SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment Number One and Restatement of:
/X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
October 31, 1997.
/ / 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 (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
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 January 28, 1998, based on a
closing price of $35.50, was approximately $1,647.7 million.
The number of shares outstanding of Registrant's Common
Stock, as of January 28, 1998, was 47,811,544.
DOCUMENTS INCORPORATED BY REFERENCE
Part III is incorporated by reference from the Registrant's
proxy statement for the 1998 annual meeting of stockholders
dated February 23, 1998.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K/A
For The Year Ended October 31, 1997
Page
- ----
<S> <C> <C>
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 .........................................................
</TABLE>
The registrant hereby amends Parts I and II and Item 14 of
its Annual Report for the year ended October 31, 1997,
on Form 10-K and restates such report in its entirety
as so amended.
PART I
Item 1. Business
SEGMENTS OF BUSINESS
Harnischfeger Industries, Inc. ("Harnischfeger
Industries" 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); pulp and paper machinery (Beloit Corporation);
and material handling equipment (P&H Material Handling). In
early fiscal 1996, the Company completed the acquisition of
Dobson Park Industries plc ("Dobson"), an industrial
engineering group with interests in underground mining
equipment, industrial electronic control systems, toys and
plastics. Dobson's principal subsidiary, Longwall
International, is engaged in the manufacture, sale and
service of mining equipment for the international
underground coal mining industry and is being integrated
into the Company's Mining Equipment Segment. In March 1996,
the Company completed the purchase of the assets of the pulp
machinery division of Ingersoll-Rand Company.
Harnischfeger Industries is the direct successor to a
business begun over 100 years ago which, at October 31,
1997, through its subsidiaries, manufactures and markets
products classified into three industry segments: Mining
Equipment, Pulp and Papermaking Machinery, and Material
Handling. Each of the Company's three business segments made
strategic acquisitions during fiscal 1997. These
acquisitions enhanced the businesses' position in each of
their markets.
The following discussion contains forward looking
statements. Terms such as "anticipate", "believe",
"estimate", "expect", "indicate", "may be", "objective",
"plan", "predict", and "will be" are intended to identify
such statements. Forward-looking statements are subject
to certain risks, uncertainties and assumptions which
could cause actual results to differ materially from
those predicted. See "Cautionary Factors" at the end
of this Item 1.
MINING EQUIPMENT
P&H Mining Equipment is the world's largest producer of
electric mining shovels and walking draglines. In addition,
P&H Mining Equipment is a significant producer of hydraulic
mining excavators, 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 Mining Equipment are used in mines,
quarries and earth-moving operations in the digging and
loading of such minerals and other ores as coal, copper,
gold, iron ore, lead, zinc, bauxite, uranium, phosphate,
stone and clay.
P&H Mining Equipment has a relationship in the mining
shovel business with Kobe Steel, Ltd. ("Kobe") pursuant to
which P&H Mining Equipment licenses Kobe to manufacture
certain electric mining shovels and related replacement
parts in Japan. Harnischfeger Corporation has the exclusive
right to market Kobe-manufactured mining shovels and parts
outside Japan (except in the case of certain government
sales). In addition, Harnischfeger Corporation 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 Mining Equipment with an
opportunity to sell component parts for shovels built in
China.
On November 29, 1994, pursuant to an exchange of
common stock, the Company completed its acquisition of Joy
Technologies Inc. ("Joy" or "Joy Mining Machinery"), a world
leader in underground mining equipment. Joy 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
and the People's Republic of China. Joy Mining Machinery
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 seven service centers in the United States
and five outside of the United States, all of which are
strategically located in major underground mining regions.
The financial position and results of operations of
Harnischfeger Industries and Joy were combined retroactively
in fiscal 1995.
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.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in underground
mining equipment, industrial electronic control systems,
toys and plastics. Longwall International ("Longwall"), one
of the main subsidiaries of Dobson, 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 is fully integrating Longwall's operations into Joy,
thus enabling Joy to offer integrated underground longwall
mining systems to the worldwide mining industry. Several
non-mining businesses were designated as businesses held for
sale with the original value of these businesses being set
at $100 million. At October 31, 1997, one business remained
unsold with a net realizable value of $9.3 million. The
remaining business is expected to be sold within the next
year.
Financial information with respect to the acquisition
of Dobson is presented in Note 2 to the Consolidated
Financial Statements incorporated herein by reference to
Item 8 of this report.
PULP AND PAPER MACHINERY
The Pulp and Paper Machinery Division 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 a change in
control of the Company, 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 paper 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 engages 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 paper machinery sales. On March
27, 1996, the Company purchased the assets of the pulp
machinery division of Ingersoll-Rand Company ("IMPCO"),
which significantly strengthens Beloit's pulping equipment
offerings.
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 fourth quarter of fiscal 1996, Beloit recorded a
$43.0 million pre-tax restructuring charge to strategically
focus on improving financial returns and increase customer
satisfaction while significantly reducing costs and cycle
time. In fiscal 1997 and 1996, utilization of the
restructuring reserve totaled $29.8 million. It is expected
that the remaining restructuring actions will be
substantially completed by the end of fiscal 1998.
Financial information with respect to the Beloit
restructuring is presented in Note 3 to the Consolidated
Financial Statements incorporated herein by reference to Item
8 of this report.
Formerly, the Pulp and Paper Machinery Division also
included the Company's 20% interest in Measurex Corporation
("Measurex"). In fiscal 1995, Measurex repurchased its
stock which had been held by the Company resulting in a pre-
tax gain of $29.7 million.
P&H MATERIAL HANDLING
P&H Material Handling produces lines of through-the-air
material handling equipment designed for a variety of users
and container handling cranes for use in ports in addition
to providing aftermarket support and distribution and
service.
Engineered overhead cranes are comprised of several
product lines: engineered cranes, standard cranes, portal
cranes, ship-to-shore cranes, and crane components. Cranes
are designed for installation in a wide range of industrial
settings. Each crane is engineered to the customer's
specifications, using standard components wherever possible.
Engineered cranes are marketed for moderate to severe duty
cycle applications in capacities from 3 to 800 tons.
Standard overhead cranes are available in capacities
from 5 to 100 tons. Stacker cranes, ranging in capacities
from 2 to 50 tons, are particularly suitable for factory
automation projects. Portal cranes range in lifting
capacities from 5 to 100 tons and are used outdoors for
woodyard, scrap, and container handling.
P&H Material Handling has two groups specializing in
aftermarket support and distribution and service. The P&H
Aftermarket Group consists of Product Support, which markets
replacement products and repair parts and P&H
Modernizations, which handles pre-owned and remanufactured
cranes and parts plus provides engineering services for the
revitalization of crane and runway systems. P&H Distribution
and Service provides installation, erection and repair and
maintenance services under the ProCare(R) trademark.
DISCONTINUED SEGMENTS
Environmental
The Company completed the sale of Joy Environmental
Technologies ("JET") in the first quarter of 1996. JET was a
unit of Joy which supplied air pollution and ash handling
equipment for electric utilities and other industrial
operations.
Systems
Syscon Corporation ("Syscon"), the remaining unit in
the Company's Systems Group, was sold in February 1995 to
Logicon, Inc. Syscon was engaged principally in providing
systems development, systems integration and systems
services to the U. S. Government, government agencies and
commercial enterprises.
INTERNATIONAL OPERATIONS
Foreign sales of the Mining Equipment segment
generated approximately 59% of the segment's consolidated
net sales in 1997, 58% in 1996 and 44% in 1995.
In 1997, 1996 and 1995, Beloit's foreign sales amounted
to 57%, 53% and 41%, respectively, of Beloit's consolidated
net sales.
Foreign sales of the P&H Material Handling segment's
consolidated net sales amounted to 50% in 1997, 39% in 1996
and 48% in 1995.
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 Industries' 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 Industries
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 Industries'
business is subject to or influenced by seasonal factors;
however, the Company's business is influenced by the
cyclical nature of the paper, mining and capital goods
industries.
Distribution
P&H Mining Equipment and Joy Mining Machinery 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.
In the United States, overhead cranes and certain
electrical products are principally marketed directly from
the segments' headquarters and regional sales offices.
Electric wire rope and chain hoists and crane modernizations
are sold through dealers and distributors, assisted and
coordinated by corporate and regional office personnel. P&H
Material Handling has a dealer network of regional
distributorships (referred to as Material Handling Centers).
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 Industries 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 Mining Equipment's principal competitor in electric
mining shovels is Bucyrus International, Inc. Harnischfeger
Industries believes P&H Mining Equipment is the leading
participant in this market. Its principal competitors in the
hydraulic mining excavator market are Demag, Hitachi,
Caterpillar and Orenstein & Koppel. In draglines, the main
competitor is Bucyrus International, Inc. The Division's
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 the continuous mining
machinery industry are EIMCO, Voest Alpine(a Tampella
Tamrock Company), Simmons-Rand Company(a subsidiary of Long-
Airdox Company) and Jeffrey. In the longwall shearer new
equipment market, Joy competes primarily with Anderson
Longwall (a subsidiary of Long-Airdox Company), Eickhoff
Corporation, and Mitsui Miike Machinery Company, Ltd. In
the continuous haulage market, Joy competes with Long-
Airdox, Fairchild International 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 paper 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 small suppliers.
The principal worldwide competitors for P&H Material
Handling are Demag and Konecranes International KCI.
Harnischfeger Industries believes that P&H Material Handling
is one of the largest worldwide participants in this market.
When considering any specific geographic market, the
competitors would normally be split into overhead cranes,
dockside cranes, hoists, and service. There are significant
numbers of competitors in each of the geographic markets and
segments of those markets.
Customers
Sales to a Pacific Rim customer in the Pulp and Paper
Machinery Segment approximated 12% of the Company's
consolidated net sales for fiscal 1997 and the related
accounts receivable from this customer approximated 25% of
consolidated accounts receivable at October 31, 1997.
Backlog
Backlog by business segment for the Company's
continuing operations (in thousands of dollars) as of the
end of fiscal years 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
October 31,
------------------------
1997 1996
---- ----
<S> <C> <C>
Mining Equipment........................ $ 358,340 $ 453,480
Pulp and Paper Machinery.. ......... ... 776,618 846,137
Material Handling ...................... 97,743 132,550
---------- ----------
$1,232,701 $1,432,167
=========== ==========
</TABLE>
Supply of Materials and Purchased Components
P&H Mining Equipment and P&H Material Handling
manufacture machines and heat-treated gears, pinions,
shafts, structural fabrications, electrical motors,
generators and other electrical parts. They purchase 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 supplies of component parts and raw
materials for its manufacturing requirements. No single
source is dominant.
Pulp and Paper Machinery 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 Mining Equipment 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 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.
P&H Material Handling has numerous trademarks and
domestic and foreign patents, patent applications and patent
licensing agreements. P&H Material Handling does not
consider these businesses materially dependent upon any
patent or patent license agreement.
Research and Development
Harnischfeger Industries 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; Portland, Oregon; and Waukesha,
Wisconsin. P&H Mining Equipment and P&H Material Handling
maintain research and development facilities 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 $40.1 million in 1997, $34.5
million in 1996 and $30.3 million in 1995.
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, 1997, Harnischfeger Industries
employed approximately 17,700 people, of which approximately
9,700 were employed in the United States. Approximately
3,400 of the U. S. employees are represented by local unions
under collective bargaining agreements with expiration dates
from May 31, 1998 to June 1, 2001. Harnischfeger Industries
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 to the Consolidated Financial
Statements incorporated herein by reference to 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 January
28, 1998, The Company had repurchased 1,576,400 shares
through open-market transactions at a cost of $62.1 million.
Other
On January 28, 1998, the Company announced the sale of 80
percent of the Company's P&H Material Handling unit for
approximately $340 million in cash at closing in a
transaction with Chartwell Investments, Inc. In addition,
the Company will receive preferred stock and royalty
payments from the new company for 10 years. The 1998
after-tax cash proceeds from the transaction are expected to
total approximately $300 million.
The transaction is expected to close in two months, subject
to completion of Chartwell's financing arrangements.
Chartwell is a private investment firm based in New York
City that controls businesses in distribution and services
with over $1 billion in sales. The Company expects to use
the proceeds of the sale to pay down debt and to buy back
stock as part of the Company's previously announced intent
to repurchase 10 million shares.
In regard to the Company's anticipated first-quarter 1998
earnings performance, the Company said it is experiencing
softness in orders for both mining equipment and pulp and
paper machinery. As a result, management's expectation is
that results for the Company's fiscal first quarter ending
January 31, 1998 will fall below the earnings of 65 cents
per share recorded in the equivalent, year-earlier period.
Cautionary Factors
This report and other documents or oral statements which
have been and will be prepared or made in the future contain
or may contain forward-looking statements by or on behalf of
the Company. Such statements are based upon management's
expectations at the time they are made. In addition to the
assumptions and other factors referred to specifically in
connection with such statements, the following factors,
among others, could cause actual results to differ
materially from those contemplated.
The Company's principal businesses involve designing,
manufacturing, marketing and servicing large, complex
machines for the mining, papermaking and capital goods
industries. Long periods of time are necessary to plan,
design and build these machines. With respect to new
machines and equipment, there are risks of customer
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, paper mills, steel mills and other
facilities that use these machines. The Company's success
in obtaining and managing a relatively small number of sales
opportunities, including the companies' success in securing
payment for such sales and meeting the requirements of
warranties and guarantees associated with such sales, can
affect the Company's financial performance. In addition,
many projects are located in undeveloped or developing
economies where political and business conditions are less
predictable. In recent years, more than 50% of the
Company's total sales occurred outside the United States.
Other factors that could cause actual results to differ
materially from those contemplated include:
- Factors affecting customers' purchases of new
equipment, rebuilds, parts and services such as:
production capacity, stockpiles and production
and consumption rates of coal, copper, iron,
gold, fiber, paper/paperboard, recycled paper,
steel and other commodities; the cash flows of
customers; the cost, availability and quality of
financing to customers and the ability of
customers to obtain regulatory approval for
investments in mining, papermaking, steel
making, automotive manufacturing and other heavy
industrial projects; consolidations among
customers; work stoppages at customers or
providers of transportation; and the timing,
severity and duration of customer buying cycles,
particularly in the paper and mining businesses.
- Factors affecting the Company's ability to
capture available sales opportunities,
including: customers' perceptions of the quality
and value of the Company's products as compared
to competitors' products; whether the Company
has successful reference installations to show
customers, especially for papermaking and mining
equipment; customers' perceptions of the health
and stability of the Company as compared to its
competitors; the Company's ability to assist
with competitive financing programs and the
availability of manufacturing capacity at the
Company's factories.
