SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
_X_ OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
___ OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ___
COMMISSION FILE NUMBER 1-9299
HARNISCHFEGER INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 39-1566457
------------------------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)
3600 South Lake Drive, St. Francis, Wisconsin 53235-3716
--------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(414) 486-6400
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 8, 2000
------------------------------ --------------------------------
Common Stock, $1 par value 48,249,089 shares
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
FORM 10-Q -- INDEX
July 31, 2000
PART I. - FINANCIAL INFORMATION Page No.
--------
Item 1 - Financial Statements:
Consolidated Statement of Operations -
Three and Nine Months Ended July 31, 2000 and 1999 4
Consolidated Balance Sheet -
July 31, 2000 and October 31, 1999 5-6
Consolidated Statement of Cash Flow -
Nine Months Ended July 31, 2000 and 1999 7
Consolidated Statement of Shareholders'
Deficit - Nine Months Ended
July 31, 2000 and 1999 8
Notes to Consolidated Financial Statements 9-24
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 25-33
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 33
PART II. - OTHER INFORMATION
Item 1 - Legal Proceedings 34
Item 2 - Changes in Securities 34
Item 3 - Defaults Upon Senior Securities 34
Item 4 - Submission of Matters to a Vote of Security Holders 34
Item 5 - Other Information 34-35
Item 6 - Exhibits and Reports on Form 8-K 35
Signatures 36
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------------- --------------------------
In thousands except per share amounts 2000 1999 2000 1999
------------------------------------------------- -------------- --------------- -------------- -----------
Revenues
<S> <C> <C> <C> <C>
Net sales $ 259,712 $ 273,693 $ 827,081 $ 832,464
Other income 1,478 869 3,386 3,667
------------- ----------- ----------- -----------
261,190 274,562 830,467 836,131
Cost of sales 198,907 290,892 633,324 715,527
Product development, selling
and administrative expenses 51,231 73,683 156,960 183,818
Strategic and Financing Initiatives -- 7,716 -- 7,716
Reorganization items 21,945 10,555 44,980 10,555
Restructuring charges (1,041) 8,231 5,438 8,231
Charge related to executive changes -- 19,098 -- 19,098
------------- ----------- ----------- -----------
Operating (loss) (9,852) (135,613) (10,235) (108,814)
Interest expense - net (excludes contractual
interest expense of $17,900 and $53,532
for 3 and 9 months ended July 31, 2000) . (4,791) (3,993) (21,925) (29,004)
------------- ----------- ----------- -----------
Loss before provision for income taxes
and minority interest (14,643) (139,606) (32,160) (137,818)
Provision for income taxes (3,000) (223,215) (9,000) (220,734)
Minority interest (241) (172) (613) (428)
------------- ----------- ----------- -----------
Loss from continuing operations (17,884) (362,993) (41,773) (358,980)
Loss from Beloit discontinued operations,
net of applicable income taxes -- (656,410) -- (751,080)
------------- ----------- ----------- -----------
Net loss $ (17,884) $ (1,019,403) $ (41,773) $(1,110,060)
============= =========== =========== ===========
Basic Earnings (Loss) Per Share:
Loss from continuing operations $ (0.38) $ (7.81) $ (0.89) $ (7.76)
Loss from Beloit discontinued operations -- (14.11) -- (16.23)
------------- ----------- ----------- -----------
Net loss per share $ (0.38) $ (21.92) $ (0.89) $ (23.99)
============= =========== =========== ===========
Diluted Earnings (Loss) Per Share:
Loss from continuing operations $ (0.38) $ (7.81) $ (0.89) $ (7.76)
Loss from Beloit discontinued operations -- (14.11) -- (16.23)
------------- ----------- ----------- -----------
Net loss per share $ (0.38) $ (21.92) $ (0.89) $ (23.99)
============= =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONSOLIDATED BALANCE SHEET
July 31, October 31,
In thousands 2000 1999
---------------------------------- ----------------- ------------------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 71,428 $ 57,453
Accounts receivable-net 185,979 202,830
Inventories 412,876 447,655
Other 54,903 50,447
----------- -----------
725,186 758,385
----------- -----------
Assets of discontinued Beloit operations 28,403 278,000
Property, Plant and Equipment:
Land and improvements 17,392 38,379
Buildings 129,940 131,961
Machinery and equipment 269,622 274,485
----------- -----------
416,954 444,825
Accumulated depreciation (242,233) (234,078)
----------- -----------
174,721 210,747
----------- -----------
Investments and Other Assets:
Goodwill 330,907 358,191
Intangible assets 34,196 37,693
Other 48,555 68,797
----------- -----------
413,658 464,681
----------- -----------
$ 1,341,968 $ 1,711,813
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
July 31, October 31,
In thousands 2000 1999
-------------------------------------------------------- ---------------- -----------
(Unaudited)
Liabilities and Shareholders' Deficit
Current Liabilities:
<S> <C> <C>
Debtor-in-possession financing ("DIP") facility $ 25,000 $ --
Short-term notes payable, including current
portion of long-term obligations 117,328 144,568
Trade accounts payable 62,534 70,012
Employee compensation and benefits 49,841 43,879
Advance payments and progress billings 27,531 45,340
Accrued warranties 37,562 39,866
Income taxes payable 105,257 101,832
Accrued restructuring charges and other liabilities 108,865 125,719
----------- -----------
533,918 571,216
Long-term Obligations 1,938 168,097
Other Non-current Liabilities:
Liability for postretirement benefits 31,987 31,990
Accrued pension costs 17,480 15,465
Other 7,832 7,855
----------- -----------
57,299 55,310
Liabilities Subject to Compromise 1,191,034 1,193,554
Liabilities of Discontinued Beloit Operations,
including liabilities subject to compromise
of $240,681 and $494,806, respectively 644,722 742,265
Minority Interest 6,608 6,522
Commitments and Contingencies (Note (f)) -- --
Shareholders' Deficit:
Common stock, $1 par value (51,668,939 and
51,668,939 shares issued, respectively) 51,669 51,669
Capital in excess of par value 564,101 572,573
Retained deficit (1,510,711) (1,468,938)
Accumulated comprehensive (loss) (106,587) (79,960)
Less:
Stock Employee Compensation Trust (1,433,147 and
1,433,147 shares, respectively) at market (659) (1,612)
Treasury stock (3,565,101 and 3,865,101 shares,
respectively) at cost (91,364) (98,883)
----------- -----------
(1,093,551) (1,025,151)
----------- -----------
1,341,968 $ 1,711,813
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
July 31,
--------------------------------------
In thousands 2000 1999
---------------------------------------------- -------------- ------------------
Operating Activities:
<S> <C> <C>
Net loss $ (41,773) $(1,110,060)
Add (deduct) - Items not affecting cash:
Loss from discontinued operation -- 751,080
Restructuring charges 5,438 8,231
Charge related to executive change -- 18,498
Reorganization items 14,583 --
Minority interest, net of dividends paid 613 666
Depreciation and amortization 40,891 35,707
Increase in income taxes, net of change in
valuation allowance 2,409 205,469
Other - net 93 --
Changes in working capital items:
Decrease in accounts receivable - net 10,083 14,703
Decrease in inventories 21,137 20,288
(Increase) in other current assets (7,357) (11,812)
(Decrease) increase in trade accounts payable (4,888) 26,209
Increase in employee compensation and benefits 4,047 7,313
(Decrease) in advance payments and progress billings (15,094) (16,740)
(Decrease) in accrued restructuring charges and
other liabilities (20,994) (4,150)
----------- -----------
Net cash provided (used) by continuing operating activities 9,188 (54,598)
----------- -----------
Investment and Other Transactions:
Property, plant and equipment acquired (19,917) (24,446)
Property, plant and equipment retired 22,382 14,961
Deposit related to APP letters of credit and other 7,340 (2,787)
----------- -----------
Net cash provided (used) by investment and
other transactions 9,805 (12,272)
----------- -----------
Financing Activities:
Dividends paid -- (4,592)
Financing fees related to DIP facility -- (15,500)
Borrowings under DIP facility 95,000 137,000
Repayments of borrowings under DIP facility (237,000) --
Issuance of long term obligations 931 125,000
Repayment of long-term obligations (183) (1,455)
(Decrease) increase in short-term notes payable- net (15,288) 12,086
----------- -----------
Net cash (used) provided by financing activities (156,540) 252,539
----------- -----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (1,456) (120)
Net cash provided (used) by discontinued Beloit operations 152,978 (155,545)
----------- -----------
Increase in Cash and Cash Equivalents 13,975 30,004
Cash and Cash Equivalents at Beginning of Period 57,453 30,012
----------- -----------
Cash and Cash Equivalents at End of Period $ 71,428 $ 60,016
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Capital in Compre- Retained Accumulated
Common Excess of hensive Earnings Comprehensive Treasury
In thousands Stock Par Value (Loss) (Deficit) (Loss) SECT Stock Total
------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended July 31, 2000
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1999 $ 51,669 $ 572,573 $ (1,468,938) $ (79,960) $ (1,612) $(98,883) $(1,025,151)
Comprehensive loss:
Net loss $ (41,773) (41,773) (41,773)
Other comprehensive loss:
Currency translation adjustment (26,627) (26,627) (26,627)
----------
Total comprehensive loss $ (68,400)
==========
300,000 shares purchased by employee
and director benefit plans (7,519) 7,519 --
Adjust SECT shares to market value (953) 953 --
------------------- ------------------------------------------------------------
Balance at July 31, 2000 $ 51,669 $ 564,101 $ (1,510,711) $(106,587) $ (659) $(91,364) $(1,093,551)
=================== ============================================================
Nine Months Ended July 31, 1999
Balance at October 31, 1998 $ 51,669 $ 586,509 $ 216,065 $ (60,289) $(13,525) $(113,579) $ 666,850
Comprehensive loss:
Net loss (1,110,060) (1,110,060) (1,110,060)
Other comprehensive loss:
Currency translation adjustment (16,206) (16,206) (16,206)
----------
Total comprehensive loss $(1,126,266)
===========
Dividends paid ($.10 per share) (4,735) (4,735)
Dividends on shares held by SECT 143 143
600,000 shares purchased by employee
and director benefit plans (10,035) 15,583 5,548
Adjust SECT shares to market value (10,748) 10,748 --
Unearned compensation expense on
executive contract buyout 7,462 7,462
Amortization of unearned compensation
on restricted stock 407 407
------------------- ------------------------------------------------------------
Balance at July 31, 1999 $ 51,669 $ 573,738 $ (898,730) $ (76,495) $ (2,777) $ (97,996) $(450,591)
=================== ============================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2000
(Unaudited)
(a) Reorganization under Chapter 11
-------------------------------
On June 7, 1999, Harnischfeger Industries, Inc. (the "Company") and
substantially all of its domestic operating subsidiaries (collectively, the
"Debtors") filed voluntary petitions for reorganization under chapter 11 of
the U.S. Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") and
orders for relief were entered. The Debtors include the Company's principal
domestic operating subsidiaries, P&H Mining Equipment ("P&H") and Joy
Mining Machinery ("Joy"), as well as Beloit Corporation ("Beloit"). The
Company's Pulp and Paper Machinery segment owned by Beloit and its
subsidiaries (the "Beloit Segment") is presented as a discontinued
operation as is more fully discussed in Note (c) - Discontinued Operations.
The Debtors' chapter 11 cases are being jointly administered for procedural
purposes only under case number 99-2171. The issue of substantive
consolidation of the Debtors has not been addressed. Unless Debtors are
substantively consolidated under a confirmed plan of reorganization,
payment of prepetition claims of each Debtor may substantially differ from
payment of prepetition claims of other Debtors.
The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code. Pursuant to the
Bankruptcy Code, actions by creditors to collect prepetition indebtedness
of the Debtors and other contractual obligations of the Debtors generally
may not be enforced. In addition, under the Bankruptcy Code, the Debtors
may assume or reject executory contracts and unexpired leases. Additional
prepetition claims may arise from such rejections and from the
determination by the Bankruptcy Court (or as agreed by the parties in
interest) to allow claims for contingencies and other disputed amounts.
From time to time since the chapter 11 filing, the Bankruptcy Court has
approved motions allowing the Debtors to reject certain business contracts
that were deemed burdensome or of little or no value to the respective
Debtor. As of September 8, 2000, the Debtors had not completed their review
of all their prepetition executory contracts and leases for assumption or
rejection. See Note (f) - Liabilities Subject to Compromise.
The Debtors received approval from the Bankruptcy Court to pay or otherwise
honor certain of their prepetition obligations, including employee wages
and product warranties. In addition, the Bankruptcy Court authorized the
Debtors to maintain their employee benefit programs. Funds of qualified
pension plans and savings plans are in trusts and protected under federal
regulations. All required contributions to qualified pension plans have
been made.
The Debtors have the exclusive right until September 15, 2000 to file a
plan or plans of reorganization. Such period has been extended from time to
time during the pendency of the Debtors' bankruptcy cases and may be
extended at the discretion of the Bankruptcy Court. Subject to certain
exceptions set forth in the Bankruptcy Code, acceptance of a plan of
reorganization requires approval of the Bankruptcy Court and the
affirmative vote (i.e., more than 50% of the number and at least 66-2/3% of
the dollar amount, both based on claims actually voted) of each class of
creditors and equity holders whose claims are impaired by the plan.
Alternatively, absent the requisite approvals, a Debtor may seek Bankruptcy
Court approval of its reorganization plan under "cramdown" provisions of
the Bankruptcy Code, assuming certain tests are met. If a Debtor fails to
submit a plan of reorganization within the exclusivity period prescribed or
any extensions thereof, any creditor or equity holder will be free to file
a plan of reorganization with the Bankruptcy Court and solicit acceptances
thereof.
February 29, 2000 was set by the Bankruptcy Court as the last date
creditors could file proofs of claim against the Debtors. In aggregate
terms, the amounts claimed by creditors are larger than the amounts
recorded in the Debtors' schedules and financial statements. Debtors are
objecting to excessive claims and otherwise seeking to reduce or eliminate
these differences. Litigation may be required to resolve such differences.
The Debtors will continue to incur significant costs associated with the
reorganizations. The amount of these expenses, which are being expensed as
incurred, is expected to significantly affect results while the Debtors
operate under chapter 11. See Note (d) - Reorganization Items.
While it is not possible to predict with certainty the length of time the
Debtors will operate under the protection of chapter 11, the outcome of the
chapter 11 proceedings in general, or the effect of the proceedings on the
business of the Company or on the interests of the various creditors and
security holders, the Debtors have analyzed a large portion of the claims
filed against the Debtors and are actively preparing for the filing of a
plan or plans of reorganization.
Under the Bankruptcy Code, postpetition liabilities and prepetition
liabilities (i.e., liabilities subject to compromise) of the Company must
be satisfied before shareholders of the Company can receive any
distribution. The ultimate recovery to the Company's shareholders, if any,
will not be determined until the end of the case when the fair value of the
Company's assets is compared to the liabilities and claims against the
Company. Based on the Company's analysis to date of (a) scheduled and filed
claims, (b) any potential recovery from the sale of Beloit assets and (c)
the valuation of the Company, P&H and Joy as going concerns, there appears
to be sufficient value to pay in full all claims against P&H and Joy.
However, there appears to be insufficient value to pay in full all claims
against the Company. Accordingly, it appears unlikely that any value will
be distributed to the Company's shareholders or otherwise attributed to the
Company's common shares. There also appears to be insufficient value to pay
in full all claims against Beloit. The U.S. Trustee for the District of
Delaware has appointed an Official Committee of Equity Holders to represent
the Company's shareholders in the proceedings before the Bankruptcy Court.
(b) Basis of Presentation
---------------------
The accompanying consolidated financial statements of the Company and its
consolidated subsidiaries have been prepared on a going concern basis which
contemplates continuity of operations, realization of assets, and
liquidation of liabilities in the ordinary course of business and does not
reflect adjustments that might result if the Debtors (other than Beloit and
Beloit's Debtor subsidiaries) are unable to continue as going concerns. As
a result of the Debtors' chapter 11 filings, such matters are subject to
significant uncertainty. The Debtors intend to file a plan or plans of
reorganization with the Bankruptcy Court. Continuing on a going concern
basis is dependent upon, among other things, the Debtors' formulation of an
acceptable plan or plans of reorganization, the success of future business
operations, and the generation of sufficient cash from operations and
financing sources to meet the Debtors' obligations. Other than recording
the estimated loss on the disposal of the Beloit discontinued operations in
the fourth quarter of fiscal 1999, the consolidated financial statements do
not reflect: (a) the realizable value of assets on a liquidation basis or
their availability to satisfy liabilities; (b) aggregate prepetition
liability amounts that may be allowed for claims or contingencies, or their
status or priority; (c) the effect of any changes to the Debtors' capital
structures or in the Debtors' business operations as the result of a
confirmed plan or plans of reorganization; or (d) adjustments to the
carrying value of assets (including goodwill and other intangibles) or
liability amounts that may be necessary as the result of actions by the
Bankruptcy Court.
The Company's consolidated financial statements have been presented in
conformity with the AICPA's Statement of Position 90-7, "Financial
Reporting By Entities In Reorganization Under the Bankruptcy Code," issued
November 19, 1990 ("SOP 90-7"). SOP 90-7 requires a segregation of
liabilities subject to compromise by the Bankruptcy Court as of the
bankruptcy filing date and identification of all transactions and events
that are directly associated with the reorganization of the Debtors.
In the opinion of management, all adjustments necessary for the fair
presentation on a going concern basis of the results of operations for the
three and nine months ended July 31, 2000 and 1999, cash flows for the nine
months ended July 31, 2000 and 1999, and financial position at July 31,
2000 have been made. All adjustments made are of a normal recurring nature,
except for those more fully discussed in these notes.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1999.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full year.
(c) Discontinued Operations
-----------------------
In light of continuing losses at Beloit and following an evaluation of the
prospects of reorganizing the Beloit Segment, on October 8, 1999 the
Company announced its plan to dispose of this segment. Subsequently, Beloit
notified certain of its foreign subsidiaries that they could no longer
expect funding of their operations to be provided by either Beloit or the
Company. Certain of the notified subsidiaries filed for or were placed into
receivership or other applicable forms of judicial supervision in their
respective countries. On May 12, 2000 the U.S. Trustee for the District of
Delaware appointed an Official Committee of Unsecured Creditors of Beloit
Corporation to represent the creditors of Beloit in proceedings before the
Bankruptcy Court.
On November 7, 1999, the Bankruptcy Court approved procedures and an
implementation schedule for the divestiture plan (the "Court Sales
Procedures") for the Beloit Segment. Between February and August 2000,
sales agreements were approved under the Court Sales Procedures with
respect to the sale of substantially all of the segment's domestic
operating assets. In addition, approval was received for the sale of all of
Beloit's significant foreign subsidiaries (apart from those that had
previously filed for or been placed into receivership or other applicable
forms of judicial supervision in their respective countries). As of
September 8, 2000, all approved sales of domestic assets had taken place,
as had several sales of foreign subsidiaries. Beloit expects that closings
on the remaining approved sales of foreign subsidiaries will occur by the
end of fiscal 2000.
The Company classified the Beloit Segment as a discontinued operation in
its consolidated financial statements as of October 31, 1999 and has
accordingly restated the Company's consolidated statements of operations
and statements of cash flow for prior periods. Revenues for the Beloit
Segment were $170.1 million for the nine months ended July 31, 2000 and
$541.3 million for the comparable period in 1999. Loss from discontinued
operations was $751.1 million for the nine months ended July 31, 1999.
