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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 2000.
/ / 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 or Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3600 South Lake Drive, St. Francis, Wisconsin 53235-3716
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code: (414) 486-6400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Common Stock, $1 Par Value
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of Registrant's Common Stock held by
non-affiliates, as of January 9, 2001, based on a closing price of $0.085 per
share, was approximately $4.1 million.
The number of shares outstanding of Registrant's Common Stock, as of
January 11, 2001, was 47,949,089.
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended October 31, 2000
Page
Part I
Item 1. Business.....................................................3
Item 2. Properties..................................................10
Item 3. Legal Proceedings...........................................12
Item 4. Submission of Matters to a Vote
of Security Holders.........................................14
Part II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters......................15
Item 6. Selected Financial Data.....................................15
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations............18
Item 7a. Quantitative and Qualitative Disclosures
About Market Risk...........................................34
Item 8. Financial Statements and Supplementary Data.................35
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......................35
Part III
Item 10. Directors and Executive Officers of the
Registrant..................................................36
Item 11. Executive Compensation......................................40
Item 12. Security Ownership of Certain Beneficial
Owners and Management.......................................45
Item 13. Certain Relationships and Related Transactions..............46
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.....................................47
Signatures ..........................................................F-57
PART I
Item 1. Business
General
Harnischfeger Industries, Inc. ("Harnischfeger" or the "Company") is the
direct successor to a business begun over 115 years ago which, at October 31,
2000, through its subsidiaries, manufactures and markets products classified
into two business segments: surface mining equipment (P&H Mining Equipment or
"P&H") and underground mining machinery (Joy Mining Machinery or "Joy"). P&H is
a major producer of surface mining equipment for the extraction of ores and
minerals and provides extensive operational support for many types of equipment
used in surface mining. Joy is a major manufacturer of underground mining
equipment for the extraction of bedded minerals and offers comprehensive service
locations near major mining regions worldwide.
This document contains forward-looking statements. When used in this
document, terms such as "anticipate", "believe", "estimate", "expect",
"indicate", "may be", "objective", "plan", "predict", "will be", and the like
are intended to identify such statements. Forward-looking statements are subject
to certain risks, uncertainties and assumptions that could cause actual results
to differ materially from those projected, including without limitation those
described below under the heading "Cautionary Factors".
Reorganization Under Chapter 11
On June 7, 1999, 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, Joy Mining Machinery and
P&H Mining Equipment. The Debtors' Chapter 11 cases are jointly administered for
procedural purposes only under case number 99-2171. The Debtors also include
Beloit Corporation ("Beloit"), the Company's other principal operating
subsidiary at the time of the bankruptcy filing. See Note 3 - Discontinued
Operations in Notes to Consolidated Financial Statements.
On October 26, 2000, the Debtors filed their proposed disclosure statement
and plan of reorganization with the Bankruptcy Court. The disclosure statement
and plan of reorganization were subsequently amended and, on December 20, 2000,
the Bankruptcy Court approved the amended disclosure statement. The disclosure
statement sets forth certain information regarding, among other matters,
significant events that occurred during the Company's Chapter 11 case and the
anticipated organization, operation and financing of reorganized Harnischfeger
Industries, Inc. The disclosure statement also describes the Debtors' proposed
plan of reorganization, certain effects of confirmation of the plan of
reorganization, certain risk factors associated with securities to be issued
under the plan, and the manner in which distributions would be made to the
Company's creditors under the proposed plan. In addition, the disclosure
statement discusses the confirmation process and the voting procedures that
holders of claims must follow for their votes to be counted. The Bankruptcy
Court set January 30, 2001 as the deadline for voting on the Debtors' plan of
reorganization. Debtors' plan of reorganization confirmation hearing is
scheduled for March 5, 2001. If the plan is approved by creditors and the
Bankruptcy Court, the Debtors anticipate emerging from bankruptcy in the spring
of 2001.
In general, the Debtors' proposed plan of reorganization provides that the
existing Harnischfeger common stock would be cancelled and that the creditors of
Harnischfeger would be issued new common stock in reorganized Harnischfeger. As
a result, if the plan is confirmed, current shareholders of Harnischfeger would
receive nothing. Most creditors of P&H and Joy would receive new five-year,
10.75% senior notes issued by reorganized Harnischfeger and guaranteed by
reorganized P&H and reorganized Joy. In certain circumstances, such creditors
could receive a portion of the new common stock. Creditors of Beloit and its
subsidiaries would receive the proceeds of the sale of the assets of Beloit and
its subsidiaries. A copy of Debtors' plan of reorganization and disclosure
statement may be obtained by calling Bankruptcy Management Corporation at
1-888-909-0100. A summary of Debtors' disclosure statement prepared by counsel
to the Equity Committee appointed by the Bankruptcy Court has been mailed to
shareholders. The Company disagrees with the Equity Committee's position
regarding valuation of the Company as set forth in the Equity Committee's
summary of the Company's disclosure statement.
Although the plan of reorganization provides for the Company's emergence
from bankruptcy, there can be no assurance that the plan will be confirmed by
the Bankruptcy Court or that the such plan will be consummated.
Discontinued Operation
On October 8, 1999, the Company announced its plan to dispose of its pulp
and paper machinery segment owned by Beloit and its subsidiaries (the "Beloit
Segment"). See Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. This segment has been classified as a
discontinued operation as is more fully discussed in Note 3 - Discontinued
Operations in Notes to Consolidated Financial Statements included in Item 8 -
Financial Statements and Supplementary Data and Item 14 - Exhibits, Financial
Statement Schedules, and Reports on Form 8-K. Accordingly, Item 1 - Business and
Item 2 - Properties describe the Company's continuing businesses without the
Beloit Segment.
DIP Facility
On July 8, 1999, the Court approved a two-year, $750 million Revolving
Credit, Term Loan and Guarantee Agreement underwritten by The Chase Manhattan
Bank (the "DIP Facility"). In May, 2000, the Company voluntarily reduced the
size of the DIP Facility to $350 million and on July 6, 2000, an Order was
entered by the Bankruptcy Court approving an amendment to the DIP Facility
modifying the DIP Facility to consist of a Tranche A sub-facility of $250
million and a Tranche B sub-facility of $100 million. The Tranche A sub-facility
has a final maturity of June 6, 2001 (the original maturity date), and the
Tranche B sub-facility matured on December 31, 2000. See Note 3 - Discontinued
Operations in Notes to Consolidated Financial Statements. Additionally, as
permitted by the original order authorizing the DIP Facility, on August 3, 2000
the DIP Facility was further amended to, among other things, effect the
syndication of the DIP Facility among a group of nine lenders, with Chase
Manhattan Bank retaining the agent role. The DIP Facility is more fully
discussed in Item 7- Management's Discussion and Analysis of Financial Condition
and Results of Operations and Note 10 - Borrowings and Credit Facilities in
Notes to Consolidated Financial Statements included in Item 8 - Financial
Statements and Supplementary Data and Item 14 - Exhibits, Financial Statement
Schedules, and Reports on Form 8-K.
Surface Mining Equipment
P&H is the world's largest producer of electric mining shovels and, in
recent years, large walking draglines and is a major provider of manufacturing,
repair and support services for the surface mining industry through it's MinePro
Services group. In addition, P&H is a significant producer of large diameter
blasthole drills and dragline bucket products. P&H products are used in mines,
quarries and earth moving operations in the digging and loading of coal, copper,
gold, iron ore, oil sands, lead, zinc, bauxite, uranium, phosphate, stone, clay
and other minerals and ores. P&H MinePro Services personnel are strategically
located close to customers in major mining centers around the world to provide
service, training, repairs, rebuilds, used equipment services, parts and
enhancement kits.
Electric mining shovels range in capacity from 13 to 80 cubic yards.
Capacities for walking draglines range from 20 to 150 cubic yards. Blasthole
drill models have drilling diameters ranging from 9 to 22 inches and bit load
capacities from 70,000 to 150,000 pounds.
P&H has a relationship in the electric mining shovel business with Kobe
Steel, Ltd. ("Kobe") pursuant to which P&H licenses Kobe to manufacture certain
electric mining shovels and related replacement parts in Japan. P&H has the
exclusive right to market Kobe-manufactured mining shovels and parts outside
Japan. In addition, P&H is party to an agreement with a corporate unit of the
People's Republic of China licensing the manufacture and sale of two models of
electric mining shovels and related components. This relationship provides P&H
with an opportunity to sell component parts for shovels built in China.
Underground Mining Machinery
Joy is a leading manufacturer of underground mining equipment. It
manufactures and services mining equipment for the underground extraction of
coal and other bedded materials. Joy has significant facilities in Australia,
South Africa, the United Kingdom and the United States, as well as sales offices
in Poland, India, Russia, and the People's Republic of China. Joy products
include: continuous miners; complete longwall mining systems; longwall shearers;
roof supports; armored face conveyors; shuttle cars; continuous haulage systems;
battery haulers; flexible conveyor trains; and roof bolters. Joy also maintains
an extensive network of service and replacement parts distribution centers to
rebuild and service equipment and to sell replacement parts in support of its
installed base. This network includes eight service centers in the United States
and five outside of the United States, all of which are strategically located in
major underground mining regions.
Certain Financial Information
Financial information about our business segments and geographic areas of
operation is contained in Note 24 - Business Segment Information in Notes to
Consolidated Financial Statements included in Item 8 - Financial Statements and
Supplementary Data and Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
International Operations
Foreign sales of the Surface Mining Equipment segment generated
approximately 61% of the segment's consolidated net sales in 2000, 65% in 1999
and 68% in 1998. Foreign sales of the Underground Mining Machinery segment
approximated 35% in 2000, 43% in 1999 and 27% in 1998. See Note 24 - Business
Segment Information in Notes to Consolidated Financial Statements included in
Item 8 - Financial Statements and Supplementary Data and Item 14 - Exhibits,
Financial Statement Schedules, and Reports on Form 8-K.
Harnischfeger's international operations are subject to certain risks not
generally applicable to its domestic businesses, including currency
fluctuations, changes in tariff restrictions, restrictive regulations of foreign
governments (including price and exchange controls), and other governmental
actions. Harnischfeger has entered into various foreign currency exchange
contracts with major international financial institutions designed to minimize
its exposure to exchange rate fluctuations on foreign currency transactions. See
"Cautionary Factors" below for additional risks associated with international
operations.
Employees
As of October 31, 2000, Harnischfeger employed approximately 7,020 people
in its continuing operations, of which approximately 4,000 were employed in the
United States. Approximately 1,700 of the U. S. employees are represented by
local unions under collective bargaining agreements. Harnischfeger believes that
it maintains generally good relationships with its employees.
Cyclicality
P&H's business, excluding aftermarket activity, is subject to cyclical
movements in the markets. The original equipment market is driven to a large
extent by commodity prices. Rising commodity prices lead to the expansion of
existing mines, opening of new mines or re-opening of less efficient mines.
Increased mining activity requires new machinery. Although the aftermarket
segment is much less cyclical, severe reductions in commodity prices result in
removing operating machines from mining production and, thus, dampen demand for
parts and services. Conversely, significant increases in commodity prices result
in higher use of equipment and requirements for more parts and services.
The Joy business has demonstrated cyclicality over the years. This
cyclicality is driven primarily by product life cycles, new product
introductions, competitive pressures and other economic factors affecting the
mining industry, such as commodity prices (particularly coal prices) and company
consolidation in the coal mining industry.
Distribution
P&H and Joy sales are made mostly through the segments' headquarters and
sales offices located around the world. The manufacture and sale of repair and
replacement parts and the servicing of equipment are important aspects of the
Company's businesses.
Competitive Conditions
P&H and Joy conduct their domestic and foreign operations under highly
competitive market conditions, requiring that their products and services be
competitive in price, quality, service and delivery.
P&H is the leading manufacturer of electric mining shovels and, in recent
years, large walking draglines. P&H's shovels and draglines compete with similar
products made by another U.S. manufacturer and, in certain foreign markets in
smaller sizes of such equipment, with foreign manufacturers. These products also
compete with hydraulic mining excavators, large rubber tired front end loaders
and bucket wheel excavators in certain mining applications. P&H's large rotary
blasthole drills compete with several worldwide drill manufacturers. P&H's
aftermarket services compete with a large number of primarily regional
suppliers.
Joy is a leading manufacturer of underground mining equipment. Its
continuous mining machinery, longwall shearers, continuous haulage equipment,
roof supports and armored face conveyors compete with a number of worldwide
manufacturers of such equipment. Joy's rebuild services compete with a large
number of local repair shops. Joy competes with various regional suppliers in
the sale of replacement parts for Joy equipment.
Both P&H and Joy compete on the basis of providing superior productivity,
reliability and service and lower overall cost to their customers. Both P&H and
Joy compete with local and regional service providers in the provision of
maintenance, rebuild and other services to mining equipment users.
Backlog
Backlog by business segment for the Company's continuing operations as of
October 31 was:
In thousands 2000 1999 1998
-----------------------------------------------------------------------
Surface Mining Equipment $ 75,734 $ 93,798 $163,009
Underground Mining Machinery 151,220 190,775 142,260
-------- -------- --------
$226,954 $284,573 $305,269
======== ======== ========
The backlog figures exclude customer arrangements under long-term repair
and maintenance contracts. In reports prior to fiscal 2000 it was the policy of
the Company to include the estimated value of two years of such arrangements as
part of its backlog.
Raw Materials
P&H purchases raw and semi-processed steel, castings, forgings, copper and
other materials from a number of suppliers. In addition, component parts, such
as engines, bearings, controls, hydraulic components and a wide variety of
mechanical and electrical items are purchased from approximately 1,500
suppliers. Purchases of materials and components are made on a competitive basis
with no single source being dominant.
Joy purchases electric motors, gears, hydraulic parts, electronic
components, forgings, steel, clutches and other components and raw materials
from outside suppliers. Although Joy purchases certain components and raw
materials from a single supplier, alternative sources of supply are available
for all such items. Joy believes that it has adequate sources of supply for
component parts and raw materials for its manufacturing requirements. No single
source is dominant.
Patents and Licenses
P&H and Joy and their respective subsidiaries own numerous patents and
trademarks and have patent licenses from others relating to their respective
products and manufacturing methods. Also, patent licenses are granted to others
throughout the world and royalties are received under most of these licenses.
While Harnischfeger does not consider any particular patent or license or group
of patents or licenses to be essential to its respective businesses, it
considers its patents and licenses significant to the conduct of its businesses
in certain product areas.
Research and Development
The Company's businesses maintain strong commitments to research and
development. P&H and Joy pursue technological development through the
engineering of new products and systems, the improvement and enhancement of
licensed technology, and synergistic acquisitions of technology by segment.
Research and development expenses were $6.5 million in 2000, $11.1 million in
1999 and $18.0 million in 1998, not including application engineering.
Environmental and Health and Safety Matters
The Company's domestic activities are regulated by federal, state and local
statutes, regulations and ordinances relating to both environmental protection
and worker health and safety. These laws govern current operations, require
remediation of environmental impacts associated with past or current operations,
and under certain circumstances provide for civil and criminal penalties and
fines as well as injunctive and remedial relief. The Company's foreign
operations are subject to similar requirements as established by their
respective countries.
The Company expends substantial managerial and financial resources in
developing and implementing actions for continued compliance with these
requirements. The Company believes that it has substantially satisfied these
diverse requirements. Because these requirements are complex and, in many areas,
rapidly evolving, there can be no guarantee against the possibility of sizeable
additional costs for compliance in the future. However, these laws have not had,
and are not presently expected to have, a material adverse effect on the
Company.
The Company's operations or facilities have been and may become the subject
of formal or informal enforcement actions or proceedings for alleged
noncompliance with either environmental or worker health and safety laws or
regulations. Such matters have typically been resolved through direct
negotiations with the regulatory agency and have typically resulted in
corrective actions or abatement programs. However, in some cases, fines or other
penalties have been paid. Historically, neither such commitments nor such
penalties have been material.
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. With respect to new machines
and equipment, there are risks of customer acceptances and start-up or
performance problems. Large amounts of capital are required to be devoted by the
Company's customers to purchase these machines and to finance the mines 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, up to 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 success of disposing of Beloit's assets; the
Company's success in confirming and implementing its plan of
reorganization; the availability of financing and refinancing; and the
Company's ability to comply with covenants in its DIP Facility and other
financing facilities.
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 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 and services as compared to competitors' products
and services; whether the Company has successful reference installations to
display to customers; 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 projects; the adequacy of the Company's systems to manage major
projects and its success in completing projects on time and within budget;
the Company's success in recruiting and retaining managers and key
employees; wage stability and cooperative labor relations; plant capacity
and utilization; and whether acquisitions are assimilated and divestitures
completed without notable surprises or unexpected difficulties.
o Factors affecting the Company's general business, such as: unforeseen
patent, tax, product, environmental, employee health and benefit, or
contractual liabilities; nonrecurring 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 2. Properties
As of October 31, 2000, the following principal properties of the Company's
continuing operations were owned, except as indicated. All of these properties
are generally suitable for operations.