- Factors affecting the Company's ability to
successfully manage sales it obtains, such as:
the accuracy of the Company's cost and time
estimates for major projects; the adequacy of
the Company's systems to manage major projects
and its success in completing projects on time
and within budget; the Company's success in
recruiting and retaining managers and key
employees; wage stability and cooperative labor
relations; plant capacity and utilization; and
whether acquisitions are assimilated and
divestitures completed without notable surprises
or unexpected difficulties.
- Factors affecting the Company's general
business, such as: unforeseen patent, tax,
product, environmental, employee health or
benefit or contractual liabilities; nonrecurring
restructuring charges; changes in accounting or
tax rules or regulations; and reassessments of
asset valuations such as inventories.
- Factors affecting general business levels, such
as political or economic turmoil in major
markets such as the United States, Canada,
Europe, Asia and the Pacific Rim, South Africa,
Australia and Chile; environmental and trade
regulations; and currency stability and ease of
exchange of currencies.
Item 2. Properties
As of October 31, 1997, the following principal
properties were owned, except as indicated. All of these
plants are generally suitable for operations.
Harnischfeger Industries 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,
hydraulic mining
excavators,
electric and
diesel-electric
draglines and large
rotary blasthole
drills.
Crane welding.
Milwaukee, Wisconsin..... 180,000 13 Electrical products,
heavy duty overhead
and portal crane
components and
service parts
warehouse.
Crane assembly.
Franklin, Pennsylvania... 714,640 63 Underground coal
mining
machinery,
components and parts.
Warrendale, Pennsylvania. 82,750 13 Underground coal
mining
parts and service.
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
Mt. Vernon, Illinois..... 107,130 12 parts sales.
Price, Utah.............. 44,200 6
Mesa, Arizona............ 12,000 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.
Litigow, Australia....... 9,000 2 Parts sales for mining
machinery parts
sales.
Wollongong, Australia.... 54,000 3 Rebuild service
center.
Moss Vale, Australia..... 107,000 18 Underground coal
mining
machinery,
components and parts.
Parkhurst, Australia..... 26,900 15 Rebuild service
center.
Rockhampton, Australia... 8,000 3 Sales.
Johannesburg, So.
Africa................. 44,000(1) 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....... 9,000 1 Electrical and
Calama, Chile............ 5,500 1 mechanical repairs.
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(2) 16 Service and rebuilds.
- -------------------------
</TABLE>
(1) Under a lease expiring in 2005.
(2) Under a lease expiring in 1998.
The mining equipment segment operates warehouses in
Casper, Gillette and Green River, Wyoming; 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 PAPER 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.
Waukesha, Wisconsin....... 57,000 10 Castings, pattern shop
and finished
product processing.
Waukesha, Wisconsin....... 76,000(1) 13 Refiner plate
machining,
finished product
processing and
warehousing.
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
Federal Way, Washington... 55,000 3 covers for rolls;
Neenah, Wisconsin......... 77,000 10 Rubber blankets; rubber
Clarks Summit, Pennsylvania 99,800 10 linings and
Renfrew, Canada........... 145,000 22 metal roll repairs.
Hattiesburg, Mississippi.. 100,000 15 Component parts and
repair
of stock and pulp
preparation equipment,
papermaking machinery
and finished product
processing equipment.
Kalamazoo, 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 Centrifugal castings.
Sherbrooke, Quebec, Canada 337,000 26 Stock and pulp
preparation
equipment and
specialized processing
systems.
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 (2) 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 2007.
(2) Under a lease expiring in 2019.
The Pulp and Paper 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.
<TABLE>
<CAPTION>
P&H MATERIAL HANDLING LOCATIONS
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- ------------------------- ----------- --------- -------------------
<S> <C> <C> <C>
Windsor, Wisconsin..... 55,000 (1) 5 Remanufacture of
overhead cranes,
hoists and material
handling equipment.
Oak Creek, Wisconsin..... 277,000 36 Engineered and
standard overhead
cranes, hoists
and material
handling equipment.
Franklin, Ohio........... 75,000 18 Standard overhead
cranes and service.
Birmingham, Alabama...... 36,500 3 Standard overhead
cranes and
service.
Simpsonville, S. Carolina 40,400 (2) 6 Standard overhead
cranes and service.
Loughborough, England.... 420,000 36 Engineered and
standard overhead
cranes, hoists,
controls and
material handling
equipment.
Johannesburg, South Africa 124,000 7 Engineered and
standard overhead
cranes, hoists
and material
handling equipment.
Mexico City, Mexico...... 65,000 3 Engineered and
standard overhead
cranes, hoists
and material
handling equipment.
Mississauga, Canada...... 17,600 (3) 1 Manufacture of
brakes.
Edmonton, Canada......... 58,300 3 Standard overhead
cranes and service.
Singapore, Singapore..... 21,200 (4) 1 Standard overhead
cranes and hoist
distribution.
- ----------------------------------
</TABLE>
(1) Under a lease expiring in 2002
(2) Under a lease expiring in 1999
(3) Under a lease expiring in 2000
(4) Under a lease expiring in 2024
The material handling division has leased facilities
for its company owned Material Handling Centers in San
Leandro, California; Reno, Nevada; Dallas and Houston,
Texas; New Orleans, Louisiana; Nashua, New Hampshire;
Chicago, Illinois; Detroit and Grand Rapids, Michigan;
Pittsburgh, Pennsylvania; Columbus, Cincinnati and
Cleveland, Ohio; Louisville, Kentucky; Denver, Colorado;
Waukesha, Wisconsin; Lynwood, Washington; Phoenix, Arizona;
and Richmond, Calgary and Saskatoon, Canada. In addition,
the division leases sales offices throughout the United
States and in principal locations in other countries. It
also has approximately 24 leased locations for service
operations in the United Kingdom, Mexico and South Africa.
Information relating to lease commitments is presented
in Note 11 to the Consolidated Financial Statements
incorporated herein by reference to Item 8 of this report.
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
Corporation, certain litigation matters and claims are
currently pending in connection with its contractual
undertakings. Beloit may on occasion enter into
arrangements to participate in the ownership of or operate
pulp or papermaking facilities in order to satisfy
contractual undertakings or resolve disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15 million failed
to perform satisfactorily. In June, 1997, a Lewiston, Idaho
jury awarded Potlatch $95 million in damages in the case.
Beloit has appealed this award to the Idaho Supreme Court.
While the eventual outcome of the Potlatch case cannot be
predicted, reserves in the October 31, 1997 Consolidated
Balance Sheet are less than the full amount of the jury
award.
The Company is also involved in a number of proceedings
and potential proceedings relating to environmental matters.
Although it is difficult to estimate the potential exposure
to the Company related to these environmental matters, the
Company believes that these matters will not have a
materially adverse effect on its consolidated financial
position or 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 1997.
Executive Officers of the Registrant
The following table sets forth, through January 29, 1998,
the executive officers of Harnischfeger Industries, their ages,
their offices with Harnischfeger Industries and the period
during which they have held such offices.
<TABLE>
<CAPTION>
Name Age Current Office and Principle Occupation
- ---------------------------- --- ---------------------------------------
<S> <C> <C>
Jeffery T. Grade............ 54 Chairman of the Board and Chief Executive
Officer since 1993; Chief 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.
Number of Years as an Officer 15
John Nils Hanson............ 56 President and Chief Operating Officer
since July 1, 1995; President and Chief
Executive Officer of Joy Mining Machinery
1990 to July 1995. Director since 1996.
Number of Years as an Officer 2
Francis M. Corby, Jr........ 53 Executive Vice President for Finance and
Administration since December 1994;
Senior Vice President, Finance and
Chief Financial Officer
from 1986 to December 1994.
Director since 1996.
Number of Years as an Officer 12
James A. Chokey............. 54 Executive Vice President for Law and
Government Affairs since July 1997;
Senior Vice President, Law and
Corporate Development of Beloit
Corporation from 1996 to July 1997.
Number of Years as an Officer -
Mark E. Readinger........... 44 Senior Vice President since
August, 1997; President
and Chief Operating Officer of
Joy Mining Machinery since 1996;
Senior Vice President of Marketing
and General Manager of the
Joy North American Aftermarket
Operations from 1994 to 1996.
Number of Years as an Officer -
Robert W. Hale.............. 51 Senior Vice President since
August, 1997; President
of P&H Mining Equipment since
December 1994; Vice
President of P&H Material
Handling from 1998 to 1994.
Number of Years as an Officer -
Thomas Engelsman............ 47 Senior Vice President since
August, 1997; President of
Beloit Corporation since August, 1995.
Number of Years as an Officer -
</TABLE>
Mr. Chokey joined Beloit Corporation in April 1996. Prior
to joining the Company, Mr. Chokey held similar positions
with Cooper Industries, A.O. Smith Corporation, RTE
Corporation and Joy Technologies Inc., where he was employed
from 1973 to 1987.
Mr. Readinger joined Joy in 1994. Prior to joining Joy, Mr.
Readinger held several positions at TRW, Inc. and its
subsidiaries from 1989 to 1994, including Vice President and
General Manager, Manager of Strategic Development and
Director of Planning.
Mr. Engelsman joined Beloit Corporation in August, 1995.
Prior to joining Beloit Corporation, Mr. Engelsman was
President and Chief Executive Officer of the Energy
Management division of Landis and Gyr from 1991 to 1995.
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
except for Mr. Engelsman who is a citizen of Australia.
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
<TABLE>
<CAPTION>
Form 10-K/A
<S> <C>
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters:
incorporated by reference to the information
under the heading "Unaudited Quarterly
Financial Data and Stock Prices" contained
in Item 8 of this report. During fiscal
years 1996 and 1997, the Company paid
quarterly dividends of 10 cents per share.
The principal market for the Company's
Common Stock is the New York Stock Exchange,
where its trading symbol is HPH. The Company's
Common Stock is also traded on the Pacific
Exchange. As of October 31, 1997, the
approximate number of holders of record
of the Company's Common Stock was 2,000.
In addition, there were an estimated 10,000
beneficial owners of shares held of record by
brokers and fiduciaries.
Item 6. Selected Financial Data:
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands
except per share amounts)
1997 1996
---- ----
<S> <C> <C>
Revenues
Net sales $3,088,538 $2,863,931
Other income 29,705 23,639
---------- ----------
3,118,243 2,887,570
Cost of Sales 2,369,115 2,166,775
Product Development, Selling
and Administrative Expenses 457,456 433,776
Restructuring Charges - 43,000
Nonrecurring Charge - -
---------- ----------
Operating Income (Loss) 291,672 244,019
Interest Expense - Net (72,543) (62,258)
---------- ----------
Pre-tax Income (Loss) before
Joy Merger Costs and Gain
on Sale of Measurex Investment 219,129 181,761
Joy Merger Costs - -
Gain on Sale of Measurex Investment - -
(Provision) Credit for Income Taxes (74,475) (63,600)
Minority Interest (6,374) (3,944)
Income (Loss) from Continuing
Operations 138,280 114,217
Income (Loss) from and (Net Loss)
on Sale of Discontinued Operations,
net of applicable income taxes - -
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes (12,999) -
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest - -
---------- ----------
Net Income (Loss) $ 125,281 $ 114,217
========== ==========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $ 2.89 $ 2.42
Income (loss) from and (net loss)
on sale of discontinued operations - -
Extraordinary loss on
retirement of debt (0.27) -
Cumulative effect of
accounting change - -
---------- ----------
Net Income (Loss) Per Common Share $2.62 $ 2.42
========== ==========
Dividends Per Common Share $0.40 $ 0.40
========== ==========
Bookings $3,080,789 $3,000,775
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1995 1994
------- ------
<S> <C> <C>
Revenues
Net sales $2,152,079 $1,551,728
Other income 32,208 23,301
---------- ----------
2,184,287 1,575,029
Cost of Sales 1,671,932 1,195,851
Product Development, Selling
and Administrative Expenses 330,990 279,016
Restructuring Charges - -
Nonrecurring Charge - -
---------- ----------
Operating Income (Loss) 181,365 100,162
Interest Expense - Net (40,713) (47,366)
---------- ----------
Pre-tax Income (Loss) before
Joy Merger Costs and Gain
on Sale of Measurex Investment 140,652 52,796
Joy Merger Costs (17,459) -
Gain on Sale of Measurex Investment 29,657 -
(Provision) Credit for Income Taxes (53,500) (13,979)
Minority Interest (7,230) (2,224)
---------- ----------
Income (Loss) from Continuing
Operations 92,120 36,593
Income (Loss) from and (Net Loss)
on Sale of Discontinued Operations,
net of applicable income taxes (31,235) (3,982)
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes (3,481) (4,827)
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest - (81,696)
---------- ----------
Net Income (Loss) $ 57,404 $ (53,912)
========= ==========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $1.99 $0.84
Income (loss) from and (net loss)
on sale of discontinued operations (0.67) (0.09)
Extraordinary loss on
retirement of debt (0.08) (0.11)
Cumulative effect of
accounting change - (1.87)
---------- ----------
Net Income (Loss) Per Common Share $1.24 $(1.23)
========== ==========
Dividends Per Common Share $0.40 $ 0.40
========== ==========
Bookings $2,252,341 $1,636,931
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1993
--------
<S> <C>
Revenues
Net sales $1,409,204
Other income 9,040
----------
1,418,244
Cost of Sales 1,083,846
Product Development, Selling
and Administrative Expenses 259,831
Restructuring Charges 67,000
Nonrecurring Charge 8,000
----------
Operating Income (Loss) (433)
Interest Expense - Net (48,313)
-----------
Pre-tax Income (Loss) before
Joy Merger Costs and Gain
on Sale of Measurex Investment (48,746)
Joy Merger Costs -
Gain on Sale of Measurex Investment -
(Provision) Credit for Income Taxes 16,497
Minority Interest 4,799
----------
Income (Loss) from Continuing
Operations (27,450)
Income (Loss) from and (Net Loss)
on Sale of Discontinued Operations,
net of applicable income taxes 7,760
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes -
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest -
---------
Net Income (Loss) $ (19,690)
==========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $(0.62)
Income (loss) from and (net loss)
on sale of discontinued operations 0.18
Extraordinary loss on
retirement of debt -
Cumulative effect of
accounting change -
-----------
Net Income (Loss) Per Common Share $(0.44)
===========
Dividends Per Common Share $ 0.40
===========
Bookings $1,487,502
===========
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1997 1996
---- ----
<S> <C> <C>
Working Capital:
Current assets $1,588,712 $1,410,250
Current liabilities 1,180,497 1,077,127
---------- ----------
Working capital $ 408,215 $ 333,123
========== ==========
Current ratio 1.3 1.3
Plant and Equipment
Net properties $ 657,100 $ 634,045
Capital expenditures 133,497 83,388
Depreciation expense 71,824 67,051
========== ==========
Total assets $2,924,535 $2,690,029
========== ==========
Debt and Capitalized Lease Obligations
Long-term obligations (1) $ 725,193 $ 662,137
Short-term notes payable 214,126 45,261
---------- ----------
$ 939,319 $ 707,398
========== ==========
Minority Interest $ 97,724 $ 93,652
========== ==========
Debt to Capitalization Ratio (2) 52.6% 48.0%
========== ==========
Shareholders' Equity $ 749,660 $ 673,485
Book value per share $15.93 $14.15
Common shares outstanding (3) 47,046,328 47,598,340
========== ==========
Number of (End of Year):
Employees 17,700 17,100
Common Shareholders of Record 1,861 1,972
========== ==========
</TABLE>
(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>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1995 1994
----- ----
<S> <C> <C>
Working Capital:
Current assets $1,213,390 $1,043,401
Current liabilities 723,303 612,076
---------- ----------
Working capital $ 490,087 $ 431,325
Current ratio 1.7 1.7
========== ==========
Plant and Equipment
Net properties $ 487,656 $ 490,237
Capital expenditures 73,484 50,842
Depreciation expense 56,642 58,628
========== ==========
Total assets $2,040,767 $1,981,953
========== ==========
Debt and Capitalized Lease
Obligations
Long-term obligations (1) $ 462,991 $ 571,054
Short-term notes payable 18,921 14,419
---------- ----------
$ 481,912 $ 585,473
========== ==========
Minority Interest $ 89,611 $ 85,570
========== ==========
Debt to Capitalization Ratio (2) 42.6% 49.9%
========== ==========
Shareholders' Equity $ 559,276 $ 502,365
Book value per share $11.98 $11.04
Common shares
outstanding (3) 46,693,061 45,503,451
========== ==========
Number of (End of Year):
Employees 14,000 14,900
Common Shareholders of
Record 2,114 2,261
========= ==========
</TABLE>
(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>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1993
------
<S> <C>
Working Capital:
Current assets $ 983,038
Current liabilities 607,802
----------
Working capital $ 375,236
Current ratio 1.6
==========
Plant and Equipment
Net properties $ 505,412
Capital expenditures 71,761
Depreciation expense 56,467
==========
Total assets $1,908,250
==========
Debt and Capitalized Lease Obligations
Long-term obligations (1) $ 559,852
Short-term notes payable 67,742
----------
$ 627,594
==========
Minority Interest $ 89,110
==========
Debt to Capitalization Ratio (2) 51.1%
==========
Shareholders' Equity $ 511,169
Book value per share $11.83
Common shares outstanding (3) 43,200,676
==========
Number of (End of Year):
Employees 14,700
Common Shareholders of Record 2,512
==========
</TABLE>
(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
Item 7. Management's Discussion and Analysis of
Financial Condition and
Results of Operations:
Overview
Fiscal 1997 marked another year of global growth and
financial achievement with an added emphasis on life-cycle
management. The Company reported strong financial results,
showing income from continuing operations of $138.3 million,
or $2.89 per share, on consolidated net sales of $3,088.5
million. This compares with income from continuing
operations of $114.2 million, or $2.42 per share, in 1996 on
sales of $2,863.9 million, which included a restructuring
charge totaling $43.0 million ($21.8 million after tax and
minority interest, or $0.46 per share). Net income for 1997
was $125.3 million, or $2.62 per share, including a $13.0
million extraordinary loss on retirement of debt. In
addition, bookings of $3,080.8 million were on par with 1996
bookings.