During fiscal 1999, the Company recorded an estimated loss of $529.0
million on the disposal of the Beloit Segment including an accrual for
estimated operating losses to be incurred by the Beloit Segment subsequent
to October 31, 1999. Based on the actual results during the nine-month
period ended July 31, 2000 and consideration of the current estimates
associated with the Beloit wind-down expenses to be incurred, the Company
believes that no adjustment to the original reserve is warranted as of July
31, 2000. See Note (f) - Liabilities Subject to Compromise for a discussion
of the APP settlement.
The Company, Beloit and certain of their officers and employees have been
named as defendants in an action in the Bankruptcy Court in which Omega
Papier Wernhausen GmbH ("Omega") is the plaintiff. This action concerns
prepetition and postpetition commitments allegedly made by the Company,
Beloit and the officers and employees named in the action with respect to a
prepetition contract between Omega and Beloit's Austrian subsidiary under
which Beloit's Austrian subsidiary agreed to supply a tissue paper making
machine for Omega's factory in Wernshausen, Germany. The action makes
claims of breach of guarantee, tortuous interference with business, breach
of covenant of good faith, fraud in the inducement and negligent
misrepresentation and seeks damages of $12 million for each of nine counts
plus punitive damages of $24 million for four of the nine counts. As of
September 8, 2000, the Company was not able to assess its ultimate
liability, if any, in the matter.
(d) Reorganization Items
--------------------
Reorganization expenses are comprised of items of income, expense and loss
that were realized or incurred by the Debtors as a result of their decision
to reorganize under chapter 11 of the Bankruptcy Code. During the three and
nine months ended July 31, 2000, reorganization expenses related to
continuing operations were as follows:
Three months Nine months
ended ended
In thousands July 31, 2000 July 31, 2000
--------------------------------------------------------------------------------
Professional fees directly related to the filing $ 8,114 $ 25,361
Amortization of DIP financing costs 1,875 5,625
Accrued retention plan costs 1,935 4,614
Write-down of property to be sold 9,000 9,000
Rejected equipment leases 1,399 1,399
Interest earned on DIP proceeds (378) (1,019)
--------------- ------------
$ 21,945 $ 44,980
=============== ============
(e) Restructuring Charges
---------------------
In the third quarter of fiscal 1999 Joy announced and implemented a
restructuring plan. A reserve of $7.3 million was established in the third
quarter of fiscal 1999, primarily for the impairment of certain assets
related to a facility rationalization. In addition, charges amounting to
$4.7 million were made in the third and fourth quarter of fiscal 1999 upon
the announcement of the severance of approximately 240 employees. Of the
amount reserved in fiscal 1999, $0.7 million had been utilized by the end
of the fiscal year. During the first nine months of fiscal 2000 a further
$5.4 million restructuring charge was recorded under the restructuring
plan, primarily for severance costs associated with the rationalization of
certain of Joy's original equipment manufacturing capacity in the United
Kingdom and to a lesser extent for reductions in employment in South Africa
associated with a reorganization of Joy's business in that market.
Details of these restructuring charges are as follows:
In thousands
-------------------------------------------------------------------------------
Reserve at Additional Reserve Reserve at
10/31/99 Reserve Utilized 7/31/00
-------------- ------------ ------------ --------------
Employee severance $ 4,009 $6,227 $7,075 $ 3,161
Facility closures 7,270 (789) 4,912 1,569
-------------- ------------ ------------ --------------
Total $ 11,279 $5,438 $11,987 $ 4,730
============== ============ ============ ==============
(f) Liabilities Subject to Compromise
---------------------------------
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All such
amounts may be subject to future adjustment depending on Bankruptcy
Court action, further developments with respect to disputed claims, or
other events. Additional prepetition claims may arise from rejection of
additional executory contracts or unexpired leases by the Debtors. Under a
confirmed plan of reorganization, prepetition claims may be paid and
discharged at amounts substantially less than their allowed amounts. The
issue of substantive consolidation of the Debtors has not been addressed.
Unless Debtors are substantively consolidated under a confirmed plan or
plans of reorganization, payment of prepetition claims of each Debtor may
substantially differ from payment of prepetition claims of other Debtors.
Recorded liabilities:
On a consolidated basis, recorded liabilities subject to compromise under
chapter 11 proceedings consisted of the following:
<PAGE>
<TABLE>
<CAPTION>
July 31, 2000 October 31, 1999
------------------------------------ --------------------------------------
Continuing Discontinued Continuing Discontinued
In thousands Operations Operations Total Operations Operations Total
------------------------------------------------------- ------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Trade accounts payable $ 93,537 $ 76,938 $ 170,475 $ 95,950 $ 106,729 $ 202,679
Accrued interest expense, as of June 6, 1999 17,285 15 17,300 17,315 15 17,330
Accrued executive changes expense 8,518 -- 8,518 8,518 -- 8,518
Accrued project costs -- -- -- -- 39,226 39,226
Put obligation to preferred shareholders of subsidiary 5,457 -- 5,457 5,457 -- 5,457
8.9% Debentures, due 2022 75,000 -- 75,000 75,000 -- 75,000
8.7% Debentures, due 2022 75,000 -- 75,000 75,000 -- 75,000
7 1/4% Debentures, due 2025
(net of discount of $1,223 and $1,218) 148,777 -- 148,777 148,782 -- 148,782
6 7/8% Debentures, due 2027
(net of discount of $103 and $100) 149,897 -- 149,897 149,900 -- 149,900
Senior Notes, Series A through D, at interest rates of
between 8.9% and 9.1%, due 1999 to 2006 69,546 -- 69,546 69,546 -- 69,546
Revolving credit facility 500,000 -- 500,000 500,000 -- 500,000
IRC lease (Princeton Paper) -- 39,000 39,000 -- 54,000 54,000
APP claims -- -- -- -- 46,000 46,000
Industrial Revenue Bonds, at interest rates of between
5.9% and 8.8%, due 1999 to 2017 18,615 11,270 29,885 18,615 14,128 32,743
Notes payable 20,000 -- 20,000 20,000 -- 20,000
Other 9,402 -- 9,402 9,471 -- 9,471
Advance payments and progress billing -- 17,883 17,883 -- 125,696 125,696
Accrued warranties -- 34,800 34,800 -- 34,054 34,054
Minority interest -- 18,099 18,099 -- 21,536 21,536
Pension and other -- 42,676 42,676 -- 53,422 53,422
---------- ---------- ---------- ---------- ---------- ----------
$1,191,034 $ 240,681 $1,431,715 $1,193,554 $ 494,806 $1,688,360
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
As a result of the bankruptcy filings, principal and interest payments may
not be made on prepetition debt without Bankruptcy Court approval or until
a reorganization plan or plans defining the repayment terms has been
confirmed. The differences in recorded prepetition liabilities subject to
compromise as of October 31, 1999 as compared to July 31, 2000 relate
primarily to: (i) the expiry of liabilities associated with certain advance
payments, progress billings and accrued project costs upon the completion
of the associated prepetition projects; (ii) the settlement of the APP
claim as discussed below under `Contingent Liabilities'; (iii) the
assumption of certain prepetition secured debt by purchasers of Beloit
assets; and (iv) changes in estimates associated with the ongoing analysis
of claims. The total interest on prepetition debt that was not paid or
charged to earnings for the period from June 7, 1999 to July 31, 2000 was
$84.7 million, of which $53.5 million relates to the first nine months of
fiscal 2000. Such interest is not being accrued since it is not probable
that it will be treated as an allowed claim. The Bankruptcy Code generally
disallows the payment of interest that accrues postpetition with respect to
unsecured claims.
Contingent Liabilities:
At July 31, 2000, the Company was contingently liable to banks, financial
institutions and others for approximately $188.4 million ($311.2 million as
of October 31, 1999) for outstanding letters of credit, bank guarantees,
surety bonds and other guarantees securing performance of sales contracts
and other obligations in the ordinary course of business. Of the $188.4
million: approximately $105.3 million ($168.7 million as of October 31,
1999) was issued at the request of the Company on behalf of Beloit;
approximately $137.5 million was issued at the request of Debtor entities
prior to the bankruptcy filing; and $50.9 million ($48.8 million as of
October 31, 1999) was issued under the DIP Facility (See Note (g) -
Borrowings and Credit Facilities). Contingent liabilities of the Debtors
outstanding as of the bankruptcy filing date may also be subject to
compromise. Additionally, there were $28.8 million ($48.5 million as of
October 31, 1999) of outstanding letters of credit or other guarantees
issued by non-US banks for non-US subsidiaries.
As of September 8, 2000, the Debtors had not completed their review of
prepetition executory contracts to determine whether to assume or reject
such contracts. Rejection of executory contracts could result in additional
prepetition claims against Debtors. As of September 8, 2000, it was not
possible to estimate the amount of additional prepetition claims that could
arise out of the rejection of executory contracts. In the case of Beloit,
the rejection of contracts for certain uncompleted projects could result in
substantial additional prepetition claims against Beloit and could
significantly increase liabilities subject to compromise of the Beloit
discontinued operations.
The Company and its subsidiaries are party to litigation matters and claims
that are normal in the course of their operations. Also, as a normal part
of their operations, the Company's subsidiaries undertake certain
contractual obligations, warranties and guarantees in connection with the
sale of products or services. Although the outcome of these matters cannot
be predicted with certainty and favorable or unfavorable resolution may
affect the results of operations 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. Generally, litigation related to
"claims", as defined by the Bankruptcy Code, against Debtors is stayed.
The Potlatch lawsuit, filed originally in 1995, related to a 1989 purchase
of pulp line washers supplied by Beloit for less than $15.0 million. In
June 1997, a Lewiston, Idaho jury awarded Potlatch $95.0 million in damages
in the case which, together with fees, costs and interest to April 2, 1999,
approximated $120.0 million. On April 2, 1999 the Supreme Court of Idaho
vacated the judgement of the Idaho District Court in the Potlatch lawsuit
and remanded the case for a new trial. This litigation has been stayed as a
result of the bankruptcy filings.
In fiscal 1996 and 1997, Beloit's Asian subsidiaries received orders for
four fine papermaking machines from Asia Pulp & Paper Co. Ltd. ("APP") for
a total of approximately $600.0 million. The first two machines were
substantially paid for and installed at APP facilities in Indonesia. Beloit
sold approximately $44.0 million of receivables from APP on these first two
machines to a financial institution. Beloit agreed to repurchase the
receivables in the event APP defaulted on the receivables and the Company
guaranteed this repurchase obligation. As of September 8, 2000, the Company
believes APP was not in default with respect to the receivables. The
machines are currently in the start-up/optimization phase and are required
to meet certain contractual performance tests. The contracts provide for
potential liquidated damages, including performance damages, in certain
circumstances. Beloit has had discussions with APP regarding certain
substantial claims and back-charges APP has asserted with respect to the
first two machines. As of September 8, 2000, it was not possible to
estimate the liabilities that could arise from claims and back-charges that
have or may be asserted with respect to the first two machines. An adverse
resolution of these claims and back-charges could result in a significant
increase in the liabilities subject to compromise of Beloit discontinued
operations.
Disputes arose between Beloit and APP regarding the two remaining machines.
On March 3, 2000, the Company announced the signing of a definitive
agreement to settle the disputes and related arbitration and legal
proceedings. Under the settlement, APP paid $135.0 million to Beloit on
April 6, 2000 and $15.9 million the Company had deposited with a bank with
respect to related letters of credit was released to the Company. The $15.9
million was classified as other assets in the Company's consolidated
financial statements as of October 31, 1999. The $135.0 million was paid
$25.0 million in cash and $110.0 million in a three-year note issued by an
APP subsidiary and guaranteed by APP. The note is governed by an indenture
and bears a fixed interest rate of 15%. Beloit intends to sell the note to
a third party or parties for fair market value. In view of the intention to
sell the note and volatility in the applicable capital markets for the
note, no value for the note has been recognized in the financial statements
as of July 31, 2000. The value for the note and its effect on the financial
statements will be recognized in the period that the note is sold. As part
of the settlement, Beloit retained a $46.0 million down payment it received
from APP for the second two papermaking machines and APP released all
rights with respect to letters of credit issued for the aggregate amount of
the down payment for the second two papermaking machines. Also as part of
the settlement, APP acquired certain components and spare parts produced or
acquired by Beloit in connection with the two papermaking machines on an as
is, where is basis. In addition, Beloit returned to APP certain promissory
notes given to Beloit by APP. The notes were initially issued in the amount
of $59.0 million and had an aggregate principal balance of $19.0 million
when they were returned to APP.
The Company and certain of its present and former senior executives have
been named as defendants in a class action, captioned In re: Harnischfeger
Industries, Inc. Securities Litigation, in the United States District Court
for the Eastern District of Wisconsin. This action seeks damages in an
unspecified amount on behalf of an alleged class of purchasers of the
Company's common stock, based principally on allegations that the Company's
disclosures with respect to the APP contracts of Beloit discussed above
violated the federal securities laws. As regards the Company, this matter
is stayed by the automatic stay imposed by the Bankruptcy Code.
The Company and its consolidated subsidiaries are 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 the
resolution of these matters will not have a materially adverse effect on
its consolidated financial position.
(g) Borrowings and Credit Facilities
--------------------------------
Borrowings of the Company and its consolidated subsidiaries consisted of
the following:
July 31, October 31,
In thousands 2000 1999
----------------------------------------- ------------- -----------
Domestic:
DIP Facility $ 25,000 $ 167,000
Other 228 227
Foreign:
Australian Term Loan, due 2000 52,893 57,734
Short term notes payable and bank overdrafts 64,176 86,539
Other 1,969 1,165
--------- ---------
144,266 312,665
Less: Amounts due within one year (142,328) (144,568)
--------- ---------
Long-term Obligations $ 1,938 $ 168,097
========= =========
Debtor-in-Possession Financing
------------------------------
On July 8, 1999 the Bankruptcy Court approved a two-year, $750 million
Revolving Credit, Term Loan and Guaranty Agreement underwritten by The
Chase Manhattan Bank (the "DIP Facility") consisting of three tranches: (i)
Tranche A $350 million revolving credit facility; (ii) Tranche B $200
million term loan facility; and (iii) Tranche C $200 million standby letter
of credit facility. Effective May 30, 2000, the Company voluntarily reduced
the size of the DIP Facility to $350 million. The third amendment to the
DIP Facility dated as of June 16, 2000 reduced the size of Tranche A to
$250 million, redefined Tranche B as a $100 million revolving loan facility
expiring December 31, 2000, and eliminated Tranche C. The fourth amendment
to the DIP Facility dated as of August 3, 2000 provides for the syndication
of the DIP Facility amongst the Chase Manhattan Bank (as agent) and certain
other lenders.
Under the amended DIP Facility, proceeds may be used to fund post-petition
working capital and other general corporate purposes during the term of the
DIP Facility and to pay up to $35 million of pre-petition claims of
critical vendors. Tranche A may be used for both revolving loans and
issuance of certain letters of credit, limited to a maximum of $210 million
in letters of credit, consisting of a $190 million sub-limit for standby
letters of credit and a $20 million sub-limit for import documentary
letters of credit. Additionally, in the case of standby letters of credit,
the aggregate letters of credit outstanding in favor of lenders to HII's
foreign subsidiaries are limited (when aggregated with loans and
investments made to repay the indebtedness of foreign subsidiaries) to $100
million. Further, letters of credit issued in connection with performance
and bid requirements, customer advances and progress payments and surety
bonds of HII's foreign subsidiaries are limited to $100 million.
Borrowings under the DIP Facility are subject to a "borrowing base"
calculation which includes eligible accounts receivable, unbilled accounts
receivable, work-in-process, raw materials, finished goods, machinery and
equipment and intellectual property, each as defined in the amended DIP
Facility agreement. Availability of funds for the benefit of Beloit are
limited to an aggregate principal amount not in excess of the sum of the
portion of the net cash proceeds received from the sales of Beloit assets,
plus $23 million, plus an amount not in excess of $17 million in respect of
letters of credit issued for Beloit's benefit. Availability of funds under
the DIP Facility for the benefit of Beloit is further limited by the
requirement that Beloit's cumulative EBITDA loss (as defined) will be no
more than $50 million for the period from May 1, 2000 through December 31,
2000. No further funds will be available to Beloit under the DIP Facility
after December 31, 2000.
The DIP Facility imposes monthly minimum EBITDA tests and quarterly limits
on capital expenditures. At July 31, 2000, $25 million in direct borrowings
had been drawn under the DIP Facility and classified as a current liability
and letters of credit in the face amount of $34.8 million had been issued
under the DIP Facility. The Debtors are jointly and severally liable under
the DIP Facility.
The DIP Facility benefits from superpriority administrative claim status as
provided for under the Bankruptcy Code. Under the Bankruptcy Code, a
superpriority claim is senior to unsecured prepetition claims and all other
administrative expenses incurred in the Chapter 11 case. Direct borrowings
under the DIP Facility are priced at LIBOR + 2.75% per annum on the
outstanding borrowings. Letters of credit are priced at 2.75% per annum
(plus a fronting fee of 0.25% to the Agent) on the outstanding face amount
of each letter of credit. In addition, the Company pays a commitment fee of
0.50% per annum on the unused amount of the commitment payable monthly in
arrears. The DIP Facility matures on the earlier of the substantial
consummation of a plan of reorganization of the Company or June 6, 2001.
In proceedings filed with the Bankruptcy Court, the Debtors agreed with the
Official Committee of Unsecured Creditors appointed by the U.S. Trustee
(the "Creditors Committee") and with MFS Municipal Income Trust and MFS
Series Trust III (collectively, the "MFS Funds"), holders of certain debt
issued by Joy, to a number of restrictions regarding transactions with
foreign subsidiaries and Beloit:
o The Debtors agreed to give at least five days prior written notice to
the Creditors Committee and to the MFS Funds of the Debtors' intention
to (a) make loans or advances to, or investments in, any foreign
subsidiary for working capital purposes after June 16, 2000 in an
aggregate amount in excess of $75 million; (b) make loans or advances
to, or investments in, any foreign subsidiary to repay the existing
indebtedness or cause letters of credit to be issued in favor of a
creditor of a foreign subsidiary in an aggregate amount, cumulatively,
in excess of $30 million; or (c) make postpetition loans or advances
to, or investments in, Beloit or any of Beloit's subsidiaries in
excess of $115 million. In September 1999, the Company notified the
Creditors Committee and MFS Funds that it intended to exceed the $115
million amount. The Company subsequently agreed, with the approval of
the Bankruptcy Court, to provide the Creditors Committee with weekly
cash requirement forecasts for Beloit, to restrict funding of Beloit
to forecasted amounts, to provide the Creditors Committee access to
information about the Beloit divestiture and liquidation process, and
to consult with the Creditors Committee regarding the Beloit
divestiture and liquidation process.
o In addition, the Debtors agreed to give notice to the Creditors
Committee and to the MFS Funds with respect to any liens created by or
on a foreign subsidiary or on any of its assets to secure any
indebtedness.
o The Debtors agreed to notify the MFS Funds of any reduction in the net
book value of Joy of ten percent or more from $364 million, after
which MFS would be entitled to receive periodic financial statements
for Joy. During fiscal 1999, MFS Funds became entitled to receive
periodic financial statements for Joy.
Continuation of unfavorable business conditions or other events could
require the Debtors to seek further modifications or waivers of certain
covenants of the DIP Facility. In such event, there is no certainty that
the Debtors would obtain such modifications or waivers to avoid default
under the DIP Facility.
The principal sources of liquidity for the Company's operating requirements
have been cash flows from operations and borrowings under the DIP Facility.
While the Company expects that such sources will provide sufficient working
capital to operate its businesses, there can be no assurances that such
sources will prove to be sufficient.