Harnischfeger owns a 94,000 square foot office building in St. Francis,
Wisconsin, which is used as its worldwide corporate headquarters. This facility
is being sold under the auspices of the Bankruptcy Court.
Surface Mining Equipment Locations
Floor Space Land Area
Location (Sq. Ft.) (Acres) Principal Operations
-------- --------- ------- --------------------
Milwaukee, Wisconsin....... 1,067,000 46 Electric mining shovels, electric and
diesel-electric draglines and large diameter
rotary blasthole drills.
Milwaukee, Wisconsin...... 180,000 13 Electrical products.
Cleveland, Ohio........... 270,000 8 Gearing manufacturing.
Cleveland, Ohio........... 70,000 (2) 2 Rebuild service center.
Elko, NV.................. 30,000 5 Rebuild service center.
Gillette, Wyoming......... 60,000 6 Rebuild service center.
Mesa, Arizona............. 17,000 5 Rebuild service center.
Kilgore, Texas............ 12,400 4 Rebuild service center.
Bassendean, Australia..... 72,500 5 Components and parts for mining machinery.
Mt. Thorley, Australia.... 81,800 11 Components and parts for mining machinery.
Mackay, Australia......... 35,500 3 Components and parts for mining machinery.
Johannesburg, So. Africa. 44,000 (3) 1 Rebuild service center.
Belo Horizonte, Brazil.... 37,700 1 Components and parts for mining shovels.
Santiago, Chile........... 6,800 1 Rebuild service center.
Antofagasta, Chile........ 21,000 1 Rebuild service center.
Calama, Chile............. 5,500 1 Rebuild service center.
Underground Mining Machinery Locations
Floor Space Land Area
Location (Sq. Ft.) (Acres) Principal Operations
-------- --------- ------- --------------------
Franklin, Pennsylvania.... 739,000 58 Underground mining machinery, components and parts.
Reno, Pennsylvania........ 121,400 22 Components and parts for mining machinery.
Brookpark, Ohio........... 85,000 4 Components and parts for mining machinery.
Solon, Ohio............... 101,200 10.6 Components and parts for mining machinery.
Abingdon, Virginia........ 63,400 22 Underground mining machinery and components.
Bluefield, Virginia....... 102,160 15
Duffield, Virginia........ 90,000 11
Homer City, Pennsylvania.. 79,920 10
Meadowlands, Pennsylvania. 117,899 13 Mining machinery rebuild, service and parts sales.
Mt. Vernon, Illinois...... 107,130 12
Price, Utah............... 44,200 6
Wellington, Utah.......... 68,000 60
McCourt Road, Australia... 101,450 33 Underground mining machinery, components and parts.
Parkhurst, Australia...... 33,500 15 Rebuild service center.
Cardiff, Australia........ 22,600 (1) 3 Repair service center.
Wollongong, Australia..... 27,000 (1) 4 Roof bolting equipment.
Steeledale, South Africa.. 285,140 12.6 Underground mining machinery, components and parts.
Wadeville, South Africa... 184,620 28.6 Underground mining machinery assembly and service.
Hendrina, South Africa.... 1,334 30.6 Underground mining machinery, components and parts.
Pinxton, England.......... 76,000 10 Service and rebuild.
Wigan, England............ 60,000 (4) 3 Engineering and administration.
Worcester, England........ 178,000 13.5 Mining machinery, components and parts.
- -------------------------
(1) Under a lease expiring in 2001.
(2) Under a lease expiring in 2002.
(3) Under a lease expiring in 2005.
(4) Under a lease expiring in 2010.
P&H operates warehouses in Gillette, Wyoming; Cleveland, Ohio; Hibbing,
Minnesota; Charleston, West Virginia; Milwaukee, Wisconsin; Mesa, Arizona; Elko,
Nevada; Negaunee, Michigan; Hinton, Sparwood, and Cornwall, Canada; Mt. Thorley,
Australia; Belo Horizonte, Brazil; Santiago, Iquique and Calama, Chile;
Johannesburg, South Africa; and Puerto Ordaz, Venezuela. The warehouses in
Hibbing, Milwaukee, Elko, Gillette, Mt. Thorley, Belo Horizonte and Johannesburg
are owned; the others are leased. In addition, P&H leases sales offices
throughout the United States and in principal surface mining locations in other
countries.
Joy operates warehouses in Green River, Wyoming; Pineville, West Virginia;
Brookwood, Alabama; Carlsbad, New Mexico; Norton, Virginia; Lovely and
Henderson, Kentucky; Cardiff, Emerald, Kurri Kurri, Moranbah and Lithgow,
Australia; Hendrina and Secunda, South Africa. All warehouses are owned except
for the warehouses in Lovely and Henderson, Kentucky, and Secunda, South Africa,
which are leased.
Item 3. Legal Proceedings
Chapter 11 Bankruptcy Filing
As a result of the bankruptcy filings, litigation relating to prepetition
claims against the Debtors is stayed. The Bankruptcy Court has, however, lifted
the stay with regard to certain litigation. See also Item 1 - Reorganization
under Chapter 11 and Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations for information regarding our bankruptcy
proceedings, which is incorporated herein by reference.
General
The Company is a party to litigation matters and claims that are normal in
the course of its operations. Although the outcome of these matters cannot be
predicted with certainty and favorable or unfavorable resolution may affect
income on a quarter-to-quarter basis, the Company believes that such matters
will not have a materially adverse effect on its consolidated financial
position.
Environmental
The Company is also involved in a number of proceedings and potential
proceedings relating to environmental matters. Although it is difficult to
estimate the potential exposure to the Company related to these environmental
matters, the Company believes that the resolution of these matters will not have
a materially adverse effect on its consolidated financial position.
Contingent Liabilities
Contingent liabilities as of the Chapter 11 filing date are subject to
compromise. At October 31, 2000, the Company was contingently liable to banks,
financial institutions and others for approximately $191.9 million for
outstanding letters of credit, bank guarantees and surety bonds securing
performance of sales contracts and other guarantees in the ordinary course of
business. Of the $191.9 million, approximately $84.5 million was issued at the
request of the Company on behalf of Beloit and approximately $107.4 million was
issued at the request of non-Beloit Debtor entities prior to the bankruptcy
filing. Included in the $191.9 million outstanding as of October 31, 2000 were
$35.5 million issued under the DIP Facility (See Note 10 - Borrowings and Credit
Facilities). Additionally, at October 31, 2000, there were $22.2 million of
outstanding letters of credit or other guarantees issued by non-US banks for
non-US subsidiaries.
As of January 11, 2001, 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. Accordingly, it is 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 Debtors' proposed
plan of reorganization provides for the rejection of virtually all of Beloit's
prepetition executory contracts.
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 against Debtors related to "claims",
as defined by the Bankruptcy Code, 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 January 11, 2001, the Company believes APP is not in default
with respect to the receivables. On October 25, 2000, the Bankruptcy Court
approved a settlement with APP which resolved disputes that had arisen between
Beloit's Asian subsidiaries and APP in connection with its contracts for the
first two paper making machines. Under this settlement, APP and certain of its
affiliates drew $17 million from two letters of credit issued on behalf of the
Company and APP and certain of its affiliates agreed to pay Beloit $0.8 million.
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 in the form of $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%. On October
2, 2000, Beloit received the first interest payment of $8.3 million. Beloit
retained Merrill Lynch to assist in a possible sale of the note. In view of the
possible sale of the note and volatility in the applicable capital markets for
the note, no value of the note has been recognized in the financial statements
as of October 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 or as
amortization payments are made under the terms of the note. 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 rights to take possession of 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.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the last
quarter of fiscal 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Harnischfeger common stock (including the associated preferred stock
purchase rights) traded on the New York Stock Exchange (NYSE) and Pacific
Exchange under the symbol "HPH" until December 8, 1999. Currently, the Company's
stock is traded over the counter, Bulletin Board, using the symbol "HRZIQ". At
January 11, 2001, there were approximately 2,300 holders of record of
Harnischfeger common stock.
The high and low sales prices as reported on the NYSE for the period during
the first quarter of fiscal 2000 that the common stock traded on the NYSE were
$1.25 and $0.25, respectively. The following table sets forth the high and low
sales prices as reported over the counter, Bulletin Board, for the periods
during fiscal 2000 that the common stock traded over the counter, Bulletin
Board:
Fiscal 2000
High Low
------------ ----------------
First Quarter $ 1.50 $ 0.13
Second Quarter 0.94 0.38
Third Quarter 0.66 0.30
Fourth Quarter 0.52 0.03
The following table sets forth the high and low sales prices as reported on
the NYSE for the periods indicated:
Fiscal 1999
High Low
------------ ----------------
First Quarter $ 11.38 $ 8.06
Second Quarter 11.25 5.25
Third Quarter 10.19 0.69
Fourth Quarter 2.00 1.00
The Company last paid a dividend in the first quarter of fiscal 1999 when
it paid a dividend of $0.10 per share of common stock. The Company's DIP
Facility restricts the payment of dividends on the Company's existing common
stock. If the Company's proposed plan of reorganization is confirmed, the
existing common stock will be cancelled. The proposed indenture for the
five-year, 10.75% senior notes to be issued under the Company's proposed plan of
reorganization contains covenants which would restrict the declaration and
payment of dividends on the new common stock to be issued by reorganized
Harnischfeger.
Item 6. Selected Financial Data
The following table sets forth certain selected historical financial data
of the Company as of October 31, on a consolidated basis. The selected
consolidated financial data was derived from the Consolidated Financial
Statements of the Company. Beloit has been classified as a discontinued
operation as of October 31, 2000 and 1999 and, accordingly, the results of
operations of prior years have been restated to reflect classifying the Beloit
Segment as a discontinued operation. The balance sheet data has not been
restated for 1998 and other prior years. The selected consolidated financial
data should be read in conjunction with the Consolidated Financial Statements of
the Company appearing in Item 8 - Financial Statements and Supplementary Data
and Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
RESULTS OF OPERATIONS
Years Ended October 31,
In thousands except per
share amounts 2000* 1999* 1998 1997 1996
- ------------------------------------- ------------ ------------ ----------- ------------ -------------
Revenues
Net sales $ 1,117,955 $ 1,114,146 $ 1,212,307 $ 1,467,341 $ 1,405,936
Other income 6,860 3,909 1,324 18,023 5,769
----------- ----------- ----------- ----------- -----------
1,124,815 1,118,055 1,213,631 1,485,364 1,411,705
Cost of sales 853,344 922,806 916,970 1,090,947 1,035,812
Product development, selling and
administrative expenses 208,933 238,952 235,268 217,629 213,492
Reorganization items 65,388 20,304 - - -
Restructuring charge 4,518 11,997 - - -
Charge related to executive changes - 19,098 - - -
Strategic and financing initiatives - 7,716 - - -
----------- ---------- ----------- ----------- -----------
Operating income (loss) (7,368) (102,818) 61,393 176,788 162,401
Interest expense - net (23,961) (28,865) (70,600) (70,259) (60,988)
----------- ---------- ----------- ----------- -----------
Income (loss) before (provision) benefit
for income taxes and minority interest (31,329) (131,683) (9,207) 106,529 101,413
(Provision) benefit for income taxes 3,000 (220,448) 24,608 (36,519) (36,898)
Minority interest (1,224) (957) (1,035) (2,129) (1,547)
----------- ---------- ----------- ---------- -----------
Income (loss) from continuing operations (29,553) (353,088) 14,366 67,881 62,968
Income (loss) from discontinued operations,
net of applicable income taxes 66,200 (798,180) (184,399) 70,399 51,249
Gain (loss) on disposal of discontinued
operations, net of applicable income taxes 227,977 (529,000) 151,500 - -
Extraordinary loss on retirement of debt,
net of applicable income taxes - - - (12,999) -
----------- ---------- ----------- ---------- -----------
Net income (loss) $ 264,624 $(1,680,268) $ (18,533) $ 125,281 $ 114,217
=========== =========== =========== =========== ===========
Earnings (Loss) Per Share - Basic
Income (loss) from continuing operations $ (0.63) $ (7.62) $ 0.31 $ 1.42 $ 1.34
Income (loss) from and net gain (loss)
on disposal of discontinued operations 6.30 (28.65) (0.71) 1.47 1.08
Extraordinary loss on retirement of debt - - - (0.27) -
----------- ----------- ----------- ----------- -----------
Net income (loss) per common share $ 5.67 $ (36.27) $ (0.40) $ 2.62 $ 2.42
=========== =========== =========== =========== ===========
Earnings (Loss) Per Share - Diluted
Income (loss) from continuing operations $ (0.63) $ (7.62) $ 0.31 $ 1.41 $ 1.32
Income (loss) from and net gain (loss)
on disposal of discontinued operations 6.30 (28.65) (0.71) 1.45 1.08
Extraordinary loss on retirement of debt - - - (0.27) -
----------- ----------- ----------- ----------- -----------
Net income (loss) per common share $ 5.67 $ (36.27) $ (0.40) $ 2.59 $ 2.40
=========== =========== =========== =========== ===========
Average Shares Outstanding
Basic 46,717 46,329 46,445 47,827 47,196
Diluted 46,717 46,329 46,445 48,261 47,565
Dividends Per Common Share $ - $ 0.10 $ 0.40 $ 0.40 $ 0.40
Bookings $ 1,041,520 $ 1,081,838** $ 1,198,531** $ 1,390,161 $ 1,406,381
Backlog $ 226,954 $ 284,573** $ 305,269** $ 358,340 $ 453,480
* Beloit was classified as a discontinued operation on October 31, 1999. The
results of operations of prior years have been restated accordingly.
** Amounts restated to exclude long-term repair and maintenance contracts as
per Company's new policy. See Item 1 - Backlog.
OTHER FINANCIAL DATA
In thousands except per As of October 31,
share amounts 2000* 1999* 1998 1997 1996
- ------------------------- ----------- ----------- ----------- ----------- -----------
Working Capital:
Current assets $ 709,424 $ 758,385 $ 1,463,144 $ 1,588,712 $ 1,410,250
Current liabilities 490,628 571,216 1,026,280 1,180,497 1,077,127
----------- ----------- ----------- ----------- -----------
Working capital $ 218,796 $ 187,169 $ 436,864 $ 408,215 $ 333,123
Current ratio 1.4 1.3 1.4 1.3 1.3
------------ ----------- ----------- ----------- -----------
Plant and Equipment
Net properties $ 177,413 $ 210,747 $ 613,581 $ 657,100 $ 634,045
Capital expenditures 32,410 26,610 133,925 126,401 76,555
Depreciation expense 25,802 26,613 66,769 67,156 63,342
----------- ----------- ----------- ----------- -----------
Total Assets $ 1,292,928 $ 1,711,813 $ 2,787,259 $ 2,924,535 $ 2,690,029
----------- ----------- ----------- ----------- ------------
Debt and Capitalized Lease
Obligations
Long-term obligations (1) $ 80,933 $ 226,126 $ 1,001,573 $ 725,193 $ 662,137
Short-term notes payable 30,965 86,539 117,607 214,126 45,261
Liabilities subject to compromise 1,220,675 1,193,554 - - -
----------- ----------- ----------- ----------- -----------
$ 1,332,573 $ 1,506,219 $ 1,119,180 $ 939,319 $ 707,398
Minority Interest $ 6,533 $ 6,522 $ 43,838 $ 97,724 $ 93,652
----------- ----------- ----------- ----------- -----------
Debt to Capitalization Ratio (2), (3) - - 61.2% 52.6% 48.0%
----------- ----------- ----------- ----------- ------------
Shareholders' Equity (Deficit) $ (794,692) $(1,025,151) $ 666,850 $ 749,660 $ 673,485
Book value per common share (3) $ - $ - $ 14.52 $ 15.93 $ 14.15
Common shares outstanding (4) 46,816 46,516 45,916 47,046 47,598
----------- ----------- ----------- ----------- ------------
Number of (End of Year):
Employees 7,000 6,800 13,700 17,700 17,100
Common shareholders of record 2,300 2,300 2,100 1,861 1,972
* Items for the years ended October 31, 2000 and 1999 exclude the
discontinued Beloit operation.
(1) Includes amounts classified as current portion of long-term obligations.
(2) Total debt to the sum of total debt, minority interest and shareholders'
equity (deficit).
(3) Data omitted for 2000 and 1999 due to lack of comparability with prior
periods.
(4) As of end of year, excluding SECT shares.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On June 7, 1999, 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, Joy Mining Machinery and
P&H Mining Equipment. The Debtors' Chapter 11 cases are jointly administered for
procedural purposes only under case number 99-2171. The Debtors also include
Beloit Corporation ("Beloit"), the Company's other principal operating
subsidiary at the time of the bankruptcy filing. See Note 3 - Discontinued
Operations in Notes to Consolidated Financial Statements. The Debtors filed
their draft disclosure statement and proposed plan of reorganization and, in the
case of Beloit and its Debtor subsidiaries, liquidation with the Bankruptcy
Court on October 26, 2000. The plan and disclosure statement were subsequently
amended and on December 20, 2000, the Bankruptcy Court approved the disclosure
statement as amended and set January 30, 2001 as the deadline for creditors to
vote on the plan. If the plan is approved by creditors and the Bankruptcy Court,
the Debtors anticipate emerging from bankruptcy in the spring of 2001.