All three of the Company's business segments continued
to experience strong order and sales activity. Leading the
way in 1997 was the Pulp and Paper Machinery segment. The
segment reported net sales of $1,267.8 million, up 12% over
1996 levels, reflecting continued strength in the market for
papermaking machines, particularly in the Pacific Rim and
Latin America. Operating income decreased from $91.5 million
in 1996, excluding the restructuring charge, to $76.5
million in 1997 due to lower margins on certain Pacific Rim
original equipment contracts.
The Mining Equipment segment, which includes P&H
Mining Equipment and Joy Mining Machinery ("Joy"), also
reported strong results with net sales of $1,467.3 million,
up 4% from 1996. The increase is due to growth in the
aftermarket business of both surface and underground mining
and steady original equipment sales.
Sales for the Material Handling segment increased 9%
to $353.4 million in 1997 from $323.2 million in 1996.
Operating income increased from $33.1 million in 1996 to
$38.4 million in 1997. These strong results are due
primarily to improved results in existing product lines and
businesses.
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
1997.
Fiscal 1997 marked the fifth year that the Company was
guided by the EVA philosophy and the second year that each
of the Company's segments posted positive EVA achievement.
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 maintain and sometimes reduce capital
employed at times of increasing profits and sales.
The discussion in Management's Discussion and Analysis
contains forward-looking statements. When used in this
document, terms such as "anticipate", "believe", "estimate",
"expect", "indicate", "may be", "objective", "plan",
"predict", and "will be" are intended to identify such
statements. Forward-looking statements are subject to
certain risks, uncertainties and assumptions which could
cause actual results to differ materially from those
projected. (See Cautionary Factors below.)
Acquisitions and Divestitures
In fiscal 1997, the Company focused on life-cycle
management initiatives through continued global expansion
and streamlining of existing businesses. Key acquisitions and
divestitures improved the Company's positioning in the
worldwide market.
Each of the Company's three business segments made
strategic acquisitions in fiscal 1997. The acquisitions
supported the life-cycle management initiative and enhanced
the businesses' positions in each of their markets. All
acquisitions were accounted for as purchase transactions
with resultant goodwill being amortized over a 30- or
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") which firmly
established the Company as a world leader in both surface
and underground mining equipment. The transaction was
completed for a purchase price of approximately $330
million, including acquisition costs, plus the assumption of
net debt of approximately $40 million. 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.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in mining
equipment, industrial electronic control systems, toys and
plastics. Longwall International ("Longwall"), the main
subsidiary of Dobson, was engaged in the manufacture, sale
and service of mining equipment for the international coal
mining industry. Its principal products included
electronically controlled roof support systems and armored
face conveyors. The acquisition of Dobson enabled Joy to
offer integrated underground longwall mining systems to the
worldwide mining industry.
As a part of the Dobson acquisition, several
non-mining businesses were designated as businesses held for
sale. The original value of the businesses was set at $100.0
million. At October 31, 1997, one business remains unsold
with a total net realizable value of $9.3 million. It is
expected that this remaining business will be sold within
the next year. Profit/losses generated during the period
related to businesses held for sale have been excluded from
operating results.
On March 27, 1996, the Company's Beloit Corporation
subsidiary 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.
On November 29, 1994, the Company completed the
acquisition of Joy Technologies Inc. ("JTI") through a
stock-for-stock merger following approval of the merger by
shareholders of each company. Under the terms of the
acquisition, accounted for as a pooling of interests, the
Company exchanged 17,720,750 shares of Company common stock
for all of JTI's 31,353,000 outstanding shares, at an
exchange ratio of .5652 of a share of the Company's common
stock for each of JTI's common shares.
Transaction costs incurred to complete the JTI merger
of $17.5 million ($11.4 million after tax, or $0.24 per
share) were charged to income and consisted primarily of
investment banker, attorney and accountant fees, severance
and related benefits, and printing, mailing and registration
expenses.
In addition, during fiscal years 1995 through 1997,
the Company made several smaller acquisitions in each of the
three business segments. All acquisitions were accounted for
as purchase transactions. Resultant goodwill is being
amortized over a 30- or 40-year period.
On April 12, 1995, the Company announced its decision
to divest of Joy Environmental Technologies ("JET"), a unit
of JTI that supplies air pollution and ash handling
equipment for electric utilities and other industrial
operations. Accordingly, the operating results of JET were
segregated and reflected in the Consolidated Statement of
Income as a discontinued operation. In December, 1995, the
Company completed the sale of JET to Babcock and Wilcox, an
operating unit of McDermott International, for $11.7
million. The loss on the sale, net of applicable taxes, was
recorded in fiscal 1995.
In February, 1995, the Company completed the sale of
Syscon Corporation ("Syscon") to Logicon, Inc. for a cash
price of $45 million. In connection with this sale, the
Company recorded a loss on sale of discontinued operations
of $(21.9) million or $(0.48) per share, net of applicable
income taxes, in the first quarter of 1995.
In September, 1997, the Company announced that it was
exploring the possible sale of P&H Material Handling. At the
end of fiscal 1997, the segment had not been sold.
Results of Operations - Consolidated
Sales: Worldwide sales in fiscal 1997 amounted to
$3,088.5 million representing an increase of 8% over 1996
sales of $2,863.9 million. All three segments reported strong
increases, led by a 12% increase in the Pulp and Paper
Machinery segment. Mining Equipment segment sales increased
4% over the prior year and Material Handling segment sales
increased 9% over the prior year.
Sales for fiscal 1996 of $2,863.9 million were 33%
greater than 1995 sales of $2,152.1 million, led by a strong
increase in the Mining Equipment segment of 49%. Sales for
the Pulp and Paper Machinery segment rose 17%. The Material
Handling segment reported a sales increase of 35% over the
prior year.
Costs and Expenses: Costs of sales increased 9% to
$2,369.1 million in 1997 from $2,166.8 million in 1996. Strong
increases in sales volume during the period were the primary
reason for the increase. Product development, selling and
administrative expenses as a percent of sales were 14.8% in
1997 and 15.1% in 1996. This level of expenses reflects
continued efforts by the Company to control costs.
Cost of sales for 1996 increased 30% to $2,166.8
million from $1,671.9 million in 1995. This increase is
consistent with the 33% increase in sales for the same
period. Product development, selling and administrative
expenses as a percent of sales decreased to 15.1% from 15.4%
in 1995.
Operating Results from Continuing Operations: The Company
reported income from continuing operations of $138.3 million
in 1997 compared to income from continuing operations of
$114.2 million in 1996 ($136.0 million, or $2.88 per share
before the nonrecurring restructuring charge) and $92.1
million in 1995.
1996 Restructuring Actions
In the fourth quarter of fiscal 1996, the Company's Beloit
Corporation subsidiary recorded a restructuring charge of
$43.0 million ($21.8 million after tax and minority
interest, or $0.46 per share). The focus of the
restructuring was to improve financial returns and increase
customer satisfaction while significantly reducing costs and
cycle times. In fiscal 1997, utilization of the
restructuring reserve totaled $29.8 million. It is expected
that the remaining restructuring actions will be
substantially completed by the end of fiscal 1998.
Details regarding specific restructuring actions are as
follows:
<TABLE>
<CAPTION>
Original Reserve 10/31/97
Reserve Utilized Reserve
<S> <C> <C> <C>
Employee severance $15,900 $(12,851) $ 3,049
Machinery and
equipment dispositions 7,600 (6,830) 770
Closure of facilities 6,800 (703) 6,097
Sale of businesses 6,000 (3,085) 2,915
Other 6,700 (6,301) 399
------- -------- -------
$43,000 $(29,770) $13,230
======= ======== =======
</TABLE>
The cash and noncash elements of the restructuring charge
approximated $27.7 million and $15.3 million, respectively.
It is expected that the remaining restructuring actions will
be funded through cash flows from continuing operations.
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 34.0% in 1997 (compared to a 35.0% federal statutory
rate), 35.0% in 1996, and 35.0% in 1995. The effective tax
rate in 1997 differed from the federal statutory rate of
35.0% due primarily to usage of tax credits.
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 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 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
are being amortized from the date of amendment to January 1,
1999. Postretirement benefit expense recognized for 1997 and
1996 was reduced by $12.8 million and $10.8 million,
respectively, for amortization of negative plan amendments.
The Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits" in the first quarter of fiscal
1995. The impact of adoption of SFAS No. 112 on the
Company's results of operations and financial position was
not material.
The Company adopted the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation"
effective for the 1997 financial statements. The standard
provides for reporting stock-based compensation at fair
value instead of the currently used intrinsic value method.
The change is not required to be recorded in the financial
statements but the pro-forma effect of the standard must be
included in the footnotes to the financial statements, if
material. The Company has elected to continue measuring
compensation cost using the intrinsic value method and as
such, no compensation expense for stock options has been
recorded. See Notes to Consolidated Financial Statements.
(Note 10 - Shareholders' Equity and Stock Options.)
In February, 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, "Earnings per Share.""
This statement establishes revised standards for computing
and presenting earnings per share. The statement is
effective for the Company's fiscal 1998 first quarter. All
prior periods will be required to be restated. The adoption
of this standard will not have a material impact on the
Company's reported earnings per share.
In June, 1997, the 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 is not
required to adopt the standard until fiscal 1999.
Bookings and Backlog
<TABLE>
<CAPTION>
Backlog at October 31, 1997, 1996 and 1995 by business
segment was as follows:
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Mining
Equipment $ 358,340 $ 453,480 $ 221,540
Pulp and Paper
Machinery 776,618 846,137 679,625
Material
Handling 97,743 132,550 130,879
---------- ---------- -----------
$1,232,701 $1,432,167 $1,032,044
========== ========== ===========
</TABLE>
Bookings were $3,080.8 million in 1997, $3,000.8 million in
1996 and $2,252.3 million in 1995. A discussion of changes
in bookings by segment is presented in the "Operating
Results by Business Segment" section which follows.
Mining Equipment backlog was reduced by $18.0 million
in fiscal 1997 due to divestitures. 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
<TABLE>
<CAPTION>
The Company's capital structure at October 31, 1997 and 1996 was as follows:
IN THOUSANDS
1997 1996
------------ -----------
<S> <C> <C>
Short-term notes payable $ 214,126 $ 45,261
Long-term obligations,
including current portion 725,193 662,137
------------ -------------
939,319 707,398
Minority interest 97,724 93,652
Shareholders' equity 749,660 673,485
------------ -------------
Total capitalization $1,786,703 $1,474,535
============ ==============
Debt to capitalization ratio 52.6% 48.0%
===== ======
</TABLE>
The Company's debt to capitalization ratio increased to
52.6% at October 31, 1997 from 48.0% at October 31, 1996.
The increase was caused primarily by the increase in net
working capital to finance increased operating levels and
the buyback of common stock, offset by an increase in equity
from strong operating results.
Cash flow used by operating activities was $79.3
million in 1997 compared to cash flow provided by operating
activities of $80.4 million in 1996 and $125.3 million in
1995. The decrease in cash flow between periods was caused
primarily by a net increase in working capital items,
particularly unbilled receivables on large paper machine
orders in the Pacific Rim, offset by higher net income and
deferred taxes.
Net working capital of $408.2 million at October 31,
1997 increased $75.1 million from October 31, 1996 levels of
$333.1 million. The change was primarily due to increases in
accounts receivable and inventories and a decrease in other
current liabilities, offset by an increase in accounts
payable.