Foreign Credit Facilities
-------------------------
Prior to the bankruptcy filings, one of the Company's Australian
subsidiaries maintained a A$90.0 million (US$52.9 million) long-term loan
facility with a group of four banks at a floating interest rate expressed
in relation to Australian dollar denominated Bank Bills of Exchange. The
Company's bankruptcy filing caused the Australian subsidiary to be in
default of certain covenants of the loan facility, a notice of default was
issued to the subsidiary by the banks, and the loan became repayable on
demand. As of July 31, 2000, the loan was fully drawn. The balance
outstanding is classified as a current liability. This loan facility is
being renegotiated to cure the default and extend its term.
As of July 31, 2000, short-term bank credit lines of foreign subsidiaries
amounted to $109.0 million. Outstanding borrowings against these credit
lines, principally in the form of demand notes, were $64.2 million as of
July 31, 2000 compared with $86.5 million as at October 31, 1999. The
short-term bank credit lines in the United Kingdom and South Africa are
being renegotiated by the Company's foreign subsidiaries with the objective
of converting the credit lines to long-term credit facilities.
(h) Income Taxes
------------
The income tax provision recognized in the Company's consolidated statement
of operations differs from the income tax benefit computed by applying the
statutory federal income tax rate to the income or loss from continuing
operations for the nine months ended July 31, 2000 due to: (i) an
additional valuation allowance on deferred tax benefits and (ii) the
effects of state and foreign taxes.
The Company believes that realization of net operating loss and tax credit
benefits in the near term is unlikely. Should the Company's plan of
reorganization result in a significantly modified capital structure, the
Company would be required to apply fresh start accounting pursuant to the
requirements of SOP 90-7. Under fresh start accounting, realization of net
operating loss and tax credit benefits will first reduce any reorganization
goodwill until exhausted and thereafter be reported as additional paid in
capital.
(i) Inventories
-----------
Consolidated inventories consisted of the following:
July 31, October 31,
In thousands 2000 1999
---------------------------------------- --------- ------------
Finished goods $ 219,779 $ 205,959
Work in process and purchased parts 199,284 256,697
Raw materials 42,979 34,271
--------- ---------
462,042 496,927
Less excess of current cost over stated
LIFO value (49,166) (49,272)
--------- ---------
$ 412,876 $ 447,655
========= =========
Inventories valued using the LIFO method represented approximately 69% and
71% of consolidated inventories at July 31, 2000 and October 31, 1999,
respectively.
(j) Earnings Per Share
------------------
The following table sets forth the reconciliation of the numerators and
denominators used to calculate the basic and diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------------- ------------- -----------
In thousands except per share amounts 2000 1999 (1) 2000 1999 (1)
---------------------------------------------------- ----------- ---------------- ------------- -----------
Basic Earnings (Loss):
----------------------------------------------------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ (17,884) $ (362,993) $ (41,773) $ (358,980)
Loss from Beloit discontinued operations -- (656,410) -- (751,080)
----------- ---------------- ----------- -----------
Net loss $ (17,884) $ (1,019,403) $ (41,773) $(1,110,060)
=========== ================ =========== ===========
Basic weighted average common shares outstanding 46,816 46,516 46,684 46,267
=========== ================ =========== ===========
Basic Earnings (Loss) Per Share:
----------------------------------------------------
Income (loss) from continuing operations $ (0.38) $ (7.81) $ (0.89) $ (7.76)
Loss from Beloit discontinued operations -- (14.11) -- (16.23)
----------- ---------------- ----------- -----------
Net loss $ (0.38) $ (21.92) $ (0.89) $ (23.99)
=========== ================ =========== ===========
Diluted Earnings (Loss):
----------------------------------------------------
Income (loss) from continuing operations $ (17,884) $ (362,993) $ (41,773) $ (358,980)
Loss from Beloit discontinued operations -- (656,410) -- (751,080)
----------- ---------------- ----------- -----------
Net loss $ (17,884) $ (1,019,403) $ (41,773) $(1,110,060)
=========== ================ =========== ===========
Basic weighted average common shares outstanding 46,816 46,516 46,684 46,267
Assumed exercise of stock options -- -- -- --
----------- ---------------- ----------- -----------
Diluted weighted average common shares outstanding 46,816 46,516 46,684 46,267
=========== ================ =========== ===========
Diluted Earnings (Loss) Per Share:
----------------------------------------------------
Income (loss) from continuing operations $ (0.38) $ (7.81) $ (0.89) $ (7.76)
Loss from Beloit discontinued operations -- (14.11) -- (16.23)
----------- ---------------- ----------- -----------
Net loss $ (0.38) $ (21.92) $ (0.89) $ (23.99)
=========== ================ =========== ===========
_______________
(1) Amounts for the three and nine months ended July 31, 1999 have been restated to reflect
Beloit as a discontinued operation.
</TABLE>
Options to purchase common stock were not included in the computation of
diluted earnings per share because the additional shares would reduce the
loss per share amount and, therefore, the effect would be anti-dilutive.
(k) Segment Information
-------------------
Business Segment Information
At July 31, 2000, the Company had two reportable segments, Surface Mining
Equipment and Underground Mining Machinery. Operating income (loss) of
segments does not include interest income or expense and provision
(benefit) for income taxes. There are no significant intersegment sales.
Identifiable assets are those used in the operations of each segment.
Corporate assets consist primarily of property, deferred financing costs,
pension assets and cash.
<TABLE>
<CAPTION>
In thousands
----------------------------------- ----------------------------------------------------------------------------
Net Operating Depreciation and Capital Identifiable
Sales Income (Loss) Amortization Expenditures Assets
---------- ------------- ---------------- -----------------------------
Three months ended July 31, 2000
<S> <C> <C> <C> <C> <C>
Surface Mining $ 114,855 $ 14,514 $ 3,929 $ 4,352 $ 411,804
Underground Mining 144,857 1,410 7,402 704 838,553
---------- ---------- ---------- ---------- ----------
Total continuing operations 259,712 15,924 11,331 5,056 1,250,357
Beloit discontinued operations -- -- -- -- 28,403
Reorganization items -- (21,945) -- -- --
Corporate -- (3,831) 2,129 -- 63,208
---------- ---------- ---------- ---------- ----------
Consolidated Total $ 259,712 $ (9,852) $ 13,460 $ 5,056 $1,341,968
========== ========== ========== ========== ==========
Three months ended July 31, 1999
Surface Mining $ 119,566 $ (9,793) $ 4,631 $ 3,724 $ 452,000
Underground Mining 154,127 (78,550)(1) 8,193 5,820 932,553
---------- ---------- ---------- ---------- ----------
Total continuing operations 273,693 (88,343) 12,824 9,544 1,384,553
Beloit discontinued operations -- -- -- -- 1,000,011
Corporate -- (9,901) 1,565 14 63,956
Strategic and financing initiatives -- (7,716) -- -- --
Reorganization items -- (10,555) -- -- --
Charge related to executive change -- (19,098) -- -- --
---------- ---------- ---------- ---------- ----------
Consolidated Total $ 273,693 $ (135,613) $ 14,389 $ 9,558 $2,448,520
========== ========== ========== ========== ==========
Nine months ended July 31, 2000
Surface Mining $ 370,356 $ 39,682 $ 12,168 $ 15,075 $ 411,804
Underground Mining 456,725 7,129 22,242 4,842 838,553
---------- ---------- ---------- ---------- ----------
Total continuing operations 827,081 46,811 34,410 19,917 1,250,357
Beloit discontinued operations -- -- -- -- 28,403
Reorganization items -- (44,980) -- -- --
Corporate -- (12,066) 6,481 -- 63,208
---------- ---------- ---------- ---------- ----------
Consolidated Total $ 827,081 $ (10,235) $ 40,891 $ 19,917 $1,341,968
========== ========== ========== ========== ==========
Nine months ended July 31, 1999
Surface Mining $ 355,584 $ 14,562 $ 13,281 $ 6,182 $ 452,000
Underground Mining 476,880 (66,843)(2) 20,149 18,232 932,553
---------- ---------- ---------- ---------- ----------
Total continuing operations 832,464 (52,281) 33,430 24,414 1,384,553
Beloit discontinued operations -- -- -- -- 1,000,011
Corporate -- (19,164) 2,277 32 63,956
Strategic and financing initiatives -- (7,716) -- -- --
Reorganization items -- (10,555) -- -- --
Charge related to executive change -- (19,098) -- -- --
---------- ---------- ---------- ---------- ----------
Consolidated Total $ 832,464 $ (108,814) $ 35,707 $ 24,446 $2,448,520
========== ========== ========== ========== ==========
(1) After restructuring (credits) charges of $(1,041) and $8,231 for the three
months ended July 31, 2000 and 1999 respectively - see Note (e) -
Restructuring Charges.
(2) After restructuring charges of $5,438 and $8,231 for the nine months ended
July 31, 2000 and 1999 respectively - see Note (e) - Restructuring Charges.
</TABLE>
<PAGE>
Geographical Segment Information
<TABLE>
<CAPTION>
In thousands
--------------------------------------------------------------------------------------------------------------
Sales to
Total Interarea Unaffiliated Operating Identifiable
Sales Sales Customers Income (Loss) Assets
-------------- ------------- ------------- -----------------------------
Three months ended July 31, 2000
<S> <C> <C> <C> <C> <C>
United States $ 193,123 $ (29,607) $ 163,516 $ 8,946 $ 1,314,121
Europe 37,859 (15,009) 22,850 6,059 300,322
Other Foreign 78,024 (4,678) 73,346 9,372 270,606
Interarea Eliminations (49,294) 49,294 -- (8,453) (634,692)
----------- ----------- ----------- ----------- -----------
$ 259,712 $ -- $ 259,712 $ 15,924 $ 1,250,357
=========== =========== =========== =========== ===========
Three months ended July 31, 1999
United States $ 180,399 $ (34,279) $ 146,120 $ (53,323) $ 1,289,047
Europe 48,113 (7,411) 40,702 (10,816) 348,682
Other Foreign 90,702 (3,831) 86,871 (17,259) 325,076
Interarea Eliminations (45,521) 45,521 -- (6,945) (578,252)
----------- ----------- ----------- ----------- -----------
$ 273,693 $ -- $ 273,693 $ (88,343) $ 1,384,553
=========== =========== =========== =========== ===========
Nine months ended July 31, 2000
United States $ 608,014 $ (80,862) $ 527,152 $ 39,610 $ 1,314,121
Europe 115,190 (43,389) 71,801 4,607 300,322
Other Foreign 241,850 (13,722) 228,128 23,014 270,606
Interarea Eliminations (137,973) 137,973 -- (20,420) (634,692)
----------- ----------- ----------- ----------- -----------
$ 827,081 $ -- $ 827,081 $ 46,811 $ 1,250,357
=========== =========== =========== =========== ===========
Nine months ended July 31, 1999
United States $ 563,981 $ (102,957) $ 461,024 $ (14,987) $ 1,289,047
Europe 161,202 (43,038) 118,164 490 348,682
Other Foreign 265,396 (12,120) 253,276 (12,502) 325,076
Interarea Eliminations (158,115) 158,115 -- (25,282) (578,252)
----------- ----------- ----------- ----------- -----------
$ 832,464 $ -- $ 832,464 $ (52,281) $ 1,384,553
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
(l) Condensed Combined Financial Statements
---------------------------------------
The following condensed combined financial statements are presented in
accordance with SOP 90-7, Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code:
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONDENSED COMBINED CONSOLIDATING
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED
JULY 31, 2000
<TABLE>
<CAPTION>
Entities in Entities not in
Reorganization Reorganization Combined
In thousands Proceedings Proceedings Eliminations Consolidated
------------------------------------------------------------ ---------------- ------------- ---------------
Revenues
<S> <C> <C> <C> <C>
Net Sales $ 608,014 $ 357,040 $ (137,973) $ 827,081
Other Income (10,136) (13,468) 26,990 3,386
--------- --------- --------- ---------
597,878 343,572 (110,983) 830,467
Cost of Sales 464,686 286,191 (117,553) 633,324
Product Development, Selling
and Administrative Expenses 118,163 38,797 -- 156,960
Reorganization Items 44,980 -- -- 44,980
Restructuring Charge -- 5,438 -- 5,438
--------- --------- --------- ---------
Operating Loss (29,951) 13,146 6,570 (10,235)
Interest Expense - Net (12,391) (9,534) -- (21,925)
--------- --------- --------- ---------
Loss before Benefit (Provision) for Income
Taxes and Minority Interest (42,342) 3,612 6,570 (32,160)
Benefit (Provision) for Income Taxes (5,576) (3,424) -- (9,000)
Minority Interest -- -- (613) (613)
Equity in Income of Subsidiaries (156,082) 627 155,455 --
--------- --------- --------- ---------
Net Income (Loss) from Continuing Operations (204,000) 815 161,412 (41,773)
Loss from Beloit Discontinued Operations -- -- -- --
--------- --------- --------- ---------
Net Income (Loss) (204,000) 815 161,412 (41,773)
========= ========= ========= =========
</TABLE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONDENSED COMBINED CONSOLIDATING
BALANCE SHEET
AS OF JULY 31, 2000
<TABLE>
<CAPTION>
Entities in Entities not in
Reorganization Reorganization Combined
In thousands Proceedings Proceedings Eliminations Consolidated
-------------------------------------------- --------------- ---------------- ------------------- ------------
ASSETS
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 32,751 $ 38,677 $ -- $ 71,428
Accounts receivable-net 113,092 75,262 (2,375) 185,979
Intercompany receivables 1,705,119 279,778 (1,984,897) --
Inventories 270,698 165,814 (23,636) 412,876
Prepaid income taxes (3,564) 3,564 -- --
Other current assets 12,349 42,557 (3) 54,903
----------- ----------- ----------- -----------
2,130,445 605,652 (2,010,911) 725,186
Assets of discontinued Beloit operations 28,403 -- -- 28,403
Property, Plant and Equipment-Net 126,430 48,291 -- 174,721
Intangible assets 148,330 216,898 (125) 365,103
Investment in subsidiaries 576,105 962,845 (1,536,674) 2,276
Other assets 41,626 4,615 38 46,279
----------- ----------- ----------- -----------
$ 3,051,339 $ 1,838,301 $(3,547,672) $ 1,341,968
=========== =========== =========== ===========
</TABLE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONDENSED COMBINED CONSOLIDATING
BALANCE SHEET
AS OF JULY 31, 2000
<TABLE>
<CAPTION>
Entities in Entities not in
Reorganization Reorganization Combined
In thousands Proceedings Proceedings Eliminations Consolidated
--------------------------------------------- ---------------- -------------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
<S> <C> <C> <C> <C>
Debtor in possession facility $ 25,000 $ -- $ -- $ 25,000
Short-term notes payable, including current
portion of long-term obligations 6 117,322 -- 117,328
Trade accounts payable 28,742 33,792 -- 62,534
Intercompany accounts payable 1,667,806 331,117 (1,998,923) --
Employee compensation and benefits 37,350 7,192 5,299 49,841
Advance payments and progress billings 10,493 17,038 -- 27,531
Accrued warranties 25,265 12,297 -- 37,562
Other current liabilities 187,031 41,205 (14,114) 214,122
----------- ----------- ----------- ----------
1,981,693 559,963 (2,007,738) 533,918
Long-term Obligations 222 1,716 -- 1,938
Other non-current liabilities
Liability for post-retirement benefits and
accrued pension costs 52,221 2,545 (5,299) 49,467
Deferred income taxes (2,021) 2,021 -- --
Other liabilities 7,820 12 -- 7,832
----------- ----------- ----------- -----------
58,020 4,578 (5,299) 57,299
Liabilities Subject to Compromise 1,191,034 -- -- 1,191,034
Liabilities of discontinued Beloit operations 471,068 173,654 -- 644,722
Minority Interest -- -- 6,608 6,608
Shareholders' Deficit:
Common stock 56,108 693,928 (698,367) 51,669
Capital in excess of par value 2,369,698 133,858 (1,939,455) 564,101
Retained earnings (2,827,889) 405,193 911,985 (1,510,711)
Accumulated comprehensive loss (156,592) (134,589) 184,594 (106,587)
Less:
Stock Employee Compensation Trust (659) -- -- (659)
Treasury stock (91,364) -- -- (91,364)
----------- ----------- ----------- ------------
(650,698) 1,098,390 (1,541,243) (1,093,551)
----------- ----------- ----------- -------------
$ 3,051,339 $ 1,838,301 $ (3,547,672) $ 1,341,968
=========== =========== =========== ============
</TABLE>
<PAGE>
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
CONDENSED COMBINED CONSOLIDATING
STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED
JULY 31, 2000
<TABLE>
<CAPTION>
Reorganization Reorganization Combined
In thousands Proceedings Proceedings Consolidated
---------------------------------------------- ------------- ------------- ------------
Net cash provided (used) by continuing
<S> <C> <C> <C>
operating activities $ (19,240) $ 28,428 $ 9,188
Investment and Other Transactions:
Cash transferred to entities not in
reorganization proceedings (17,705) 17,705 --
Property, plant and equipment acquired (17,321) (2,596) (19,917)
Property, plant and equipment retired 10,931 11,451 22,382
Other - net 10,741 (3,401) 7,340
--------- --------- ---------
Net cash provided (used) by investment
and other transactions (13,354) 23,159 9,805
Financing Activities:
Borrowings under DIP Facility 95,000 -- 95,000
Repayment of borrowing under DIP Facility (237,000) -- (237,000)
Issuance (repayments) of long-term obligations, net -- 748 748
Decrease in short-term notes payable- net -- (15,288) (15,288)
--------- --------- ---------
Net cash used by financing activities (142,000) (14,540) (156,540)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents -- (1,456) (1,456)
Cash provided by (used in) Discontinued Operations 177,170 (24,192) 152,978
--------- --------- ---------
Increase in Cash and Cash Equivalents 2,576 11,399 13,975
Cash and Cash Equivalents at Beginning of Period 30,175 27,278 57,453
--------- --------- ---------
Cash and Cash Equivalents at End of Period $ 32,751 $ 38,677 $ 71,428
========= ========= =========
</TABLE>
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
On June 7, 1999, Harnischfeger Industries, Inc. (the "Company") and
substantially all of its domestic operating subsidiaries (collectively, the
"Debtors") filed voluntary petitions for reorganization under chapter 11 of
the U.S. Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") and
orders for relief were entered. The Debtors include the Company's principal
domestic operating subsidiaries, P&H Mining Equipment ("P&H") and Joy
Mining Machinery ("Joy"), as well as Beloit Corporation ("Beloit"). The
Company's Pulp and Paper Machinery segment owned by Beloit and its
subsidiaries (the "Beloit Segment") is presented as a discontinued
operation as is more fully discussed in Note (c) - Discontinued Operations
included in Item 1 - Financial Statements. The Debtors' chapter 11 cases
are being jointly administered for procedural purposes only under case
number 99-2171. The issue of substantive consolidation of the Debtors has
not been addressed. Unless Debtors are substantively consolidated under a
confirmed plan of reorganization, payment of prepetition claims of each
Debtor may substantially differ from payment of prepetition claims of other
Debtors.
The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code. Pursuant to the
Bankruptcy Code, actions by creditors to collect prepetition indebtedness
of the Debtors and other contractual obligations of the Debtors generally
may not be enforced. In addition, under the Bankruptcy Code, the Debtors
may assume or reject executory contracts and unexpired leases. Additional
prepetition claims may arise from such rejections and from the
determination by the Bankruptcy Court (or as agreed by the parties in
interest) to allow claims for contingencies and other disputed amounts.
