and Equipment
Net properties $631,328 $657,100 $634,045 $487,656 $490,237
Capital expenditures 133,925 126,401 76,555 67,875 46,907
Depreciation expense 66,769 67,156 63,342 53,008 56,105
- -------------------------------------------------------------------------------------------------------------------------
Total assets $2,787,259 $2,924,535 $2,690,029 $2,040,767 $1,981,953
Debt and Capitalized
Lease Obligations
Long-term obligations (1) $1,001,573 $725,193 $662,137 $462,991 $571,054
Short-term notes payable 117,607 214,126 45,261 18,921 14,419
- -------------------------------------------------------------------------------------------------------------------------
$1,119,180 $939,319 $707,398 $481,912 $585,473
=========================================================================================================================
Minority Interest $43,838 $97,724 $93,652 $89,611 $85,570
- -------------------------------------------------------------------------------------------------------------------------
Debt to Capitalization Ratio (2) 61.2% 52.6% 48.0% 42.6% 49.9%
=========================================================================================================================
Shareholders' Equity $666,850 $749,660 $673,485 $559,276 $502,365
Book value per share $14.52 $15.93 $14.15 $11.98 $11.04
Common shares outstanding (3) 45,915,942 47,046,328 47,598,340 46,693,061 45,503,451
=========================================================================================================================
Number of (End of Year):
Employees 13,700 17,700 17,100 14,000 14,900
Common Shareholders of Record 2,100 1,861 1,972 2,114 2,261
=========================================================================================================================
(1) Includes amounts classified as current portion of long-term obligations (2)
Total debt to total debt, minority interest and shareholders' equity (3) As of
end of year, excluding SECT shares
</TABLE>
Report of Independent Accountants
PricewaterhouseCoopers LLP
To The Directors and Shareholders of Harnischfeger Industries, Inc.
In our opinion, the consolidated financial statements appearing on pages 27 to
43 of this report present fairly, in all material respects, the financial
position of Harnischfeger Industries, Inc. and its subsidiaries (the "Company")
at October 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended October 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/PricewaterhouseCoopers
Milwaukee, Wisconsin
December 8, 1998, except as to note 18, which is as of December 16, 1998
EXHIBIT 21
HARNISCHFEGER INDUSTRIES, INC.
SUBSIDIARIES
October 31, 1998
Harnischfeger Industries, Inc. is public held and has no parent. The
following subsidiaries are wholly-owned except as noted below. Certain
subsidiaries, which if considered in the aggregate as a single subsidiary would
not constitute a significant subsidiary, are omitted from this list.
Description(1)
Jurisdiction
Beloit Corporation (2) ....................................... Delaware
Beloit Canada Ltd./Ltee (3) ................................ Canada
Joy Technologies Canada Inc. (4) ......................... Canada
Harnischfeger Corporation of Canada, Ltd. (5) .......... Canada
Beloit Industrial Ltda. (6) ................................ Brazil
Beloit Poland S.A. (7) ..................................... Poland
Beloit Fast Service S.A. (8) ........................... Poland
Beloit Pulping Group, Inc. ................................. Delaware
BWRC, Inc. ................................................. Delaware
Beloit Africa (Proprietary) Limited .................... South Africa
Beloit Asia Pacific (M) Inc. ........................... Mauritius
Beloit Xibe Roll Covering Company, Ltd. (9) ........ China
Beloit Asia Pacific (T) Co., Ltd. ...................... Thailand
Beloit Europe GmbH ..................................... Switzerland
Beloit Italia S.p.A. (10) .............................. Italy
Beloit Nippon Ltd. (11) ................................ Japan
Beloit Walmsley Limited ................................ United Kingdom
Beloit Austria GmbH .................................... Austria
Optical Alignment Systems and Inspection Services, Inc. New Hampshire
Sandusky International, Inc. (12) ...................... Ohio
Princeton Paper Company LLC ............................ Illinois
Kuesters Beloit, LLC (13) ............................... Illinois
Paperchine Insurance Ltd. .............................. Bermuda
Harnischfeger Corporation .................................... Delware
HCHC Inc. .................................................. Delaware
Harnischfeger de Chile Limitada (14) ................... Chile
Harnischfeger Mexico Holdings S.A. de C.V. (15) ........ Mexico
Harnischfeger of Australia Pty. Ltd. (16) .............. Australia
Harnischfeger do Brasil Comercio e Industria Ltda. ..... Brazil
Harnischfeger Venezuela, S.A. .......................... Venezuela
The Horsburgh & Scott Company .............................. Ohio
American Alloy Company ................................. Ohio
Uralmash-Harnischfeger, LLC (17) ........................... Illinois
Joy Technologies Inc. ........................................ Delaware
Harnischfeger (South Africa) (Proprietary) Limited ......... South Africa
HCHC UK Holdings, Inc. ..................................... Delaware
Joy Mining Machinery Limited .......................... United Kingdom
Joy Manufacturing Company Pty. Limited ..................... Australia
Cram Australia Pty. Limited ............................ Australia
(1) Where the name of the subsidiary is indented, it is wholly-owned by its
immediate parent listed after the margin above it, unless otherwise
indicated. (2) Harnischfeger Industries, Inc. owns 80% of the voting
securities of Beloit Corporation (3) Beloit Corporation owns 70% of the
voting securities of Beloit Canada Ltd./Ltee. Harnischfeger Corporation,
Joy Technologies Inc., and Joy Technologies Canada Inc. each own 10% of the
voting securities of Beloit Canada Ltd./Ltee. (4) Beloit Canada Ltd./Ltee.