Net working capital decreased to $333.1 million in
1996 from $490.1 million in 1995, due mainly to cash used
for acquisitions and restructuring activities.
Cash applied to investing activities in 1997 was
$102.3 million, primarily caused by additional investments
in property, plant and equipment. Cash applied to investing
activities in 1996 was $424.0 million, primarily caused by
the acquisitions of Dobson and IMPCO, offset by the sale of
businesses.
Capital expenditures for property, plant and equipment
in 1997 net of dispositions were $99.9 million compared with
$66.6 million in 1996. Depreciation and amortization was
$94.4 million and $89.3 million in 1997 and 1996,
respectively.
The $176.9 million of cash provided by financing
activities in 1997 was primarily due to the issuance of
$150.0 million, 67/8% debentures on February 25, 1997 and
increases in borrowings against the Revolving Credit
Facility, offset by the repurchase of JTI's 101/4% Senior
Notes and a buyback of common stock. Cash provided by
financing activities in 1996 of $140.4 million was primarily
from the issuance of debt related to the Dobson acquisition
offset by a decrease in short-term notes payables.
The Company completed the acquisition of Dobson in
early 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,
71/4% debentures issued on December 19, 1995, at 99.153%.
The Company's Beloit Corporation subsidiary 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, JTI offered to purchase for cash
any and all of its outstanding 101/4% 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 share,
consisting primarily of unamortized financing costs and
purchase premiums. The indenture for the Senior Notes
provides that JTI may, at its option, redeem the Senior
Notes in whole or in part at any time on or after September
1, 1998 at 105.125% of their principal amount, plus accrued
interest, declining to 100% of their principal amount, plus
accrued interest, on or after September 1, 2000. It is the
Company's current intention to redeem the remaining Senior
Notes ($7.7 million) in September, 1998.
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, 1997, the Company had repurchased 906,400 shares through
open-market transactions at a cost of $38.2 million.
The Company maintains the ability to expand its borrowings
in several ways, including the following:
(1) A shelf registration with the Securities and Exchange
Commission for the sale of up to $200.0 million of debt
securities. To date, $150.0 million have been issued under
this registration.
(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. Direct borrowings and commercial paper are
both considered a utilization of the facility. At October
31, 1997, utilization of the facility amounted to $150.0
million and $84.1 million for direct borrowings and
commercial paper, respectively.
(3) Short-term bank credit lines of foreign subsidiaries
of approximately $218.3 million of which approximately $74.0
million was outstanding at October 31, 1997.
The Company believes its available cash, cash flow
provided by operating activities and committed credit lines
provide adequate liquidity on both a short- and long-term
basis.
The Company has no significant capital commitments as
of October 31, 1997. Any future commitments are expected to
be funded through cash flow from operations and, if
necessary, from available lines of credit.
It is the Company's policy not to participate in
high-yield financings, highly leveraged transactions, or
other "derivative" instruments. Hedging of specific foreign
exchange transaction exposures does occur in certain
circumstances.
The Company intends to continue to expand its
businesses, both internally and through acquisitions.
Acquisitions are evaluated in light of the five
characteristics required of a core business. It is expected
that new acquisitions would be financed primarily by
internally-generated funds or additional borrowings.
Operating Results by Business Segment
Mining Equipment:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $1,467,341 $1,405,936 $941,779
Operating income 201,803 183,141 122,116
Bookings 1,390,161 1,406,381 972,419
</TABLE>
The Mining Equipment segment reported net sales of
$1,467.3 million in 1997, a 4% increase from 1996 sales of
$1,405.9 million. The sales increase is due to an increase
in aftermarket activity for both surface and underground
mining operations. Operating income was $201.8 million or
13.8% of sales, compared to operating income of $183.1
million or 13.0% of sales in 1996. Net sales and operating
income amounted to $941.8 million and $122.1 million,
respectively, in 1995.
The increase in operating income is primarily due to
increased sales. Foreign sales of the Mining Equipment
segment amounted to 59% of total sales in 1997, 58% in 1996
and 44% in 1995.
Bookings amounted to $1,390.2 million in 1997 compared
to $1,406.4 million in 1996. The decrease is the result of
market softness for original equipment for underground
mining.
Pulp and Paper Machinery:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $1,267,847 $1,134,779 $ 970,418
Operating income before
restructuring charge 76,485 91,511 56,062
Restructuring charge - (43,000) -
---------- ----------- --------
Operating income after
restructuring charge 76,485 48,511 56,062
Bookings 1,372,085 1,269,507 1,016,273
</TABLE>
The Pulp and Paper Machinery segment reported sales of
$1,267.8 million and operating income of $76.5 million for
1997. Sales volume in 1997 was 12% higher than the prior
year's level of $1,134.8 million, reflecting continued
strength in the worldwide pulp and paper industry's spending
for original equipment and aftermarket services. Foreign
sales for this segment amounted to 57% of total sales in
1997, 53% in 1996 and 41% in 1995. Operating income in 1997
was 6.0% of sales compared to 8.1% in 1996 before the
restructuring charge. Operating income in 1997 was reduced
by a fourth quarter charge of $27.6 million for additional
contract costs related to four large Indonesian contracts.
(Note 17 - Subsequent Event - Restatement of Operating
Results.)
Net sales and operating income amounted to $1,134.8
million and $48.5 million, respectively, in 1996. Net sales
were 17% higher than in 1995 reflecting the cyclical upturn
in the worldwide pulp and paper industry. Operating income
as a percent of sales increased to 8.1%, before the
restructuring charge, in 1996 from 5.8% in 1995.
In the fourth quarter of fiscal 1996, the Pulp and
Paper Machinery segment recorded a restructuring charge of
$43.0 million. The focus of the restructuring was to better
serve its customers, strengthen market position, enable the
segment to increase EVA and improve profitability levels.
The charge was primarily comprised of costs related to
severance, machinery and equipment dispositions, closure of
certain facilities and sale of businesses. See Notes to
Consolidated Financial Statements. (Note 3 - Restructuring
Charge.)
Bookings activity improved in 1997 to $1,372.1 million
from $1,269.5 million in 1996. The 8% increase reflects
improved bookings in both pulp and paper machinery and
aftermarket services and products, particularly in the
Pacific Rim and Latin America.
MATERIAL HANDLING:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $353,350 $323,216 $239,882
Operating income 38,399 33,107 22,850
Bookings 318,543 324,887 263,649
</TABLE>
The Material Handling segment reported net sales of $353.4
million in 1997, an increase of 9% from 1996 levels of
$323.2 million. Operating income increased to $38.4 million
compared to $33.1 million in 1996, an increase of 16%.
Increases are primarily due to improved results from
existing businesses. Foreign sales amounted to 50% of total
sales in 1997 compared to 39% in 1996 and 48% in 1995.
Net sales of the Material Handling segment increased
to $323.2 million in 1996 from $239.9 million in 1995.
Operating income increased from $22.9 million in 1995 to
$33.1 million in 1996. The increase in both sales and
profitability is primarily due to improved results from
original equipment sales and aftermarket services from
existing businesses.
Bookings amounted to $318.5 million in 1997, as
compared to $324.9 million in 1996. The bookings levels
reflect the segment's continued leadership in the domestic
equipment market and continued growth of its aftermarket
business.
The Company is currently exploring the potential
divestiture of the Material Handling business. The potential
sale will be contingent on the Company receiving adequate
terms and proceeds for the business.
DISCONTINUED OPERATIONS:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $ - $ - $101,472
Loss from discontinued
operations - - (31,235)
</TABLE>
Net sales and loss from discontinued operations in
1995 of $101.5 million and $(31.2) million, respectively,
relate to the sale of Syscon and JET.
Other
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 Corporation, certain
litigation matters and claims are currently pending in
connection with its contractual undertakings. Beloit may on
occasion enter into arrangements to participate in the
ownership of or operate pulp or paper making 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 $15.0 million
failed to perform satisfactorily. In June, 1997, a Lewiston,
Idaho jury awarded Potlatch $95.0 million in damages in the
case. Beloit has appealed this award to the Idaho Supreme
Court. While the eventual outcome of the Potlatch case
cannot be predicted, reserves in the October 31, 1997
Consolidated Balance Sheet are less than the full amount of
the jury award.
On August 14, 1997, the Company established a new
long-term incentive compensation plan which covers 11 key
elected officers of the Company. The plan, which replaces
traditional stock options for the participants, consists of
awards of up to an aggregate of 1.2 million 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 by 50% within three years or
70% within five years. If target prices are not met, none of
the shares will be awarded. As the stock price has declined
since inception of the plan, no compensation expense was
recorded in fiscal 1997.
The Company has addressed Year 2000 system issues in
all of its subsidiaries and does not anticipate any
significant problems in the transition to the year 2000.
Anticipated Year 2000 conversion costs will be expensed as
incurred and are expected to be immaterial.
Cautionary Factors
This report and other documents or oral statements which
have been and will be prepared or made in the future contain
or may contain forward-looking statements by or on behalf of
the Company. Such statements are based upon management's
expectations at the time they are made. In addition to the
assumptions and other factors referred to specifically in
connection with such statements, the following factors,
among others, could cause actual results to differ
materially from those contemplated.
The Company's principal businesses involve designing,
manufacturing, marketing and servicing large, complex
machines for the mining, papermaking and capital goods
industries. Long periods of time are necessary to plan,
design and build these machines. With respect to new
machines and equipment, there are risks of customer
acceptance and start-up or performance problems. Large
amounts of capital are required to be devoted by the
Company's, steel mills and other facilities that use these
machines. The Company's success in obtaining and managing a
relatively small number of sales opportunities, including
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, steel 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, papermaking, steel making, automotive manufacturing
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,
particularly in the paper and mining businesses.
- - Factors affecting the Company's ability to capture
available sales opportunities, including: customers'
perceptions of the quality and value of the Company's
products as compared to competitors' products; 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, especially for papermaking and mining equipment;
customers' perceptions of the health and stability of the
Company as compared to its competitors; the Company's
ability to assist with competitive financing programs; 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 turmoil and economic growth in major markets such
as the United States, Canada, Europe, the Far East, South
Africa, Australia and Chile; environmental and trade
regulations; and the stability and ease of exchange of
currencies.
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk: not applicable
Item 8. Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
Consolidated Statement of Income
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1997 1996
<S> <C> <C>
Revenues
Net sales $3,088,538 $2,863,931
Other income 29,705 23,639
---------- ----------
3,118,243 2,887,570
Cost of Sales 2,369,115 2,166,775
Product Development,
Selling
and Administrative
Expenses 457,456 433,776
Restructuring Charge - 43,000
---------- ----------
Operating Income 291,672 244,019
Interest Expense - Net (72,543) (62,258)
---------- ----------
Income before Joy Merger
Costs, Gain on Sale
of Measurex Investment,
Provision
for Income Taxes and
Minority Interest 219,129 181,761
Joy Merger Costs - -
Gain on Sale of Measurex
Investment - -
Provision for
Income Taxes (74,475) (63,600)
Minority Interest (6,374) (3,944)
----------- -----------
Income from Continuing
Operations 138,280 114,217
Loss from and Net Loss
on Sale of
Discontinued Operation,
net of applicable
income taxes - -
Extraordinary Loss on
Retirement of Debt,
net of applicable
income taxes (12,999) -
----------- ----------
Net Income $ 125,281 $ 114,217
=========== ==========
Earnings Per Share
Income from
continuing operations $2.89 $2.42
Loss from and net
loss on sale of
discontinued operation - -
Extraordinary loss on
retirement of debt (0.27) -
------ ------
Net Income Per Share $2.62 $2.42
====== ======
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Income
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995
<S> <C>
Revenues
Net sales $2,152,079
Other income 32,208
----------
2,184,287
Cost of Sales 1,671,932
Product Development, Selling
and Administrative Expenses 330,990
Restructuring Charge -
----------
Operating Income 181,365
Interest Expense - Net (40,713)
-----------
Income before Joy Merger Costs,
Gain on Sale
of Measurex Investment,
Provision
for Income Taxes and
Minority Interest 140,652
Joy Merger Costs (17,459)
Gain on Sale of
Measurex Investment 29,657
Provision for Income Taxes (53,500)
Minority Interest (7,230)
----------
Income from
Continuing Operations 92,120
Loss from and Net Loss
on Sale of
Discontinued Operation,
net of applicable
income taxes (31,235)
Extraordinary Loss on
Retirement of Debt,
net of applicable
income taxes (3,481)
------------
Net Income $ 57,404
============
Earnings Per Share
Income from continuing
operations $1.99
Loss from and net loss
on sale of
discontinued operation (0.67)
Extraordinary loss on
retirement of debt (0.08)
------------
Net Income Per Share $1.24
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheet
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS)
1997 1996
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents
(including cash equivalents
of $6,376 and $3,455 in
1997 and 1996,
respectively, at cost which
approximates market) $ 29,383 $ 36,936
Accounts receivable - net 836,169 667,786
Inventories 594,761 547,115
Businesses held for sale 9,323 26,152
Other current assets 119,076 132,261
--------- ---------
1,588,712 1,410,250
Property, Plant and Equipment:
Land and improvements 60,724 48,371
Buildings 293,501 301,010
Machinery and equipment 821,479 776,332
--------- ---------
1,175,704 1,125,713
Accumulated depreciation (518,604) (491,668)
--------- ----------
657,100 634,045
Investments and Other Assets:
Goodwill 508,634 512,693
Intangible assets 33,027 39,173
Other assets 137,062 93,868
--------- ----------
678,723 645,734
--------- ----------
$ 2,924,535 $2,690,029
========= ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including
current portion of
long-term obligations $ 225,853 $ 49,633
Trade accounts payable 460,689 346,056
Employee compensation
and benefits 132,268 160,488
Advance payments and progress
billings 85,680 155,199
Accrued warranties 47,753 50,718
Other current liabilities 228,254 315,033
--------- ----------
1,180,497 1,077,127
Long-term Obligations 713,466 657,765
Other Liabilities:
Liability for postretirement
benefits 56,202 78,814
Accrued pension and
related costs 36,707 39,902
Other liabilities 11,608 14,364
Deferred income taxes 78,671 54,920
--------- ----------
183,188 188,000
Minority Interest 97,724 93,652
Shareholders' Equity:
Common stock (issued 51,607,172
and 51,406,946 shares,
respectively) 51,607 51,407