The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code. Pursuant to the
Bankruptcy Code, actions 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 Company to reject certain business
contracts that were deemed burdensome or of no value to the Company. As of the
date of this report, the Debtors had not completed their review of all their
prepetition executory contracts and leases for assumption or rejection. See also
Note 9 - Liabilities Subject to Compromise in Notes to Consolidated Financial
Statements included in Item 8 - Financial Statements and Supplementary Data and
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
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 are current in the respective plans.
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 with regard to claims actually voted) of each class of
creditors and equity holders whose claims are impaired by the plan.
Alternatively, absent the requisite approvals, the Company may seek Bankruptcy
Court approval of its reorganization plan under "cramdown" provisions of the
Bankruptcy Code, assuming certain tests are met.
February 29, 2000 was set by the Bankruptcy Court as the last date
creditors could file proofs of claim under the Bankruptcy Code. There may be
differences between the amounts recorded in the Company's financial statements
and the amounts claimed by the Company's creditors. Litigation may be required
to resolve such disputes. The Company's schedules are available from the
Poorman-Douglas Corporation, telephone: 503-350-5954.
The Company has incurred and will continue to incur significant costs
associated with the reorganization. The amount of these expenses, which are
being expensed as incurred, is expected to significantly affect future results.
See Note 6 - Reorganization Items in Notes to Consolidated Financial Statements.
Although the Company currently anticipates emerging from Bankruptcy during
the first half of calendar year 2001, it is not possible to predict with
certainty the length of time the Company 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. Under the Bankruptcy Code, postpetition liabilities and
prepetition liabilities (i.e., liabilities subject to compromise) must be
satisfied before shareholders can receive any distribution. Under the terms of
the Company's proposed plan of reorganization, the Company's existing common
stock will be cancelled and the holders of the Company's existing common stock
will receive nothing for their stock. The U.S. Trustee for the District of
Delaware has appointed an Official Committee of Equity Holders to represent
shareholders in the proceedings before the Bankruptcy Court.
The accompanying Consolidated Financial Statements 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 do
not reflect adjustments that might result if the Debtors (other than Beloit and
its 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 have filed a plan of reorganization with the Bankruptcy
Court. Continuing on a going concern basis is dependent upon, among other
things, acceptance of Debtors' plan of reorganization by creditors, 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 sale of the Beloit discontinued operations
in 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 structure or in the Debtors' business
operations as the result of an approved plan 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 financial statements as of October 31, 2000 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 Company.
Surface Mining Equipment
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 fiscal years ended October 31:
In thousands 2000 1999 1998
------------------------------------------------------
Net sales $ 506,311 $ 498,343 $ 443,330
Operating Profit 57,432 33,976 31,416
Bookings 488,247 429,132 440,352
Sales for the surface mining equipment segment were $506.3 million in
fiscal 2000, a 2% increase from 1999 sales of $498.3 million. Capital sales
increased 16% as product innovation and high levels of support for customers led
to a 38% increase in sales of electric mining shovels. Aftermarket sales
decreased 6% as a result of a combination of mine closures and production
cutbacks. Sales in 1998 were $443.3 million and included capital sales that were
2% greater than 1999 and 12% less than 2000 and aftermarket sales that were 18%
less than 1999 and 13% less than 2000.
Operating profit was $57.4 million or 11.3% of sales in 2000, compared to
operating profit of $34.0 million and 6.8% in 1999 and $31.4 million and 7.1% in
1998, respectively. The higher operating profit in 2000 as compared to 1999 was
primarily due to increased machine sales and lower operating expenses. Operating
profit in 1999 was greater than 1998 because of higher aftermarket sales in 1999
and the negative effect of the 1998 United Steelworkers' strike on 1998
operating profit.
Bookings amounted to $488.2 million in 2000 compared to $429.1 million in
1999. The increase is primarily due to an increase in demand for electric mining
shovels. Bookings in 1998 were $440.4 million and included capital bookings that
were 22% greater than 1999. The P&H order backlog was $75.7 million at the end
of 2000 compared with $93.8 million at the end of 1999 and $163.0 million at the
end of 1998. 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 $300
million at the end of 2000.
The Chapter 11 filing in the third quarter of 1999 impacted operating
results in several ways. Supplier shipments in the latter part of 1999 were
lower than expected resulting in lost sales and production inefficiencies.
Collection difficulties increased in the latter part of fiscal 1999 and
continued in fiscal 2000 as some customers delayed paying outstanding
receivables due to their own operating difficulites and their concern about the
Company's financial condition. As a result, the third quarter of 1999 reflected
charges amounting to approximately $5.0 million for changes in estimates for
warranty and excess and obsolete inventory accruals.
Underground Mining Machinery
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 fiscal years ended October 31:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Net sales $ 611,644 $ 615,803 $ 768,977
Operating profit (loss) * 16,956 (65,893) 50,568
Bookings 553,273 652,706 758,179
* after charges of $11,165 for prepetition lawsuit settlements in 2000, after
net restructuring charges of $4,518 (See Note 8 - Restructuring Charges in
Notes to Consolidated Financial Statements) and $11,997 in 2000 and 1999,
respectively, and after charges against operating profit of $63,520 in 1999
for changes in estimates for allowances for doubtful accounts, warranty,
and excess and obsolete inventory.
Sales of the underground mining machinery segment in fiscal 2000
approximated fiscal 1999 levels. Higher sales of new machines in the United
States substantially offset lower sales of new machines in markets outside of
the U. S. The increase in new machine sales in the U. S. was attributable to
increases in the sales of longwall mining related equipment. The decrease in
non-U. S. new machine sales was attributable to a decrease in the sales of
longwall mining related equipment. Even though the global market for the
segment's, new machines did not improve significantly, market conditions
stabilized from the conditions that caused the reduction in new machine sales in
1999 as compared to 1998. After market sales were flat in 2000 as compared to
1999. Increases in complete machine rebuild sales in the United States and
increases in repair parts sales into China were partially offset by lower
aftermarket sales in South Africa. The decrease in aftermarket sales in South
Africa was due to strengthening of the U.S. dollar relative to the South African
rand and the corresponding impact on the translation of South African
aftermarket sales denominated in rand into U.S. dollars for financial reporting
purposes.
Net sales in 1999 were 20% lower than net sales in 1998. Shipments of new
machines declined in the United States and Australia. In the U. S., excess coal
stockpiles, depressed coal prices, and continuing consolidation of the
underground coal mining industry led to the closure of less efficient mines. In
Australia, overcapacity in the coal mining industry and depressed prices for
coal led coal producers to close mines and cut costs which reduced their
spending on new equipment. Aftermarket net sales in 1999 were approximately 7%
lower than aftermarket net sales in 1998. This decrease was the result of lower
complete machine rebuild sales in the United Kingdom and lower component repair
sales in the United States. The reduction in machine rebuilds in the United
Kingdom was the result of a reduction in the number of underground coal mines in
operation in that market.
Operating profit in 2000 was $17.0 million compared to an operating loss of
$65.9 million in 1999. These figures reflect reductions in 2000 and 1999 for
charges related to lawsuit settlements, restructuring, and changes in accounting
estimates. The $11.2 million charge in fiscal 2000 for lawsuit settlements was
due to the Company's desire to finalize as many outstanding contingent
prepetition liabilities as possible in support of the Company's proposed plan of
reorganization. Before these reductions, operating profit was $32.7 million in
2000 compared to operating profit of $9.6 million in 1999. This improvement in
operating results, despite net sales being flat in 2000 compared to 1999, was
the result of cost reduction programs. Spending for manufacturing overhead,
selling, engineering, and administrative expenses were $23 million lower in
fiscal 2000 than in fiscal 1999.
In the 1999 fiscal year the segment reported an operating loss of $65.9
million compared to an operating profit of $50.6 million in fiscal 1998. During
1999 the segment incurred restructuring charges of $12 million associated with
actions taken to reduce its cost structure in response to reductions in sales
revenue from earlier periods. In addition, the segment recorded charges of $63.5
million associated with revised valuation estimates concerning accounts
receivables, inventories, and warranty reserves. The remaining reduction in
operating profit in 1999 as compared to 1998 was the result of the decrease in
net sales partially offset by approximately $45 million of cost reductions.
New order bookings were $100 million less in fiscal 2000 than 1999. This
decrease was primarily due to continued softness in the global market for the
segment's new equipment and the timing of the receipt of new orders for longwall
system equipment. A slight improvement in new machine orders in the United
States in fiscal 2000 was more than offset by a $75 million decrease in orders
for longwall system equipment for the United Kingdom and China.
In fiscal 1999, new order bookings were 14% lower than they were in fiscal
1998. This decrease was experienced for both new machines and aftermarket
products, primarily in the United States and in the United Kingdom. In the
United States, consolidations among coal producers, combined with the supply of
coal exceeding demand, led to a continued soft market for underground mining
equipment and services in 1999. In the United Kingdom, activity in the coal
industry was at a low level as the few remaining mines were concentrating on
reducing costs.
The Chapter 11 filing in the third quarter of fiscal 1999 impacted
operating results in several ways. Supplier shipments in the latter part of
fiscal 1999 were lower than expected resulting in lost sales and production
inefficiencies. The decision was made to discontinue several equipment models
that were either not required by customers or that no longer provided sufficient
margins to be attractive. Collection difficulties increased in the latter part
of fiscal 1999 and continued in fiscal 2000 as some customers delayed paying
outstanding receivables due to their own operating difficulties and their
concerns about the Company's financial condition and continued ability to
fulfill commitments.
The third and fourth quarters of fiscal 1999 reflected the following
charges against earnings:
Underground Mining
In thousands Machinery
- --------------------------------------------------------------------------------
Changes in estimates:
Allowance for doubtful accounts $ 5,300
Warranty and other 22,000
Excess and obsolete inventory 36,200
--------
63,500
Restructuring charges 11,997
--------
$ 75,497
========
During fiscal 1999, restructuring charges of $12.0 million were recorded
for rationalization of certain of Joy's original equipment manufacturing
facilities and the reorganization and reduction of its operating structure on a
global basis. Costs of $7.3 million were charged 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 (third quarter
$0.9 million; fourth quarter $3.8 million) were made for severance of
approximately 240 employees.
During fiscal 2000, additional charges amounting to $6.1 million were
recorded, primarily for severance associated with facilities rationalization and
to a lesser extent for severance associated with global operating structure
reorganization and reduction. A prior reserve amounting to $1.6 million was
reversed as it was no longer needed for facility rationalization.
The Company anticipates that the restructuring reserves will be
substantially utilized during fiscal 2001.
Strategic and Financing Initiatives
The Company incurred $7.7 million of charges in fiscal 1999 related to
certain consulting and legal costs associated with strategic financing and
business alternatives investigated prior to the Chapter 11 filing.
Reorganization Items
Reorganization expenses are items of income, expense and loss that were
realized or incurred by the Company as a result of its decision to reorganize
under Chapter 11 of the Bankruptcy Code.
Net reorganization expenses in fiscal 2000 and 1999 consisted of the
following:
In thousands
- -----------------------------------------------------------------------------------------------
Expense Cash payment
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
Professional fees directly related to the filing $ 39,061 $ 14,457 $ 33,644 $ 2,567
Amortization of DIP financing costs 10,602 3,125 2,563 15,000
Accrued retention plan costs 3,603 730 2,350 -
Write-down of property to be sold 9,000 - - -
Settlement of performance guarantees 2,991 - 2,991 -
Rejected equipment leases 1,399 2,322 - -
Interest earned on DIP proceeds (1,268) (330) (1,268) (330)
--------------------------------------------
$ 65,388 $ 20,304 $ 40,280 $ 17,237
============================================
Charge Related to Executive Changes
A charge to earnings of $19.1 million was made in fiscal 1999 in connection
with certain management organizational changes that occurred during the third
quarter of that year. The charge was primarily associated with supplemental
retirement, restricted stock, and long-term compensation plan obligations. This
charge consisted of $0.6 million paid prior to the Chapter 11 filing,
adjustments of $10.0 million reducing the carrying value of the applicable plan
assets and an accrued liability of $8.5 million which has been classified in the
consolidated balance sheet as part of the liabilities subject to compromise.
Income Taxes
As a result of continuing losses in fiscal 2000 and its Chapter 11 filing,
the Company has continued to record valuation reserves to offset any future U.S.
income tax benefits until it is more likely than not that the Company will be
able to realize such benefits.
The Company believes that realization of net operating loss and tax credit
benefits in the near term is unlikely. The Company's proposed plan of
reorganization would result in a significantly modified capital structure. If
the plan of reorganization is approved by creditors, SOP 90-7 would require the
Company to apply fresh start accounting. Under fresh start accounting,
realization of net operating loss and tax credit benefits first reduces any
reorganization goodwill until exhausted and thereafter is reported as additional
paid in capital. Because the Company's proposed plan of reorganization also
provides for certain substantial changes in the Company's ownership, if the
Company's proposed plan of reorganization is confirmed, it is likely that there
will be annual limitations on the amount of the federal carryforwards which the
Company will be able to utilize on its income tax returns. This annual
limitation is an amount equal to the value of the stock of the Company
immediately before the ownership change adjusted to reflect the increase in
value of the Company resulting from the cancellation of creditors' claims,
multiplied by a federally mandated long-term tax exempt rate.
Discontinued Operations
Beloit Corporation
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 the Beloit 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 January 11, 2001, all approved sales of domestic
assets had taken place, as had sales of the majority of Beloit's foreign
subsidiaries. Beloit expects that closings on the remaining approved sales of
foreign subsidiaries will occur by the middle of fiscal 2001.
The Company classified the Beloit Segment as a discontinued operation in
its consolidated financial statements as of October 31, 2000 and 1999 and has
accordingly restated the Company's consolidated statements of operations for all
periods presented. The Company has not restated its consolidated balance sheets
or consolidated statements of cash flows for periods prior to fiscal 1999.
Revenues for the Beloit Segment were $170.4 million for fiscal 2000 and $684.0
million for fiscal 1999. Income(loss) from and net gain(loss) on disposal of
discontinued operations relating to the Beloit Segment was $294.2 million,
($1,327.1 million) and ($188.8 million) in 2000, 1999 and 1998, respectively.
The income from and net gain on disposal of discontinued operations of
$294.2 million recorded in the fourth quarter of fiscal 2000 consists of income
from discontinued operations of $66.2 million and a gain on disposal of
discontinued operations of $228.0 million. These gains are comprised of the
following:
In thousands
- --------------------------------------------------------------------------------
APP settlement $ 62,000
Norscan settlement 4,200
---------
Income from discontinued operations 66,200
---------
Foreign liabilities released 227,467
Domestic liabilities released 8,130
Partial release from Princeton Paper lease reserve 15,000
Loss on domestic entities sold (22,620)
---------
Net gain on the disposal of discontinued operations 227,977
---------
Income from and net gain on disposal of discontinued operations $ 294,177
=========
The elements of the income and gain are discussed below:
The $62.0 million APP income included $33.0 million of cash receipts and
the release of a $46.0 million bank guarantee offset by a $17.0 million draw
upon an outstanding bank guarantee by APP. See Item 3 - Contingent Liabilities.
The $4.2 million represents a cash settlement of litigation with Norscan.
The $228.0 million gain on disposal of discontinued operations included (i)
$227.5 million gain associated with the Company's release from the liabilities
of foreign subsidiaries that were disposed of during fiscal 2000, (ii) $15.0
million reduction in a facility long-term lease obligation for a domestic
business that was sold, (iii) settlements of obligations at less than recorded
amounts, and (iv) losses in excess of established reserves related to the sale
of domestic entities.
The loss from discontinued operations of $798.2 million in fiscal 1999
included (i) allocated interest expense of approximately $30.0 million based on
Beloit's portion of the consolidated debt, (ii) restructuring charges of $78.7
million in the third quarter and $3.6 million in the fourth quarter, (iii)
additional estimated losses on APP contracts of $87.0 million in the second
quarter and $163.5 million in the third quarter, (iv) additional expenses of
$143.1 million in the third quarter reflecting the effects of changes in other
accounting estimates and (v) reorganization expenses of $136.1 million in the
third quarter associated with the closing of a pulp and paper mill and the
related rejection of a 15-year operating lease. The Company did not record an
income tax benefit with respect to the 1999 loss. See Note 12 - Income Taxes.
The elements of the 1999 loss from discontinued operations are discussed below.
|X| The restructuring charges primarily related to a strategic reorganization
of Beloit. This reorganization rationalized certain product offerings from
a full breadth of product lines to more specific offerings. As part of the
restructuring, outsourcing was expected to increase significantly. The
charge consisted of facility closure charges including estimated amounts
for reductions in assets to net realizable values of $74.1 million and
accruals for closing and disposal costs of $8.2 million related to closing
certain manufacturing facilities, engineering offices and research and
development centers. In connection with these restructuring charges, the
Company expected to reduce headcount at Beloit by at least 600 employees.