From time to time since the chapter 11 filing, the Bankruptcy Court has
approved motions allowing the Debtors to reject certain business contracts
that were deemed burdensome or of little or no value to the respective
Debtor. As of September 8, 2000, the Debtors had not completed their review
of all their prepetition executory contracts and leases for assumption or
rejection. See Note (f) - Liabilities Subject to Compromise included in
Item 1 - Financial Statements.
The Debtors received approval from the Bankruptcy Court to pay or otherwise
honor certain of their prepetition obligations, including employee wages
and product warranties. In addition, the Bankruptcy Court authorized the
Debtors to maintain their employee benefit programs. Funds of qualified
pension plans and savings plans are in trusts and protected under federal
regulations. All required contributions to qualified pension plans have
been made.
The Debtors have the exclusive right until September 15, 2000 to file a
plan or plans of reorganization. Such period has been extended from time to
time during the pendency of the Debtors' bankruptcy cases and may be
extended at the discretion of the Bankruptcy Court. Subject to certain
exceptions set forth in the Bankruptcy Code, acceptance of a plan of
reorganization requires approval of the Bankruptcy Court and the
affirmative vote (i.e., more than 50% of the number and at least 66-2/3% of
the dollar amount, both based on claims actually voted) of each class of
creditors and equity holders whose claims are impaired by the plan.
Alternatively, absent the requisite approvals, a Debtor may seek Bankruptcy
Court approval of its reorganization plan under "cramdown" provisions of
the Bankruptcy Code, assuming certain tests are met. If a Debtor fails to
submit a plan of reorganization within the exclusivity period prescribed or
any extensions thereof, any creditor or equity holder will be free to file
a plan of reorganization with the Bankruptcy Court and solicit acceptances
thereof.
February 29, 2000 was set by the Bankruptcy Court as the last date
creditors could file proofs of claim against the Debtors. In aggregate
terms, the amounts claimed by creditors are larger than the amounts
recorded in the Debtors' schedules and financial statements. Debtors are
objecting to excessive claims and otherwise seeking to eliminate these
differences. Litigation may be required to resolve such differences.
The Debtors will continue to incur significant costs associated with the
reorganizations. The amount of these expenses, which are being expensed as
incurred, is expected to significantly affect results while the Debtors
operate under chapter 11. See Note (d) - Reorganization Items included in
Item 1 - Financial Statements.
While it is not possible to predict with certainty the length of time the
Debtors will operate under the protection of chapter 11, the outcome of the
chapter 11 proceedings in general, or the effect of the proceedings on the
business of the Company or on the interests of the various creditors and
security holders, the Debtors have analyzed a large portion of the claims
filed against the Debtors and are actively preparing for the filing of a
plan or plans of reorganization.
Under the Bankruptcy Code, postpetition liabilities and prepetition
liabilities (i.e., liabilities subject to compromise) of the Company must
be satisfied before shareholders of the Company can receive any
distribution. The ultimate recovery to the Company's shareholders, if any,
will not be determined until the end of the case when the fair value of the
Company's assets is compared to the liabilities and claims against the
Company. Based on the Company's analysis to date of (a) scheduled and filed
claims, (b) any potential recovery from the sale of Beloit assets and (c)
the valuation of the Company, P&H and Joy as going concerns, there appears
to be sufficient value to pay in full all claims against P&H and Joy.
However, there appears to be insufficient value to pay in full all claims
against the Company. Accordingly, it appears unlikely that any value will
be distributed to the Company's shareholders or otherwise attributed to the
Company's common shares. There also appears to be insufficient value to pay
in full all claims against Beloit. The U.S. Trustee for the District of
Delaware has appointed an Official Committee of Equity Holders to represent
the Company's shareholders in the proceedings before the Bankruptcy Court.
The accompanying consolidated financial statements of the Company and its
consolidated subsidiaries have been prepared on a going concern basis which
contemplates continuity of operations, realization of assets, and
liquidation of liabilities in the ordinary course of business and does not
reflect adjustments that might result if the Debtors (other than Beloit and
Beloit's Debtor subsidiaries) are unable to continue as going concerns. As
a result of the Debtors' chapter 11 filings, such matters are subject to
significant uncertainty. The Debtors intend to file a plan or plans of
reorganization with the Bankruptcy Court. Continuing on a going concern
basis is dependent upon, among other things, the Debtors' formulation of an
acceptable plan or plans of reorganization, the success of future business
operations, and the generation of sufficient cash from operations and
financing sources to meet the Debtors' obligations. Other than recording
the estimated loss on the disposal of the Beloit discontinued operations in
the fourth quarter of fiscal 1999, the consolidated financial statements do
not reflect: (a) the realizable value of assets on a liquidation basis or
their availability to satisfy liabilities; (b) aggregate prepetition
liability amounts that may be allowed for claims or contingencies, or their
status or priority; (c) the effect of any changes to the Debtors' capital
structures or in the Debtors' business operations as the result of a
confirmed plan or plans of reorganization; or (d) adjustments to the
carrying value of assets (including goodwill and other intangibles) or
liability amounts that may be necessary as the result of actions by the
Bankruptcy Court.
The Company's consolidated financial statements have been presented in
conformity with the AICPA's Statement of Position 90-7, "Financial
Reporting By Entities In Reorganization Under the Bankruptcy Code", issued
November 19, 1990 ("SOP 90-7"). SOP 90-7 requires a segregation of
liabilities subject to compromise by the Bankruptcy Court as of the
bankruptcy filing date and identification of all transactions and events
that are directly associated with the reorganization of the Debtors.
The commentary in Management's Discussion and Analysis contains
forward-looking statements. When used in this document, terms such as
"anticipate", "believe", "estimate", "expect", "indicate", "may be",
"objective", "plan", "predict", and "will be" are intended to identify such
statements. Forward-looking statements are subject to certain risks,
uncertainties and assumptions which could cause actual results to differ
materially from those projected, including those, without limitation,
described in Item 5 - Other Information - "Cautionary Factors" in Part II
of this report.
Surface Mining Equipment
------------------------
Three Months Ended July 31, 2000 as Compared to 1999
----------------------------------------------------
The following table sets forth certain data with respect to the Surface
Mining Equipment segment from the consolidated statement of operations of
the Company for the three months ended July 31:
In thousands 2000 1999
--------------------------------------------------------------------
Net Sales $ 114,855 $ 119,566
Operating Profit (Loss) * $ 14,514 $ (9,793)
Bookings $ 112,848 $ 99,745
-------------
* after charges against operating profit of $5,000 in 1999 for
changes in estimates for allowance for doubtful accounts,
warranty, and excess and obsolete inventory.
Sales of the Surface Mining Equipment segment were $114.9 million for the
three months ended July 31, 2000, a 4% decrease from sales of $119.6
million during the same period of fiscal 1999. Original equipment sales
increased by 25%, driven by an increase in sales of electric mining
shovels. The increase in electric mining shovel sales was partially offset
by a decrease in sales related to draglines. Aftermarket sales decreased
15% for the three months ended July 31, 2000 due to lower parts and
dragline service sales.
Operating profit was $14.5 million or 12.6% of sales in the three months
ended July 31, 2000, compared to an operating loss before charges
associated with changes in estimates of $4.8 million for the corresponding
period in 1999. The higher operating profit in the third quarter of 2000 as
compared to the same period of 1999 was due primarily to lower product
costs and lower selling, general and administrative expenses.
Bookings were $112.8 million in the three months ended July 31, 2000
compared to $99.7 million during the equivalent period in 1999. The
increase is primarily due to higher original equipment bookings. The P&H
order backlog was $73.3 million as of July 31, 2000 compared with $93.8
million at October 31, 1999. These booking and backlog figures exclude
customer arrangements under long-term repair and maintenance contracts. In
financial reports prior to fiscal 2000 it was the policy of the Company to
include two years of estimated value of such arrangements as part of its
reported backlog. The total estimated value of long-term repair and
maintenance arrangements with P&H customers, which extend for periods of up
to thirteen years, amounted to approximately $240 million as of July 31,
2000.
Nine Months Ended July 31, 2000 as Compared to 1999
---------------------------------------------------
The following table sets forth certain data with respect to the Surface
Mining Equipment segment from the consolidated statement of operations of
the Company for the nine months ended July 31:
In thousands 2000 1999
--------------------------------------------------------------------
Net Sales $ 370,356 $ 355,584
Operating Profit * $ 39,682 $ 14,562
Bookings $ 349,861 $ 308,355
-------------
* after charges against operating profit of $5,000 in 1999 for
changes in estimates for allowance for doubtful accounts,
warranty, and excess and obsolete inventory.
Sales of the Surface Mining Equipment segment were $370.4 million in the
first nine months of fiscal 2000, a 4% increase from sales of $355.6
million during the same period of fiscal 1999. Original equipment sales
increased 26%, driven by an increase in sales of electric mining shovels.
The increase in electric mining shovels was partially offset by a decrease
in sales related to draglines. Aftermarket sales decreased 7% in the first
nine months of 2000 as compared with the first nine months of 1999 which
benefited from carryover parts shipments that were deferred due to the
United Steelworkers' strike in Milwaukee during the fourth fiscal quarter
of 1998.
Operating profit was $39.7 million or 10.7% of sales in the nine months
ended July 31, 2000, compared to operating profit before charges associated
with changes in estimates of $19.6 million and 5.5% of sales for the
corresponding period in 1999. The higher operating profit in the first nine
months of 2000 as compared to the first nine months of 1999 was due
primarily to lower product costs and lower selling, general and
administrative expenses.
Bookings were $349.9 million in the first nine months of fiscal 2000
compared to $308.4 million during the equivalent period in 1999. The
increase is primarily due to higher demand for P&H's original equipment
resulting from product innovation and expanded product support for
customers. Order backlog was $73.3 million as of July 31, 2000 compared
with $93.8 million at October 31, 1999. These booking and backlog figures
exclude customer arrangements under long-term repair and maintenance
contracts.
Underground Mining Machinery
----------------------------
Three Months Ended July 31, 2000 as Compared to 1999
----------------------------------------------------
The following table sets forth certain data with respect to the Underground
Mining Machinery segment from the consolidated statement of operations of
the Company for the three months ended July 31:
In thousands 2000 1999
-----------------------------------------------------------------
Net Sales $ 144,857 $ 154,127
Operating Profit (Loss) * $ 1,410 $ (78,550)
Bookings $ 126,924 $ 137,702
-------------
* after restructuring (credits) charges of $(1,041) and $8,231
in 2000 and 1999, respectively, and after charges against
operating profit of $63,520 in 1999 for changes in estimates
for allowance for doubtful accounts, warranty, and excess and
obsolete inventory.
Net sales for the third quarter of fiscal 2000 were $9.3 million less than
they were in the third quarter last year. This decrease in net sales was
due to a decline in new machine and repair parts sales, partially offset by
an increase in machine rebuild sales. The decline in new machine sales
resulted from lower sales of longwall shearers, roof supports and face
conveyors in the United Kingdom, offset by an increase in shipments of
continuous miners in the United States. The decline in sales for longwall
mining equipment reflects continued softness in the global market for that
equipment. Shipments of continuous miners in the United States in each of
the past two quarters exceeded shipments in the corresponding quarters last
year. In the aftermarket, decreased parts sales in all markets were more
than offset by an increase in component repair sales and a significant
increase in machine rebuilds, primarily in the United States and the United
Kingdom. The increase in machine rebuild activity is partially associated
with customers' decisions to delay the purchase of new equipment and to
refurbish their existing equipment.
Despite the decline in net sales during the third quarter of fiscal 2000,
operating profit before restructuring charges (credits) and charges
associated with changes in estimates was $0.4 million this year compared to
a $6.8 million loss for the third quarter last year. The loss of gross
margin associated with the decline in net sales was offset by a favorable
sales mix and a $6.5 million reduction in spending for manufacturing
overhead and selling, engineering and administrative expenses. These
reduced spending levels were the result of cost reduction programs that
were initiated during the third quarter last year.
New order bookings in the current quarter were $10.8 million less than in
the third quarter of fiscal 1999. The entire decrease in new orders was due
to continued softness in all geographic markets for new machine sales. The
booking of a large order for a complete longwall equipment system, roof
supports, face conveyor and shearing machine in the United States was
partially offset by the cancellation of a roof support and face conveyor
order in the United Kingdom. Aftermarket bookings in the current quarter
were approximately the same level as a year ago. The backlog for
underground mining machinery was $136.7 million as of July 31, 2000
compared to $190.7 million at October 31, 1999. These bookings and backlog
figures exclude customer arrangements under long-term repair and
maintenance contracts. In financial reports prior to fiscal 2000 it was the
policy of the Company to include two years of estimated value of such
arrangements as part of its reported backlog. The total estimated value of
long-term repair and maintenance arrangements with Joy customers, which
extend for periods of up to eight years, amounted to approximately $75.2
million as of July 31, 2000.
Nine Months Ended July 31, 2000 as Compared to 1999
---------------------------------------------------
The following table sets forth certain data with respect to the Underground
Mining Machinery segment from the consolidated statement of operations of
the Company for the nine months ended July 31:
In thousands 2000 1999
-------------------------------------------------------------------
Net Sales $ 456,725 $ 476,880
Operating Profit (Loss) * $ 7,129 $ (66,843)
Bookings $ 387,190 $ 470,576
-------------
* after restructuring charges of $5,438 and $8,231 in 2000 and
1999, respectively, and after charges against operating profit
of $63,520 in 1999 for changes in estimates for allowance for
doubtful accounts, warranty, and excess and obsolete
inventory.
Net sales for the first nine months of fiscal 2000 were $20.2 million less
than in the same period of fiscal 1999. The lower sales resulted from
declines in roof support sales and shuttle car shipments. The decline in
roof support sales reflects softness in the global market for this product.
The decrease in sales of shuttle cars reflects the competition that
suppliers of new shuttle cars are facing from used equipment vendors and
from alternative batch haulage equipment such as battery powered equipment.
In the aftermarket, a decrease in repair parts sales was more than offset
by an increase in complete machine rebuilds in the United States.
Before charges or credits for restructuring and changes in estimates,
operating profit for the first three quarters of fiscal 2000 was $12.6
million compared with $4.9 million for the same period a year ago. The
benefits of Joy's cost reduction programs more than offset the decrease in
operating profit associated with lower net sales. Year-to-date spending for
manufacturing overhead, selling, engineering and administrative expenses
was $19 million less than for the same period of fiscal 1999.
New order bookings for the first three quarters of fiscal 2000 were $83
million below bookings for the equivalent period of fiscal 1999. This
decrease in new orders was due to a decline in orders for new machines.
Orders for roof supports, shuttle cars and longwall shearers were less than
they were a year ago. The level of new machine orders reflects continued
softness in the markets for the segment's new machines. In the aftermarket,
bookings in the first nine months of fiscal 2000 were at approximately the
same level as in fiscal 1999.
In the third quarter of fiscal 1999 Joy announced and implemented a
restructuring plan. A reserve of $7.3 million was established in the third
quarter of fiscal 1999, primarily for the impairment of certain assets
related to a facility rationalization. In addition, charges amounting to
$4.7 million were made in the third and fourth quarter of fiscal 1999 upon
the announcement of the severance of approximately 240 employees. Of the
amount reserved in fiscal 1999, $0.7 million had been utilized by the end
of the fiscal year. During the first nine months of fiscal 2000, a further
$5.4 million restructuring charge was recorded under the restructuring
plan, primarily for severance costs associated with the rationalization of
certain of Joy's original equipment manufacturing capacity in the United
Kingdom and to a lesser extent for reductions in employment in South Africa
associated with a reorganization of Joy's business in that market.
Details of these restructuring charges are as follows:
In thousands
----------------------------------------------------------------------
Reserve at Additional Reserve Reserve at
10/31/99 Reserve Utilized 7/31/00
----------- ------------ --------- -----------
Employee severance $ 4,009 $ 6,227 $ 7,075 $ 3,161
Facility closures 7,270 (789) 4,912 1,569
------- ------- ------- -------
Total $11,279 $ 5,438 $11,987 $ 4,730
======= ======= ======= =======
Discontinued Operations
-----------------------
In light of continuing losses at Beloit and following an evaluation of the
prospects of reorganizing the Beloit Segment, on October 8, 1999 the
Company announced its plan to dispose of this segment. Subsequently, Beloit
notified certain of its foreign subsidiaries that they could no longer
expect funding of their operations to be provided by either Beloit or the
Company. Certain of the notified subsidiaries filed for or were placed into
receivership or other applicable forms of judicial supervision in their
respective countries. On May 12, 2000 the U.S. Trustee for the District of
Delaware appointed an Official Committee of Unsecured Creditors of Beloit
Corporation to represent the creditors of Beloit in proceedings before the
Bankruptcy Court.
On November 7, 1999, the Bankruptcy Court approved procedures and an
implementation schedule for the divestiture plan (the "Court Sales
Procedures") for the Beloit Segment. Between February and August 2000,
sales agreements were approved under the Court Sales Procedures with
respect to the sale of substantially all of the segment's domestic
operating assets. In addition, approval was received for the sale of all of
Beloit's significant foreign subsidiaries (apart from those that had
previously filed for or been placed into receivership or other applicable
forms of judicial supervision in their respective countries). As of
September 8, 2000, all approved sales of domestic assets had taken place,
as had several sales of foreign subsidiaries. Beloit expects that closings
on the remaining approved sales of foreign subsidiaries will occur by the
end of fiscal 2000.
The Company classified the Beloit Segment as a discontinued operation in
its consolidated financial statements as of October 31, 1999 and has
accordingly restated the Company's consolidated statements of operations
and statements of cash flow for prior periods. Revenues for the Beloit
Segment were $170.1 million for the nine months ended July 31, 2000 and
$541.3 million for the comparable period in 1999. Loss from discontinued
operations was $751.1 million for the nine months ended July 31, 1999.
During fiscal 1999, the Company recorded an estimated loss of $529.0
million on the disposal of the Beloit Segment including an accrual for
estimated operating losses to be incurred by the Beloit Segment subsequent
to October 31, 1999. Based on the actual results during the nine-month
period ended July 31, 2000 and consideration of the current estimates
associated with the Beloit wind-down expenses to be incurred, the Company
believes that no adjustment to the original reserve is warranted as of July
31, 2000. See Note (f) - Liabilities Subject to Compromise included in
Item 1 - Financial Statements for a discussion of the APP settlement.
Income Taxes
------------
The income tax provision recognized in the Company's consolidated statement
of operations differs from the income tax benefit computed by applying the
statutory federal income tax rate to the income or loss from continuing
operations for the nine months ended July 31, 2000 due to: (i) a valuation
allowance on deferred tax benefits and (ii) the effects of state and
foreign taxes.
The Company believes that realization of net operating loss and tax credit
benefits in the near term is unlikely. Should the Company's plan of
reorganization result in a significantly modified capital structure, the
Company would be required to apply fresh start accounting pursuant to the
requirements of SOP 90-7. Under fresh start accounting, realization of net
operating loss and tax credit benefits will first reduce any reorganization
goodwill until exhausted and thereafter be reported as additional paid in
capital.
Liquidity and Capital Resources
-------------------------------
Chapter 11 Proceedings
----------------------
The matters described under this caption "Liquidity and Capital Resources",
to the extent that they relate to future events or expectations, may be
significantly affected by the chapter 11 proceedings. Those proceedings
will involve, or result in, various restrictions on the Debtors'
activities, limitations on financing, the need to obtain Bankruptcy Court
approval for various matters, and uncertainty as to relationships with
vendors, suppliers, customers and others with whom the Debtors may conduct
or seek to conduct business. In addition, the recorded amounts of: (i) the
estimated cash proceeds to be realized upon the disposal of Beloit's assets
to be sold or liquidated, and (ii) the estimated cash requirements to fund
Beloit's remaining costs and claims, could be materially different from the
actual amounts.