Capital in excess of par value 625,358 615,089
Retained earnings 253,727 148,175
Cumulative translation
adjustments (41,440) (37,584)
Less: Stock Employee
Compensation Trust
(1,433,147 and
1,533,993 shares,
respectively) at market (56,430) (61,360)
Treasury Stock (3,127,697
and 2,274,613 shares,
respectively) at cost (83,162) (42,242)
------------ ---------
749,660 673,485
------------ ---------
$ 2,924,535 $ 2,690,029
============ ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flow
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS)
1997 1996
<S> <C> <C>
Operating Activities
Net income $ 125,281 $ 114,217
Add (deduct) - Items not
affecting cash:
Restructuring charge - 43,000
Loss from discontinued operations,
net of income taxes - -
Extraordinary loss on retirement
of debt, net of income taxes 12,999 -
Net gain on sale of
Measurex investment,
net of income taxes - -
Depreciation and amortization 94,425 89,270
Minority interest,
net of dividends paid 6,127 3,254
Deferred income taxes - net 58,145 18,855
Other - net (33,895) (22,065)
Changes in working capital,
excluding the effects of
acquisition opening balance sheets:
(Increase) in accounts
receivable - net (199,809) (81,007)
(Increase) in inventories (48,276) (30,291)
(Increase) in other current assets (23,550) (10,978)
Increase in trade accounts payable 114,927 18,223
(Decrease) increase in employee
compensation and benefits (28,545) (6,729)
(Decrease) increase in advance
payments and progress billings (69,251) (62,071)
(Decrease) increase in
other current liabilities (87,923) 6,673
---------- ---------
Net cash (used) provided by
operating activities (79,345) 80,351
---------- --------
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 (17,097) (11,350)
Proceeds from sale of
New Philadelphia Fan Co. 18,051 -
Proceeds from sale of
Castings Division 7,229 -
Proceeds from sale of non-core
Dobson Park businesses 16,829 73,848
Proceeds from sale of Joy
Environmental Technologies - 11,651
Proceeds from sale of investment
in Measurex Corporation - -
Proceeds from sale of
Syscon Corporation - -
Property, plant and equipment
- acquired (133,497) (83,388)
Property, plant and
equipment - retired 33,549 16,826
Other - net (27,368) 6,174
---------- ----------
Net cash (applied to)
provided by investment and
other transactions (102,304) (423,980)
---------- ----------
Financing Activities
Purchase of treasury stock (40,720) -
Dividends paid (19,151) (18,905)
Exercise of stock options 7,164 6,762
Issuance of long-term obligations 261,411 198,892
Redemption of long-term obligations (198,270) (2,334)
Increase (decrease) in
short-term notes payable 166,505 (43,973)
--------- ---------
Net cash provided by (applied to)
financing activities 176,939 140,442
--------- ---------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (2,843) 1,080
---------- ---------
(Decrease) Increase in Cash
and Cash Equivalents (7,553) (202,107)
---------- ----------
Cash and Cash Equivalents
at Beginning of Year 36,936 239,043
---------- ----------
Cash and Cash Equivalents
at End of Year $ 29,383 $ 36,936
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flow
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS)
1995
<S> <C>
Operating Activities
Net income $ 57,404
Add (deduct) - Items not affecting cash:
Restructuring charge -
Loss from discontinued
operations, net of income taxes 31,235
Extraordinary loss on retirement
of debt, net of income taxes 3,481
Net gain on sale of Measurex investment,
net of income taxes (18,657)
Depreciation and amortization 70,512
Minority interest, net of dividends paid 3,589
Deferred income taxes - net 10,937
Other - net 3,594
Changes in working capital, excluding
the effects of
acquisition opening balance sheets:
(Increase) in accounts receivable - net (73,343)
(Increase) in inventories (28,003)
(Increase) in other current assets (7,776)
Increase in trade accounts payable 13,922
(Decrease) increase in employee
compensation and benefits 16,217
(Decrease) increase in advance
payments and progress billings 34,156
(Decrease) increase in other
current liabilities 8,033
--------
Net cash (used) provided
by operating activities 125,301
--------
Investment and Other Transactions
Purchase of Dobson Park Industries plc,
net of cash acquired of $4,631 -
Purchase of Pulp Machinery Division
of Ingersoll-Rand, net of
cash acquired of $6,858 -
Other acquisitions, net of cash acquired (27,905)
Proceeds from sale of
New Philadelphia Fan Co. -
Proceeds from sale of Castings Division -
Proceeds from sale of non-core
Dobson Park businesses -
Proceeds from sale of Joy
Environmental Technologies -
Proceeds from sale of investment
in Measurex Corporation 96,004
Proceeds from sale of Syscon Corporation 45,000
Property, plant and equipment - acquired (73,484)
Property, plant and equipment - retired 11,724
Other - net (7,249)
---------
Net cash (applied to) provided
by investment and
other transactions 44,090
---------
Financing Activities
Purchase of treasury stock (3,009)
Dividends paid (18,524)
Exercise of stock options 17,309
Issuance of long-term obligations 9,588
Redemption of long-term obligations (108,769)
Increase (decrease) in short-term
notes payable 828
---------
Net cash provided by (applied to)
financing activities (102,577)
---------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (520)
---------
(Decrease) Increase in Cash and Cash Equivalents 66,294
---------
Cash and Cash Equivalents at Beginning of Year 172,749
---------
Cash and Cash Equivalents at End of Year $ 239,043
=========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
Capital in
Common Excess of
Stock Par Value
<S> <C> <C>
Balance at October 31, 1994 $50,519 $577,068
Net income
Exercise of 861,930 stock
options 599 9,131
Dividends paid ($0.40 per share)
Dividends on shares held by SECT 681
Adjust SECT shares to
market value 16,832
Translation adjustments
110,000 shares acquired
as Treasury Stock
457,991 shares transferred from
Treasury Stock to SECT
Purchase of 425,345 shares
by employee benefit plans
-------- --------
Balance at October 31, 1995 51,118 603,712
Net income
Exercise of 320,172 stock
options 282 5,730
Issuance of restricted stock 7 (11,555)
Dividends paid ($0.40 per share)
Dividends on shares held by SECT 697
Adjust SECT shares to
market value 13,541
Translation adjustments
Purchase of 230,000 shares
by employee benefit plans 2,964
-------- -------
Balance at October 31, 1996 51,407 615,089
Net income
Exercise of 301,072 stock
options 200 4,984
Dividends paid ($0.40 per share)
Dividends on shares held by SECT 578
Adjust SECT shares to
market value (2,950)
Translation adjustments
Purchase of 209,373 shares
by employee benefit plans 4,582
1,062,457 shares
acquired as treasury stock
Amortization of unearned
compensation on restricted stock 3,075
------- --------
Balance at October 31, 1997 $51,607 $625,358
======= ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
(DOLLAR AMOUNTS IN THOUSANDS)
Cumulative
Retained Translation
Earnings Adjustments
<S> <C> <C>
Balance at October 31, 1994 $15,361 $(37,452)
Net income 57,404
Exercise of 861,930 stock
options
Dividends paid ($0.40 per share) (19,205)
Dividends on shares held by SECT
Adjust SECT shares to
market value
Translation adjustments (4,666)
110,000 shares acquired
as Treasury Stock
457,991 shares transferred from
Treasury Stock to SECT
Purchase of 425,345 shares
by employee benefit plans
-------- ---------
Balance at October 31, 1995 53,560 (42,118)
Net income 114,217
Exercise of 320,172 stock
options
Issuance of restricted stock
Dividends paid ($0.40 per share) (19,602)
Dividends on shares held by SECT
Adjust SECT shares to
market value
Translation adjustments 4,534
Purchase of 230,000 shares
by employee benefit plans
------ --------
Balance at October 31, 1996 148,175 (37,584)
Net income 125,281
Exercise of 301,072 stock
options
Dividends paid ($0.40 per share) (19,729)
Dividends on shares held by SECT
Adjust SECT shares to
market value
Translation adjustments (3,856)
Purchase of 209,373 shares
by employee benefit plans
1,062,457 shares
acquired as treasury stock
Amortization of unearned
compensation on restricted stock
-------- --------
Balance at October 31, 1997 $253,727 $(41,440)
======== =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
(DOLLAR AMOUNTS IN THOUSANDS)
Treasury
SECT Stock
------ --------
<S> <C> <C>
Balance at October 31, 1994 $(53,760) $(52,009)
Net income
Exercise of 861,930 stock
options 7,579
Dividends paid ($0.40 per share)
Dividends on shares held by SECT
Adjust SECT shares to
market value (16,832)
Translation adjustments
110,000 shares acquired
as Treasury Stock (3,009)
457,991 shares transferred from
Treasury Stock to SECT (8,505) 8,505
Purchase of 425,345 shares
by employee benefit plans 11,035
-------- ---------
Balance at October 31, 1995 (60,483) (46,513)
Net income
Exercise of 320,172 stock
options 750
Issuance of restricted stock 11,914
Dividends paid ($0.40 per share)
Dividends on shares held by SECT
Adjust SECT shares to
market value (13,541)
Translation adjustments
Purchase of 230,000 shares
by employee benefit plans 4,271
-------- ----------
Balance at October 31, 1996 (61,360) (42,242)
Net income
Exercise of 301,072 stock
options 1,980
Dividends paid ($0.40 per share)
Dividends on shares held by SECT
Adjust SECT shares to
market value 2,950
Translation adjustments
Purchase of 209,373 shares
by employee benefit plans 3,888
1,062,457 shares
acquired as treasury stock (44,808)
Amortization of unearned
compensation on restricted stock
--------- ---------
Balance at October 31, 1997 $(56,430) $(83,162)
========= =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
(DOLLAR AMOUNTS IN THOUSANDS)
Total
------
<S> <C>
Balance at October 31, 1994 $499,727
Net income 57,404
Exercise of 861,930 stock
options 17,309
Dividends paid ($0.40 per share) (19,205)
Dividends on shares held by SECT 681
Adjust SECT shares to
market value -
Translation adjustments (4,666)
110,000 shares acquired
as Treasury Stock (3,009)
457,991 shares transferred from
Treasury Stock to SECT -
Purchase of 425,345 shares
by employee benefit plans 11,035
--------
Balance at October 31, 1995 559,276
Net income 114,217
Exercise of 320,172 stock
options 6,762
Issuance of restricted stock 366
Dividends paid ($0.40 per share) (19,602)
Dividends on shares held by SECT 697
Adjust SECT shares to
market value -
Translation adjustments 4,534
Purchase of 230,000 shares
by employee benefit plans 7,235
---------
Balance at October 31, 1996 673,485
Net income 125,281
Exercise of 301,072 stock
options 7,164
Dividends paid ($0.40 per share) (19,729)
Dividends on shares held by SECT 578
Adjust SECT shares to
market value -
Translation adjustments (3,856)
Purchase of 209,373 shares
by employee benefit plans 8,470
Purchase of 1,062,457 shares
acquired as treasury stock (44,808)
Amortization of unearned
compensation on restricted stock 3,075
--------
Balance at October 31, 1997 $749,660
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
Notes to Consolidated
Financial Statements
Harnischfeger Industries, Inc.
(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 restated
to reflect the Company's divestiture in 1995 of the Systems
Group and Joy Environmental Technologies ("JET") 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. Such contracts include
contracts for papermaking machinery, certain mining
equipment and custom-engineered cranes. 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) gains
included in operating income were $(701), $(1,150) and
$1,901 in 1997, 1996 and 1995, respectively.
Goodwill and Intangible Assets: Goodwill represents the
excess of the purchase price over the fair value of
identifiable net assets of acquired companies and is
amortized on a straight-line basis over periods ranging from
30 to 40 years. The Company assesses the carrying value of
goodwill at each balance sheet date. 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", such assessments
include, as appropriate, a comparison of (a) the estimated
future nondiscounted cash flows anticipated to be generated
during the remaining amortization period of the goodwill to
(b) the net carrying value of goodwill. The Company
recognizes diminution in value of goodwill, if any, on a
current basis. Other intangible assets are amortized over
the shorter of their legal or economic useful lives ranging
from 5 to 20 years. Accumulated amortization was $95,033 and
$93,383 at October 31, 1997 and 1996, 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 $40,094, $34,471 and $30,348
in 1997, 1996 and 1995, 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: Earnings per share are based upon the
weighted average number of common shares outstanding during
the year. The number of shares used in the computation were
47,826,813, 47,196,388 and 46,218,144 in 1997, 1996 and
1995, respectively. Common stock equivalents were not
significant in any of the years presented. Shares in the
Stock Employee Compensation Trust ("SECT") are not
considered outstanding for purposes of computing earnings
per share.
Future Accounting Changes: In February, 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 128,
"Earnings per Share." This statement establishes revised
standards for computing and presenting earnings per share.
The statement is effective for the Company's fiscal 1998
first quarter. All prior periods will be required to be
restated. The adoption of this standard will not have a
material impact on the Company's reported earnings per
share.
In June, 1997, the 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 is not
required to adopt the standard until fiscal 1999.
Note 2
Acquisitions
In early 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 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.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in underground
mining equipment, industrial electronic control systems,
toys and plastics. Longwall International ("Longwall"), one
of the main subsidiaries of Dobson, was engaged in the
manufacture, sale and service of underground mining
equipment for the international coal mining industry.
Longwall's products included electronically controlled roof
support systems and armored face conveyors.
The Company is fully integrating Longwall's 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 $71,000. As of October 31, 1997, approximately
$46,000 of the reserves had been used.
As part of the Dobson acquisition, the non-core
businesses are held for sale and separately classified as
such in the Consolidated Balance Sheet. These businesses
were originally valued at $100,000. All but one of the
businesses have been sold, aggregating net proceeds of
$90,677. The remaining balance represents the net realizable
value including the expected cash flow from the remaining
business. This business is expected to be sold within the
next year. Profit/losses generated during the period related
to businesses held for sale have been excluded from
operating results.
On March 27, 1996, the Company's Beloit Corporation
subsidiary 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.
On November 29, 1994, the Company completed the
acquisition of JTI upon the approval of the shareholders of
each company. Under the terms of the acquisition, accounted
for as a pooling of interests, the Company exchanged
17,720,750 common shares for all of JTI's 31,353,000
outstanding shares, at an exchange ratio of .5652 of a share
of the Company's common stock for each of JTI's common
shares.
Transaction costs incurred to complete the JTI merger
of $17,459 ($11,384 after tax, or $0.24 per share) were
charged to income and consisted primarily of investment
banker, attorney and accountant fees, severance and related
benefits, and printing, mailing and registration expenses.
Note 3
Restructuring Charge
In the fourth quarter of fiscal 1996, the Company's Beloit
Corporation subsidiary recorded a restructuring charge. The
focus of the restructuring is to better serve its customers
and strengthen its market position in the worldwide pulp and
paper industry. The restructuring is consistent with the
Company's policy to generate positive Economic Value Added
("EVA"). The restructuring initiative involves organizing
engineering and manufacturing operations into Centers of
Excellence and expanding the aftermarket capabilities of the
subsidiary. The total estimated cost of the restructuring
activities reduced pre-tax income by $43,000 ($21,830 after
tax and minority interest, or $0.46 per share). Included in
the charge are costs related to severance for approximately
500 employees worldwide, the disposition of machinery and
equipment, closure of certain facilities and the sale of
businesses. At the end of fiscal 1997, $29,770 had been
charged against the reserve and 444 employees had been
terminated in accordance with the plan.