These actions included staff reductions in manufacturing, engineering,
marketing, product development and administrative support functions.
|X| The additional estimated losses on APP contracts primarily related to the
Company's efforts to mitigate damages with respect to the APP matter more
fully discussed below and to improve short-term liquidity. Beloit's Asian
subsidiaries had sought to sell the assets associated with two papermaking
machines to alternative customers. The Company recorded an $87.0 million
reserve in the second quarter against the decrease in realizable value of
certain paper machines for Asian customers, primarily the second two paper
machines ordered by APP. The Company recorded an additional $147.7 million
reserve in the third quarter to reflect the Company's determination that
the foreseeable market conditions for this type of large paper machine did
not support valuing these machines at greater than estimated liquidation
values. The Company also recorded a $15.8 million charge in the third
quarter for changes in estimates of costs associated with the first two
machines sold to APP.
|X| The additional estimated losses on contracts and other expenses reflecting
changes in other accounting estimates related to the Company's provisions
for excess and obsolete inventory, doubtful accounts receivable, and
anticipated losses on contracts. These changes in estimates were based on
the Company's best estimates of costs to complete contracts, customer
demand for new machines, rebuilds and services, costs of financing,
material and labor costs, and overall levels of customer satisfaction with
machine performance. The need for these changes in estimates arose as a
result of the Chapter 11 filing and a combination of adverse factors
impacting the Company during the third quarter, including reductions in
product line offerings and material supply delays caused by prepetition
liquidity limitations and postpetition resupply timing difficulties. The
third quarter charges were originally classified in the consolidated
statement of operations as follows:
In thousands
--------------------------------------------------
Charged to product development,
selling, and administrative expenses:
Allowance for doubtful accounts $ 35,900
--------
Charged to cost of sales:
Warranties and other 32,400
Excess and obsolete inventory 25,000
Losses on contracts 49,800
---------
107,200
---------
$ 143,100
=========
|X| Reorganization expenses of $136.1 million related to Princeton Paper
Company, LLC, ("Princeton Paper"), a subsidiary of Beloit and one of
the Debtors, who had, until July 1999, operated a pulp and paper mill
located in Fitchburg, Massachusetts (the "Mill"). Beloit originally
became responsible for the operations of Princeton Paper and the Mill
in 1997 through settlement of a dispute with the former owner of the
Mill and the holders of bonds which had been issued to finance the
Mill. Under that settlement, Princeton Paper committed to make lease
payments under a fifteen-year operating lease of the Mill. Beloit
guaranteed those obligations. On July 8, 1999, the Company obtained
authority from the Bankruptcy Court for Princeton Paper to fully cease
operating, and shortly thereafter the Mill was shut down.
Subsequently, the Company rejected the lease and settlement agreement,
pursuant to the Bankruptcy Code. The Company recorded a charge of
$82.1 million relating to the decision to close Princeton Paper
including a charge of $54.0 million relating to the rejection of the
lease. The characterization and treatment of the lease in the
bankruptcy case could affect Beloit's ultimate liability for the lease
payments.
Cash flow used by Beloit in operating activities during fiscal 1999 was
$222.2 million. The principal sources of funding for Beloit was provided by its
operations, credit facilities of its subsidiaries and the Company. Between the
Chapter 11 filing on June 7, 1999 and October 31, 1999, the cash used by Beloit
was $116.0 million and was provided primarily through the DIP Facility. Beloit
and the other Debtors are jointly and severally liable under the DIP Facility.
During 1999, the Company recorded an estimated loss of $529.0 million on
the disposal of the Pulp and Paper Machinery segment. The Company did not record
an income tax benefit associated with this estimated loss. See Note 12 - Income
Taxes in Notes to Consolidated Financial Statements included in Item 8 -
Financial Statements and Supplementary Data and Item 14 - Exhibits, Financial
Statement Schedules, and Reports on Form 8-K. This estimated loss is comprised
of the following:
In thousands
- ----------------------------------------------------------------------------
Estimated loss on the disposal of the businesses and assets $(472,118)
Accrued estimated operating losses and facility wind-down costs (43,304)
Accrued postpetition letters of credit, guarantees and sureties (12,500)
Accrued post-closing environmental costs (7,000)
Accrued employee termination costs (12,000)
Gain on curtailment of defined benefit pension plans 17,922
---------
Net estimated loss on the disposal of discontinued operations $(529,000)
=========
The elements of the estimated loss on the disposal of the segment are
discussed below.
|X| The estimated loss on the disposal of the Beloit businesses and assets
of $472.1 million anticipated that there would be approximately $243.2
million in sales proceeds from the five sales agreements approved
under the Court Sales Procedure and an additional $34.4 million in
proceeds, based primarily on appraisals, from the disposition of the
remaining 13 domestic and 18 international operations that will be
sold or liquidated by the end of the wind-down process.
|X| The accrual for estimated operating losses and wind-down costs
represented approximately $28.3 million in estimated operating losses
from October 31, 1999 until the facilities are sold or operations
otherwise cease and approximately $15.0 million for the wind-down
costs for facilities that will be sold or liquidated.
|X| The accrual for estimated additional costs under postpetition letters
of credit, guarantees and sureties of $12.5 million represents
estimated additional customer contract claims as a result of the
divestiture plan.
|X| The accrual for estimated employee termination costs reflected
estimated severance and related benefits costs with respect to
approximately 1,071 employees, the majority of whom received
applicable notifications during January 2000.
|X| The accrual for estimated post-closing environmental costs of $7.0
million relate to (i) cost estimates for the removal of asbestos and
hazardous wastes at certain facilities being sold or closed and (ii)
increased estimated costs associated with the completion of certain
remediation activities at one of Beloit's domestic manufacturing
facilities assuming the activities will be performed by a buyer or
subcontracted to a third-party.
|X| The gain on the curtailment of defined benefit plans of $17.9 million
reflects the elimination of future years of service accruals.
At October 31, 2000, Beloit was contingently liable to banks, financial
institutions, and others for approximately $84.4 million for outstanding letters
of credit and bank guarantees. This amount was all issued by U.S. banks for U.S.
Beloit subsidiaries. Beloit also may have guaranteed performance of its
equipment at levels specified in sales contracts without the requirement of a
letter of credit.
The assets and liabilities of discontinued operations are comprised of the
following:
In thousands October 31
- ---------------------------------------------------------------------------------------
2000 1999
--------- ---------
Assets:
Cash and cash equivalents $ 9,622 $ 19,290
Accounts receivable - net 17,642 153,761
Inventories 5,531 110,770
Other current assets 6,524 18,662
Property, plant and equipment - net 31,396 311,424
Other non-current assets 1,006 39,691
Goodwill and other intangibles - 96,520
Allowance for estimated loss on disposal (56,490) (472,118)
---------- ---------
Total assets, representing estimated disposal cash proceeds $ 15,231* $ 278,000
========= =========
Liabilities:
Postpetition liabilities:
Trade accounts payable $ (12,351) $ (57,111)
Employee compensation and benefits (14,420) (14,605)
Accrued contract losses, restructuring costs and other (8,016) (76,859)
Funded debt and capitalized lease obligations - (24,080)
Operating losses and facility wind-down costs (10,519) (43,304)
Postpetition letters of credit, guarantees and sureties (10,974) (12,500)
Employee termination costs - (12,000)
Post-closing environmental costs (7,677) (7,000)
--------- ---------
Total postpetition liabilities (63,957) (247,459)
--------- ----------
Prepetition liabilities:
Trade accounts payable (89,438) (145,955)
Funded debt (2,471) (14,128)
Advance payments and progress billings (24,883) (125,696)
Accrued warranties (25,000) (34,054)
Princeton Paper lease (39,000) (54,000)
APP claims - (46,000)
Pension and other (47,339) (53,437)
Minority interest (18,023) (21,536)
--------- --------
Total prepetition liabilities (246,154) (494,806)
--------- --------
Total liabilities, including liabilities
subject to compromise $(310,111) $(742,265)
========= =========
* Total assets as of October 31, 2000 exclude a $16 million postpetition
intercompany receivable from Harnischfeger Industries, Inc. and the APP
Note. See Note 9 - Liabilities Subject to Compromise in the Notes to
Consolidated Financial Statements.
All intercompany accounts, including Beloit intracompany accounts, have
been eliminated in the Consolidated Financial Statements in accordance with
generally accepted accounting principles and are not included in the numbers
above. While such intercompany obligations are eliminated in the preparation of
consolidated financial statements, they remain obligations on a separate legal
entity basis. On September 21, 2000, the committee to represent the interests of
creditors of Harnischfeger and its non-Beloit subsidiaries and the committee
appointed to represent the interests of the creditors of Beloit and its
subsidiaries reached agreement to settle certain intercompany and intercreditor
issues. The committee settlement agreement has been incorporated into the
Debtors' proposed plan of reorganization. Under the committee settlement
agreement the Company and its non-Beloit subsidiaries will receive nothing on
account of their prepetition intercompany claims, including the Company's $780
million claim against Beloit. Similarly, Beloit will receive nothing on account
of its $9.95 million claim against P&H. The committee settlement agreement also
provides for (i) a sharing of professional fees and expenses relating to the
Beloit bankruptcy filing, (ii) an agreement to limit claims against officers and
directors, (iii) an agreement that none of the Debtors will be substantively
consolidated, (iv) an agreement that Beloit and its subsidiaries are not
entitled to compensation for certain tax attributes, including tax loss
carryforwards, and (v) an agreement by the Company not to require the separation
or termination of two pension plans covering employees of Beloit and its
subsidiaries. The committee settlement agreement contemplates that the Company's
plan be effective on or before March 5, 2001.
Other Beloit Matters:
o The Potlatch lawsuit, filed originally in 1995, related to a 1989 purchase
of pulp line washers supplied by Beloit for less than $15 million. In June
1997, a Lewiston, Idaho jury awarded Potlatch $95 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. Potlatch filed a motion with the
Bankruptcy Court to lift the stay. The Company opposed this motion and the
motion was denied.
o 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. Omega has
represented to the Bankruptcy Court that it is seeking a total of $36
million in damages. As of October 31, 2000, the Company was not able to
assess its ultimate liability, if any, in the matter.
Material Handling
On March 30, 1998, the Company completed the sale of approximately 80% of
the common stock of the Company's P&H material handling ("Material Handling")
segment to Chartwell Investments, Inc. in a leveraged recapitalization
transaction. As such, the accompanying financial statements have been
reclassified to reflect Material Handling as a discontinued operation. The
Company retained approximately 20% of the outstanding common stock and 11% of
the outstanding voting securities of Material Handling and held one director
seat in the new company until December, 2000. In addition, the Company licensed
Material Handling to use the "P&H" trademark on existing Material
Handling-produced products on a worldwide basis for periods specified in the
agreement for a royalty fee payable over a ten year period. The material
handling segment recorded revenues of $130.5 million in 1998 prior to the
divestiture. Income (loss) from discontinued operations for the company for
fiscal 1999 included income of $4.4 million in 1998 derived from this segment.
The Company reported a $151.5 million after-tax gain on the sale of this
discontinued operation in the second quarter of fiscal 1998. Proceeds consisted
of $341.0 million in cash and preferred stock, originally valued at $4.8
million, with a 12.25% payment-in-kind dividend, and $7.2 million in common
stock that was not reflected in the Company's balance sheet or gain calculations
due to the nature of the leveraged recapitalization transaction. Material
Handling subsequently issued additional shares of common stock, reducing the
Company's holding to 15.6% of the outstanding common stock. In view of
continuing operating losses by Material Handling, the Company reduced to zero
the $5.4 million carrying value of its investment in this business during the
third quarter of 1999. Material Handling filed for Chapter 11 bankruptcy
protection on May 17, 2000.
Material Handling and its affiliates have asserted more than 200 claims
against the Debtors in their bankruptcy cases and Debtors have filed a similar
number of claims against Material Handling in Material Handling's bankruptcy
case. Most of Material Handling's claims against the Debtors are duplicative and
the Company has objected to many of these claims. The liquidated claimed amount
is approximately $0.5 million, although all of the claims assert additional
unliquidated amounts. In addition, Material Handling has advised Debtors that it
may assert additional claims for approximately $340 million based on theories
that the transactions in which Material Handling was sold to Chartwell
Investments, Inc. are voidable. The Company disputes the assertion of any such
claims.
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 may result in, various restrictions on the Company's 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 Company 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. Under the terms of the Company's
proposed plan of reorganization, the Company's existing common stock will be
cancelled and the holders of the Company's existing common stock will receive
nothing for their stock. The U.S. Trustee for the District of Delaware has
appointed an Official Committee of Equity Holders to represent the shareholders
in the proceedings before the Bankruptcy Court.
Working Capital
Working capital of continuing operations, excluding liabilities subject to
compromise, as of October 31, 2000, was $218.8 million including $72.1 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
increase in working capital during the 2000 fiscal year was due to decreases in
accounts receivable and inventories, offset by a reduction in non-U.S.
short-term borrowings, reduction in customer advance payments and progress
billings and reduction in accrued liabilities associated with restructuring
charges recorded in fiscal 1999.
Cash Flow from Continuing Operations
Cash provided by continuing operations in fiscal 2000 was $36.7 million
compared to cash provided by continuing operations of $10.6 million in 1999. The
improvement in cash provided by operations was primarily due to improved
operating results of the Company's two business segments. During fiscal 2000,
$170 million was used for investments, financing activities and other
transactions compared to $258 million of cash being provided by these categories
in fiscal 1999. Approximately $180 million of the fiscal 2000 cash usage was
associated with a net reduction in the Company borrowings. In fiscal 1999,
additional borrowings by the company provided approximately $294 million.
In connection with discontinued operations, $152 million of cash was
provided in fiscal 2000 compared to a $241 million cash usage in fiscal 1999.
The cash provided in fiscal 2000 was primarily associated with the sales of the
assets of the discontinued operations. In total, cash increased approximately
$15 million during fiscal 2000.
DIP Facility
On July 8, 1999 the Bankruptcy Court approved a two-year, $750 million
Revolving Credit, Term Loan and Guarantee Agreement underwritten by the Chase
Manhattan Bank (the "DIP Facility"). In May, 2000, the Company voluntarily
reduced the size of the DIP Facility to $350 million and on July 6, 2000, an
order was entered by the Court approving an amendment to the DIP Facility
resulting in a voluntary reduction of the DIP Facility to $350 million
consisting of a Tranche A sub-facility of $250 million and a Tranche B
sub-facility of $100 million. The Tranche A sub-facility has a final maturity of
June 6, 2001 (the original maturity date), and the Tranche B sub-facility
matured on December 31, 2000. Additionally; as permitted by the original order
authorizing the DIP Facility, on August 3, 2000 the DIP Facility was further
amended to, among other things, effect the syndication of the DIP Facility among
a group of nine lenders, with Chase Manhattan Bank retaining the agent role.
Proceeds from the DIP Facility may be used to fund postpetition working
capital and for other general corporate purposes during the term of the DIP
Facility and to pay up to $35 million of prepetition claims of critical vendors.
Approximately $8.3 million of such disbursements have been made. Under the
amended terms of the DIP Facility, the Company is permitted to make loans and
issue letters of credit in favor of or on behalf of foreign subsidiaries for
specified limited purposes, including individual limits for loans and advances
of up to $75 million for working capital needs and $100 million for loans and
letters of credit used for support or repayment of existing foreign credit
facilities, and an aggregate limit of $150 million for all such loans and
letters of credit, including any stand-by letters of credit issued to support
foreign business opportunities. Beginning June 1, 2000, the amended DIP Facility
imposed monthly minimum EBITDA tests and quarterly limits on capital
expenditures.
DIP Facility lenders benefit 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 DIP Facility, payable monthly in arrears. The DIP Facility matures
on the earlier of the substantial consummation of a plan of reorganization or
June 6, 2001.
In proceedings filed with the Bankruptcy Court, the Company 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:
|X| The Company 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 in an aggregate amount in excess of $90 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 stipulated
$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 Creditors Committee regarding the Beloit divestiture and
liquidation process. All such reports and notices have been provided to the
Creditors Committee as agreed.
|X| In addition, the Company 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. In
accordance with this requirement, the Company has provided such notice in
connection with the refinancing of the credit facilities of certain foreign
subsidiaries.
|X| The Company also 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
Funds would be entitled to receive periodic financial statements for Joy.
As of October 31, 1999, MFS Funds is entitled to receive periodic financial
statements for Joy.
As of January 31, 2000, the Company and the Chase Manhattan Bank entered
into a Waiver and Amendment Letter which waived compliance with certain negative
covenants of the DIP Facility as they related to the sale of the assets of
Beloit and among other things, amended the EBITDA tests in the DIP Facility to
levels that are appropriate for the Company's continuing businesses.
Continuation of unfavorable business conditions or other events could require
the Company to seek further modifications or waivers of certain covenants of the
DIP Facility. In such event, there is no certainty that the Company 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 the sale of Beloit assets. While the
Company expects that cash flows from operations and the DIP Facility will
provide sufficient working capital to operate its businesses, there can be no
assurances that such sources will prove to be sufficient. The Debtors are
jointly and severally liable under the DIP Facility. At October 31, 2000, $30
million in direct borrowings had been drawn under the DIP Facility and are
classified as a short-term obligation on the Company's Balance Sheet.