Under the Bankruptcy Code, postpetition liabilities and prepetition
liabilities (i.e., liabilities subject to compromise) must be satisfied
before shareholders can receive any distribution. The ultimate recovery to
shareholders, if any, will not be determined until the end of the case when
the fair value of the Company's assets is compared to the liabilities and
claims against the Company. Based on the Company's analysis to date of (a)
scheduled and filed claims, (b) any potential recovery from the sale of
Beloit assets and (c) the valuation of the Company, P&H and Joy as going
concerns, there appears to be sufficient value to pay in full all claims
against P&H and Joy. However, there appears to be insufficient value to pay
in full all claims against the Company. Accordingly, it appears unlikely
that any value will be distributed to the Company's shareholders or
otherwise attributed to the Company's common shares. There also appears to
be insufficient value to pay in full all claims against Beloit. The U.S.
Trustee for the District of Delaware has appointed an Official Committee of
Equity Holders to represent the Company's shareholders in the proceedings
before the Bankruptcy Court.
Working Capital
---------------
Working capital of continuing operations, excluding liabilities subject to
compromise, as of July 31, 2000, was $191.3 million including $71.4 million
of cash and cash equivalents, as compared to working capital of $187.2
million including $57.5 million of cash and cash equivalents as of October
31, 1999. The main factors influencing the change in working capital were:
(a) a $22.4 million decline in short-term borrowings by foreign
subsidiaries, resulting principally from a significant decrease in the
borrowing needs of the Company's South African subsidiaries as well as a
decline in the value of the British Pound, Australian Dollar and other
major currencies against the U.S. Dollar during fiscal 2000, which reduced
the U.S. Dollar value of these local currency borrowings by approximately
$11.0 million; (b) the $14.1 million increase in cash balances maintained
by the Company noted above; and (c) a $7.5 million reduction in trade
accounts payable and a $17.8 million reduction in advance payments and
progress billings, partially offset by a $16.9 million decrease in accounts
receivable, primarily reflective of a smaller number of major capital
orders in the third quarter of fiscal 2000 as compared with the final
quarter of fiscal 1999. These working capital increases were largely offset
by inventory reduction efforts (notably at Joy) which resulted in a $34.8
million decline in inventory during the first nine months of fiscal 2000
and the reclassification of borrowings under the DIP Facility from long-
term to current maturity which resulted in a $25.0 million increase in
current liabilities.
Cash Flow from Continuing Operations
------------------------------------
Cash generated by the Company's continuing operations was $9.2 million for
the nine months ended July 31, 2000 compared with cash used by continuing
operations of $54.6 million for the comparable period in 1999. The
improvement in operating cash flows resulted primarily from the reduction
in operating losses from $108.8 million for the first nine months of fiscal
1999 to $10.2 million for the same period in fiscal 2000. However, this
improvement was mitigated somewhat by several other factors, most notably:
(a) the net discharge of $4.9 million in trade accounts payable during the
first nine months of fiscal 2000 compared with an increase of $26.2 million
in trade accounts payable for the same period of fiscal 1999, reflecting
the severe cash constraints experienced by the Company in the period prior
to the bankruptcy filing; (b) the utilization by Joy of $12.0 million of
previously established restructuring reserves during the first nine months
of fiscal 2000 compared with none in 1999; and (c) the inclusion in the
1999 operating loss of $26.7 million of non-cash restructuring charges,
reorganization items and charges related to executive change compared with
$20.0 million for these items in fiscal 2000.
Investment and other transactions provided $9.8 million during the first
nine months of fiscal 2000 compared with a cash utilization of $12.3
million associated with investment and other transactions during the same
period of fiscal 1999. The principal reasons for the difference in cash
flows from investments and other transactions between the two periods were:
(a) the inclusion in fiscal 1999 of a $15.9 million deposit placed with a
bank in connection with certain letters of credit associated with the APP
contracts and the subsequent release of the deposit during fiscal 2000
generating cash of an equal amount; and (b) the inclusion in fiscal 2000 of
proceeds of $8.0 million related to the sale of land in Wisconsin.
DIP Facility
------------
On July 8, 1999 the Bankruptcy Court approved a two-year, $750 million
Revolving Credit, Term Loan and Guaranty Agreement underwritten by The
Chase Manhattan Bank (the "DIP Facility") consisting of three tranches: (i)
Tranche A $350 million revolving credit facility; (ii) Tranche B $200
million term loan facility; and (iii) Tranche C $200 million standby letter
of credit facility. Effective May 30, 2000, the Company voluntarily reduced
the size of the DIP Facility to $350 million. The third amendment to the
DIP Facility dated as of June 16, 2000 reduced the size of Tranche A to
$250 million, redefined Tranche B as a $100 million revolving loan facility
expiring December 31, 2000 and eliminated Tranche C. The fourth amendment
to the DIP Facility dated as of August 3, 2000 provides for the syndication
of the DIP Facility amongst the Chase Manhattan Bank (as agent) and certain
other lenders.
Under the amended DIP Facility, proceeds may be used to fund post-petition
working capital and other general corporate purposes during the term of the
DIP Facility and to pay up to $35 million of pre-petition claims of
critical vendors. Tranche A may be used for both revolving loans and
issuance of certain letters of credit, limited to a maximum of $210 million
in letters of credit, consisting of a $190 million sub-limit for standby
letters of credit and a $20 million sub-limit for import documentary
letters of credit. Additionally, in the case of standby letters of credit,
the aggregate letters of credit outstanding in favor of lenders to HII's
foreign subsidiaries are limited (when aggregated with loans and
investments made to repay the indebtedness of foreign subsidiaries) to $100
million. Further, letters of credit issued in connection with performance
and bid requirements, customer advances and progress payments and surety
bonds of HII's foreign subsidiaries are limited to $100 million.
Borrowings under the DIP Facility are subject to a "borrowing base"
calculation which includes eligible accounts receivable, unbilled accounts
receivable, work-in-process, raw materials, finished goods, machinery and
equipment and intellectual property, each as defined in the amended DIP
Facility agreement. Availability of funds for the benefit of Beloit are
limited to an aggregate principal amount not in excess of the sum of the
portion of the net cash proceeds received from the sales of Beloit assets,
plus $23 million, plus an amount not in excess of $17 million in respect of
letters of credit issued for Beloit's benefit. Availability of funds under
the DIP Facility for the benefit of Beloit is further limited by the
requirement that Beloit's cumulative EBITDA loss (as defined) will be no
more than $50 million for the period from May 1, 2000 through December 31,
2000. No further funds will be available to Beloit under the DIP Facility
after December 31, 2000.
The DIP Facility imposes monthly minimum EBITDA tests and quarterly limits
on capital expenditures. At July 31, 2000, $25 million in direct borrowings
had been drawn under the DIP Facility and classified as a current liability
and letters of credit in the face amount of $34.8 million had been issued
under the DIP Facility. The Debtors are jointly and severally liable under
the DIP Facility.
The DIP Facility benefits from superpriority administrative claim status as
provided for under the Bankruptcy Code. Under the Bankruptcy Code, a
superpriority claim is senior to unsecured prepetition claims and all other
administrative expenses incurred in the Chapter 11 case. Direct borrowings
under the DIP Facility are priced at LIBOR + 2.75% per annum on the
outstanding borrowings. Letters of credit are priced at 2.75% per annum
(plus a fronting fee of 0.25% to the Agent) on the outstanding face amount
of each letter of credit. In addition, the Company pays a commitment fee of
0.50% per annum on the unused amount of the commitment payable monthly in
arrears. The DIP Facility matures on the earlier of the substantial
consummation of a plan of reorganization of the Company or June 6, 2001.
In proceedings filed with the Bankruptcy Court, the Debtors agreed with the
Official Committee of Unsecured Creditors appointed by the U.S. Trustee
(the "Creditors Committee") and with MFS Municipal Income Trust and MFS
Series Trust III (collectively, the "MFS Funds"), holders of certain debt
issued by Joy, to a number of restrictions regarding transactions with
foreign subsidiaries and Beloit:
o The Debtors agreed to give at least five days prior written notice to
the Creditors Committee and to the MFS Funds of the Debtors' intention
to (a) make loans or advances to, or investments in, any foreign
subsidiary for working capital purposes after June 16, 2000 in an
aggregate amount in excess of $75 million; (b) make loans or advances
to, or investments in, any foreign subsidiary to repay the existing
indebtedness or cause letters of credit to be issued in favor of a
creditor of a foreign subsidiary in an aggregate amount, cumulatively,
in excess of $30 million; or (c) make postpetition loans or advances
to, or investments in, Beloit or any of Beloit's subsidiaries in
excess of $115 million. In September 1999, the Company notified the
Creditors Committee and MFS Funds that it intended to exceed the $115
million amount. The Company subsequently agreed, with the approval of
the Bankruptcy Court, to provide the Creditors Committee with weekly
cash requirement forecasts for Beloit, to restrict funding of Beloit
to forecasted amounts, to provide the Creditors Committee access to
information about the Beloit divestiture and liquidation process, and
to consult with the Creditors Committee regarding the Beloit
divestiture and liquidation process.
o In addition, the Debtors agreed to give notice to the Creditors
Committee and to the MFS Funds with respect to any liens created by or
on a foreign subsidiary or on any of its assets to secure any
indebtedness.
o The Debtors agreed to notify the MFS Funds of any reduction in the net
book value of Joy of ten percent or more from $364 million, after
which MFS would be entitled to receive periodic financial statements
for Joy. During fiscal 1999, MFS Funds became entitled to receive
periodic financial statements for Joy.
Continuation of unfavorable business conditions or other events could
require the Debtors to seek further modifications or waivers of certain
covenants of the DIP Facility. In such event, there is no certainty that
the Debtors would obtain such modifications or waivers to avoid default
under the DIP Facility.
The principal sources of liquidity for the Company's operating requirements
have been cash flows from operations and borrowings under the DIP Facility.
While the Company expects that such sources will provide sufficient working
capital to operate its businesses, there can be no assurances that such
sources will prove to be sufficient.
Year 2000 Readiness Disclosure
------------------------------
The year 2000 ("Y2K") issue focuses on the ability of information systems
to properly recognize and process date-sensitive information beyond
December 31, 1999. To address this problem, the Company implemented a Y2K
readiness plan for information technology systems ("IT") and non-IT
equipment, facilities and systems. All material IT and non-IT equipment,
processes and software were compliant and resulted in no material Y2K
issues through September 8, 2000. While no material Y2K problems have been
encountered to date and none are expected, it is possible that such
problems could arise as the year progresses.
Market Risk
-----------
Volatility in interest rates and foreign exchange rates can impact the
Company's earnings, equity and cash flow. From time to time the Company
undertakes transactions to hedge this impact. The hedge instrument is
considered effective if it offsets partially or completely the negative
impact on earnings, equity and cash flow due to fluctuations in interest
and foreign exchange rates. In accordance with the Company's policy, the
Company does not execute derivatives that are speculative or that increase
the Company's risk from interest rate or foreign exchange rate
fluctuations. At July 31, 2000 the Company was not party to any interest
rate derivative contracts. Foreign exchange derivatives at that date were
exclusively in the form of forward exchange contracts executed over the
counter. The counterparty to substantially all these contracts is The Chase
Manhattan Bank which is currently the only institution entering into
forward foreign exchange contracts with the Company and the other Debtors.
The Company has adopted a Foreign Exchange Risk Management Policy. It is a
risk-averse policy under which most exposures that impact earnings and cash
flow are fully hedged, subject to a net $5 million equivalent of permitted
exposures per currency. Exposures that impact only equity or do not have a
cash flow impact are generally not hedged with derivatives. There are two
categories of foreign exchange exposures that are hedged: assets and
liabilities denominated in a foreign currency and future committed receipts
or payments denominated in a foreign currency. These exposures normally
arise from imports and exports of goods and from intercompany trade and
lending activity.
As of July 31, 2000, the nominal or face value of forward foreign exchange
contracts to which the Company and its subsidiaries were parties was $77.2
million in absolute U.S. dollar equivalent terms.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
See "Market Risk" in Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.
<PAGE>
PART II. OTHER INFORMATION
Item 1- Legal Proceedings
-----------------
See Item 3 - Legal Proceedings, of Part I of the Company's annual report on
Form 10-K for the year ended October 31, 1999 and Item 1 - Legal
Proceedings, of Part II of the Company's quarterly reports on Form 10-Q for
the quarters ended January 31, 2000 and April 30, 2000. As of August 31,
2000, the plaintiff in the Brickell Partners, Ltd. litigation agreed to
dismiss this matter without prejudice.
Item 2 - Changes in Securities
---------------------
Not applicable.
Item 3 - Defaults upon Senior Securities
-------------------------------
In connection with the chapter 11 bankruptcy filings described in Item
2--Management's Discussion and Analysis of Financial Condition and Results
of Operations of Part I, the Debtors discontinued the payment of principal
and interest on all prepetition indebtedness. See Note (f) - Liabilities
Subject to Compromise and Note (g) - Borrowings and Credit Facilities of
Item 1 - Financial Statements of Part I, which are incorporated herein by
reference.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the first
nine months of fiscal 2000.
Item 5 - Other Information - "Cautionary Factors"
----------------------------------------
This report and other documents or oral statements which have been and will
be prepared or made in the future contain or may contain forward-looking
statements by or on behalf of the Company. Such statements are based upon
management's expectations at the time they are made. Actual results may
differ materially. 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. Significant periods of
time are necessary to plan, design and build these machines. There are
risks of customer acceptances and start-up or performance problems. Large
amounts of capital are required to be devoted by the Company's customers to
purchase these machines and to finance the mines that use these machines.
The Company's success in obtaining and managing a relatively small number
of sales opportunities, including the Company's success in securing payment
for such sales and meeting the requirements of warranties and guarantees
associated with such sales, can affect the Company's financial performance.
In addition, many projects are located in undeveloped or developing
economies where business conditions are less predictable. In recent years,
between 25% and 65% of the Company's total sales occurred outside the
United States.
Other factors that could cause actual results to differ materially from
those contemplated include:
o Factors relating to the Company's chapter 11 filing, such as: the
possible disruption of relationships with creditors, customers,
suppliers and employees; the Company's degree of success in executing
its plan of disposition of Beloit; the ability to successfully
prepare, have confirmed and implement a plan of reorganization; the
availability of debtor-in-possession and exit financing; and the
Company's ability to comply with covenants in its DIP Facility. As a
result of the Company's chapter 11 filing, the continuation of the
Company, or segments of the Company, on a going concern basis is
subject to significant uncertainty.
o 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, oil
sands and other ores and minerals; 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
projects; consolidations among customers; work stoppages at customers
or providers of transportation; and the timing, severity and duration
of customer buying cycles.
o Factors affecting the Company's ability to capture available sales
opportunities, including: customers' perceptions of the quality and
value of the Company's products as compared to competitors' products;
customers' perceptions of the health and stability of the Company as
compared to its competitors; the Company's ability to assist customers
with competitive financing programs; and the availability of
manufacturing capacity at the Company's factories.
o Factors affecting the Company's ability to successfully manage sales
it obtains, such as: the accuracy of the Company's cost and time
estimates for major sales; the adequacy of the Company's systems to
manage major sales and its success in completing sales on time and
within budget; the Company's success in recruiting and retaining
managers and key employees; wage stability and cooperative labor
relations; plant capacity and utilization; and whether acquisitions
are assimilated and divestitures completed without notable surprises
or unexpected difficulties.
o Factors affecting the Company's general business, such as: unforeseen
patent, tax, product, environmental, employee health or benefit, or
contractual liabilities; non-recurring restructuring and other special
charges; changes in accounting or tax rules or regulations;
reassessments of asset valuations for such assets as receivables,
inventories, fixed assets and intangible assets; and leverage and debt
service.
o Factors affecting general business levels, such as: political and
economic turmoil in major markets such as the United States, Canada,
Europe, Asia and the Pacific Rim, South Africa, Australia and Chile;
environmental and trade regulations; and the stability and ease of
exchange of currencies.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
4(a) Third Amendment to Revolving Credit, Term Loan and Guarantee
Agreement, dated as of June 16, 2000.
4(b) Fourth Amendment to Revolving Credit and Guarantee Agreement,
dated as of August 3, 2000.
11 Statement re: Calculation of Earnings Per Share
(b) Reports on Form 8-K
None.
(c) Financial data schedules
<PAGE>
FORM 10-Q
---------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
(Registrant)
/s/ Kenneth A. Hiltz
------------------------------
Kenneth A. Hiltz
Senior Vice President and
Chief Financial Officer
Date: September 8, 2000
/s/ Michael S. Olsen
------------------------------
Michael S. Olsen
Vice President, Controller and
Chief Accounting Officer
Date: September 8, 2000
<PAGE>
Exhibit 4(a)
-------------
THIRD AMENDMENT
TO REVOLVING CREDIT, TERM
LOAN AND GUARANTY AGREEMENT
THIRD AMENDMENT, dated as of June 16, 2000 (the "Amendment"), to the
REVOLVING CREDIT, TERM LOAN AND GUARANTY AGREEMENT, dated as of June 7, 1999,
among HARNISCHFEGER INDUSTRIES, INC., a Delaware corporation (the "Borrower"), a
debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, the
Guarantors named therein (the "Guarantors"), THE CHASE MANHATTAN BANK, a New
York banking corporation ("Chase"), each of the other financial institutions
party thereto (together with Chase, the "Banks") and THE CHASE MANHATTAN BANK,
as Agent for the Banks (in such capacity, the "Agent"):
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Banks and the Agent are
parties to that certain Revolving Credit, Term Loan and Guaranty Agreement,
dated as of June 7, 1999, as amended by that certain First Amendment to
Revolving Credit, Term Loan and Guaranty Agreement, dated as of July 8, 1999 and
that certain Second Amendment to Revolving Credit, Term Loan and Guaranty
Agreement, dated as of July 8, 1999 (as the same may be further amended,
modified or supplemented from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower and the Guarantors have requested that from and
after the Effective Date (as hereinafter defined) of this Amendment, the Credit
Agreement be amended subject to and upon the terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. As used herein, all terms that are defined in the Credit Agreement shall
have the same meanings herein.
2. Section 1.01 of the Credit Agreement is hereby amended by inserting the
following new definitions in appropriate alphabetical order:
"Account" shall mean any right to payment for goods sold, regardless
of how such right is evidenced and whether or not it has been earned
by performance.
"Account Debtor" shall mean the Person obligated on an Account.
"Amending Order" shall have the meaning set forth in paragraph 43 of
the Third Amendment.
"Beloit" shall mean Beloit Corporation, a Delaware corporation.
"Beloit EBITDA" shall mean, for any period, all as determined in
accordance with GAAP, the consolidated net income (or net loss) of
Beloit and its consolidated Subsidiaries for such period, plus (a) the
sum of (i) depreciation expense, (ii) amortization expense, (iii)
other non-cash charges, (iv) provision for LIFO adjustment for
inventory valuation, (v) net total Federal, state and local income tax
expense, (vi) gross interest expense for such period less gross
interest income for such period, (vii) extraordinary losses, (viii)
any non-recurring charge or restructuring charge, (ix) the cumulative
effect of any change in accounting principles, (x) the debit, if any,
attributable to Minority Interests and (xi) "Chapter 11 expenses" (or
"administrative costs reflecting Chapter 11 expenses") as shown on
Beloit's consolidated statement of income for such period minus (b)
extraordinary gains minus (c) the credit, if any, attributable to
Minority Interests plus or minus (d) the amount of cash received or
expended in such period in respect of any amount which, under clause
(viii) above, was taken into account in determining Beloit EBITDA for
such or any prior period. In determining consolidated net income (or
net loss) of Beloit and its consolidated Subsidiaries, there shall not
be taken into account (i) the impact of Beloit's settlement with Asia
Pulp & Paper Co., Ltd., (ii) professional fees and expenses associated
with Beloit in an amount not to exceed $25,000,000 in the aggregate
and (iii) the impact of adjustments with respect to prepetition
liabilities of Beloit and its consolidated Subsidiaries.