<TABLE>
<CAPTION>
Details of the restructuring charge are as follows:
Original Reserve 10/31/97
Reserve Utilized Reserve
<S> <C> <C> <C>
Employee severance $15,900 $(12,851) $ 3,049
Machinery and
equipment dispositions 7,600 (6,830) 770
Closure of facilities 6,800 (703) 6,097
Sale of businesses 6,000 (3,085) 2,915
Other 6,700 (6,301) 399
-------- --------- -------
$43,000 $(29,770 ) $13,230
======= ======== =======
</TABLE>
The cash and noncash elements of the restructuring
charge approximated $27,700 and $15,300, respectively. Cash
outflows to date are approximately $18,400. The remaining
reserves are expected to be substantially utilized during
1998.
Note 4
Accounts Receivable
<TABLE>
<CAPTION>
Accounts receivable at October 31 consisted of the following:
1997 1996
<S> <C> <C>
Trade receivables $438,591 $507,312
Unbilled receivables 405,897 169,086
Allowance for doubtful
accounts and
contract losses (8,319) (8,612)
-------- --------
$836,169 $667,786
======== ========
</TABLE>
The amount of accounts receivable due beyond one year is not
significant.
Note 5
Inventories
<TABLE>
<CAPTION>
Inventories at October 31 consisted of the following:
1997 1996
<S> <C> <C>
Finished goods $274,391 $198,160
Work in process and
purchased parts 247,568 278,671
Raw materials 132,980 134,448
-------- --------
654,939 611,279
Less excess of current
cost over stated
LIFO value (60,178) (64,164)
--------- ---------
$594,761 $547,115
========= =========
</TABLE>
Inventories valued using the LIFO method represented
approximately 54% and 56% of consolidated inventories at
October 31, 1997 and 1996, respectively.
Note 6
Income Taxes
<TABLE>
<CAPTION>
The components of income for the Company's domestic and
foreign operations for the years ended October 31 were as
follows:
1997 1996 1995
<S> <C> <C> <C>
Domestic $126,230 $ 82,533 $102,701
Foreign 92,899 99,228 37,951
-------- -------- --------
Pre-tax income from
continuing operations
before Joy merger costs
and gain on sale of
Measurex investment $219,129 $181,761 $140,652
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
The consolidated provision for income taxes included in the
Consolidated Statement of Income for the years ended October
31 consisted of the following:
1997 1996 1995
<S> <C> <C> <C>
Current provision(benefit):
Federal $ (5,048) $ 4,957 $17,934
State 1,618 2,288 1,311
Foreign 24,691 36,474 14,690
--------- --------- -------
Total current 21,261 43,719 33,935
Deferred provision
(credit):
Federal 44,784 13,409 7,721
State and foreign (236) 6,472 1,509
--------- ------- -------
Total deferred 44,548 19,881 9,230
------- ------- -------
Total consolidated
income tax provision $65,809 $63,600 $43,165
======= ======= =======
</TABLE>
The income tax provision is included in the Consolidated
Statement of Income as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Continuing operations $ 74,475 $63,600 $53,500
Loss from discontinued
operations - - (8,015)
Extraordinary item -
retirement of debt (8,666) - (2,320)
-------- ------- -------
$65,809 $63,600 $43,165
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
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:
1997 1996 1995
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
Goodwill amortization
not deductible for
tax purposes 1.6 1.9 0.7
Differences in foreign
and U.S. tax rates 9.2 3.4 0.3
Differences in Foreign
Sales Corporation and
U.S. tax rate (0.8) (0.6) (1.5)
State income taxes, net
of federal tax impact 0.8 1.8 0.5
General business and foreign
tax credits utilized (14.4) (9.1) (1.5)
Other items-net 2.6 2.6 1.5
----- ----- -----
Effective tax rate 34.0% 35.0% 35.0%
===== ===== =====
</TABLE>
Temporary differences and carryforwards which gave rise to
the net deferred tax (liability) asset at October 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Inventories $(16,788) $(22,601)
Reserves not currently
deductible 5,757 59,892
Depreciation and amortization
in excess of book expense (41,926) (54,666)
Employee benefit related items 15,319 22,823
Tax credit carryforwards 28,300 14,579
Tax loss carryforwards 65,032 71,572
Other - net (65,618) (36,956)
Valuation allowance (34,895) (44,968)
--------- ---------
Net deferred tax
(liability) asset $(44,819) $ 9,675
======= =======
</TABLE>
This net (liability) asset is included in the Consolidated
Balance Sheet in the following captions:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Other current assets $ 33,852 $ 64,595
Deferred income taxes (78,671) (54,920)
--------- ---------
$(44,819) $ 9,675
========= =========
</TABLE>
At October 31, 1997, the Company had general business
tax credits of $17,971 expiring in 2009-2012, and
alternative minimum tax credit carryforwards of $10,329
which do not expire. In addition, tax loss carryforwards
consisted of foreign carryforwards of $25,469 with various
expiration dates, capital loss carryforwards of $19,481 with
various expiration dates, and domestic carryforwards of
$20,082 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 $160,300 at
October 31, 1997. 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 $11,809, $30,205 and $31,686
for 1997, 1996 and 1995, respectively.
Note 7
Long-Term Obligations, Bank Credit Facilities and Interest
Expense
<TABLE>
<CAPTION>
Long-term obligations at October 31 consisted of the following:
1997 1996
<S> <C> <C>
10 1/4% Senior Notes,
due 2003 $ 7,730 $188,380
8.9% Debentures, due 2022 75,000 75,000
8.7% Debentures, due 2022 75,000 75,000
71/4% Debentures, due 2025
(net of discount of $1,247
and $1,261, respectively) 148,753 148,739
67/8% Debentures, due 2027
(net of discount of $111) 149,889 -
Senior Notes, Series A
through D, at interest rates
of between 8.9% and 9.1%,
due 1998 to 2006 71,364 73,182
Revolving Credit Facility 150,000 40,000
Industrial Revenue Bonds, at
interest rates of between 5.9%
and 8.8%, due 1998 to 2017 33,400 34,629
Other 14,057 27,207
--------- ---------
725,193 662,137
Less:
Amounts payable within
one year 11,727 4,372
-------- ---------
$713,466 $657,765
======== =========
</TABLE>
The 10 1/4% Senior Notes have a maturity date of
September 1, 2003. JTI may, at its option, redeem the Senior
Notes in whole or in part at any time on or after September
1, 1998 at 105.125% of their principal amount, plus accrued
interest, declining to 100% of their principal amount, plus
accrued interest, on or after September 1, 2000.
In addition, upon a change of control of JTI, JTI is
required to make an offer to purchase the Senior Notes then
outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued interest. On December
29, 1994, JTI issued an offer to purchase for cash at 101%
any and all of its outstanding 10 1/4% Senior Notes. This
offer expired on February 10, 1995 with $270 being
repurchased under the offer. Prior to this tender offer, the
Company had purchased $11,350 of outstanding 10 1/4% Senior
Notes in unsolicited open market transactions. In 1995, as a
result of the 10-1/4% Senior Note repurchases and repayment
of remaining borrowings under JTI's Bank Facility, the
Company recorded an extraordinary loss on debt retirement,
net of applicable income taxes, of $(3,481), or $(0.08) per
share, consisting primarily of unamortized financing costs
and purchase premiums.
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 share, consisting
primarily of unamortized financing costs and purchase
premiums. Debt purchased was funded through available cash
and credit facilities. It is the Company's current intention
to redeem the remaining notes in September, 1998.
The Company has $150,000 of unsecured debentures
outstanding with interest rates ranging from 8.7% to 8.9%
due at maturity in 2022.
The 7 1/4% debentures were issued on December 19, 1995
at 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 99.925%. Proceeds were
used to repay short-term indebtedness and to increase cash.
The debentures will mature on February 15, 2027, are not
redeemable by the Company prior to maturity and are not
subject to sinking fund requirements. Each holder of the
debentures has the right to require the Company to repay the
holders, in whole or in part, on February 15, 2007, at a
repayment price equal to 100% of the aggregate principal
amount thereof plus accrued and unpaid interest. Interest on
the debentures is payable semi-annually on February 15 and
August 15 of each year commencing on August 15, 1997.
The Senior Notes, Series A through D, are privately
placed and unsecured. The Series D Notes provide for eleven
equal annual repayments beginning in 1996; Series A through
C Notes are due at maturity in 1999, 1999 and 2001,
respectively.
The terms of certain of the debt instruments 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 November, 1993, the Company entered into a
four-year Revolving Credit Facility Agreement between the
Company and certain domestic and foreign financial
institutions that allowed for borrowings of up to $150,000
at rates expressed in relation to LIBOR and other rates. In
November, 1994, the facility was increased to $240,000. In
October, 1997, the $240,000 facility was replaced by a new
$500,000 Revolving Credit Facility which expires in October,
2002. A facility fee is payable on the Revolving Credit
Facility. At October 31, 1997, direct outstanding borrowings
under the facility were $150,000 and commercial paper
borrowings, considered a utilization of the facility, were
$84,149.
Installments payable to holders of the outstanding
long-term obligations of the Company are due as follows:
1998 $11,727
1999 39,215
2000 2,738
2001 28,073
2002 152,062
At October 31, 1997, short-term bank credit lines of
foreign subsidiaries were approximately $218,300. The
outstanding borrowings were $73,977 with a weighted average
interest rate of 7.2%. There were no compensating balance
requirements under these lines of credit.
<TABLE>
<CAPTION>
Net interest expense consisted of the following:
1997 1996 1995
<S> <C> <C> <C>
Interest income $ 3,458 $ 6,505 $ 11,035
Interest expense (76,001) (68,763) (51,748)
---------- ---------- ---------
Interest
expense - net $(72,543) $ (62,258) $(40,713)
========== ========== =========
</TABLE>
Interest paid was $76,378, $65,161 and $52,615 in
1997, 1996 and 1995, respectively.
Note 8
Pensions and Other
Employee Benefits
The Company and its subsidiaries have a number of defined
benefit, defined contribution and government mandated
pension plans covering substantially all employees. Benefits
from these plans are based on factors which include various
combinations of years of service, fixed monetary amounts per
year of service, employee compensation during the last years
of employment and the recipient's social security benefit.
The Company's funding policy with respect to its qualified
plans is to contribute annually not less than the minimum
required by applicable law and regulation nor more than the
amount which can be deducted for income tax purposes. The
Company also has a nonqualified senior executive
supplemental pension plan, funded by Company stock held in a
trust, 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, 1997 and 1996.
The Company recorded an additional minimum pension
liability and intangible asset of $4,513 and $5,600 in 1997
and 1996, respectively, to recognize the unfunded
accumulated benefit obligation of certain plans. Pension
expense for all plans of the Company was $20,953 in 1997,
$19,132 in 1996 and $17,344 in 1995. Net periodic pension
costs for U.S. plans and plans of subsidiaries outside the
United States for which SFAS No. 87, "Employers' Accounting
for Pensions," has been adopted included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 23,602 $ 22,892 $ 16,854
Interest cost on projected
benefit obligation 62,722 56,792 33,655
Actual gain on
plan assets (115,397) (98,003) (55,856)
Net amortization
and deferral 43,277 33,832 20,134
--------- --------- ---------
Net periodic pension cost $ 14,204 $ 15,513 $ 14,787
========= ========= =========
</TABLE>
The discount rate used for U.S. plans was 7.5% in 1997 and
8.0% in 1996 and 1995, respectively, and for non-U.S. plans
ranged from 7.0%-15.0%. The assumed rate of increase in
future compensation of U.S. salaried employees was 4.5% in
1997 and 5.0% in 1996 and 1995, respectively, and for
non-U.S. salaried employees ranged from 2.0%-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 ranged from 8.0% to 10.0% and for non-U.S. plans
ranged from 8.5%-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.
The following table sets forth the plans' funded status at
October 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
<S> <C> <C>
Actuarial present
value of:
Vested benefits $715,967 $30,043
Accumulated benefits 757,050 35,492
Projected benefits 827,474 42,903
Net assets available
for benefits 864,281 9,836
Plans' assets greater
(less)
than projected
benefits 36,807 (33,067)
Unrecognized (asset)
obligation existing
at adoption (5,328) 663
Unrecognized prior
service cost 33,657 1,801
Unrecognized net
(gain) loss (18,341) 9,272
--------- ---------
Net pension asset
(liability) $ 46,795 $(21,331)
========= =========
</TABLE>
<TABLE>
<CAPTION>
1996
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
<S> <C> <C>
Actuarial present
value of:
Vested benefits $601,511 $ 34,139
Accumulated benefits 633,397 39,149
Projected benefits 704,585 46,243
Net assets available
for benefits 771,887 9,807
Plans' assets greater
(less)
than projected
benefits 67,302 (36,436)
Unrecognized (asset)
obligation existing
at adoption (5,508) 846
Unrecognized prior
service cost 27,311 2,023
Unrecognized net
(gain) loss (38,358) 9,748
--------- --------
Net pension asset
(liability) $50,747 $(23,819)
========= =========
</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 $9,957 in 1997,
$10,783 in 1996 and $6,321 in 1995.
In the first quarter of fiscal 1995, the Company
implemented SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". The impact upon adoption of SFAS
No. 112 on the Company's results of operations and financial
position was not material.
Note 9
Postretirement Benefits Other Than Pensions
The Company generally provides certain health care and life
insurance benefits under various 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 7.5% at October
31, 1997 and 8.0% at October 31, 1996 and October 31, 1995,
respectively.
The following table sets forth the plans' funded
status and amounts recognized in the Company's Consolidated
Balance Sheet as of October 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $53,531 $58,819
Fully eligible active plan
participants 2,052 2,788
Other active plan
participants 3,182 7,832
------- -------
Total 58,765 69,439
Plan assets at fair value - -
Accumulated postretirement
benefit obligation in excess
of plan assets 58,765 69,439
Unrecognized transition
obligation - -
Unrecognized prior service
credit 11,903 20,653
Unrecognized gain 2,590 7,214
------- -------
Accrued postretirement
benefit liability 73,258 97,306
Less: Current portion 17,056 18,492
------- -------
$56,202 $78,814
======= =======
</TABLE>
For measurement purposes, an annual rate of increase
in the per capita cost of covered health care benefits in
the range of 6.2% to 9.0% for non-Medicare eligible
participants was assumed for 1997 (a range of 5.4% to 8.0%
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, 1997 by $3,000 and the aggregate service
cost and interest cost components of the net periodic
postretirement benefit cost for the year by $200.