Additionally, letters of credit in the face amount of $35.6 million had been
issued and were outstanding under the DIP Facility as of October 31, 2000.
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 October 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 counterparties to these
contracts are several commercial banks, all of which hold investment grade
ratings, but there is a concentration of these contracts held with The Chase
Manhattan Bank. The Company is authorized to enter into various foreign exchange
contracts under authority granted by the Bankruptcy Court and as provided in the
DIP Facility. Consequently, there is a concentration of these contracts held
with The Chase Manhattan Bank.
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.
The fair value of the Company's forward exchange contracts at October 31,
2000 is analyzed in the following table of dollar equivalent terms:
In thousands
------------------------------------------
Maturing in 2001
------------------
Buy Sell
--- ----
US Dollar 1,616 (713)
Austrailian Dollar (168) -
German Deutschemark (19) 46
British Pound (666) -
Accounting Pronouncements
In October 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
a replacement of SFAS No. 125" and it rescinds Statement No. 127, "Deferral of
the Effective Date of Certain Provisions of SFAS No. 125." SFAS No. 140 revises
the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries
over most of SFAS No. 125's provisions without reconsideration. SFAS No. 140
will be effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. The adoption of
SFAS No. 140 is not expected to have a significant effect on the Company based
upon its current conformity with SFAS No. 125.
In October 2000, the Emerging Issues Task Force ("EITF") reached a
consensus in Issue No. 00-10, "Accounting for Shipping and Handling Fees and
Costs." EITF Issue No. 00-10 requires companies to classify all amounts billed
to a customer in a sale transaction related to shipping and handling as revenue.
Initial application of EITF Issue No. 00-10 is required for financial statements
for the fiscal years beginning after December 15, 1999. Reclassification of
comparative financial statements for prior periods is required. The Company
plans to apply EITF Issue No. 00-10 in fiscal year 2001. It is not expected to
have a significant effect on the Company's financial statements.
In December 1999, The Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The SEC staff expressed its view that revenue generally is realized
or realizable and earned when all of the following criteria are met: persuasive
evidence of an arrangement exists; delivery has occurred or services have been
rendered; the seller's price to the buyer is fixed or determinable; and
collectibility is reasonably assured. Implementation of SAB 101 is required for
fiscal years beginning after December 15, 1999. The Company plans to implement
SAB 101 in fiscal year 2001. It is not expected to have a significant effect on
the Company's financial statements.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS No. 133") was issued and was effective for all fiscal
years beginning after June 15, 1999. SFAS No. 133 was subsequently amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133" and SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities-An Amendment of FASB Statement No. 133". SFAS No. 133 (as amended by
SFAS No. 137 and SFAS No. 138) is now effective for fiscal years beginning after
June 15, 2000, with early adoption permitted. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair values.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether the derivative is
part of a hedge transaction and the type of hedge transaction. For fair-value
hedge transactions in which the Company is hedging changes in an asset's,
liability's or firm commitment's fair value, changes in the fair value of the
derivative instrument will generally be offset in the income statement by
changes in the fair value of the hedged item. For cash-flow hedge transactions,
in which the Company is hedging the variability of cash flows related to a
variable rate asset, liability or forecasted transaction, changes in the fair
value of the derivative instrument will be reported in other comprehensive
income. The gains and losses on the derivative instrument that are reported in
other comprehensive income will be reclassified as earnings in the periods in
which earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current period
earnings. The Company plans to adopt SFAS No. 133 in fiscal 2001. Based upon the
Company's current derivative and hedging activities, management believes that
SFAS No. 133, will not have a significant effect on its results of operations.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
See "Market Risk" in Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Item 8. Financial Statements and Supplementary Data
See the audited Consolidated Financial Statements and Financial Statement
Schedule of Harnischfeger Industries, Inc. attached hereto and listed in the
index.
Unaudited Quarterly Financial Data
2000 Quarterly Financial Data Fiscal Quarter** 2000
(In thousands except per share amounts) First Second Third Fourth Year
--------------------------------------------------------------------------
Net sales $ 285,287 $ 282,082 $ 259,712 $ 290,874 $ 1,117,955
Gross profit (loss) 63,444 69,508 60,805 70,854 264,611
Operating income (loss) (5,779) 5,396 (9,852) 2,867 (7,368)
Income (loss) from continuing operations (17,546) (6,343) (17,884) 12,220 (29,553)
Income (loss) from discontinued operation - - - 66,200 66,200
Gain on disposal of discontinued operation - - - 227,977 227,977
----------- ----------- ------------- --------- -------------
Net income (loss) $ (17,546) $ (6,343) $ (17,884) $ 306,397 $ 264,624
=========== =========== ============= ========= =============
Earnings (Loss) Per Share - Basic
Income (loss) from continuing operations $ (0.38) $ (0.13) $ (0.38) $ 0.26 $ (0.63)
Income from and net gain on disposal
of discontinued operation - - - 6.30 6.30
----------- ----------- ------------- --------- -------------
Net income (loss) per share $ (0.38) $ (0.13) $ (0.38) $ 6.56 $ 5.67
=========== =========== ============= ========= =============
Earnings (Loss) Per Share - Diluted
Income (loss) from continuing operations $ (0.38) $ (0.13) $ (0.38) $ 0.26 $ (0.63)
Income from and net gain on disposal
of discontinued operation - - - 6.30 6.30
----------- ----------- ------------- --------- -------------
Net income (loss) per share $ (0.38) $ (0.13) $ (0.38) $ 6.56 $ 5.67
=========== =========== ============= ========= =============
1999 Quarterly Financial Data Fiscal Quarter* 1999
(In thousands except per share amounts) First Second Third Fourth Year
--------------------------------------------------------------------------
Net sales $ 264,437 $ 294,334 $ 273,693 $ 281,682 $ 1,114,146
Gross profit (loss) 63,027 71,109 (17,199) 74,403 191,340
Operating income (loss) 10,784 16,015 (135,613) 5,996 (102,818)
Income (loss) from continuing operations (386) 4,399 (362,993) 5,892 (353,088)
Loss from discontinued operation (16,013) (78,657) (656,410) (47,100) (798,180)
Loss on disposal of discontinued operation - - - (529,000) (529,000)
----------- ----------- ------------- --------- -------------
Net loss $ (16,399) $ (74,258) $ (1,019,403) $(570,208) $ (1,680,268)
=========== =========== ============= ========= =============
Earnings (Loss) Per Share - Basic
Income (loss) from continuing operations $ (0.01) $ 0.09 $ (7.81) $ 0.12 $ (7.62)
Loss from and net loss on disposal
of discontinued operation (0.35) (1.69) (14.11) (12.38) (28.65)
----------- ----------- ------------- --------- -------------
Net loss per share $ (0.36) $ (1.60) $ (21.92) $ (12.26) $ (36.27)
=========== =========== ============= ========= =============
Earnings (Loss) Per Share - Diluted
Income (loss) from continuing operations $ (0.01) $ 0.09 $ (7.81) $ 0.12 $ (7.62)
Loss from and net loss on disposal
of discontinued operation (0.35) (1.69) (14.11) (12.38) (28.65)
----------- ----------- ------------- --------- -------------
Net loss per share $ (0.36) $ (1.60) $ (21.92) $ (12.26) $ (36.27)
=========== =========== ============= ========= =============
* See Notes to Consolidated Financial Statements for descriptions of
unusual items affecting quarters.
** See Note 3 Discontinued Operations and Note 10 Income Taxes for unusual
items affecting the fourth quarter.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. None
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Registrant
The following table contains certain information (including principal
occupation, business experience and beneficial ownership of the Company's Common
Stock as of January 11, 2001) regarding the directors of the Company. All
shares beneficially owned by the directors under the Directors Stock
Compensation Plan are voted by the trustee of the Company's Deferred
Compensation Trust as directed by the Company's Management Policy Committee.
Director Current Shares
Since Term Owned(1)
-------- ------- --------
Donna M. Alvarado........Principal of Aguila International, an 1992 2000 51,257(2)
international business development
consulting firm, since 1994. President
and Chief Executive Officer of Quest
International, a non-profit educational
organization, from 1989 to 1994.
Director, Park National Bank and
Birmingham Steel Corp. Age 51.
Harry L. Davis...........Professor of Creative Management at the 1987 2000 115,114(3)
University of Chicago since 1994. Professor
of Marketing from 1963 to 1994. Deputy
Dean of the Graduate School of Business
at the University of Chicago from 1983 to 1993.
Director, Golden Rule Insurance Company and
Peter Martin Associates. Age 62.
John Nils Hanson.........Chairman, President and Chief Executive Officer 1996 2000 207,894(4)
since 2000. Vice Chairman from
1998 to 2000. President and Chief Executive
Officer since 1999. President and Chief
Operating Officer from 1996 to 1998. Executive
Vice President and Chief Operating Officer from
1995 to 1996. President and Chief Executive
Officer of Joy Technologies Inc. from 1994 to 1995.
President, Chief Operating Officer and Director of
Joy Technologies Inc. from 1990 to 1995.
Director, Arrow Electronics. Age 59.
Stephen M. Peck..........Maintains an investment office at Gilder, 1998 2000 5,000(5)
Gagnon, Howe & Co. since 1988. General
Partner at Wilderness Partners, L.P., an
investment partnership, since 1989. Director
of Fresenius Medical Care, OFFIT Investment
Funds, Banyan Strategic Realty Trust and
Grand Union Co. Serves as a member of the
Advisory Board of the Brown Simpson Asset
Management. Chairman of the Torrey Funds and
Chairman of Mount Sinai-NYU Health.
Non-employee Chairman of the Board of Grand Union
Company. Age 65.
John D. Correnti.........Chairman and Chief Executive Officer, 1994 2001 42,502(3)
Birmingham Steel Corp., a major steel
producer, since 1999. Chief Executive
Officer, Vice Chairman and Director of
Nucor Corporation, a major steel producer,
from 1996 to 1999. President, Chief
Operating Officer and Director of Nucor
from 1991 to 1995. Director of Navistar
International Corporation. Age 53.
Robert B. Hoffman........Chairman of the Board of the Company 1994 2001 71,842(6)
from 1999 to 2000. Vice Chairman and Chief
Financial Officer of Monsanto Company,
a diversified company in agriculture,
pharmaceuticals and food products, from
1997 to 1999. Senior Vice President and
Chief Financial Officer from 1994 to 1997.
Director, Kemper Scudder Group of
Municipal Funds. Age 64.
Jean-Pierre Labruyere....Chairman and Chief Executive since 1972 1994 2001 77,379(3)
of Labruyere, Eberle S.A., a financial holding
company based in France with global interests
in many business areas including food
distribution, laser printing, electronic
archiving and wine production. Director,
Algeco S.A. and Martin Maurel
Bank - Banque de France Adviser. Age 62.
Robert M. Gerrity........Chairman and Chief Executive Officer of 1994 2002 3,747(7)
Antrim Group Inc., a technology corporation,
since 1996. Director and former President and
Chief Executive Officer of Ford New
Holland, now New Holland n.v., a London-
based agricultural and industrial equipment
manufacturer. Director, Libralter Engineered
Systems, Birmingham Steel Corp. and
Standard Motor Products, Inc. Age 62.
L. Donald LaTorre........President of L & G Management Consultants 1997 2002 101,562(8)
Corporation since 1997. Retired Director of
Engelhard Corporation, a world-leading provider
of environmental technologies, specialty
chemical products, engineered materials
and related services, since 1997. President
and Chief Operating Officer from 1995 to
1997. Senior Vice President and Chief
Operating Officer from 1990 to 1995.
Trustee, Bloomfield College; Chairman
and Director, Mercer University School
of Engineering Board. Age 63.
Leonard E. Redon.........Director, Rochester Area Operations, and 1997 2002 85,150(3)
Vice President, Eastman Kodak Company,
a company engaged worldwide in developing,
manufacturing and marketing consumer and
commercial imaging products, since 1997.
President and Chief Executive Officer
of Qualex, Inc., the world's largest wholesale
photo processor, in 1997. Vice President of
Eastman Kodak Company and President,
Customer Equipment Services Division of
Eastman Kodak, 1995 to 1997. General
Manager and Vice President of
Government and Education Markets from
1994 to 1995. Age 48.
- -----------------
Notes:
(1) Beneficial ownership of these shares consists of sole voting power and sole
investment power except as noted below. None of the directors beneficially
owned 1% or more of the Company's Common Stock.
(2) Includes 50,757 shares beneficially owned under the Directors Stock
Compensation Plan.
(3) Shares beneficially owned under the Directors Stock Compensation Plan.
(4) Includes 68,057 of exercisable options.
(5) Shares held indirectly by his wife.
(6) Includes 70,842 shares beneficially owned under the Directors Stock
Compensation Plan.
(7) Includes 2,747 shares beneficially owned under the Directors Stock
Compensation Plan.
(8) Includes 100,562 shares beneficially owned under the Directors Stock
Compensation Plan.
Executive Officers of the Registrant
The following table sets forth the executive officers of the Company, their
ages, their offices with the Company, and the period during which they have been
executive officers of the Company.
Name Age Current Office and Principal Occupation Years as Officer
---- --- --------------------------------------- ----------------
John Nils Hanson......... 59 Chairman, President and Chief Executive Officer since 2000. 5
Vice Chairman from 1998 to 2000; President and Chief Executive
Officer since 1999; President and Chief Operating
Officer from 1996 to 1998. Executive Vice President and Chief
Operating Officer from 1995 to 1996. President, Chief Operating
Officer and Director of Joy from 1990 to 1995. Director since 1996.
James A. Chokey.......... 57 Executive Vice President for Law and Government Affairs and 3
General Councel since 1997. Senior Vice President, Law and
Corporate Development of Beloit from 1996 to 1997. Prior to
joining the Company, Mr. Chokey held similar positions with
Cooper Industries, A.O. Smith Corporation, RTE Corporation
and Joy Technologies Inc.
Robert N. Dangremond..... 57 Senior Vice President and Chief Restructuring Officer since 1
1999. Principal with turnaround management firm Jay Alix &
Associates.
Kenneth A. Hiltz......... 48 Senior Vice President and Chief Financial Officer since 1
1999. Principal with turnaround management firm Jay Alix &
Associates.
Dennis R. Winkleman...... 50 Executive Vice President Human Resources since 2000. Mr. -
Winkleman held similar positions with Midwest Generation LLC
in 2000, Beloit Corporation from 1997 to 2000 and Zenith
Electronics from 1995 to 1997.
Wayne F. Hunnell......... 54 Senior Vice President since 1998. President and Chief 2
Operating Officer of Joy since 1998; Vice President and
controller of Joy from 1995 to 1998. Vice President and
Controller of P&H from 1993 to 1995.
Robert W. Hale........... 54 Senior Vice President since 1997. President and Chief 3
Executive Officer of P&H since 1994.
Mark E. Readinger........ 47 Senior Vice President from 1997 to 2001. President of Beloit from 3
1998 to 2001; President and Chief Operating Officer of Joy from 1996
to 1998; Senior Vice President of Marketing and General
Manager of the Joy North American Aftermarket Operations from
1994 to 1996. Mr. Readinger resigned his positions as an officer
of the Company and Beloit effective January 2, 2001.
The business address of each of the executive officers is: 3600 South Lake
Drive, St. Francis, Wisconsin 53235-3716. All executive officers are citizens of
the United States of America. Officers are elected annually or until their
successors are elected but may be removed at any time at the discretion of the
Board of Directors. There are no family relationships between the executive
officers.
Involvement in Certain Legal Proceedings.
On June 7, 1999, the Company and substantially all of its domestic
operating subsidiaries, including Beloit, Joy, and P&H, filed for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. Certain of the Company's officers
are also officers or directors of other subsidiaries of the Company which filed
for reorganization under Chapter 11. As such, each of the Company's executive
officers has been associated with a corporation that filed a petition under the
federal bankruptcy laws within the last five years. In addition, Mr. Dangremond
served as Restructuring Officer and Chief Financial Officer of Zenith
Electronics Corporation and as interim Chief Executive Officer and President of
Forstmann & Company when those firms filed petition under Chapter 11 of the
United States Bankruptcy Code in 1999 and 1995, respectively.
Section 16(a) Beneficial Ownership Reporting Compliance.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the last fiscal year and Forms 5 and amendments
thereto furnished to the Company with respect to the last fiscal year, and
written representations from reporting persons that no Form 5 is required, the
Company is not aware that any director, officer or beneficial owner of more than
10% of the Company's Common Stock failed to file on a timely basis reports
required by Section 16(a) of the Securities Exchange Act of 1934 during the last
fiscal year.
Item 11. Executive Compensation
Summary Compensation Table.
The following table shows compensation awarded to, earned by or paid to the
Company's Chief Executive Officer and each of the four most highly compensated
executive officers (other than the Chief Executive Officer) who were serving as
executive officers at the end of fiscal 2000 for services rendered to the
Company and its subsidiaries during fiscal 2000, 1999, and 1998. Two of the
Company's executive officers, Mr. Dangremond and Mr. Hiltz, are employed by Jay
Alix & Associates. Amounts earned by Jay Alix & Associates during fiscal 1999
are disclosed in Item 13 - Certain Relationships and Related Transactions.