"Beloit Intercompany Loan" shall mean the portion of the Net Cash
Proceeds received from the Beloit sale auction which were loaned by
Beloit to the Borrower.
"Borrowing Base" shall mean, on any date, the amount (calculated based
on the most recent monthly Borrowing Base Certificate delivered
pursuant to this Agreement) that is equal to the sum of (a) 85% of the
total of Eligible Accounts Receivable, plus (b) 35% of Eligible
Unbilled Accounts Receivable, plus (c) 35% of Eligible
Work-in-Process, plus (d) 50% of Eligible Raw Materials and Finished
Goods, plus (e) the M&E Component, plus (f) the Intellectual Property
Component (until Tranche B is repaid in full). Borrowing Base
component definitions may be adjusted and revised from time to time by
the Agent in the Agent's exclusive judgment.
"Borrowing Base Certificate" shall mean a certificate substantially in
the form of Exhibit E hereto (with such changes therein as may be
required by the Agent to reflect the components of and reserves
against the Borrowing Base as provided for hereunder from time to
time), executed and certified by a Financial Officer of the Borrower,
which shall include appropriate exhibits and schedules as referred to
therein and as provided for in Section 5.09.
"Dilution Factors" shall mean, with respect to any period, the
aggregate amount of all deductions, credit memos, returns,
adjustments, allowances, bad debt write-offs and other non-cash
credits to Accounts. Off Invoice amounts and amounts recorded on
expenditure authorization forms (as reflected in accordance with the
Borrower's and Guarantors' current and historical accounting
practices) shall not be deemed to be Dilution Factors.
"Dilution Ratio" shall mean at any date, the amount (expressed as a
percentage) equal to (a) the aggregate amount of the Dilution Factors
for the 12 most recently ended fiscal months divided by (b) total (i)
gross sales (excluding intercompany sales) for the 12 most recently
ended fiscal months minus (ii) Off Invoice amounts attributable to
Accounts during such period.
"Dilution Reserve" shall mean at any date the Dilution Ratio
multiplied by the Eligible Accounts Receivable on such date.
"Eligible Accounts Receivable" shall mean, on any date, all domestic
Accounts of the Borrower and the Guarantors on such date, that (i)
have been invoiced and represent the bona fide sale of merchandise or
rendition of services in the ordinary course of business in connection
with its trade operations, and (ii) are deemed by the Agent in good
faith to be eligible for inclusion in the calculation of the Borrowing
Base. Without limiting the foregoing, to qualify as an Eligible
Account Receivable, an Account shall indicate the Borrower or such
Guarantor (whether by legal or trade name) as sole payee and as sole
remittance party. In determining the amount to be so included, the
face amount of Accounts shall be reduced, without duplication, by (a)
the aggregate amount of all cash received in respect of the Accounts
but not yet applied by the Borrower or such Guarantor to reduce the
amount of Accounts, (b) the amount of all actual returns, discounts,
claims, credits, charges, price adjustments or other adjustments or as
otherwise included as an item in the deductions management system
aging report or other similar reporting and (c) the aggregate amount
of all other reserves, limits, advance payment liabilities and
deductions provided for in this definition and elsewhere in this
Agreement. Unless otherwise approved from time to time in writing by
the Agent, no Account shall be an Eligible Account Receivable if (and
without duplication):
(a) the Borrower or such Guarantor does not have sole lawful and
absolute title to such Account; or
(b) it arises out of a sale made to an Affiliate; or
(c) (i) it is unpaid more than 60 days from the due date, (ii) in
the case of Special Dating Accounts, it is unpaid more than 120 days
from the date of invoice, (iii) it has been written off the Borrower's
or Guarantor's books or has been otherwise designated as
uncollectible, (iv) without duplication, it has been included on the
Borrower's or Guarantors' aged analysis report or similar reporting
which identifies disputes or Accounts potentially difficult to
collect, or (v) it has been placed with attorney or other third party
for collection; or
(d) more than 50% in face amount of all Accounts of the same
Account Debtor and its known Affiliates, taken together, are
ineligible pursuant to clause (c) above; or
(e) the Account Debtor is a creditor of the Borrower or a
Guarantor who (i) has or has asserted a right of setoff against the
Borrower or such Guarantor or (ii) has disputed its liability (whether
by chargeback or otherwise) or made any claim with respect to the
Account or any other Account of the Borrower or such Guarantor which
has not been resolved, in each case, without duplication, to the
extent of the amount owed by the Borrower or such Guarantor to the
Account Debtor, the amount of such actual or asserted right of setoff,
or the amount of such dispute or claim, as the case may be, provided,
that items will not be considered ineligible under this clause (e) if
such item was included in the Borrower's calculation of the Dilution
Reserve; or
(f) the Account Debtor is insolvent or the subject of any
bankruptcy case or insolvency proceeding of any kind; or
(g) the Account is not payable in Dollars or the Account Debtor
is either not incorporated under the laws of the United States of
America or any State thereof or is located outside or has its
principal place of business or substantially all of its assets outside
the continental United States, except to the extent the Account is
supported by an irrevocable letter of credit reasonably satisfactory
to the Agent (as to form, substance and issuer) and assigned to and
directly drawable by the Agent; or
(h) the sale to the Account Debtor is on a bill-and-hold,
guaranteed sale, sale-and-return, ship-and-return, sale on approval or
consignment or other similar basis or made pursuant to any other
written agreement providing for repurchase or return of any
merchandise which has been claimed to be defective or otherwise
unsatisfactory; or
(i) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower or
such Guarantor duly assigns its rights to payment of such Account to
the Agent pursuant to the Assignment of Claims Act of 1940, as
amended, which assignment and related documents and filings shall be
in form and substance reasonably satisfactory to the Agent; or
(j) the Account is subject to any adverse security deposit,
progress payment or other similar advance made by or for the benefit
of the Account Debtor to the extent thereof; or
(k) as to all or any part of such Account a check, promissory
note, draft, trade acceptance or other instrument for the payment of
money has been received, presented for payment and returned
uncollected for any reason.
Without limiting the foregoing, (x) no Account shall be an
Eligible Account Receivable if it is for goods that have been sold
under a purchase order or pursuant to the terms of a contract or other
agreement or understanding (written or oral) that indicates that any
Person other than the Borrower or a Guarantor has or has had or is
purported to have or have had an ownership interest in such goods, and
(y) in determining the aggregate amount of Accounts from the same
Account Debtor and any Affiliates thereof that are unpaid more than 60
days from the due date pursuant to clause (c) above, there shall be
excluded the amount of any net credit balances due and owing to the
Account Debtor in respect of Accounts that are so unpaid.
"Eligible Finished Goods" shall mean, on any date, the Inventory Value
of Finished Goods of the Borrower or Guarantors on such date as shown
on the Borrower's and Guarantors' perpetual inventory records less (i)
the Specific Aging Reserve, (ii) the General Reserve and (iii) any
other reserves. No adjustment to Finished Goods is to be made for
unfavorable variances.
"Eligible Inventory" shall mean all Inventory valued at the lower of
(i) cost determined in accordance with GAAP stated on a basis
consistent with the historical practices of the Borrower as of the
date hereof or (ii) market value, that the Agent, in its reasonable
discretion, shall deem eligible, reduced by (x) the value of reserves
which have been recorded by the Borrower with respect to obsolete,
slow-moving or excess inventory and (y) such other reserves as the
Agent, in its reasonable commercial discretion after consultation with
the Borrower, shall deem appropriate. Without in any way limiting the
discretion of the Agent to deem an item of Inventory ineligible, the
Agent shall not treat any item of Inventory as eligible if:
(a) such item of Inventory is subject to any Lien whatsoever;
(b) such item of Inventory (i) is damaged, not in good condition
(to the extent not provided for by reserves as described above) or
(ii) does not meet all material standards imposed by any Governmental
Authority having regulatory authority over such item of inventory, its
use or its sale;
(c) such item of Inventory is not currently either readily usable
or salable, at prices approximating at least the cost thereof, in the
normal course of the business of the Borrower or the relevant
Subsidiary, as the case may be (to the extent not provided for by
reserves as described above);
(d) any event shall have occurred or any condition shall exist
with respect to such item of Inventory which would substantially
impede the ability of the Borrower or the relevant Guarantor to
continue to use or sell such item of inventory in the normal course of
business;
(e) any claim disputing the title of the Borrower or the relevant
Guarantor to, or right to possession of or dominion over, such item of
Inventory shall have been asserted;
(f) any representation or warranty contained in this Agreement or
in any other Loan Document applicable to either Inventory in general
or to any such specific item of Inventory has been breached with
respect to such items of Inventory, and such breach shall materially
impair the value of such Inventory;
(g) the Borrower or the relevant Subsidiary, as the case may be,
does not have good and marketable title as sole owner of such item of
Inventory;
(h) such item of Inventory is owned by the Borrower or the
relevant Subsidiary and has been consigned to other Persons, or is
located at, or in the possession of, a vendor of the Borrower, or is
in transit to or from, or held or stored by, third parties;
(i) such item of Inventory is located outside of the United
States;
(j) such item of Inventory is evidenced by an Account;
(k) such item of Inventory is subject to any licensing, patent,
royalty, trademark, trade name or copyright agreements with any third
party from whom the Borrower or any Subsidiary has received notice of
a dispute in respect of any such agreement;
(l) such item of Inventory was manufactured and/or transferred by
or from the Borrower's or Guarantors' operating business units (to the
extent of the amount of intercompany profits thereon);
(m) accounting adjustments were made to such item of Inventory
that increased its value upon the acquisition of an operating company
(to the extent of such increase); or
(n) such item of Inventory has been otherwise determined by the
Agent (after consultation with the Borrower), exercising its
commercially reasonable discretion, to be unacceptable because the
Agent believes that such item of Inventory is not readily salable
under the customary terms on which it is usually sold.
Without limiting the foregoing, Inventory shall not be Eligible
Inventory if (i) the purchase order, invoice or any other document in
connection therewith indicates that any Person other than the Borrower
or a Guarantor has any ownership interest therein or (ii) it arises
from a contract or other agreement with a supplier or customer that
has a contracting party other than the Borrower or a Guarantor.
"Eligible Raw Materials" shall mean on any date, the Inventory Value
of Raw Materials of the Borrower or a Guarantor on such date as shown
on the Borrower's or Guarantors' perpetual inventory records or
equivalent reporting in accordance with their current and historical
classification of raw materials excluding Supplies.
"Eligible Unbilled Accounts Receivable" shall mean the accumulated
work in progress costs which have been recognized as cost of sales
that are not yet able to be billed to the customer under the contract
items.
"Eligible Work-in-Process" shall mean, on any date, the Inventory
Value of Work-In-Process of the Borrower and the Guarantors on such
date that constitutes work-in-process as shown on the Borrower's or
Guarantors' perpetual inventory records or equivalent reporting in
accordance with their current and historical classification of
work-in-process.
"Finished Goods" shall mean completed goods and components to be sold
by the Borrower and the Guarantors in the normal course of business.
"Fixed Overhead and Depreciation" shall mean indirect manufacturing
costs and depreciation as classified by the Borrower and the
Guarantors in accordance with their current and historical accounting
practices.
"General Reserve" shall mean the amount of Inventory Value of damaged,
defective, obsolete or otherwise not-saleable Inventory as of the end
of each fiscal month.
"Intellectual Property Component" shall mean a valuation for the
intangible value of intellectual property of the Borrower and the
Guarantors as determined by the Agent in its sole discretion.
"Inventory" shall mean all Raw Materials, Work-in-Process, and
Finished Goods held by the Borrower and Guarantors in the normal
course of business.
"Inventory Value" shall mean a dollar amount equal to the lesser of
(i) the standard cost (exclusive of favorable or unfavorable
variances) of Inventory determined on a basis consistent with GAAP and
with the Borrower's and the Guarantors' current and historical
accounting practice or (ii) the market value of such Inventory.
"Joy" shall mean Joy Technologies Inc., a Delaware corporation, doing
business as Joy Mining Machinery.
"M&E Component" shall mean the orderly liquidation value of machinery
and equipment as determined by an appraisal company as selected by the
Agent.
"Net Cash Proceeds" shall mean, in respect of any sale of assets of
Beloit or any of its consolidated Subsidiaries (other than in the
ordinary course of business), the proceeds of such sale after the
payment of or reservation for expenses that are directly related to
(or the need for which arises as a result of) the transaction of sale,
including, but not limited to, related severance costs, taxes payable,
brokerage commissions, professional expenses, other similar costs that
are directly related to the sale and the amount secured by valid and
perfected Liens, if any, on such assets.
"Off Invoice" shall mean amounts deducted by the Borrower or any
Guarantor at the time of invoice generation and therefore are not
included in Accounts.
"P&H" shall mean Harnischfeger Corporation, a Delaware corporation,
doing business as P&H Mining Equipment.
"Raw Materials" shall mean any raw materials or supplies used or
consumed in the manufacture, packing or shipping of goods to be sold
by the Borrower and the Guarantors in the normal course of business.
"Special Dating Accounts" shall mean Accounts with payment terms that
exceed thirty (30) days from invoice date.
"Third Amendment" shall mean the Third Amendment, dated as of June 16,
2000 to this Agreement.
"Third Amendment Effective Date" shall have the meaning set forth in
paragraph 43 of the Third Amendment.
"Tranche A Maturity Date" shall mean June 7, 2001.
"Tranche A Revolving Loans" shall have the meaning given such term in
Section 2.01(a).
"Tranche B Maturity Date" shall mean December 31, 2000 or, if earlier,
the date on which Beloit receives the proceeds of the sale of the
promissory note heretofore delivered to Beloit by APP (as defined in
Section 4.02(h)).
"Tranche B Revolving Loans" shall have the meaning given such term in
Section 2.01(b).
"Work-in-Process" shall mean goods to be sold by the Borrower and the
Guarantors in the normal couse of business, which are currently in the
process of being manufactured.
3. Section 1.01 of the Credit Agreement is hereby amended by deleting the
following definitions in their entirety: "Maturity Date"; "Prepayment Date"
"Required Tranche C Banks"; "Term Loans"; "Total Tranche C Commitment"; "Tranche
C Bank"; "Tranche C Commitment"; "Tranche C Letter of Credit"; "Tranche C Letter
of Credit Outstandings"; and "Unused Total Tranche C Commitment".
4. From and after the Third Amendment Effective Date, the Credit Agreement
shall be amended such that all references in the Credit Agreement to the defined
terms deleted pursuant to paragraph 3 above shall be deleted in their entirety.
5. The definition of the term "Agreement" set forth in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"Agreement" shall mean this Revolving Credit and Guaranty Agreement,
as the same may from time to time be further amended, modified or
supplemented.
6. The definition of the term "Capital Expenditures" set forth in Section
1.01 of the Credit Agreement is hereby amended by deleting the words "and
including" appearing in the first parenthetical phrase thereof, and inserting in
lieu thereof the words "but excluding from the calculation thereof".
7. The definition of the term "EBITDA" set forth in Section 1.01 is hereby
amended (i) by inserting immediately following the words "Borrower and its
Subsidiaries" appearing in the second line thereof the parenthetical clause
"(other than Beloit and its Subsidiaries)", (ii) by deleting the words "which in
accordance with GAAP is excluded from operating income" appearing in clause
"(viii)" thereof and (iii) by inserting immediately following the words "the
Borrower's consolidated statement of income" appearing in clause "(xi)" thereof
the parenthetical "(excluding the results of Beloit and its Subsidiaries)".
8. The definition of the term "Letter of Credit" set forth in Section 1.01
of the Credit Agreement is hereby amended (i) by deleting the amount
"$110,000,000" appearing in subclause (ii)(x)(A) thereof and inserting in lieu
thereof the words "(when aggregated with loans and investments permitted by
Section 6.10(iv)(y)) $100,000,000" and (ii) by deleting the amount "$40,000,000"
appearing in subclause (ii)(x)(B) thereof and inserting in lieu thereof the
amount "$100,000,000".
9. The definition of the term "Loans" set forth in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"Loans" shall mean the Tranche A Revolving Loans and the Tranche B
Revolving Loans.
10. The definition of the term "Termination Date" set forth in Section 1.01
of the Credit Agreement is hereby amended in its entirety to read as follows:
"Termination Date" shall mean the earliest to occur of (i) the Tranche
A Maturity Date (in the case of the Total Tranche A Commitment), (ii)
the Tranche B Maturity Date (in the case of the Total Tranche B
Commitment), (iii) the Consummation Date and (iv) the acceleration of
the Loans and the termination of the Total Commitment in accordance
with the terms hereof.
11. The definition of the term "Tranche A Commitment" set forth in Section
1.01 of the Credit Agreement is hereby amended by inserting the words "Tranche
A" immediately preceding the words "Revolving Loans" appearing therein.
12. The definition of the term "Tranche B Commitment" set forth in Section
1.01 of the Credit Agreement is hereby amended by deleting the words "a Term
Loan" appearing therein and inserting in lieu thereof the words "Tranche B
Revolving Loans".
13. The definition of the term "Total Exposure" set forth in Section 1.01
of the Credit Agreement is hereby amended in its entirety to read as follows:
"Total Exposure" shall mean, at any time, the sum of (i) the Total
Tranche A Commitments and (ii) the Total Tranche B Commitments at such
time.
14. The definition of the term "Total Tranche B Commitment" set forth in
Section 1.01 of the Credit Agreement is hereby amended in its entirety as
follows:
"Total Tranche B Commitment" shall mean, at any time, the sum of the
Tranche B Commitments at such time.
15. The definition of the term "Unused Total Tranche A Commitment" set
forth in Section 1.01 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"Unused Total Tranche A Commitment" shall mean, at any time, (i) the
Total Tranche A Commitment less (ii) the sum of (x) the aggregate
outstanding principal amount of all Tranche A Revolving Loans and (y)
the aggregate Tranche A Letter of Credit Outstandings.
16. The definition of the term "Unused Total Tranche B Commitment" set
forth in Section 1.01 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"Unused Total Tranche B Commitment" shall mean, at any time, the Total
Tranche B Commitment less the aggregate outstanding principal amount
of all Tranche B Revolving Loans.
17. Section 2.01 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"SECTION 2.01. Commitments of the Banks; Borrowing Base.
(1) Each Tranche A Bank severally and not jointly with the other
Tranche A Banks agrees, upon the terms and subject to the conditions
herein set forth, to make revolving credit loans (each a "Tranche A
Revolving Loan" and collectively, the "Tranche A Revolving Loans") to
the Borrower at any time and from time to time during the period
commencing on the date hereof and ending on the Termination Date (or
the earlier date of termination of the Total Tranche A Commitment) in
an aggregate principal amount not to exceed, when added to such
Tranche A Bank's Tranche A Commitment Percentage of the then aggregate
Tranche A Letter of Credit Outstandings, the Tranche A Commitment of
such Tranche A Bank, which Revolving Loans may be repaid and
reborrowed in accordance with the provisions of this Agreement. At no
time shall the sum of the then outstanding aggregate principal amount
of the Tranche A Revolving Loans plus the then aggregate Tranche A
Letter of Credit Outstandings exceed the lesser of (i) the Total
Tranche A Commitment of $250,000,000 as the same may be reduced from
time to time pursuant to Section 2.09 and (ii) the Borrowing Base.