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.
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost includes the following
components:
1997 1996 1995
<S> <C> <C> <C>
Service cost $ 163 $ 327 $ 502
Interest cost on
accumulated
postretirement
benefit obligation 4,743 5,632 6,475
Amortization of prior
service (credit) (12,810) (10,780) (9,417)
Net amortization and
deferral (2,943) (2,624) (225)
---------- --------- ---------
Net periodic
postretirement
benefit cost $ (10,847) $ (7,445) $ (2,665)
========== ========== ==========
</TABLE>
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 20% or more of the outstanding
common stock of the Company.
In September, 1997, the Company announced its intent
to repurchase up to ten million shares of its common stock.
At October 31, 1997, the Company had repurchased 906,400
shares for treasury at a cost of approximately $38,200. An
additional $6,600 of treasury stock was repurchased in
separate transactions.
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
and 1997, 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 and 1997 was
estimated using the Black-Scholes option-pricing method with
the following weighted average assumptions:
Expected stock price volatility 29.45%
Risk-free interest rate 6.54%
Expected life of options 7 years
Expected dividends $0.40 per share
On August 14, 1997, the Company established a new long-term
incentive compensation plan which covers 11 key elected
officers 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. If target prices are not met, none of the
shares will be awarded. As the stock price has declined
since inception of the plan, no compensation expense was
recorded in fiscal 1997.
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 30,000 shares were granted under this plan in
fiscal year 1997.
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. Shares are forfeited
if the officer voluntarily terminates 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. Following shareholder
approval of the 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 4,160,405 shares have been granted at prices
ranging from $6.75 to $47.00 per share. At October 31, 1997,
1,159,771 of the options were outstanding, 1,901,075 had
been exercised and 1,099,559 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.
<TABLE>
<CAPTION>
Certain information regarding stock options is as follows:
Number Weighted Average
of Shares Price Per Share
<S> <C> <C>
Outstanding at
October 31, 1994 1,858,946 $19.04
Granted 637,750 29.17
Exercised (861,930) 18.44
Canceled or expired (190,480) 19.01
---------- ------
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
---------- ------
Exercisable at
October 31, 1997 573,386 $26.86
========== ======
</TABLE>
The weighted average contractual life of options outstanding
at October 31, 1997 is 7.78 years with exercise prices
ranging from $14.38 to $47.00.
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 $27,307, $27,887 and
$20,822 in 1997, 1996 and 1995, respectively.
At October 31, 1997, 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:
1998 $19,761
1999 20,000
2000 13,496
2001 10,169
2002 8,716
2003 and thereafter 81,091
Note 12
Commitments, Contingencies and Off-Balance-Sheet Risks
At October 31, 1997, the Company was contingently liable to
banks, financial institutions and others for approximately
$441,000 for outstanding letters of credit securing
performance of sales contracts and other guarantees in the
ordinary course of business, excluding the H-K Systems, Inc.
back-up bond guarantee facility. The Company may also
guarantee performance of its equipment at levels specified
in sales contracts without the requirement of a letter of
credit.
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 Corporation, certain
litigation matters and claims are currently pending in
connection with its contractual undertakings. Beloit may on
occasion enter into arrangements to participate in the
ownership of or operate pulp or papermaking facilities in
order to satisfy contractual undertakings or resolve
disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15,000 failed to
perform satisfactorily. In June, 1997, a Lewiston, Idaho
jury awarded Potlatch $95,000 in damages in the case. Beloit
has appealed this award to the Idaho Supreme Court. While
the eventual outcome of the Potlatch case cannot be
predicted, reserves in the October 31, 1997 Consolidated
Balance Sheet are less than the full amount of the jury
award.
The Company is also involved in a number of
proceedings and potential proceedings relating to
environmental matters. Although it is difficult to estimate
the potential exposure to the Company related to these
environmental matters, the Company believes that these
matters will not have a materially adverse effect upon its
consolidated financial position or results of operations.
The Company has entered into various foreign currency
exchange contracts with major international financial
institutions designed to minimize its exposure to exchange
rate fluctuations on foreign currency transactions. These
contracts are used to hedge known cash receipts and
disbursements in the ordinary course of business. At October
31, 1997, the outstanding net U.S. dollar face amounts of
contracts to cover sales and purchase activity totaled
approximately $78,400. In addition, at October 31, 1997, the
Company had outstanding foreign exchange contracts totaling
$10,689 to cover interest and borrowing obligations. The
difference between contract and estimated fair values at
October 31, 1997 was not significant. It is the Company's
policy not to participate in high-yield financings, highly
leveraged transactions or other "derivative" instruments.
On October 29, 1993, the Company completed the sale of
H-K Systems, Inc. to that unit's senior management and some
equity partners. The Company agreed to make available a
back-up bonding guarantee facility for certain bid,
performance and other contract bonds issued by H-K Systems,
Inc. Outstanding contract bonds under the guarantee
arrangement totaled approximately $14,700 at October 31,
1997. No new bonds can be issued during 1998.
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, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997
Carrying Value Fair Value
<S> <C> <C>
Cash and Cash
Equivalents $ 29,383 $ 29,383
=========== ===========
Long-Term Obligations (725,193) (769,361)
=========== ===========
1996
Carrying Value Fair Value
Cash and Cash
Equivalents $ 36,936 $ 36,936
=========== ==========
Long-Term Obligations (662,137) (708,204)
=========== ==========
</TABLE>
Note 14
Transactions With Affiliated Companies
Mitsubishi Heavy Industries, Ltd. ("Mitsubishi") owns a 20%
interest in Beloit Corporation. In connection with this
ownership interest, Mitsubishi entered into certain
agreements that provide it with the right to designate one
of Beloit's five directors. The agreements also place
certain restrictions on the transfer of Beloit stock. In the
event of change in control of the Company, Mitsubishi has
the right to sell its 20% interest back to the Company for
the greater of $60,000 or the book value of its equity
interest.
On October 1, 1996, Beloit Corporation entered into a
joint venture agreement with Eduard Kuester Maschinenfabrik
GmbH & Co. KG ("Kuesters"). Kuesters owns a 55% interest in
the joint venture and is authorized to appoint two of the
four members of the joint venture advisory board, including
the chairman.
<TABLE>
<CAPTION>
Transactions with related parties for the years ending
October 31 were as follows:
1997 1996 1995
<S> <C> <C> <C>
Sales $ 3,965 $1,267 $1,553
Purchases 39,413 223 265
Receivables 8,291 6,306 6,413
Payables 18,994 41 14
License Income 7,831 7,127 7,582
</TABLE>
The Company believes that its transactions with all
related parties were competitive with alternate sources of
supply for each party involved.
As of October 31, 1994, the Company's total investment
in Measurex Corporation, including related expense, equity
income and net of dividends received, amounted to $66,347,
representing a 20% interest. In fiscal 1995, Measurex
repurchased its stock which had been purchased by the
Company resulting in a pre-tax gain of $29,657. Measurex
continues to have cooperative agreements with Beloit.
Note 15
Segment Information
The Company designs, manufactures, markets and services
products structured into three industry segments.
The "Mining Equipment Segment" consists of P&H Mining
Equipment (Harnischfeger Corporation) and Joy Mining
Machinery. P&H Mining Equipment designs, manufactures and
markets electric mining shovels, electric and
diesel-electric draglines, buckets, hydraulic mining
excavators, large rotary blasthole drilling equipment and
related replacement parts for the surface mining and
quarrying industries. Joy Mining Machinery 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 12% of the Company's consolidated net
sales for fiscal 1997 and the related accounts receivable
from this customer approximated 25% of consolidated accounts
receivable at October 31, 1997.
The "Material Handling Segment" (Harnischfeger
Corporation) designs, manufactures, services and markets
overhead cranes, electric wire rope and chain hoists,
engineered products, container cranes and crane
modernizations and electrical products for use worldwide in
a variety of industries and applications. In September,
1997, the Company announced that it was exploring the
possible sale of this business segment.
Intersegment sales are not significant. Common
operating plants have been allocated to the respective
segments.
Corporate assets include principally cash, cash
equivalents, and administration facilities.
<TABLE>
<CAPTION>
Segments of Business by Industry
Total Operating
Sales Income
--------- ---------
<S> <C> <C>
1997
Mining Equipment $1,467,341 $ 201,803
Pulp and Paper Machinery 1,267,847 76,485
Material Handling 353,350 38,399
---------- ---------
Total continuing operations 3,088,538 316,687
Corporate - (25,015)
---------- ---------
Consolidated total $3,088,538 $ 291,672
========== =========
1996
Mining Equipment $1,405,936 $ 183,141
Pulp and Paper Machinery 1,134,779 48,511(1)
Material Handling 323,216 33,107
---------- ---------
Total continuing operations 2,863,931 264,759
Corporate - (20,740)
Consolidated total $2,863,931 $ 244,019
========== =========
1995
Mining Equipment $ 941,779 $ 122,116
Pulp and Paper Machinery 970,418 56,062
Material Handling 239,882 22,850
---------- ---------
Total continuing operations 2,152,079 201,028
Corporate - (19,663)
Discontinued Operations - -
---------- ---------
Consolidated total $2,152,079 $181,365
========== =========
</TABLE>
(1) After restructuring charge of $43,000.
<TABLE>
<CAPTION>
Segments of Business by Industry
Depreciation and Capital
Amortization Expenditures
---------------- ------------
<S> <C> <C>
1997
Mining Equipment $ 41,231 $ 61,004
Pulp and Paper Machinery 45,122 53,616
Material Handling 6,964 7,096
---------- --------
Total continuing operations 93,317 121,716
Corporate 1,108 11,781
---------- --------
Consolidated total $ 94,425 $133,497
========== ========
1996
Mining Equipment $ 44,051 $ 23,938
Pulp and Paper Machinery 38,788 39,769
Material Handling 5,893 6,833
---------- --------
Total continuing operations 88,732 70,540
Corporate 538 12,848
---------- --------
Consolidated total $ 89,270 $ 83,388
========== ========
1995
Mining Equipment $ 29,280 $ 25,963
Pulp and Paper Machinery 33,296 39,227
Material Handling 4,517 5,609
---------- --------
Total continuing operations 67,093 70,799
Corporate 675 2,473
Discontinued Operations 2,744 212
---------- --------
Consolidated total $ 70,512 $ 73,484
========== ========
</TABLE>
(1) After restructuring charge of $43,000.
<TABLE>
<CAPTION>
Segments of Business by Industry
Identifiable
Assets
------------
<S> <C>
1997
Mining Equipment $1,371,484
Pulp and Paper Machinery 1,240,764
Material Handling 232,559
----------
Total continuing operations 2,844,807
Corporate 79,728
----------
Consolidated total $2,924,535
==========
1996
Mining Equipment $1,362,435
Pulp and Paper Machinery 1,023,819
Material Handling 204,412
----------
Total continuing operations 2,590,666
Corporate 99,363
----------
Consolidated total $2,690,029
==========
1995
Mining Equipment $ 797,921
Pulp and Paper Machinery 817,411
Material Handling 154,905
----------
Total continuing operations 1,770,237
Corporate 222,881
Discontinued Operations 47,649
----------
Consolidated total $2,040,767
==========
</TABLE>
(1) After restructuring charge of $43,000.
<TABLE>
<CAPTION>
Geographical Segment Information
Total Interarea
Sales Sales
------- ---------
<S> <C> <C>
1997
United States $2,121,490 $(280,314)
Europe 760,752 (165,730)
Other Foreign 661,915 (9,575)
Interarea Eliminations (455,619) 455,619
----------- ---------
$3,088,538 $ -
=========== ==========
1996
United States $1,860,203 $(213,061)
Europe 837,815 (158,639)
Other Foreign 562,558 (24,945)
Interarea Eliminations (396,645) 396,645
----------- ---------
$2,863,931 $ -
=========== =========
1995
United States $1,690,096 $(199,940)
Europe 337,293 (43,604)
Other Foreign 381,493 (13,259)
Interarea Eliminations (256,803) 256,803
----------- ---------
$2,152,079 $ -
=========== =========
</TABLE>
<TABLE>
<CAPTION>
Geographical Segment Information
Sales to
Unaffiliated Operating
Customers Income
----------- --------
<S> <C> <C>
1997
United States $1,841,176 $219,685
Europe 595,022 114,629
Other Foreign 652,340 50,077
Interarea Eliminations - (67,704)
---------- --------
$3,088,538 $316,687
========== ========
1996
United States $1,647,142 $156,556
Europe 679,176 86,273
Other Foreign 537,613 49,263
Interarea Eliminations - (27,333)
---------- --------
$2,863,931 $264,759
========== ========
1995
United States $1,490,156 $165,916
Europe 293,689 19,520
Other Foreign 368,234 35,290
Interarea Eliminations - (19,698)
---------- ---------
$2,152,079 $201,028
========== =========
</TABLE>
<TABLE>
<CAPTION>
Geographical Segment Information
Identifiable
Assets
----------
<S> <C>
1997
United States $1,814,018
Europe 672,929
Other Foreign 441,489
Interarea Eliminations (83,629)
----------
$2,844,807
==========
1996
United States $1,456,221
Europe 700,496
Other Foreign 478,847
Interarea Eliminations (44,898)
----------
$2,590,666
==========
1995
United States $1,202,038
Europe 313,822
Other Foreign 261,171
Interarea Eliminations (6,794)
----------
$1,770,237
==========
</TABLE>
Exports of U.S.-produced products were approximately
$508,000, $321,000 and $263,000 in 1997, 1996 and 1995,
respectively.
Note 16
Discontinued Operations
In February, 1995, the Company completed the sale of Syscon
Corporation to Logicon, Inc. for a cash price of $45,000. In
connection with this sale, the Company recorded a loss of
$(21,948) or $(0.48) per share, net of applicable income
taxes, in the first quarter of 1995.
In December, 1995, the Company completed the sale of
substantially all of the assets of JET to Babcock and
Wilcox, an operating unit of McDermott International, for
$11,651. The loss on sale, net of applicable income taxes,
was recorded in fiscal 1995. As a result, the Consolidated
Statement of Income reflects a loss from the discontinued
operations of $(9,287) or $(0.19) per share for fiscal 1995.