===================================================================================================================================
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------------------
Awards Payouts
----------------------------------------------
Other Restricted All
Annual Stock Securities LTIP Other
Name Bonus Compensation Awards Underlying Payouts Compen-
and Salary ($) ($) ($) Options/SARs ($) sation
Principal Position Year $ (1) (2) (3) (4) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
John Nils Hanson 2000 650,004 640,590(5) - - - - 4,902 (6)
Chairman, President and Chief 1999 545,186(7) - 145,684 (8) - - - 6,726
Executive Officer 1998 462,900 - - - 12,616 - 8,550
- -----------------------------------------------------------------------------------------------------------------------------------
James A. Chokey 2000 277,400 276,187(5) - - - - 3,216 (6)
Executive Vice President 1999 254,400(7) - 41,542 (9) - - - 6,351
and General Counsel 1998 254,400 - 136,229 (10) - 6,004 - 6,102
- -----------------------------------------------------------------------------------------------------------------------------------
Robert W. Hale 2000 259,170 299,743(5) - - - - 1,582 (6)
Senior Vice President and 1999 235,020 177,336 (11) - - - - 3,846
President and CEO 1998 230,850 - - - 9,314 - 8,550
Harnischfeger Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
Wayne F. Hunnell 2000 249,625 188,465(5) - - - - 4,500 (12)
Senior Vice President and President 1999 240,500 - - - - - 3,004
and COO 1998 221,323 57,856 - - 1,208 - 1,440
Joy Technologies Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Dennis R. Winkleman 2000 173,978 188,265 (5) 84,000 (14) - - - 505 (6)
Executive Vice President
Human Resources (13)
- -----------------------------------------------------------------------------------------------------------------------------------
Notes
(1) Where no amount is listed, the aggregate amount of perquisites and other
personal benefits received by the named executive for that year was less
than the lesser of either $50,000 or 10 percent of the total of the annual
salary and bonus for the executive in that year.
(2) No restricted Common Stock is outstanding.
(3) Options granted in 1998 equal the number of shares withheld for tax
purposes in connection with the distribution in 1998 of shares from the
Company's Deferred Compensation Trust as a result of accounting rule
changes in 1998.
(4) No Long-Term Incentive Plan payouts were made to the named executives
during fiscal years 1998, 1999 and 2000.
(5) Represents bonuses earned in fiscal 2000 under the Bankruptcy Court
approved EBITDA-based incentive compensation plan and payable in cash to
the named executives the first week of January, 2001. Also includes $4,890
for Mr. Hanson, Mr. Chokey and Mr. Winkleman and $6,000 for Mr. Hale paid
in cash at the end of December, 2000 under profit sharing feature of the
incentive compensation plan.
(6) Represents group term life insurance premiums paid by the Company for the
benefit of the executives.
(7) Executive compensation reported in the Company's Annual Report on Form 10-K
for fiscal 1999 overstated Mr. Hanson's and Mr. Chokey's salaries by
$108,334 and $42,400, respectively.
(8) Includes $121,597 related to country club expenses and initial membership
fees.
(9) Represents $25,722 related to automobile expenses and $15,820 related to
country club expenses.
(10) Includes $50,150 related to automobile expenses and $83,420 related to
country club expenses and initial membership fees.
(11) Supplemental salary and profit sharing bonus earned by Mr. Hale in 1999,
$77,530 of which was paid in fiscal 2000 and the remainder of which is
payable bi-monthly through February, 2002.
(12) Represents executive life insurance premium paid by the Company on behalf
of Mr. Hunnell.
(13) Information for Mr. Winkleman covers fiscal 2000, the year he became an
executive officer of the Company.
(14) Bonus paid to Mr. Winkleman in 2000 in connection with the liquidation of
Beloit Corporation under the Bankruptcy Court approved Key Employee
Retention Plan.
Options/SAR Grants Table.
No grants of stock options or SARs were made during the last fiscal year to
the executive officers named in the Summary Compensation Table.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table.
The following table shows information with respect to the executive
officers named in the Summary Compensation Table concerning the number and value
of options outstanding at the end of the last fiscal year. No options were
exercised by executive officers during the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES (1)
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options/
Options/SARs at SARs at Fiscal Year-
Fiscal Year-End (#) End ($) (2)
Name Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------
John Nils Hanson 75,807 (3) -- -- --
- -----------------------------------------------------------------------------------------
James A. Chokey 12,504 -- -- --
- -----------------------------------------------------------------------------------------
Robert W. Hale 30,314 -- -- --
- -----------------------------------------------------------------------------------------
Wayne F. Hunnell 7,633 -- -- --
- -----------------------------------------------------------------------------------------
Dennis R. Winkleman -- -- -- --
- -----------------------------------------------------------------------------------------
Notes:
(1) No Stock Appreciation Rights (SARs) are outstanding.
(2) All outstanding options have exercise prices above the trading price of the
Company's Common Stock over the counter Bulletin Board at the end of the
fiscal year of $0.09.
(3) Includes 6,191 options under the Joy Technologies Inc. Stock Option Plan
(the "Joy Option Plan"). As a consequence of the merger of the Company and
Joy Technologies Inc. in November, 1994, all options that had been granted
under the Joy Option Plan to any Joy Technologies Inc. employees were
converted into options to purchase the Company's Common Stock.
Long-Term Incentive Plan ("LTIP") Awards Table.
No long-term incentive plan awards were made during the last fiscal year to
the executive officers named in the Summary Compensation Table.
Defined Benefit or Actuarial Plan Disclosure.
The following table sets forth the estimated annual benefits payable upon
retirement at normal retirement age for the years of service indicated under the
Company's defined benefit pension plan (and excess benefit arrangements defined
below) at the indicated remuneration levels.
Remuneration covered by the plan includes the following amounts reported in
the Summary Compensation Table: salary and bonus.
The years of service credited for each of the executive officers named in
the Summary Compensation Table are: John Nils Hanson, 13 years; Dennis R.
Winkleman, 3 years; Robert W. Hale, 12 years; Wayne F. Hunnell, 22 years; James
A. Chokey, 18 years.
Benefits are based both upon credited years of service with the Company or
its subsidiaries and the highest consecutive five year average annual salary and
incentive compensation during the last ten calendar years of service. Estimated
benefits under the retirement plan are subject to the provisions of the Internal
Revenue Code which limit the annual benefits which may be paid from a tax
qualified retirement plan. Amounts in excess of such limitations are payable
from the general funds of the Company under the Company's Supplemental
Retirement Plan. The estimated benefits in the table do not reflect offsets
under the plan of 1.25% per year of service (up to a maximum of 50%) of the
Social Security benefit.
Years of Service
- --------------------------------------------------------------------------------
5 10 15 20 25 30
Remuneration
- -------------------- ------- ------- ------- ------- ------- -------
400,000 ........ 30,000 60,000 90,000 120,000 150,000 180,000
- -------------------- ------- ------- ------- ------- ------- -------
600,000 ........ 45,000 90,000 135,000 180,000 225,000 270,000
- -------------------- ------- ------- ------- ------- ------- -------
800,000 ........ 60,000 120,000 180,000 240,000 300,000 360,000
- -------------------- ------- ------- ------- ------- ------- -------
1,000,000 ........ 75,000 150,000 225,000 300,000 375,000 450,000
- -------------------- ------- ------- ------- ------- ------- -------
1,200,000 ........ 90,000 180,000 270,000 360,000 450,000 540,000
==================== ======= ======= ======= ======= ======= =======
Compensation of Directors.
Directors who are not officers or employees of the Company receive an
annual retainer fee of $22,600 and a fee of $1,250 for each Board and Board
committee meeting attended. Committee chairs receive $1,500 for each committee
meeting attended. Directors who are employees of the Company earn no additional
remuneration for their services as directors.
Following the resignation of then Chairman and Chief Executive Officer in
May 1999, Mr. Robert B. Hoffman was elected non-employee Chairman. In June,
1999, the Human Resources Committee of the Board of Directors considered the
compensation to be paid to Mr. Hoffman as a non-employee Chairman. Following
recommendations from outside consultants as to compensation paid in comparable
situations, it was determined that Mr. Hoffman should receive a quarterly
payment of $125,000 (such amount to be periodically reviewed by the Human
Resources Committee), in addition to outside director retainer and meeting fees.
Mr. Hoffman served as non-employee Chairman until August 28, 2000 when Mr.
Hanson was elected Chairman.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements.
The Company's Key Employee Retention Plan was approved by the Bankruptcy
Court in September, 1999. This plan covers approximately 142 employees,
including each of the executive officers named in the Summary Compensation
Table, and provides emergence bonuses and severance and change-in-control
benefits. Emergence is defined as the earlier of the consummation of a plan of
reorganization or the consummated sale or substantially complete liquidation of
the Company or, in the case of participants who are employees of P&H, Joy or
Beloit, the respective operating subsidiaries. Emergence bonus payments for
executive officers named in the Summary Compensation Table would be 85% of base
salary.
Severance benefits for the executive officers named in the Summary
Compensation Table under the Key Employee Retention Plan would be paid in the
event of an involuntary termination, other than for cause, and would amount to
two year's base salary, payable over 24 months, with mitigation after twelve
months. Medical benefit continuation for up to 24 months and outplacement
assistance is also provided.
Change-in-control benefits for the executive officers named in the Summary
Compensation Table under the Key Employee Retention Plan would be paid in the
event of an involuntary termination of employment, other than for cause, or a
voluntary termination for "good reason" during the 24-month period following a
change-in-control of the Company. Benefits to the executive officers named in
the Summary Compensation Table under this provision would equal the lesser of
three years base salary plus target bonus or the maximum amount that would not
cause the payment to be non-deductible to the Company under Section 280G of the
Internal Revenue Code and would be paid in a lump sum. Consummation of the
Company's proposed plan of reorganization would constitute a change-in-control
under the Key Employee Retention Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table lists the beneficial ownership of Common Stock as of
January 11, 2001 by each of the executive officers named in the Summary
Compensation Table and the Company's executive officers and directors as a
group. As of such date, no person was known to the Company to own beneficially
more than 5% of its Common Stock, Beneficial ownership of these shares consists
of sole voting power and sole investment power except as noted below. As of
January 11, 20001, no person had filed a Schedule 13G with the Securities and
Exchange Commission indicating beneficial ownership of more than 5% of the
Company's Common Stock.
Name and Address Shares Percent
of Beneficial Owner Owned of Class(1)
- ------------------- ----- --------
John Nils Hanson 215,644 (2) 0.4%
James A. Chokey 20,422 (3) less than 0.1%
Robert W. Hale 41,056 (4) less than 0.1%
Wayne F. Hunnell 11,583 (5) less than 0.1%
Dennis R. Winkleman none --
All executive officers
and directors
as a group (16 persons) 842,258 (6) 1.6%
- -----------------------
Notes:
(1) Based on 47,949,089 shares of Common Stock outstanding.
(2) Includes 75,807 shares Mr. Hanson has a right to acquire upon exercise of
stock options.
(3) Includes 12,504 shares Mr. Chokey has a right to acquire upon exercise of
stock options.
(4) Includes 30,314 shares Mr. Hale has a right to acquire upon exercise of
stock options.
(5) Includes 9,983 shares Mr. Hunnell has a right to acquire upon exercise of
stock options.
(6) Includes 128,608 shares which are subject to currently exercisable options
and 545,053 shares beneficially owned under the Directors Stock
Compensation Plan.
See Item 10 - Directors and Executive Officers for additional information
on beneficial ownership of Common Stock by directors. All shares beneficially
owned by the directors under the Directors Stock Compensation Plan are voted by
the trustee of the Company's Deferred Compensation Trust as directed by the
Company's Management Policy Committee.
Item 13. Certain Relationships and Related Transactions
Transactions with Management and Others; Indebtedness of Management.
Mr. Dangremond and Mr. Hiltz, non-employee executive officers of the
Company, and several other financial professionals currently working on behalf
of the Company, are principals or employees of the turnaround
management-consulting firm of Jay Alix & Associates. The Company has retained
Jay Alix & Associates to provide certain financial expertise to assist the
Company during the pendency of its bankruptcy case. During fiscal 2000, the
Company incurred fees of $7,528,889 ($1,948,926 in fiscal 1999) payable to Jay
Alix & Associates. The Company expects to continue to incur fees with Jay Alix &
Associates during the pendency of the Company's bankruptcy case.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
The response to this portion of Item 14 is submitted in a separate section
of this report. See the audited Consolidated Financial Statements and
Financial Statement Schedule of Harnischfeger Industries, Inc. attached
hereto and listed on the index to this report.
(2) Financial Statement Schedule:
The response to this portion of Item 14 is submitted in a separate section
of this report. See the audited Consolidated Financial Statements and
Financial Statement Schedule of Harnischfeger Industries, Inc. attached
hereto and listed on the index to this report.
Exhibits
Number Exhibit
------ ----------------------------------------------------------------------
3 (a) Restated Certificate of Incorporation of Harnischfeger
Industries, Inc. (incorporated by reference to Exhibit 3(a) to Report
of Harnischfeger Industries, Inc. on Form 10-Q for the quarter ended
April 30, 1997).
(b) Bylaws of Harnischfeger Industries, Inc., as amended November 22,
1999. (incorporated by reference to Exhibit 3(b) to Report of
Harnischfeger Industries, Inc. on Form 10-k for the year ended October
31, 1999, File No. 01-9299).
(c) Certificate of Designations of Preferred Stock, Series D (incorporated
by reference to Exhibit 28.1(b) to Registrant's Current Report on Form
8-K dated March 25, 1992).
4 (a) 9.1% Series A Senior Note Agreement dated as of September 15, 1989
(incorporated by reference to Exhibit 4(b) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991,
File No.1-9299).
(b) 9.1% Series B Senior Note Agreement dated as of October 15, 1989
(incorporated by reference to Exhibit 4(c) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991,
File No.1-9299).
(c) 8.95% Series C Senior Note Agreement dated as of February 15,
1991(incorporated by reference to Exhibit 4(d) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October
31, 1991, File No. 1-9299).
(d) 8.9% Series D Senior Note Agreement dated as of October 1, 1991
(incorporated by reference to Exhibit 4(e) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991,
File No. 1-9299).
(e) Indenture for Debentures between Harnischfeger Industries, Inc. and
Continental Bank, National Association, Trustee, dated March 1, 1992
(incorporated by reference to Exhibit 4(f) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992,
File No. 1-9299).
(f) First Supplemental Indenture for Debentures between Harnischfeger
Industries, Inc. and Continental Bank, National Association, Trustee,
dated June 12, 1992 (incorporated by reference to Exhibit 4(g) to
Report of Harnischfeger Industries, Inc. on Form 10-K for the year
ended October 31, 1992, File No. 1-9299).
(g) Registration Statement filed on Form S-3, for issuance of Debt
Securities of up to $200,000,000 dated April 10, 1996, File No.
333-2401.
(h) Registration Statement filed on Form S-3, for issuance of Debt
Securities of up to $200,000,000 dated February 23, 1998, File No.
333-46429.
(i) Rights Agreement dated as of February 8, 1989 between the Registrant
and the First National Bank of Boston, as Rights Agent, which includes
as Exhibit A the Certificate of Designations of Preferred Stock,
Series D, setting forth the terms of the Preferred Stock, Series D; as
Exhibit B the Form of Rights Certificate; and as Exhibit C the Summary
of Rights to Purchase Preferred Stock, Series D (incorporated by
reference to Exhibit 1 to Registrant's Registration Statement on Form
8-A filed on February 9, 1989).
(j) Amendment No. 1 to the Rights Agreement dated as of October 9, 1995
(incorporated by reference to Exhibit 4(j) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1997,
File No. 1-9299).
(k) Amendment No. 2 to the Rights Agreement dated as of September 15, 1998
(incorporated by reference to Exhibit 4(k) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1998,
File No. 1-9299).
(l) Harnischfeger Industries, Inc. Stock Employee Compensation Trust
Agreement effective as of March 23, 1993 (incorporated by reference to
Exhibit 4(k) to Report of Harnischfeger Industries, Inc. on Form 10-K
for the year ended October 31, 1993, File No.1-9299).*
(m) Amendment One to Harnischfeger Industries, Inc. Stock Employee
Compensation Trust Agreement dated January 1, 1994 (incorporated by
reference to Exhibit 4(j) to Report of Harnischfeger Industries, Inc.
on Form 10-K for the year ended October 31, 1995, File No. 1-9299).*
(n) Amendment Two to Harnischfeger Industries, Inc. Stock Employee
Compensation Trust Agreement dated May 6, 1995 (incorporated by
reference to Exhibit 4(k) to Report of Harnischfeger Industries, Inc.
on Form 10-K for the year ended October 31, 1995, File No. 1-9299).*
(o) $500,000,000 Credit Agreement dated as of October 17, 1997 among
Harnischfeger Industries, Inc. as borrower and each other financial
institution which from time to time thereto as lenders, Chase
Manhattan Bank as Administrative Agent, First Chicago Markets, Inc. as
Syndication Agent and Royal Bank of Canada as Documentation Agent
(incorporated by reference to Exhibit 4(n) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1997,
File No.1-9299).