(2) Each Tranche B Bank severally and not jointly with the other
Tranche B Banks agrees, upon the terms and subject to the conditions
herein set forth, to make revolving credit loans (each a "Tranche B
Revolving Loan" and collectively, the "Tranche B Revolving Loans") to
the Borrower at any time and from time to time during the period
commencing on the date hereof and ending on the Termination Date (or
the earlier date of termination of the Total Tranche B Commitment) in
an aggregate principal amount not to exceed the Tranche B Commitment
of such Tranche B Bank, which Revolving Loans may be repaid and
reborrowed in accordance with the provisions of this Agreement. At no
time shall the sum of the then outstanding aggregate principal amount
of the Tranche B Revolving Loans exceed the lesser of (i) the Total
Tranche B Commitment of $100,000,000 as the same may be reduced from
time to time pursuant to Section 2.09 and (ii) the Borrowing Base.
(3) Each Borrowing shall be made by the applicable Banks pro rata
in accordance with their respective Commitments; provided, however,
that the failure of any Bank to make any Loan shall not in itself
relieve the other Banks of their obligations to lend.
(4) At no time shall the sum of the then outstanding aggregate
principal amount of the Loans plus the then aggregate Letter of Credit
Outstandings exceed the lesser of (i) Total Commitment of
$350,000,000, as the same may be reduced from time to time pursuant to
Section 2.09 and (ii) the Borrowing Base.
(5) Notwithstanding any other provision of this Agreement to the
contrary, the aggregate principal amount of all outstanding Loans plus
the then aggregate Letter of Credit Outstandings shall not at any time
exceed the Borrowing Base and no Loan shall be made or Letter of
Credit issued in violation of the foregoing."
18. Section 2.02 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"SECTION 2.02. Letters of Credit.
(1) Upon the terms and subject to the conditions herein set
forth, the Borrower may request a Fronting Bank, at any time and from
time to time after the date hereof and prior to the Termination Date,
to issue, and, subject to the terms and conditions contained herein,
such Fronting Bank shall issue, for the account of the Borrower or a
Guarantor one or more Tranche A Letters of Credit, provided that no
Tranche A Letter of Credit shall be issued if after giving effect to
such issuance (i) the aggregate Tranche A Letter of Credit
Outstandings shall exceed $210,000,000 (consisting of a sublimit of
(x) $20,000,000 for import documentary letters of credit and (y)
$190,000,000 for standby letters of credit) or (ii) the aggregate
Tranche A Letter of Credit Outstandings, when added to the aggregate
outstanding principal amount of the Tranche A Revolving Loans, would
exceed the Total Tranche A Commitment and, provided further that no
Tranche A Letter of Credit shall be issued if the Fronting Bank shall
have received notice from the Agent or the Required Tranche A Banks
that the conditions to such issuance have not been met.
(2) No Letter of Credit shall expire later than (i) 60 days after
the Tranche A Maturity Date in the case of standby Letters of Credit
issued in connection with performance and bid requirements and (ii) in
the case of all other Letters of Credit, the earlier of (x) one year
from the date of the issuance thereof and (y) 60 days after the
Tranche A Maturity Date, provided that if any Letter of Credit shall
be outstanding on the Termination Date, the Borrower shall, at or
prior to the Termination Date, except as the Agent and the Fronting
Bank may otherwise agree in writing, (A) cause all Letters of Credit
which expire after the Termination Date to be returned to the Fronting
Bank undrawn and marked "cancelled" or (B) if the Borrower is unable
to do so in whole or in part, either (I) provide a "back-to-back"
letter of credit to one or more Fronting Banks in a form satisfactory
to such Fronting Bank and the Agent (in their sole discretion), issued
by a bank satisfactory to such Fronting Bank and the Agent (in their
sole discretion), in an amount equal to 105% of the then undrawn
stated amount of all outstanding Letters of Credit issued by such
Fronting Banks and/or (II) deposit cash in the Letter of Credit
Account in an amount equal to 105% of the then undrawn stated amount
of all Letter of Credit Outstandings as collateral security for the
Borrower's reimbursement obligations in connection therewith, such
cash to be remitted to the Borrower upon the expiration, cancellation
or other termination or satisfaction of such reimbursement
obligations.
(3) The Borrower shall pay to each Fronting Bank, in addition to
such other fees and charges as are specifically provided for in
Section 2.20 hereof, such fees and charges in connection with the
issuance and processing of the Letters of Credit issued by such
Fronting Bank as are customarily imposed by such Fronting Bank from
time to time in connection with letter of credit transactions.
(4) Drafts drawn under each Tranche A Letter of Credit shall be
reimbursed by the Borrower in Dollars not later than the first
Business Day following the date of draw and shall bear interest from
the date of draw until the first Business Day following the date of
draw at a rate per annum equal to the Alternate Base Rate plus 1-3/4%
and thereafter until reimbursed in full at a rate per annum equal to
the Alternate Base Rate plus 3-3/4% (computed on the basis of the
actual number of days elapsed over any year of 360 days). The Borrower
shall effect such reimbursement (x) if such draw occurs prior to the
Termination Date (or the earlier date of termination of the Total
Tranche A Commitment), in cash or through a Borrowing of Revolving
Loans without the satisfaction of the conditions precedent set forth
in Section 4.02 or (y) if such draw occurs on or after the Termination
Date (or the earlier date of termination of the Total Tranche A
Commitment), in cash.
(5) Immediately upon the issuance of any Tranche A Letter of
Credit by any Fronting Bank, such Fronting Bank shall be deemed to
have sold to each Tranche A Bank other than such Fronting Bank and
each such other Tranche A Bank shall be deemed unconditionally and
irrevocably to have purchased from such Fronting Bank, without
recourse or warranty, an undivided interest and participation, to the
extent of such Tranche A Bank's Commitment Percentage, in such Tranche
A Letter of Credit, each drawing thereunder and the obligations of the
Borrower and the Guarantors under this Agreement with respect thereto.
Upon any change in the Tranche A Commitments pursuant to Section
10.03, it is hereby agreed that with respect to all Tranche A Letter
of Credit Outstandings, there shall be an automatic adjustment to the
participations hereby created to reflect the new Commitment
Percentages of the assigning and assignee Tranche A Banks. Any action
taken or omitted by a Fronting Bank under or in connection with a
Tranche A Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for such
Fronting Bank any resulting liability to any other Tranche A Bank.
(6) In the event that a Fronting Bank makes any payment under any
Letter of Credit and the Borrower shall not have reimbursed such
amount in full to such Fronting Bank on the first Business Day
following the date of draw, the Fronting Bank shall promptly notify
the Agent, which shall promptly notify each Bank (as applicable)
thereof, and each Bank (as applicable) shall promptly and
unconditionally pay to the Agent for the account of the Fronting Bank
the amount of such Bank's Commitment Percentage of such unreimbursed
payment in Dollars and in same day funds. If the Fronting Bank so
notifies the Agent, and the Agent so notifies the applicable Banks
prior to 11:00 a.m. (New York City time) on any Business Day, such
Banks shall make available to the Fronting Bank such Bank's Commitment
Percentage of the amount of such payment on such Business Day in same
day funds. If and to the extent such Bank shall not have so made its
Commitment Percentage of the amount of such payment available to the
Fronting Bank, such Bank agrees to pay to such Fronting Bank,
forthwith on demand such amount, together with interest thereon, for
each day from such date until the date such amount is paid to the
Agent for the account of such Fronting Bank at the Federal Funds
Effective Rate. The failure of any Bank (as applicable) to make
available to the Fronting Bank its Commitment Percentage of any
payment under any Letter of Credit (as applicable) shall not relieve
any other Bank (as applicable) of its obligation hereunder to make
available to the Fronting Bank its Commitment Percentage of any
payment under any such Letter of Credit on the date required, as
specified above, but no Bank shall be responsible for the failure of
any other Bank to make available to such Fronting Bank such other
Bank's Commitment Percentage of any such payment. Whenever a Fronting
Bank receives a payment of a reimbursement obligation as to which it
has received any payments from the Banks pursuant to this paragraph,
such Fronting Bank shall pay to each Bank which has paid its
Commitment Percentage thereof, in Dollars and in same day funds, an
amount equal to such Bank's applicable Commitment Percentage thereof.
19. Section 2.05(b) of the Credit Agreement is hereby amended (i) by
inserting the words "or Tranche B Bank (as applicable)" immediately following
the words "Tranche A Bank" each time the same appears therein and (ii) by
inserting the words "or Tranche B Banks (as applicable)" immediately following
the words "Tranche A Banks" each time the same appears therein.
20. Section 2.05(c) of the Credit Agreement is hereby deleted in its
entirety.
21. Section 2.09 of the Credit Agreement is hereby amended by deleting the
words "Tranche C" appearing in the first sentence thereof and inserting in lieu
thereof the words "Tranche B".
22. Section 2.12 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"SECTION 2.12 Commitment Termination; Cash Collateral.
(1) If at any time the aggregate principal amount of the
outstanding Loans plus the aggregate Letter of Credit Outstandings
exceeds the lesser of (x) the Total Commitment and (y) the Borrowing
Base, the Borrower will within three Business Days (i) prepay the
Loans in an amount necessary to cause the aggregate principal amount
of the outstanding Loans plus the aggregate Letter of Credit
Outstandings to be equal to or less than the Total Commitment and/or
the Borrowing Base, as the case may be, and (ii) if, after giving
effect to the prepayment in full of the Loans, the aggregate Letter of
Credit Outstandings in excess of the amount of cash held in the Letter
of Credit Account exceeds the Total Commitment and/or the Borrowing
Base, as the case may be, deposit into the Letter of Credit Account an
amount equal to 105% of the amount by which the aggregate Letter of
Credit Outstandings in excess of the amount of cash held in the Letter
of Credit Account so exceeds the Total Commitment or Borrowing Base,
as the case may be.
(2) Upon the Termination Date, the Total Commitment shall be
terminated in full and the Borrower shall pay the Loans and
unreimbursed draws under Letters of Credit in full and, except as the
Agent may otherwise agree in writing, if any Letter of Credit remains
outstanding, deposit into the Letter of Credit Account an amount equal
to 105% of the amount by which the sum of the aggregate Letter of
Credit Outstandings exceeds the amount of cash held in the Letter of
Credit Account, such cash to be remitted to the Borrower upon the
expiration, cancellation, satisfaction or other termination of such
reimbursement obligations, or otherwise comply with Section 2.02(c)."
23. Section 2.13(d) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(d) Any partial prepayment of the Loans by the Borrower pursuant
to Section 2.13 shall be applied first to Tranche B Revolving Loans
and second to Tranche A Revolving Loans, and in each case as to ABR
Loans or Eurodollar Loans as specified by the Borrower or, in the
absence of such specification, as determined by the Agent, provided
that in each case no Eurodollar Loans shall be prepaid pursuant to
Section 2.13 to the extent that such Loan has an Interest Period
ending after the required date of prepayment unless and until all
outstanding ABR Loans and Eurodollar Loans with Interest Periods
ending on such date have been repaid in full."
24. Section 2.13(e) of the Credit Agreement is hereby deleted in its
entirety.
25. Section 4.02 of the Credit Agreement is hereby amended by inserting the
following new subsections "(g)" and "(h)" at the end thereof:
"(g) Borrowing Base Certificate. The Agent shall have received
the timely delivery of the most recent Borrowing Base Certificate
required pursuant to Section 5.10.
(h) Beloit Credit Support. The obligation of the Banks to make
Loans hereunder and the obligation of the Fronting Bank to issue
Letters of Credit hereunder, the proceeds of which are used to fund
the operations of Beloit through intercompany loans and advances or
through the issuance of Letters of Credit for Beloit's benefit shall
be (i) limited to an aggregate principal amount not in excess of the
sum of (x) the Beloit Intercompany Loan plus (y) $23,000,000 plus (z)
an amount not in excess of $17,000,000 in respect of Letters of Credit
issued for Beloit's benefit, provided that no further loans and
advances to Beloit may be made from the proceeds of Loans or issuance
of Letters of Credit following the Tranche B Maturity Date and (ii)
subject to maintaining cumulative Beloit EBITDA for the period
commencing on May 1, 2000 through the Tranche B Maturity Date that
reflects an EBITDA loss of no more than $50,000,000 for such period.
Notwithstanding anything to the contrary set forth in the "proviso"
appearing at the end of clause (i) of the preceding sentence, loans
and advances to Beloit may continue to be made from the proceeds of
Loans or issuance of Letters of Credit following the Tranche B
Maturity Date if (1) the promissory note heretofore delivered by Asia
Pulp & Paper Co. Ltd. ("APP") to Beloit in partial settlement of
Beloit's claims against APP has not been sold by Beloit prior to the
Tranche B Maturity Date (but no further loans and advances to Beloit
may be made from the proceeds of Loans or issuance of Letters of
Credit following the date on which such promissory note of APP has
been sold by Beloit), (2) the limitation on the aggregate principal
amount that may be made available to Beloit that is set forth in
clause (i) of the preceding sentence shall be reduced to $25,000,000
in the aggregate (inclusive of intercompany loans and advances and
Letters of Credit), and (3) the condition with respect to Beloit's
cumulative EBITDA loss that is set forth in clause (ii) of the
preceding sentence continues to be satisfied."
26. Article 5 of the Credit Agreement is hereby amended by inserting the
following new Sections 5.10 and 5.11 at the end thereof:
SECTION 5.10 Borrowing Base Certificate. Furnish to the Agent as
soon as available and in any event within fifteen (15) Business Days
following the immediately preceding fiscal month end a Borrowing Base
Certificate showing the Borrowing Base as of the close of business on
the last day of such fiscal month, and (iii) if requested by the Agent
at any other time when the Agent reasonably believes that the then
existing Borrowing Base Certificate is materially inaccurate, as soon
as reasonably available but in no event later than five (5) Business
Days after such request, a Borrowing Base Certificate showing the
Borrowing Base as of the date of the Borrowing Base Certificate
containing such material inaccuracy, in each case with supporting
documentation (including, without limitation, the documentation
described on Schedule 1 to Exhibit E), and (iv) such other supporting
documentation and additional reports with respect to the Borrowing
Base as the Agent shall reasonably request.
SECTION 5.11 Collateral Monitoring and Review. At any time upon
the request of the Agent or the Required Banks through the Agent,
permit the Agent or professionals (including consultants, accountants
and appraisers) retained by the Agent or its professionals to conduct
evaluations and appraisals of (i) the Borrower's practices in the
computation of the Borrowing Base and (ii) the assets included in the
Borrowing Base, and pay the reasonable fees and expenses in connection
therewith (including, without limitation, the reasonable and customary
fees and expenses of FTI/Policano & Manzo). In connection with any
collateral monitoring or review and appraisal relating to the
computation of the Borrowing Base, the Borrower shall make such
adjustments to the Borrowing Base as the Agent shall reasonably
require based upon the terms of this Agreement and results of such
collateral monitoring, review or appraisal."
27. Section 6.01 of the Credit Agreement is hereby amended by deleting
clause (vi) thereof in its entirety and inserting in lieu thereof the following:
"(vi) Liens on the assets of Foreign Subsidiaries granted to secure
Indebtedness for borrowed money of such Foreign Subsidiaries in
existence on the Filing Date, and in an aggregate amount not in excess
of $200,000,000 of such Indebtedness;"
28. Section 6.03 of the Credit Agreement is hereby amended (i) by deleting
clause (iv) thereof in its entirety and by inserting in lieu thereof the
following:
"(iv) Capitalized Leases in an amount not to exceed $5,000,000 in the
aggregate"
and (ii) by inserting the following parenthetical phase immediately following
the words "by the Borrower or any Guarantor to Foreign Subsidiaries" appearing
in clause (viii) thereof:
"(other than to foreign consolidated Subsidiaries of Beloit)"
29. Section 6.04 of the Credit Agreement is hereby amended by deleting the
table set forth therein in its entirety and inserting in lieu thereof the
following table:
"Fiscal Quarter Ending Maximum Capital Expenditures
July 31, 2000 $ 10,100,000
October 31, 2000 $ 10,300,000
January 31, 2001 $ 6,600,000
April 30, 2001 $ 6,700,000
Thereafter through Tranche A
Maturity Date $ 2,700,000"
30. Section 6.05 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"SECTION 6.05 EBITDA. (a) Permit cumulative EBITDA for each period
commencing on June 1, 2000 and ending on the last day of each fiscal
month listed below to be less than the amount specified opposite such
fiscal month:
Fiscal Month EBITDA
June, 2000 $ 4,000,000
July, 2000 $ 7,500,000
August, 2000 $13,000,000
September, 2000 $20,000,000
October, 2000 $30,000,000
November, 2000 $36,000,000
December, 2000 $43,000,000
January, 2001 $52,500,000
February, 2001 $61,000,000
March, 2001 $70,000,000
April, 2001 $79,000,000
May, 2001 $90,500,000
(b) Permit EBITDA to be negative for any month commencing with June
2000."
31. Section 6.06 of the Credit Agreement is hereby amended by inserting the
words "or other obligation" immediately following the word "Indebtedness" in the
second place the word "Indebtedness" appears in clause (i) thereof.
32. Section 6.10 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"SECTION 6.10 Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of indebtedness or other
securities of, make or permit to exist any loans or advances to, or
make or permit to exist any investment in, any other Person (all of
the foregoing, "Investments"), except for (i) ownership by the
Borrower or the Guarantors of the capital stock of each of the
Subsidiaries listed on Schedule 3.05, (ii) Permitted Investments,
(iii) advances and loans among the Borrower and the Guarantors (other
than to and among Beloit and its consolidated Subsidiaries) in the
ordinary course and consistent with past practice, (iv) advances and
loans by the Borrower or the Guarantors to Foreign Subsidiaries
(excluding advances and loans to any Foreign Subsidiaries that are
consolidated Subsidiaries of Beloit) the terms of which advances and
loans comply with Section 6.03(viii), provided that the aggregate
amount of such advances and loans made from and after the Third
Amendment Effective Date shall not exceed in the aggregate (x)
$75,000,000 in the case of advances and loans the source of which were
borrowed under this Agreement to finance the working capital
requirements of such Foreign Subsidiaries or (y) $100,000,000 in the
case of advances and loans the source of which were borrowed under
this Agreement that are used to repay the Indebtedness of such Foreign
Subsidiaries (when aggregated with Letter of Credit Outstandings of
Letters of Credit issued for the benefit of such Foreign Subsidiaries
and described in clause (ii)(x)(A) of the definition of "Letter of
Credit"), (v) Investments, advances and loans among Foreign
Subsidiaries and (vi) advances and loans by the Borrower (or any
Guarantor other than Beloit and its consolidated Subsidiaries) to
Beloit and its consolidated Subsidiaries in an aggregate amount not in
excess of an amount equal to the sum of the Beloit Intercompany Loan
plus $23,000,000 plus an amount not in excess of $17,000,000 in
respect of Letters of Credit issued for Beloit's benefit (whenever
issued), provided that the sum of advances and loans that are
permitted by clauses (iv)(x) and (y) of the first sentence of this
Section 6.10 plus the Letter of Credit Outstandings of Letters of
Credit issued for the benefit of Foreign Subsidiaries and described in
clauses (ii)(x)(A) and (B) of the definition of the term "Letter of
Credit" shall not exceed $150,000,000 in the aggregate. Nothing herein
shall preclude the Borrower or any Subsidiary from forming additional
Foreign Subsidiaries so long as the effect of such transaction is not
to change the direct or indirect ownership or control of any assets
that are presently directly or indirectly owned or controlled by the
Foreign Subsidiaries whose ownership interests are pledged to the
Banks hereunder.