owns 90% and Joy Technologies Inc. owns 10% of the voting securities of Joy
Technologies Canada Inc. (5) Joy Technologies Canada Inc. owns 90% and
Harnischfeger Corporation owns 10% of the voting securities of
Harnischfeger Corporation of Canada Limited. (6) Beloit Corporation owns
45% of the voting quotas and 100% of the non-voting quotas of Beloit
Industrial Ltda. This gives Beloit Corporation 82.1% ownership of Beloit
Industrial Ltda. (7) Beloit Corporation owns 99.90% of the voting
securities of Beloit Poland S.A. (8) Beloit Poland S.A. owns 71.3% of the
voting securities of Beloit Fast Service S.A. (9) Beloit Asia Pacific (M)
Inc. owns 65% and Beloit Corporation owns 25% of the voting securities of
Beloit Xibe Roll Covering Company, Ltd.
(10) BWRC, Inc. owns 99.98% of the voting securities of Beloit Italia S.p.A.
(11) BWRC, Inc. owns 50% of the voting securities of Beloit Nippon Ltd.
(12) BWRC, Inc. owns 50% of the voting securities of Sandusky
International, Inc.
(13) Beloit Corporation owns 45% of the voting securities of Kuesters
Beloit, LLC.
(14) HCHC, Inc. owns 90% and Harnischfeger Corporation owns 10% of the
voting securities of
Harnischfeger de Chile Limitada.
(15) HCHC, Inc. owns 90% and Harnischfeger Corporation owns 10% of the
voting securities of
Harnischfeger Mexico Holdings S.A. de C.V.
(16) HCHC, Inc. owns 75% of the voting securities of Harnischfeger of Australia
Pty. Ltd. (17) Harnischfeger Corporation owns 65% of the voting securities of
Uralmash-Harnischfeger, LLC.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 and in the
Registration Statements on Form S-8 listed below of Harnischfeger Industries,
Inc. of our report dated December 8, 1998, except as to Note 18, which is as of
December 16, 1998, appearing in this Annual Report on Form 10-K.
1. Registration Statement on Form S-8 (Registration No. 33-42833)
2. Registration Statement on Form S-8 (Registration No. 33-23985)
3. Registration Statement on Form S-8 (Registration No. 33-46738)
4. Registration Statement on Form S-8 (Registration No. 33-46739)
5. Registration Statement on Form S-8 (Registration No. 33-46740)
6. Registration Statement on Form S-8 (Registration No. 33-57209)
7. Registration Statement on Form S-3 (Registration No. 33-57979)
8. Registration Statement on Form S-8 (Registration No. 33-58087)
9. Registration Statement on Form S-8 (Registration No. 333-01703)
10. Registration Statement on Form S-8 (Registration No. 333-01705)
11. Registration Statement on Form S-3 (Registration No. 333-02401)
12. Registration Statement on Form S-8 (Registration No. 333-10327)
13. Registration Statement on Form S-8 (Registration No. 333-10329)
14. Registration Statement on Form S-3 (Registration No. 333-46429)
15. Registration Statement on Form S-8 (Registration No. 333-65577)
/s/PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
December 23, 1998
Exhibit 24
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, her attorney, with full power to act for her and in her name, place and
stead, to sign her name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Donna M. Alvarado
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such
Form 10-K Annual Report, hereby ratifying and confirming all that said attorney
may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ John D. Correnti
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Robert M. Gerrity
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Harry L. Davis
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Ralph C. Joynes
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Robert B. Hoffman
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ L. Donald LaTorre
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Stephen M. Peck
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Leonard E. Redon
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Jean-Pierre Labruyere
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of
them, his attorney, with full power to act for him and in his name, place and
stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Larry D. Brady
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
John N. Hanson or Francis M. Corby, Jr., and each or any of them, his attorney,
with full power to act for him and in his name, place and stead, to sign his
name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying
and confirming all that said attorney may or shall lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Jeffery T. Grade
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade or John N. Hanson, and each or any of them, his attorney, with
full power to act for him and in his name, place and stead, to sign his name in
the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ Francis M. Corby, Jr.
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1998; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Jeffery T. Grade, and Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name, place and stead, to
sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby
ratifying and confirming all that said attorney may or shall lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
seal this 7th day of December, 1998.
(SEAL)
/s/ John N. Hanson
Exhibit 27
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(Replace this text with the legend)
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<LEGEND>
(Replace this text with the legend)
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<NAME> Harnischfeger Industries, Inc.
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0
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<NAME> Harnischfeger Industries, Inc.
<MULTIPLIER> 1,000
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<BONDS> 752,697
0
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(Replace this text with the legend)
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<NAME> Harnischfeger Industries, Inc.
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0
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<NAME> Harnischfeger Industries, Inc.
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0
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