(p) Revolving Credit, Term Loan and Guaranty Agreement dated as of June 7,
1999 among Harnischfeger Industries, Inc. as Borrower and The Chase
Manhattan Bank, as Administrative Agent (incorporated by reference to
Exhibit 10(a) to Report of Harnischfeger Industries, Inc. on Form 10-Q
for the quarter ended April 30, 1999).
(q) First Amendment to Revolving Credit, Term Loan and Guaranty Agreement,
dated July 8, 1999 (incorporated by reference to Exhibit 10(a) to
Report of Harnischfeger Industries, Inc. on Form 10-Q for the quarter
ended July 31, 1999).
(r) Second Amendment to Revolving Credit, Term Loan and Guaranty
Agreement, dated July 8, 1999 (incorporated by reference to Exhibit
10(b) to Report of Harnischfeger Industries, Inc. on Form 10-Q for the
quarter ended July 31, 1999).
(s) Waiver and Amendment Letter dated as of January 31, 2000 to Revolving
Credit, Term Loan and Guarantee Agreement dated July 8, 1999.
(incorporated by reference to Exhibit 4(s) to Report of Harnischfeger
Industries, Inc. on Form 10-k for the year ended October 31, 1999,
File No. 01-9299)
(t) Third Amendment and Revolving Credit, Term Loan and Guaranty Agreement
dated as of June 16, 2000. (incorporated by reference to Exhibit 4(a)
Report of Harnischfeger Industries, Inc. on Form 10-Q for the quarter
ended July 31, 2000).
(u) Fourth Amendment to Revolving Credit and Guaranty Agreement, dated as
of August 3, 2000. (incorporated by reference to Exhibit 4(b) to
Report of Harnischfeger Industries, Inc. on Form 10-Q for the quarter
ended July 31, 2000).
10 (a) Harnischfeger Industries, Inc. 1988 Incentive Stock Plan, as amended
on March 6, 1995 (incorporated by reference to Exhibit 10(a) to Report
of Harnischfeger Industries, Inc. on Form 10-K for the year ended
October 31, 1995, File No. 01-9299).*
(b) Harnischfeger Industries, Inc. Stock Incentive Plan as amended and
restated as of September 12, 1998 (incorporated by reference to
Exhibit 10(b) to Report of Harnischfeger Industries, Inc. on Form 10-K
for the year ended October 31, 1998, File No. 1-9299).*
(c) Harnischfeger Industries, Inc. Executive Incentive Plan, as amended
and restated as of September 9, 1998 (incorporated by reference to
Exhibit 10(c) to Report of Harnischfeger Industries, Inc. on Form 10-K
for the year ended October 31, 1998, File No. 1-9299).*
(d) Long-Term Compensation Plan for Key Executives, as amended and
restated as of December 17, 1998 (incorporated by reference to Exhibit
10(b) to Report of Harnischfeger Industries, Inc. on Form 10-Q for the
quarter ended January 31, 1999, File No. 1-9299).*
(e) Harnischfeger Industries, Inc. Supplemental Retirement Plan, as
amended and restated as of June 3, 1999. (incorporated by reference to
Exhibit 10(e) to Report of Harnischfeger Industries, Inc. on Form 10-k
for the year ended October 31, 1999, File No. 01-9299)
(f) Directors Stock Compensation Plan, as amended and restated as of
August 24, 1998 (incorporated by reference to Exhibit 10(f) to Report
of Harnischfeger Industries, Inc. on Form 10-K for the year ended
October 31, 1998, File No. 1-9299).*
(g) Service Compensation Agreement for Directors effective as of June 1,
1992 (incorporated by reference to Exhibit 10(g) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October
31, 1992, File No.1-9299).*
(h) Long-Term Compensation Plan for Directors, as amended and restated as
of February 9, 1998 (incorporated by reference to Exhibit 10(e) to
Report of Harnischfeger Industries, Inc. on Form 10-Q for the quarter
ended January 31, 1998, File No. 1-9299).*
(i) Joy Technologies Inc. 1991 Stock Option and Equity Incentive Plan
dated November 12, 1991 (incorporated by reference to Exhibit
99-1999.1 to Registration Statement on For S-8, File No. 33-57209).*
(j) Amendment to Joy Technologies Inc. 1991 Stock Option and Equity
Incentive Plan dated November 29, 1994 (incorporated by reference to
Exhibit 99-1999.2 to Registration Statement on Form S-8, File No.
33-57209).*
(k) Harnischfeger Industries Deferred Compensation Trust as amended and
restated as of October 9, 1995 (incorporated by reference to exhibit
10 to Report of Harnischfeger Industries, Inc. on Form 10-Q for the
quarter ended January 31, 1995, File No. 01-9299).*
(l) Amendment No. 1 to Harnischfeger Industries Deferred Compensation
Trust as amended and restated as of October 9, 1995 (incorporated by
reference to Exhibit 10(j) to Report of Harnischfeger Industries, Inc.
on Form 10-K for the year ended October 31, 1996, File No. 01-9299).*
(m) Termination and Release Agreement dated as of May 24, 1999 by and
between Harnischfeger Industries, Inc. and Jeffery T. Grade
(incorporated by reference to Exhibit 10(c) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter ended April 30, 1999).*
(n) Termination and Release Agreement dated as of May 24, 1999 by and
between Harnischfeger Industries, Inc. and Francis M. Corby, Jr.
(incorporated by reference to Exhibit 10(d) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter ended April 30, 1999).*
(o) Form of Key Employee Retention Plan letter dated October 20, 1999
between Harnischfeger Industries, Inc. and John Nils Hanson, James A.
Chokey, Robert W. Hale, Wayne F. Hunnell and Mark E. Readinger
(incorporated by reference to Exhibit 10(o) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1999,
File No. 01-9299)*
(p) Employment, Consulting, Waiver and Release Agreement by and Between
Harnischfeger Industries, Inc. and Mark E. Readinger dated as of
November 30, 2000.*
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
25 Financial Data Schedules.
* Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
None.
HARNISCHFEGER INDUSTRIES, INC.
(Debtor-in-Possession as of June 7, 1999)
Form 10-K Item 8 and Items 14(a)(1) and 14(a)(2)
Index to Consolidated Financial Statements
And Financial Statement Schedule
The following Consolidated Financial Statements of Harnischfeger
Industries, Inc. and the related Report of Independent Accountants are included
in Item 8 - Financial Statements and Supplementary Data and Item 14 - Exhibits,
Financial Statement Schedules, and Reports on Form 8-K:
Page in This
Item 14(a) (1): Form 10-K
- --------------------------------------------------------------------------------
Report of Independent Accountants F-2
Consolidated Statement of Operations for the
fiscal years ended October 31, 2000, 1999 and 1998 F-3
Consolidated Balance Sheet at October 31, 2000 and 1999 F-4, F-5
Consolidated Statement of Cash Flow for the fiscal
years ended October 31, 2000, 1999 and 1998 F-6
Consolidated Statement of Shareholders' Equity (Deficit)
for the fiscal years ended October 31, 2000,
1999 and 1998 F-7, F-8
Notes to Consolidated Financial Statements F-9
The following Consolidated Financial Statement schedule of Harnischfeger
Industries, Inc. and related Report of Independent Accountants is included in
Item 14(a)(2):
Report of Independent Accountants on Financial Statement Schedule for the
Years Ended October 31, 2000, 1999 and 1998.
Schedule II. Valuation and Qualifying Accounts
All other schedules are omitted because they are either not applicable or
the required information is shown in the financial statements or notes thereto.
Financial statements of less than 50% owned companies have been omitted
because the proportionate share of their profit before income taxes and total
assets are less than 20% of the respective consolidated amounts and investments
in such companies are less than 20% of consolidated total assets.
REPORT OF INDEPENDENT ACCOUNTANTS
To The Directors and Shareholders
of Harnischfeger Industries, Inc.
In our opinion, the Consolidated Financial Statements appearing in the
accompanying index present fairly, in all material respects, the financial
position of Harnischfeger Industries, Inc. and its subsidiaries (the "Company")
at October 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended October 31, 2000, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
The accompanying Consolidated Financial Statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 -
Significant Accounting Policies in Notes to Consolidated Financial Statements,
on June 7, 1999, the Company and substantially all of its domestic operating
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware. The Company has formulated a Joint Plan of Reorganization and
Disclosure Statement, as amended, of the Debtors that were filed with the
Bankruptcy Court on October 26, 2000. Although the Company is continuing its
on-going business operations as a Debtor-in-Possession under the jurisdiction of
the Bankruptcy Court, its ability to continue to operate as a going concern is
contingent upon, among other matters, the approval by the Company's creditors of
the Joint Plan of Reorganization. The approval and implementation of the Joint
Plan of Reorganization could materially change the recorded amounts and
classifications of assets and liabilities. Substantial losses from operations,
liquidity issues, shareholder deficits, and the uncertainty of approval by the
Company's creditors of the Joint Plan of Reorganization, raises substantial
doubt about the Company's ability to continue as a going concern. The
accompanying Consolidated Financial Statements do not include any adjustments to
the carrying value of the assets or amounts of liabilities that might be
necessary as a consequence of the implementation of the Joint Plan of
Reorganization or any adjustments relating to the recoverability of assets or
liquidation of liabilities in the ordinary course of business that might result
if the Company is unable to continue as a going concern.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 11, 2001
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Consolidated Statement of Operations
- --------------------------------------------------------------------------------
In thousands except per share amounts Years Ended October 31,
- ------------------------------------------------------------------------------------------------
2000 1999 1998
------------ ------------ -------------
Revenues
Net sales $ 1,117,955 $ 1,114,146 $ 1,212,307
Other income 6,860 3,909 1,324
----------- ----------- -------------
1,124,815 1,118,055 1,213,631
Cost of sales 853,344 922,806 916,970
Product development, selling
and administrative expenses 208,933 238,952 235,268
Reorganization items 65,388 20,304 -
Restructuring charges 4,518 11,997 -
Charge related to executive changes - 19,098 -
Strategic and financing initiatives - 7,716 -
----------- ----------- -------------
Operating income (loss) (7,368) (102,818) 61,393
Interest expense - net (excludes contractual
interest expense of $ 70,531 and $31,230 for
2000 and 1999, respectively) (23,961) (28,865) (70,600)
----------- ----------- -------------
Loss before (provision) benefit for
income taxes and minority interest (31,329) (131,683) (9,207)
(Provision) benefit for income taxes 3,000 (220,448) 24,608
Minority interest (1,224) (957) (1,035)
----------- ----------- -------------
Income (loss) from continuing operations (29,553) (353,088) 14,366
Income (loss) from discontinued operations,
net of applicable income taxes 66,200 (798,180) (184,399)
Gain (loss) on disposal of discontinued operations,
net of applicable income taxes
of $45,000 in 1998 227,977 (529,000) 151,500
----------- ----------- -------------
Net income (loss) $ 264,624 $(1,680,268) $ (18,533)
=========== =========== =============
Basic earnings (loss) per share:
Income (loss) from continuing operations $ (0.63) $ (7.62) $ 0.31
Income (loss) from and net gain (loss) on
disposal of discontinued operations 6.30 (28.65) (0.71)
----------- ----------- -------------
Net income (loss) per share $ 5.67 $ (36.27) $ (0.40)
=========== =========== =============
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ (0.63) $ (7.62) $ 0.31
Income (loss) from and net gain (loss) on
disposal of discontinued operations 6.30 (28.65) (0.71)
----------- ----------- -------------
Net income (loss) per share $ 5.67 $ (36.27) $ (0.40)
=========== =========== =============
See accompanying notes to consolidated financial statements.
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Consolidated Balance Sheet
- -----------------------------------------------------------------------------
In thousands October 31,
- -----------------------------------------------------------------------------
2000 1999
------------- -------------
Assets
Current Assets:
Cash and cash equivalents (including cash
equivalents of $50,411 and $48,211, in
2000 and 1999, respectively) $ 72,123 $ 57,453
Accounts receivable, net 177,151 202,830
Inventories 410,331 447,655
Other 49,819 50,447
----------- -----------
709,424 758,385
----------- -----------
Assets of Discontinued Beloit Operations 15,231 278,000
Property, Plant and Equipment:
Land and improvements 17,548 38,379
Buildings 127,724 131,961
Machinery and equipment 258,749 274,485
----------- -----------
404,021 444,825
Accumulated depreciation (226,608) (234,078)
----------- -----------
177,413 210,747
----------- -----------
Investments and Other Assets:
Goodwill 320,947 358,191
Intangible assets 29,831 37,693
Other 40,082 68,797
----------- ----------
390,860 464,681
----------- ----------
$ 1,292,928 $ 1,711,813
=========== ===========
See accompanying notes to consolidated financial statements.
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Consolidated Balance Sheet
- --------------------------------------------------------------------------------------
In thousands October 31,
- --------------------------------------------------------------------------------------
2000 1999
------------- ------------
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 108,774 $ 144,568
Trade accounts payable 72,491 70,012
Employee compensation and benefits 52,210 43,879
Advance payments and progress billings 11,052 45,340
Accrued warranties 34,941 39,866
Income taxes payable 104,869 101,832
Accrued restructuring
charges, and other liabilities 106,291 125,719
------------ ------------
490,628 571,216
Long-term Obligations 3,124 168,097
Other Non-current Liabilities:
Liability for postretirement benefits 32,331 31,990
Accrued pension costs 13,738 15,465
Other 5,866 7,855
------------ ------------
51,935 55,310
Liabilities Subject to Compromise 1,220,675 1,193,554
Liabilites of Discontinued Beloit Operations,
including liabilities subject to compromise
of $246,154 and $494,806 in 2000 and 1999,
respectively 314,725 742,265
Minority Interest 6,533 6,522
Commitments and Contingencies (Note 21) - -
Shareholders' Equity (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 563,542 572,573
Retained earnings (deficit) (1,204,314) (1,468,938)
Accumulated comprehensive (loss) (114,874) (79,960)
Less:
Stock employee compensation trust (1,433,147 and
1,433,147 shares, respectively) at market (100) (1,612)
Treasury stock (3,881,929 and 3,865,101 shares,
respectively) at cost (90,615) (98,883)
------------ -----------
(794,692) (1,025,151)
------------ -----------
$ 1,292,928 $ 1,711,813
=========== ===========
See accompanying notes to consolidated financial statements.
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Consolidated Statement of Cash Flow
- --------------------------------------------------------------------------------
In thousands Years Ended October 31,
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
-------------- -------------- -------------
Operating Activities:
Net income (loss) $ 264,624 $(1,680,268) $ (18,533)
Add (deduct) - items not affecting cash:
(Income) loss from and net (gain) loss on disposal
of discontinued operation (294,177) 1,327,180 (155,876)
Restructuring charges 4,518 11,997 65,000
Reorganization items 25,108 14,615 -
Charge related to executive change - 18,498 -
Minority interest, net of dividends paid 1,224 957 (54,981)
Depreciation and amortization 57,389 50,540 86,760
Increase (decrease) in income taxes, net of change
in valuation allowance 2,127 204,067 (201,771)
Other - net (7,716) 5,834 (17,735)
Changes in Working Capital, exclusive of acquisitions and divestitures
and net of liabilities subject to compromise:
Decrease (increase) in accounts receivable - net 13,975 11,075 51,590
Decrease (increase) in inventories 13,772 21,129 (68,773)
(Increase) decrease in other current assets (3,585) (18,881) 11,958
Increase (decrease) in trade accounts payable 7,420 40,412 (97,331)
Increase (decrease) in employee compensation and benefits 8,345 6,424 (36,462)
(Increase) decrease in advance payments and progress billings (31,146) 8,588 39,950
(Decrease) increase in accrued contract losses and other liabilities (25,180) (11,599) (32,892)
----------- -------------- -------------
Net cash provided (used) by continuing operations 36,698 10,568 (429,096)
----------- -------------- -------------
Investment and Other Transactions:
Acquisitions, net of cash acquired - - (40,192)
Proceeds from sale of Material Handling - - 341,000
Proceeds from sale of J&L Fiber Systems - - 109,445
Net proceeds from sale of non-core Dobson Park businesses - - 9,323
Property, plant and equipment acquired (32,410) (26,610) (133,925)
Property, plant and equipment retired 22,786 12,318 16,893
Deposit related to APP letters of credit and other 21,706 (16,434) (12,700)
---------- -------------- -------------
Net cash provided (used) by investment and other transactions 12,082 (30,726) 289,844
---------- -------------- -------------
Financing Activities:
Dividends paid - (4,592) (18,556)
Exercise of stock options - - 1,318
Purchase of treasury stock - - (33,154)
Financing fees related to DIP Facility (2,563) (15,000) -
Borrowings under DIP Facility 115,000 167,000 -
Repayments of borrowings under DIP Facility (252,000) - -
Borrowings under long-term obligations prior to bankruptcy filing - 125,000 -
Issuance of long-term obligations 2,043 - 292,300
Redemption of long-term obligations - - (11,763)
Payments on long-term obligations (47,565) (2,113) -
Increase (decrease) in short-term notes payable 3,345 18,910 (87,333)
------- ----------- ----------
Net cash provided (used) by financing activities (181,740) 289,205 142,812
------- ----------- ----------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (3,952) (93) (2,931)
Cash provided (used) in Discontinued Operations 151,582 (241,513) -
------- ----------- ----------
Increase in Cash and Cash Equivalents 14,670 27,441 629
Cash and Cash Equivalents at Beginning of Year 57,453 30,012 29,383
------- ----------- ----------
Cash and Cash Equivalents at End of Year $ 72,123 $ 57,453 $ 30,012
======== =========== ===========
See accompanying notes to consolidated financial statements.