33. Section 6.11 of the Credit Agreement is hereby amended by inserting the
following words immediately preceding the amount "$10,000,000" appearing in
clause (ii) thereof:
"$250,000 for each such sale or (in the case of assets having a fair
market value in excess of $250,000)"
34. Clause (i) of Section 7.01 of the Credit Agreement is hereby amended by
inserting the parenthetical phrase "(other than the Amending Order)" immediately
following the words "modifying either of the Orders" appearing at the end
thereof.
35. Section 7.01 of the Credit Agreement is hereby further amended by
inserting the word "or" at the end of clause (q) thereof and by inserting the
following new clause (r) immediately following clause (q):
"(r) the Borrower shall fail to deliver a certified Borrowing Base
Certificate when due and such default shall continue unremedied for
more than three (3) Business Days;"
36. Section 10.03(b) of the Credit Agreement is hereby amended by deleting
clauses "(i)" and "(ii)" thereof in their entirety and inserting in lieu thereof
the following:
"(i) the Agent and the Fronting Bank must give their respective prior
written consent, which consent will not be unreasonably withheld, (ii)
the aggregate amount of the respective Commitments and/or related
Loans or Letters of Credit of the assigning Bank subject to each such
assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Agent) shall,
unless otherwise agreed to in writing by the Borrower and the Agent,
in no event be less than $5,000,000 or the remaining portion of such
Bank's Commitment and/or related Loans or Letters of Credit that is
being assigned, if less"
37. Section 10.10(a) of the Credit Agreement is hereby amended by inserting
the following words immediately following the words "or release any Guarantor"
appearing in clause (B) at the end of the first sentence thereof:
", or amend any of the advance rates set forth in the definition of
the term "Borrowing Base"
38. Section 10.10(b) of the Credit Agreement is hereby amended by deleting
the parenthetical phrases "(or unreimbursed Tranche C Letters of Credit)" and
"(or the funding of each unreimbursed Tranche C Letter of Credit)" each time the
same appears therein.
39. Annex A to the Credit Agreement is hereby replaced in its entirety by
Annex A hereto.
40. Annex B to the Credit Agreement is hereby replaced in its entirety by
Annex B hereto.
41. Annex C to the Credit Agreement is hereby deleted in its entirety.
42. The Credit Agreement is hereby amended by annexing, as Exhibit E
thereto, Exhibit E hereto.
43. From and after the Third Amendment Effective Date, the title of the
Credit Agreement shall be amended to, and shall thereafter be referred to as,
the "Revolving Credit and Guaranty Agreement."
44. This Amendment shall not become effective until the date (the "Third
Amendment Effective Date") on which (i) this Amendment shall have been executed
by the Borrower, the Guarantors, the Banks and the Agent, and the Agent shall
have received evidence satisfactory to it of such execution, (ii) the Borrower
shall have paid to the Agent, for the respective account of the Tranche A Banks,
an amendment fee in an aggregate amount equal to $2,187,500, (iii) the Borrower
shall have paid to the Agent, for the respective account of the Tranche B Banks,
an amendment fee in an aggregate amount equal to $375,000 and (iv) the
Bankruptcy Court shall have entered an order satisfactory in form and substance
to the Agent (the "Amending Order") authorizing the terms of this Amendment
(including the payment of the fees provided for in clauses (ii) and (iii)
above).
45. The Borrower and the Guarantors hereby jointly and severally represent
and warrant that, as of the Third Amendment Effective Date, there exists no
Event of Default and that the representations and warranties contained in
Section 3 of the Credit Agreement (after giving effect to this Amendment) are
true and correct in all material respects on and as of the date hereof.
46. Except to the extent hereby amended, the Credit Agreement and each of
the Loan Documents remain in full force and effect and are hereby ratified and
affirmed.
47. The Borrower agrees that its obligations set forth in Section 10.05 of
the Credit Agreement shall extend to the preparation, execution and delivery of
this Amendment, including the reasonable fees and disbursements of special
counsel to the Agent.
48. This Amendment shall be limited precisely as written and shall not be
deemed (a) to be a consent granted pursuant to, or a waiver or modification of,
any other term or condition of the Credit Agreement or any of the instruments or
agreements referred to therein or (b) to prejudice any right or rights which the
Agent or the Banks may now have or have in the future under or in connection
with the Credit Agreement or any of the instruments or agreements referred to
therein. Whenever the Credit Agreement is referred to in the Credit Agreement or
any of the instruments, agreements or other documents or papers executed or
delivered in connection therewith, such reference shall be deemed to mean the
Credit Agreement as modified by this Amendment.
49. This Amendment may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
50. This Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and the year first above written.
BORROWER:
HARNISCHFEGER INDUSTRIES, INC.
By: _________________________
Title:
GUARANTORS:
AMERICAN ALLOY COMPANY
AMERICAN LONGWALL FACE CONVEYORS, INC.
AMERICAN LONGWALL, INC.
AMERICAN LONGWALL REBUILD, INC.
AMERICAN LONGWALL ROOF SUPPORTS, INC.
BELOIT CORPORATION
BELOIT PULPING GROUP, INC.
BENEFIT, INC.
FIELD REPAIR SERVICES LLC
FITCHBURG CORPORATION
HARNISCHFEGER CORPORATION
HARNISCHFEGER WORLD SERVICES CORPORATION
THE HORSBURGH & SCOTT COMPANY
JOY TECHNOLOGIES INC.
OPTICAL ALIGNMENT SYSTEMS AND INSPECTION
SERVICES, INC.
PRINCETON PAPER COMPANY, LLC
RCHH, INC.
SOUTH SHORE CORPORATION
SOUTH SHORE DEVELOPMENT LLC
AMERICAN LONGWALL MEXICO, INC.
BELOIT INTERNATIONAL SERVICES, INC.
BELOIT IRON WORKS, INC.
DOBSON MANAGEMENT SERVICES, INC.
GULLICK DOBSON, INC.
HARNISCHFEGER CREDIT CORPORATION
HARNISCHFEGER OVERSEAS, INC.
JOY INTERNATIONAL SALES CORPORATION, INC.
MINING SERVICES, INC.
MIP PRODUCTS, INC.
PEAC, INC.
PMAC, INC.
RADER RESOURCE RECOVERY, INC.
RYL, LLC
SMK COMPANY
By:______________________________
Title:
BELOIT TECHNOLOGIES, INC.
BWRC DUTCH HOLDINGS, INC.
BWRC, INC.
DOBSON PARK INDUSTRIES, INC.
HARNISCHFEGER TECHNOLOGIES, INC.
HCHC, INC.
HCHC UK HOLDINGS, INC.
HIHC, INC.
JOY MM DELAWARE, INC.
JOY TECHNOLOGIES DELAWARE, INC.
JTI UK HOLDINGS, INC.
By:______________________________
Title:
ECOLAIRE EXPORT FSC, INC.
ECOLAIRE INCORPORATED
INDUSTRIAL CLEAN AIR, INC.
J.P.D., INC.
JOY ENERGY SYSTEMS, INC.
JOY POWER PRODUCTS, INC.
NEW ECOLAIRE, INC.
P.W.E.C., INC.
PEABODY & WIND ENGINEERING CORPORATION
SMITH MACHINE WORKS, INC.
By:_______________________________
Title:
BELOIT HOLDINGS, INC.
By:_______________________________
Title:
JOY ENVIRONMENTAL TECHNOLOGIES, INC.
By:________________________________
Title:
PEOC, INC.
By:________________________________
Title:
AGENT:
THE CHASE MANHATTAN BANK,
Individually as a Tranche A Bank,
Tranche B Bank and Tranche C
Bank and as Agent
By:_________________________________
Title:
270 Park Avenue
New York, New York 10017
<PAGE>
Exhibit 4(b)
FOURTH AMENDMENT TO REVOLVING
CREDIT AND GUARANTY AGREEMENT
FOURTH AMENDMENT, dated as of August 3, 2000 (the "Amendment"), to the
REVOLVING CREDIT AND GUARANTY AGREEMENT, dated as of June 7, 1999, among
HARNISCHFEGER INDUSTRIES, INC., a Delaware corporation (the "Borrower"), a
debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, the
Guarantors named therein (the "Guarantors"), THE CHASE MANHATTAN BANK, a New
York banking corporation ("Chase"), each of the other financial institutions
party thereto (together with Chase, the "Banks") and THE CHASE MANHATTAN BANK,
as Agent for the Banks (in such capacity, the "Agent"):
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Banks and the Agent are
parties to that certain Revolving Credit, Term Loan and Guaranty Agreement,
dated as of June 7, 1999, as amended by that certain First Amendment to
Revolving Credit, Term Loan and Guaranty Agreement, dated as of July 8, 1999,
that certain Second Amendment to Revolving Credit, Term Loan and Guaranty
Agreement, dated as of July 8, 1999 and that certain Third Amendment to
Revolving Credit, Term Loan and Guaranty Agreement, dated as of June 16, 2000
(as the same may be further amended, modified or supplemented from time to time,
the "Credit Agreement"); and
WHEREAS, Section 10.03(b) of the Credit Agreement provides that each
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under the Credit Agreement (including, without
limitation, all or a portion of its Commitment and the same portion of the
related Loans at the time owing to it) by executing and delivering with such
Eligible Assignee an Assignment and Acceptance in substantially the form of
Exhibit D to the Credit Agreement (a copy of which is annexed hereto as Schedule
I); and
WHEREAS, Chase wishes to assign to each of the financial institutions
(other than Chase) that is named on Annex A and Annex B hereto (such financial
institutions other than Chase, collectively the "New Banks"), and each of the
New Banks wishes to assume, a pro rata portion of Chase's interests, rights and
obligations under the Credit Agreement; and
WHEREAS, the Borrower, the Guarantors, Chase, the New Banks and the
Agent have determined that the execution and delivery of this Amendment to
effectuate a reallocation of the Total Commitment among Chase and the New Banks
will be more expeditious and administratively efficient than the execution and
delivery of a separate Assignment and Acceptance between Chase and each of the
New Banks; and
WHEREAS, upon the occurrence of the Effective Date (as hereinafter
defined) of this Amendment, each of the New Banks shall become a party to the
Credit Agreement as a Bank and shall have the rights and obligations of a Bank
thereunder, the respective Commitment of Chase and each of the New Banks under
the Credit Agreement shall be in the amount set forth opposite its name on Annex
A and Annex B hereto, as the same may be reduced from time to time pursuant to
Section 2.09 of the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. As used herein, all terms that are defined in the Credit Agreement shall
have the same meanings herein.
2. Annex A to the Credit Agreement is hereby replaced in its entirety by
Annex A hereto.
3. Annex B to the Credit Agreement is hereby replaced in its entirety by
Annex B hereto.
4. The signature pages of the Credit Agreement are hereby amended to
conform to the signature pages hereto.
5. By its execution and delivery hereof, Chase shall be deemed to have made
each of the statements set forth in clauses (i) and (ii) of paragraph 2 of the
Assignment and Acceptance as if such statements were fully set forth herein at
length.
6. By its execution and delivery hereof, each of the New Banks shall be
deemed to have made each of the statements set forth in clauses (i), (ii),
(iii), (iv) and (v) of paragraph 3 of the Assignment and Acceptance as if such
statements were fully set forth herein at length.
7. On the Effective Date, (i) each New Bank will pay to the Agent (for the
account of Chase) such amount as represents such New Bank's pro rata portion of
the aggregate principal amount of the Loans, if any, that are outstanding on the
Effective Date and such New Bank's pro rata portion of the aggregate amount of
the then unreimbursed drafts, if any, that were theretofore drawn under Letters
of Credit, and (ii) the Agent shall pay to each of the New Banks such fees as
have been previously agreed to between the Agent and such New Bank. Promptly
following the occurrence of the Effective Date, and in accordance with Section
10.03(e) of the Credit Agreement, the Agent shall record in the Register the
names and addresses of each New Bank and the principal amount equal to such
Bank's Commitment reflected on Annex A and Annex B hereto.
8. By its execution and delivery hereof, each of the New Banks (i) agrees
that any interest, Commitment Fees and Letter of Credit Fees (pursuant to
Sections 2.07, 2.19 and 2.20 of the Credit Agreement) that accrued prior to the
Effective Date shall not be payable to such New Bank and authorizes and directs
the Agent to deduct such amounts from any interest, Commitment Fees or Letter of
Credit Fees paid after the date hereof and to pay such amounts to Chase (it
being understood that interest, Commitment Fees and Letter of Credit Fees
respecting the Commitment of Chase and each New Bank which accrue on or after
the Effective Date shall be payable to such Bank in accordance with its
Commitment), (ii) acknowledges that if such New Bank is organized under the laws
of a jurisdiction outside of the United States, such New Bank has heretofore
furnished to the Agent the forms prescribed by the Internal Revenue Service of
the United States certifying as to such New Bank's exemption from United States
withholding taxes with respect to any payments to be made to such New Bank under
the Credit Agreement (or such other documents as are necessary to indicate that
all such payments are subject to such tax at a rate reduced by an applicable tax
treaty) and (iii) acknowledges that such New Bank has heretofore supplied to the
Agent the information requested on the administrative questionnaire which is
attached to the Assignment and Acceptance as Exhibit A.
9. This Amendment shall not become effective (the "Effective Date") until
(i) the date on which this Amendment shall have been executed by the Borrower,
the Guarantors, Chase, the New Banks and the Agent, and the Agent shall have
received evidence satisfactory to it of such execution and (ii) the payments
provided for in clauses (i) and (ii) of paragraph 7 hereof shall have been made.
10. Except to the extent hereby amended, the Credit Agreement and each of
the Loan Documents remain in full force and effect and are hereby ratified and
affirmed.
11. The Borrower agrees that its obligations set forth in Section 10.05 of
the Credit Agreement shall extend to the preparation, execution and delivery of
this Amendment, including the reasonable fees and disbursements of special
counsel to the Agent.
12. This Amendment shall be limited precisely as written and shall not be
deemed (a) to be a consent granted pursuant to, or a waiver or modification of,
any other term or condition of the Credit Agreement or any of the instruments or
agreements referred to therein or (b) to prejudice any right or rights which the
Agent or the Banks may now have or have in the future under or in connection
with the Credit Agreement or any of the instruments or agreements referred to
therein. Whenever the Credit Agreement is referred to in the Credit Agreement or
any of the instruments, agreements or other documents or papers executed or
delivered in connection therewith, such reference shall be deemed to mean the
Credit Agreement as modified by this Amendment.
13. This Amendment may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
14. This Amendment shall be governed by, and construed in accordance with,
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and the year first above written.
BORROWER:
HARNISCHFEGER INDUSTRIES, INC.
By: _________________________
Title:
GUARANTORS:
AMERICAN ALLOY COMPANY
AMERICAN LONGWALL FACE CONVEYORS, INC.
AMERICAN LONGWALL, INC.
AMERICAN LONGWALL REBUILD, INC.
AMERICAN LONGWALL ROOF SUPPORTS, INC.
BELOIT CORPORATION
BELOIT PULPING GROUP, INC.
BENEFIT, INC.
FIELD REPAIR SERVICES LLC
FITCHBURG CORPORATION
HARNISCHFEGER CORPORATION
HARNISCHFEGER WORLD SERVICES CORPORATION
THE HORSBURGH & SCOTT COMPANY
JOY TECHNOLOGIES INC.
OPTICAL ALIGNMENT SYSTEMS AND INSPECTION
SERVICES, INC.
PRINCETON PAPER COMPANY, LLC
RCHH, INC.
SOUTH SHORE CORPORATION
SOUTH SHORE DEVELOPMENT LLC
AMERICAN LONGWALL MEXICO, INC.
BELOIT INTERNATIONAL SERVICES, INC.
BELOIT IRON WORKS, INC.
DOBSON MANAGEMENT SERVICES, INC.
GULLICK DOBSON, INC.
HARNISCHFEGER CREDIT CORPORATION
HARNISCHFEGER OVERSEAS, INC.
JOY INTERNATIONAL SALES CORPORATION, INC.
MINING SERVICES, INC.
MIP PRODUCTS, INC.
PEAC, INC.
PMAC, INC.
RADER RESOURCE RECOVERY, INC.
RYL, LLC
SMK COMPANY
By:____________________________________
Title:
BELOIT TECHNOLOGIES, INC.
BWRC DUTCH HOLDINGS, INC.
BWRC, INC.
DOBSON PARK INDUSTRIES, INC.
HARNISCHFEGER TECHNOLOGIES, INC.
HCHC, INC.
HCHC UK HOLDINGS, INC.
HIHC, INC.
JOY MM DELAWARE, INC.
JOY TECHNOLOGIES DELAWARE, INC.
JTI UK HOLDINGS, INC.
By:____________________________________
Title:
ECOLAIRE EXPORT FSC, INC.
ECOLAIRE INCORPORATED
INDUSTRIAL CLEAN AIR, INC.
J.P.D., INC.
JOY ENERGY SYSTEMS, INC.
JOY POWER PRODUCTS, INC.
NEW ECOLAIRE, INC.
P.W.E.C., INC.
PEABODY & WIND ENGINEERING CORPORATION
SMITH MACHINE WORKS, INC.
By:___________________________________
Title:
BELOIT HOLDINGS, INC.
By:___________________________________
Title:
JOY ENVIRONMENTAL TECHNOLOGIES, INC.
By:___________________________________
Title:
PEOC, INC.
By:___________________________________
Title:
AGENT:
THE CHASE MANHATTAN BANK,
Individually as a Tranche A Bank and
a Tranche B Bank and as Agent
By:____________________________________
Title:
<PAGE>
NEW BANKS:
PPM FINANCE, INC.
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
CIT GROUP/BUSINESS CREDIT, INC.
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
FOOTHILL INCOME TRUST II, L.P.
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
GE CAPITAL CORP.
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
GMAC COMMERCIAL CREDIT LLC
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
NATIONAL AUSTRALIA BANK (NEW YORK)
A.C.N. 004044937
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
BANK OF SCOTLAND
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
THE PROVIDENT BANK
As a Tranche A Bank and a Tranche B Bank
By:_____________________________________
Title:
<PAGE>
Exhibit 11
HARNISCHFEGER INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
----------------------------- ----------------------------
2000 1999 2000 1999
---------- ----------- ---------- ------------
Average common shares outstanding
<S> <C> <C> <C> <C>
Basic 46,816 46,516 46,684 46,267
========== ========== ========== ==========
Diluted 46,816 46,516 46,684 46,267
========== ========== ========== ==========
Loss from continuing operations $ (17,884) $ (362,993) $ (41,773) $ (358,980)
Loss from discontinued Beloit operations -- (656,410) -- (751,080)
----------- ----------- ---------- ------------
Net loss $ (17,884) $(1,019,403) $ (41,773) $ (1,110,060)
========= =========== ========== ============
Basic Earnings (Loss) Per Share
Loss from continuing operations $ (0.38) $ (7.81) $ (0.89) $ (7.76)
Loss from discontinued Beloit operations -- (14.11) -- (16.23)
----------- ----------- ---------- ------------
Net loss $ (0.38) $ (21.92) $ (0.89) $ (23.99)
=========== ============ ========== ============
Diluted Earnings (Loss) Per Share
Loss from continuing operations $ (0.38) $ (7.81) $ (0.89) $ (7.76)
Loss from discontinued Beloit operations -- (14.11) -- (16.23)
----------- ----------- ---------- ------------
Net loss $ (0.38) $ (21.92) $ (0.89) $ (23.99)
========== ============ ========== ============
</TABLE>