Operating results of discontinued operations as of October
31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net sales $ - $ - $101,472
Loss before
income taxes - - (39,250)
Income taxes credit - - 8,015
------ ----- ---------
Loss from
discontinued
operations $ - $ - $(31,235)
===== = ===== =========
</TABLE>
Note 17
Subsequent Event-Restatement of Operating Results
During the second quarter of fiscal 1998, the Company
identified at its Beloit Corporation subsidiary additional
estimated contract costs of approximately $155,000 related
to four, large ongoing Indonesian projects with total
contract values aggregating approximately $600,000. At the
direction of the Company's Board of Directors, a special
review was undertaken to assess the reasonableness of the
revised cost estimates and the related financial reporting
implications. Based upon the Company's internal review and
the results of the special review, it has been determined
that $27,600 of the approximate $155,000 in additional
contract costs relate to certain isolated costs which were
inadvertently overlooked in the preparation of the year-end
cost estimates on these contracts. As such, $27,600 of
these costs are more appropriately recorded in the fourth quarter
of fiscal 1997 and the remaining $127,400 will be recorded
in the Company's first and second quarters of fiscal 1998.
Accordingly, the Company's fiscal 1997 financial statements
have been restated as follows:
<TABLE>
<CAPTION>
As Reported Restated
<S> <C> <C>
Income before provision for income
taxes and minority interest $ 246,729 $ 219,129
Provision for income taxes (83,875) (74,475)
Minority interest (10,014) (6,374)
---------- ---------
Income from continuing operations $ 152,840 $ 138,280
========== =========
Net Income $ 139,841 $ 125,281
========== =========
Earnings per share
Income from continuing operations $ 3.20 $ 2.89
Net income 2.93 2.62
</TABLE>
The additional estimated contract costs of approximately
$155,000 on these Indonesian contracts are based upon the
Company's best estimate at this time of the total estimated
costs to complete these contracts. The actual costs may
vary significantly from these estimates based upon numerous
factors, including the volatility of the Indonesian
political and economic situation and delivery, performance and
other risks inherent in executing these large, complex projects.
Report of Independent Accountants
To the Directors and Shareholders of Harnischfeger
Industries, Inc.
In our opinion, the consolidated financial statements listed
in the index appearing under Item 14(a)(1) and (2) of this Form
10-K/A, after the restatement described in Note 17, present
fairly, in all material respects, the financial position of
Harnischfeger Industries, Inc., and its subsidiaries (the
"Company") at October 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the
three years in the period ended October 31, 1997, 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.
Price Waterhouse LLP
Milwaukee, Wisconsin
November 18, 1997, except as to Note 17, which is as of June
1, 1998
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices
Harnischfeger Industries, Inc.
(Dollar amounts in thousands except per share and market
price amounts)
Fiscal Quarter 1997
First Second
--------- --------
<S> <C> <C>
Net sales $699,411 $794,578
Gross profit 171,774 189,632
Operating income 67,500 91,373
Income from continuing
operations 30,858 44,971
Extraordinary loss on
retirement of debt, net of
applicable income taxes - -
--------- --------
Net income $ 30,858 $ 44,971
========= ========
Earnings per share:
Income from continuing
operations $ 0.65 $ 0.94
Extraordinary loss on
retirement of debt - -
--------- --------
Net income per share $ 0.65 $ 0.94
========= ========
Market price of common stock:
High $ 50 $ 49 1/4
Low 39 1/2 40
Fiscal Quarter 1996
First Second
-------- --------
Net sales $632,684 $739,509
Gross profit 141,152 178,689
Operating income 53,178 72,649
Net income $ 23,191 $ 33,555
======== ========
Earnings per share:
Net income per share $ 0.50 $ 0.71
Market price of common stock:
High $ 35 1/4 $ 42 1/8
Low 28 5/8 33 3/4
</TABLE>
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices
Harnischfeger Industries, Inc.
(Dollar amounts in thousands except per share and market price amounts)
Fiscal Quarter 1997
Third Fourth
------ ------
<S> <C> <C>
Net sales $786,029 $808,520
Gross profit 185,681 172,336
Operating income 75,270 57,529
Income from continuing
operations 35,890 26,561
Extraordinary loss on
retirement of debt, net of
applicable income taxes - (12,999)
-------- ---------
Net income $ 35,890 $ 13,562
======== =========
Earnings per share:
Income from continuing
operations $ 0.75 $ 0.55
Extraordinary loss on
retirement of debt - (0.27)
-------- ---------
Net income per share $ 0.75 $ 0.28
======== =========
Market price of common stock:
High $43 7/8 $ 44 13/16
Low 38 7/8 37 15/16
Fiscal Quarter 1996
Third Fourth (1)
------- ----------
Net sales $779,752 $711,986
Gross profit 182,487 194,828
Operating income 79,502 38,690
Net income $ 37,692 $ 19,779
======== ========
Earnings per share:
Net income per share $ 0.80 $ 0.41
======== ========
Market price of common stock:
High $ 41 5/8 $ 41
Low 30 1/4 30 7/8
</TABLE>
(1) After restructuring charge of $43,000 ($21,830 after
tax, or $0.46 per share)
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices
Harnischfeger Industries, Inc.
(Dollar amounts in thousands except per share and market price amounts)
1997
Year
------
<S> <C>
Net sales $3,088,538
Gross profit 719,423
Operating income 291,672
Income from continuing operations 138,280
Extraordinary loss on
retirement of debt, net of
applicable income taxes (12,999)
-----------
Net income $ 125,281
===========
Earnings per share:
Income from continuing operations $ 2.89
Extraordinary loss on
retirement of debt (0.27)
-----------
Net income per share $ 2.62
===========
Market price of common stock:
High $ 50
Low 37 15/16
1996
Year (1)
-----------
Net sales $2,863,931
Gross profit 697,156
Operating income 244,019
Net income $ 114,217
==========
Earnings per share:
Net income per share $ 2.42
==========
Market price of common stock:
High $ 42 1/8
Low 28 5/8
</TABLE>
(1) After restructuring charge of $43,000 ($21,830 after
tax, or $0.46 per share)
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 1998 Annual Meeting of Shareholders dated February
23, 1998.
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, 1997, 1996 and 1995
Consolidated Balance Sheet at October 31, 1997
and 1996
Consolidated Statement of Cash Flow for the years
ended October 31, 1997, 1996 and 1995
Consolidated Statement of Shareholders' Equity
for the years ended October 31, 1997, 1996 and
1995
Notes to Consolidated Financial Statements
Report of Independent Accountants
(2) Financial Statement Schedule
For the Years Ended October 31, 1997, 1996 and 1995:
II. Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Balance at Additions
Beginning by
Classification of Year Acquisition
- ------------------------------ ---------- -----------
<S> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ 8,612 $ 158
====== ======
For the year ended October 31, 1996
Doubtful accounts $ 7,604 $2,240
====== ======
For the year ended October 31, 1995
Doubtful accounts $ 7,230 $ 495
====== ======
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Additions
Charged
Classification to Expense Deductions(1)
- ------------------------------ ----------- -------------
<S> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ 2,604 $(3,006)
======= =======
For the year ended October 31, 1996
Doubtful accounts $ 4,278 $(4,381)
======= =======
For the year ended October 31, 1995
Doubtful accounts $ 1,483 $(1,514)
======= ========
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Other Items
Including
Transactions
Currency of
Translation Discontinued
Classification Effects Operations
- ------------------------------ ------------- -----------
<S> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ (291) $ 242
======= =======
For the year ended October 31, 1996
Doubtful accounts $(1,117) $ (12)
======= =======
For the year ended October 31, 1995
Doubtful accounts $ (26) $ (64)
======= =======
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Balance
at End
Classification of Year
- ------------------------------ ---------
<S> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ 8,319
=======
For the year ended October 31, 1996
Doubtful accounts $ 8,612
=======
For the year ended October 31, 1995
Doubtful accounts $ 7,604
=======
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
Allowance Deducted in Balance Sheet from Deferred Tax
Assets:
<CAPTION>
Balance at Additions/ Balance
Beginning Deductions- at end
of Year Net of Year
---------- ---------- --------
<S> <C> <C> <C>
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
========== ========== ========
For the year ended October 31, 1995 $ 14,206 $ 4,050 $ 18,256
========== ========== ========
</TABLE>
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 50% or less-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) Exhibits and Exhibit Index
See the Exhibit Index included as the last part of this
report which is incorporated herein by reference. Each
management contract and compensatory plan or arrangement
required to be filed as an exhibit to this report is
identified in the Exhibit Index by an asterisk (*) following
the description of the exhibit.
(b) Reports on Form 8-K
NONE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this amended and restated report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of St. Francis, Wisconsin, on the 15th day of June 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 June 15, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Signature Title
- ------------------------------- --------------------------------------
/s/JEFFERY T. GRADE Chairman and Chief Executive Officer
-------------------------
Jeffery T. Grade
/s/JOHN NILS HANSON Director and President and Chief
--------------------- Operating Officer
John Nils Hanson
/s/FRANCIS M. CORBY, JR. Director and Executive Vice
----------------------- President for Finance
Francis M. Corby, Jr. 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
------------------------
Leonard E. Redon
(1) Director
------------------------
Donald Taylor
</TABLE>
- -------------------------
(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.
June 15, 1998
By: /s/JEFFERY T. GRADE
--------------------
Jeffery T. Grade,
Attorney-in-fact
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
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 April 15, 1997 (incorporated by
reference to Exhibit 3(b) to Report of
Harnischfeger Industries, Inc. on Form 10-Q for
the quarter ended April 30, 1997).
(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 issued March 3, 1992
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
issued June 22, 1992 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 $150,000,000 dated August 22, 1992,
File No. 33-51436 (incorporated by
reference to Exhibit 4(h) to Report of
Harnischfeger Industries, Inc. on Form 10-K
for the year ended October 31, 1992,
File No. 1-9299).
(h) 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.
(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) 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).*
(l) 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).*
(m) 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).*
(n) $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 Documentation 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).
(o) Form of Indenture, dated as of September 1, 1993,
for Joy Technologies Inc.'s 10 1/4% Senior Notes
due 2002(incorporated by reference to Exhibit 4.1
to Joy Technologies Inc.'s Report on Form 10-Q for
the quarter ended August 27, 1993, filed October 7, 1993).
9(a) Amendment No. 1 to Form of Indenture for Joy
Technologies Inc.'s 10 1/4% Senior Notes due
2002.
(b) Amendment No. 2 to Form of Indenture for Joy
Technologies Inc.'s 10 1/4% Senior Notes due
2002.
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 February 10, 1997
(incorporated by reference to Exhibit 10(a)
to Report of Harnischfeger Industries, Inc. on
form 10-Q for the quarter ended January 31, 1997).*
(c) Harnischfeger Industries, Inc. Executive
Incentive Plan, as amended and restated as of
February 10, 1997 (incorporated by reference to
Exhibit 10(b) to Report of Harnischfeger Industries,
Inc. on Form 10-Q for the quarter ended January 31, 1997).*
(d) Long-Term Compensation Plan for Key Executives
as of September 8, 1997 (incorporated by
reference to Exhibit 10(d) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31,
1997, File No. 1-9299).*
(e) Harnischfeger Industries, Inc. Supplemental
Retirement and Stock Funding Plan, as amended
and restated as of February 10, 1997 (incorporated
by reference to Exhibit 10(b) to Report of
Harnischfeger Industries, Inc. on Form 10-Q for the
quarter ended January 31, 1997).*
(f) Directors Stock Compensation Plan,as amended and
restated, as of February 10, 1997 (incorporated by
reference to Exhibit 10(b) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter ended January
31, 1997).*
(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 of September 8, 1997 (incorporated by
reference to Exhibit 10(h) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended
October 31, 1997, File No. 1-9299).*
(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 issued on
June 8, 1997 to Jeffery T. Grade (incorporated
by reference to Exhibit 10(m) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year
ended October 31, 1997, File No. 1-9299).*
(n) Amended and Restated Grant Letter issued on
June 8, 1997 to Francis M. Corby, Jr
(incorporated by reference to Exhibit 10(n) to Report
of Harnischfeger Industries, Inc. on Form 10-K
for the year ended October 31, 1997, File No. 1-9299).*
11 Statement Re Computation of Earnings Per Share,
filed herewith.
21 Subsidiaries of the Registrant (incorporated by
reference to Exhibit 21 to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended
October 31, 1997, File No. 1-9299.
23 Consent of Price Waterhouse LLP, filed herewith
24 Powers of Attorney (incorporated by reference to
Exhibit 24 to Report of Harnischfeger Industries, Inc. on
Form 10-K for the year ended October 31, 1997, File
No. 1-9299.
27 Amended Financial Data Schedule, filed herewith.
*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/A.
- ----------------------
</TABLE>
EXHIBIT 11
HARNISCHFEGER INDUSTRIES, INC.
CALCULATIONS OF EARNINGS (LOSS)PER SHARE
(Dollar amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
Determination of Number of Shares 1997 1996 1995
--------------------------------- ---- ---- ----
<S> <C> <C> <C>
Average shares outstanding.............. 47,826,813 47,196,388 46,218,144
========== ========== ==========
Net Income (Loss)
-----------------
Income from Continuing Operations....... $138,820 $114,217 $92,120
Loss from and Net Loss on Sale of
Discontinued Operation, net of
applicable income taxes............... - - (31,235)
Extraordinary Loss on Retirement of Debt,
net of applicable income taxes........ (12,999) - (3,481)
--------- -------- ---------
Net Income ............................. $125,821 $114,217 $ 57,404
======== ======== =========
Earnings (Loss) Per Share
-------------------------
Income from continuing operations....... $ 2.89 $ 2.42 $ 1.99
Loss from and net loss on sale of
discontinued operation................. - - (0.67)
Extraordinary loss on retirement of debt. (0.27) - (0.08)
------- ------- ---------
Net Income Per Share..................... $ 2.62 $ 2.42 $ 1.24
======= ======= ========
</TABLE>
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 November 18, 1997, except as to Note 17,
which is as of June 1, 1998, appearing in this Annual Report
on Form 10-K/A.
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)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
June 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 29,383
<SECURITIES> 0
<RECEIVABLES> 844,488
<ALLOWANCES> 8,319
<INVENTORY> 594,761
<CURRENT-ASSETS> 1,588,712
<PP&E> 1,175,704
<DEPRECIATION> 518,604
<TOTAL-ASSETS> 2,924,535
<CURRENT-LIABILITIES> 1,180,497
<BONDS> 713,466
0
0
<COMMON> 51,607
<OTHER-SE> 698,053
<TOTAL-LIABILITY-AND-EQUITY> 2,924,535
<SALES> 3,088,538
<TOTAL-REVENUES> 3,118,243
<CGS> 2,369,115
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,543
<INCOME-PRETAX> 219,129
<INCOME-TAX> 74,475
<INCOME-CONTINUING> 138,280
<DISCONTINUED> 0
<EXTRAORDINARY> (12,999)
<CHANGES> 0
<NET-INCOME> 125,281
<EPS-PRIMARY> 2.62
<EPS-DILUTED> 2.60
</TABLE>