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Consolidated Statement of Shareholders' Equity (Deficit)
- --------------------------------------------------------------------------------
Capital in Retained Accumulated
Common Excess of Comprehensive Earnings Comprehensive Treasury
In thousands Stock Par Value Income (Loss) (Deficit) Income (Loss) SECT Stock Total
- -------------------------------------- ---------------------------------------------------------------------------------------
Balance at October 31, 1997 $ 51,607 $ 625,358 $ 253,727 $ (41,440) $ (56,430) $ (83,162)$749,660
Comprehensive income (loss)
Net loss -- -- $ (18,533) (18,533) -- -- -- (18,533)
Other comprehensive income
(loss):
Currency translation
adjustment -- -- (18,849) -- (18,849) -- -- (18,849)
-----------
Total comprehensive
income (loss) -- -- $ (37,382) -- -- -- -- --
===========
Exercise of 61,767 stock options 62 1,256 -- -- -- -- 1,318
Dividends paid ($.40 per share) -- -- (19,129) -- -- -- (19,129)
Dividends on shares held by SECT -- 573 -- -- -- -- 573
Adjust SECT shares to market value
146,401 shares purchased by
employee -- (42,905) -- -- 42,905 -- --
and director benefit plans -- 1,527 -- -- -- 4,108 5,635
1,338,554 shares acquired as
treasury stock -- -- -- -- -- (33,154) (33,154)
Rabbi Trust shares -- -- -- -- -- (1,371) (1,371)
Amortization of unearned
compensation on restricted
stock -- 700 -- -- -- -- 700
-------- ----------- -------- --------- --------- --------- ---------
Balance at October 31, 1998 $ 51,669 $ 586,509 $ 216,065 $ (60,289) $ (13,525) $(113,579)$666,850
Comprehensive income (loss):
Net loss -- -- $(1,680,268)(1,680,268) -- -- --(1,680,268)
Other comprehensive income
(loss):
Change in additional minimum
pension liability -- -- (6,365) -- (6,365) -- -- (6,365)
Currency translation
adjustment -- -- (13,306) -- (13,306) -- -- (13,306)
-----------
Total comprehensive income
(loss) -- -- $(1,699,939) -- -- -- -- --
===========
Dividends paid ($.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) -- -- -- 15,582 5,547
Adjust SECT shares to market value -- (11,913) -- -- 11,913 -- --
Adjust Rabbi Trust shares -- -- -- -- -- (886) (886)
Unearned compensation expense on
executive contract buyout -- 7,462 -- -- -- -- 7,462
Amortization of unearned
compensation on
restricted stock -- 407 -- -- -- -- 407
------ -------- --------- --------- -------- -------- --------
Balance at October 31, 1999 $ 51,669 $ 572,573 $(1,468,938) $(79,960) $ (1,612) $(98,883)$(1,025,151)
======== =========== =========================================================
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Consolidated Statement of Shareholders' Equity (Deficit)
- --------------------------------------------------------------------------------
Compre-
Capital in hensive Retained Accumulated
Common Excess of Income Earnings Comprehensive Treasury
In thousands Stock Par Value (Loss) (Deficit) Income (Loss) SECT Stock Total
- -------------------------------------- --------------------------------------------------------------------------------------------
Balance at October 31, 1999 $ 51,669 $ 572,573 $(1,468,938) $ (79,960) $ (1,612) $ (98,883) $(1,025,151)
Comprehensive income (loss):
Net income -- -- $ 264,624 264,624 -- -- -- 264,624
Other comprehensive income (loss):
Change in additional minimum
pension liability -- -- 1,732 -- 1,732 -- -- 1,732
Currency translation adjustment -- -- (36,646) -- (36,646) -- -- (36,646)
---------
Total comprehensive
income (loss): -- -- $ 229,710 -- -- -- -- --
=========
300,000 shares purchased by employee
and director benefit plans -- (7,519) -- -- -- 7,519 --
Adjust SECT shares to market value -- (1,512) -- -- 1,512 --
Adjust Rabbi Trust shares -- -- -- -- -- 749 749
------------------- -----------------------------------------------------------
Balance at October 31, 2000 $ 51,669 $563,542 $(1,204,314) $ (114,874) $ (100)$ (90,615) $ (794,692)
=================== ===========================================================
See accompanying notes to consolidated financial statments.
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Notes to Consolidated Financial Statements
October 31, 2000
- --------------------------------------------------------------------------------
1. Reorganization under Chapter 11
On June 7, 1999, 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, Joy Mining Machinery and P&H Mining Equipment. The Debtors'
Chapter 11 cases are jointly administered for procedural purposes only
under case number 99-2171. The Debtors also include Beloit Corporation
("Beloit"), the Company's other principal operating subsidiary at the time
of the bankruptcy filing. See Note 3 - Discontinued Operations. On October
26, 2000, the Debtors filed their draft disclosure statement and proposed
plan of reorganization and, in the case of Beloit and its Debtor
subsidiaries, liquidation with the Bankruptcy Court. The plan and
disclosure statement were subsequently amended and, on December 20, 2000,
the Bankruptcy Court approved the disclosure statement as amended and set
January 30, 2001 as the deadline for creditors to vote on the plan.
Debtors' plan of reorganization confirmation hearing is scheduled for March
5, 2001. If the plan is approved by creditors and the Bankruptcy Court, the
Debtors anticipate emerging from bankruptcy in the spring of 2001. In
general, the Debtors' proposed plan of reorganization provides that the
existing Harnischfeger common stock would be cancelled and that the
creditors of Harnischfeger would be issued new common stock in reorganized
Harnischfeger. As a result, if the plan is confirmed, current shareholders
of Harnischfeger would receive nothing. Most creditors of P&H and Joy would
receive new five-year, 10.75% senior notes issued by reorganized
Harnischfeger and guaranteed by reorganized P&H and reorganized Joy. In
certain circumstances, such creditors could receive a portion of the new
common stock. Creditors of Beloit and its subsidiaries would receive the
proceeds of the sale of the assets of Beloit and its subsidiaries.
The Debtors are currently operating their businesses as
debtors-in-possession pursuant to the Bankruptcy Code. Pursuant to the
Bankruptcy Code, actions 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
Company to reject certain business contracts that were deemed burdensome or
of no value to the Company. As of January 11, 2001, the Debtors had not
completed their review of all their prepetition executory contracts and
leases for assumption or rejection. See also Note 9 - 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 are current in the respective
plans.
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 with regard to claims actually voted) of each
class of creditors and equity holders whose claims are impaired by the
plan. Alternatively, absent the requisite approvals, the Company may seek
Bankruptcy Court approval of its reorganization plan under "cramdown"
provisions of the Bankruptcy Code, assuming certain tests are met.
February 29, 2000 was set by the Bankruptcy Court as the last date
creditors could file proofs of claim under the Bankruptcy Code. There may
be differences between the amounts recorded in the Company's schedules and
financial statements and the amounts claimed by the Company's creditors.
Litigation may be required to resolve such disputes.
The Company has incurred and will continue to incur significant costs
associated with the reorganization. The amount of these expenses, which are
being expensed as incurred, is expected to significantly affect future
results. See Note 6 - Reorganization Items.
Although the Company currently anticipates emerging from Bankruptcy during
the first half of calendar year 2001, it is not possible to predict with
certainty the length of time the Company 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. Under the
Bankruptcy Code, postpetition liabilities and prepetition liabilities
(i.e., liabilities subject to compromise) must be satisfied before
shareholders can receive any distribution. Under the terms of the Company's
proposed plan of reorganization, the Company's existing common stock will
be cancelled and the holders of the Company's existing common stock will
receive nothing for their stock. The U.S. Trustee for the District of
Delaware has appointed an Official Committee of Equity Holders to represent
shareholders in the proceedings before the Bankruptcy Court.
2. Significant Accounting Policies
Nature of Operations: The Company is the direct successor to a business
begun over 115 years ago which, at October 31, 2000, through its
subsidiaries, manufactures and markets products classified into two
business segments: surface mining equipment (P&H) and underground mining
machinery (Joy). P&H is a major producer of surface mining equipment for
the extraction of ores and minerals and provides extensive operational
support for many types of equipment used in surface mining. Joy is a major
manufacturer of underground mining equipment for the extraction of bedded
minerals and offers comprehensive service locations near major mining
regions worldwide.
Basis of Presentation: The accompanying Consolidated Financial Statements
have been prepared on a going concern basis which contemplate continuity of
operations, realization of assets, and liquidation of liabilities in the
ordinary course of business and do not reflect adjustments that might
result if the Debtors 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 have filed a plan of reorganization with the
Bankruptcy Court. Although the plan of reorganization provides for the
Company's emergence from bankruptcy, there can be no assurance that the
plan of reorganization will be approved by creditors and confirmed by the
Court or that such plan of reorganization will be consummated. Continuing
on a going concern basis is dependent upon, among other things,
confirmation of Debtors' proposed plan 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, 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 structure
or in the Debtors' business operations as the result of an approved plan 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 or arising from
a confirmed plan of reorganization. Such adjustments could include
recognition of the forgiveness of debt, the revaluation of assets, and
other "fresh start" related items.
The Company's 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 Company. See Note 6 - Reorganization Items.
Schedules have been filed by the Company with the Bankruptcy Court setting
forth the assets and liabilities of the Company as of June 7, 1999, the
bankruptcy filing date, as reflected in the Company's accounting records.
Differences between amounts reflected in such schedules and claims filed by
creditors are currently being investigated and either resolved by mutual
consent or adjudicated. The final amounts of such claims are not presently
determinable.
Principles of Consolidation: The Consolidated Financial Statements include
the accounts of all majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Ultimate
realization of assets and settlement of liabilities in the future could
differ from those estimates.
Inventories: Inventories are stated at the lower of cost or market value.
Cost is determined by the last-in, first-out (LIFO) method for
substantially all domestic inventories and by the first-in, first-out
(FIFO) method for the inventories of foreign subsidiaries. The Company
evaluates the need to record adjustments for impairment of inventory on a
regular basis. The Company's policy is to evaluate all inventory including
manufacturing raw material, work-in-process, finished goods, and spare
parts. Inventory in excess of the Company's estimated usage requirements is
written down to its estimated net realizable value. Inherent in the
estimates of net realizable value are management estimates related to the
Company's future manufacturing schedules, customer demand, possible
alternative uses and ultimate realization of potentially excess inventory.
Revenue Recognition: Revenue is recognized generally upon shipment. Revenue
on long-term contracts of at least 6 months in duration is recorded using
the percentage-of-completion method for financial reporting purposes. Sales
of other products and services are recorded as products are shipped or
services are rendered. A provision for estimated future costs relating to
warranty expense is recorded when appropriate.
Property, Plant and Equipment: Property, plant and equipment are stated at
historical cost. Expenditures for major renewals and improvements are
capitalized, while maintenance and repairs which do not significantly
improve the related asset or extend its useful life are charged to expense
as incurred. For financial reporting purposes, plant and equipment are
depreciated primarily by the straight-line method over the estimated useful
lives of the assets which generally range from 5 to 20 years for
improvements, from 33 to 50 years for buildings and from 3 to 15 years for
machinery and equipment. Depreciation expense for 2000, 1999 and 1998 was
$25.8 million, $26.6 million and $28.2 million, respectively. Depreciation
claimed for income tax purposes is computed by accelerated methods.
Cash Equivalents: The Company considers all highly liquid debt instruments
with a maturity of three months or less at the date of purchase to be cash
equivalents.
Foreign Exchange Contracts: Exchange transaction gains or losses incurred
on forward foreign exchange contracts are reflected in income except where
the forward contract is designated as a hedge of a firm foreign currency
commitment. In this case the gain or loss is deferred and included in the
measurement of the related foreign currency transaction when it occurs,
unless it is estimated that deferral would result in a permanent loss in
which case it is recognized immediately.
Foreign Currency Translation: Exchange gains or losses incurred on
transactions conducted by one of the Company's operations in a currency
other than its functional currency are normally reflected in income. An
exception is made where the transaction is a long-term intercompany loan
that is not expected to be repaid in the foreseeable future. In this case
the transaction gain or loss is included in shareholders equity as an
element of Comprehensive Income (Loss). Assets and liabilities of
international operations that have a functional currency that is not the
U.S. dollar are translated into U.S. dollars at year-end exchange rates.
Any gain or loss arising on this translation is included in shareholders
equity as an element of Comprehensive Income (Loss). Assets and liabilities
of operations which have the U.S. dollar as their functional currency (but
which maintain their accounting records in local currency) are re-measured
into U.S. dollars at year-end exchange rates, except for non-monetary items
for which historical rates are used. Exchange gains or losses arising on
re-measurement are recognized in income. Pre-tax foreign exchange gains
(losses) included in operating income (loss) were $4.0 million, $1.7
million and ($2.0 million), in 2000, 1999 and 1998, respectively.
Goodwill and Intangible Assets: Goodwill represents the excess of the
purchase price over the fair value of identifiable net assets of acquired
companies and is amortized on a straight-line basis over periods ranging up
to 40 years. The Company periodically reevaluates the carrying value and
estimated life of goodwill, using undiscounted cash flows, whenever
significant events or changes occur which might impair recovery of recorded
assets. The Company writes down recorded costs of assets to fair value,
based on discounted cash flows or market values, when recorded costs, prior
to impairment, are higher. Management believes that there is no further
impairment of the remaining goodwill included in the Company's Consolidated
Balance Sheet at October 31, 2000. The Company has filed for Bankruptcy
reorganization under Chapter 11 as described under Note 1 - Reorganization
under Chapter 11, which could cause management to reassess its estimate of
the realizability of goodwill or its amortization period. Factors used for
this assessment in the future would include management's estimate of each
of the mining segments continuing ability to generate positive cash flow
and income from operations, as well as the strategic significance of
various assets to the Company's business objectives. Other intangible
assets, primarily comprising computer software, are amortized over the
shorter of their legal or economic useful lives ranging from 3 to 12-1/2
years. Accumulated amortization was $86.7 million and $83.1 million at
October 31, 2000 and 1999, respectively.
Other Non-current Assets: Other non-current assets in 2000 include
primarily prepaid pension and financing costs. In 1999, non-current assets
included primarily prepaid pension and financing costs and a money market
deposit which was subject to restrictions over its use.
Income Taxes: Deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable
to future years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities, and for tax
basis carryforwards. A valuation allowance is provided for deferred tax
assets where it is considered more likely than not that the Company will
not realize the benefit of such assets. See Note 12 - Income Taxes.
Research and Development Expenses: Research and development costs are
expensed as incurred. Such costs incurred in the development of new
products or significant improvements to existing products amounted to $6.5
million, $11.1 million and $18.0 million in 2000, 1999 and 1998,
respectively.
Earnings Per Share: Income (loss) per share is computed in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share". Basic income (loss) per common share is based upon the weighted
average number of common shares outstanding during each year. Diluted
income (loss) per common share is calculated based upon the sum of the
weighted average number of shares outstanding and the weighted average
numbers of potential dilutive common shares outstanding. There are no
differences in the income used to compute the Company's basic and diluted
income (loss) per share.
Comprehensive Income: In 1999, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This statement establishes rules for the reporting
of comprehensive income and its components. Comprehensive income consists
of net income (loss), foreign currency translation effects, and charges for
additional minimum pension liabilities and is presented in the Consolidated
Statement of Shareholders' Equity (Deficit).
Segment Information: The Company's continuing operations are divided into
two segments, surface mining equipment and underground mining equipment,
based on the Company's organizational structure for each of these products
and services.
Future Accounting Changes: In October 2000, the Financial Accounting
Standards Board (FASB) issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," a
replacement of SFAS No. 125 and it rescinded SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of SFAS No. 125". SFAS No. 140 revises
the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it
carries over most of SFAS No. 125's provisions without reconsideration.
SFAS No. 140 will be effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001.
The adoption of SFAS No. 140 is not expected to have a significant effect
on the Company based upon its current conformity with SFAS No. 125.
In October 2000, the Emerging Issues Task Force ("EITF") reached a
consensus in Issue No. 00-10, "Accounting for Shipping and Handling Fees
and Costs". EITF Issue No. 00-10 requires companies to classify all amounts
billed to a customer in a sale transaction related to shipping and handling
as revenue. Initial application of EITF Issue No. 00-10 is required for
financial statements for the fiscal years beginning after December 15,
1999. Reclassification of comparative financial statements for prior
periods is required. The Company plans to apply EITF Issue No. 00-10 in
fiscal year 2001. It is not expected to have a significant effect on the
Company's financial statements.
In December 1999, The Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements". SAB 101 summarizes certain of the SEC staff's views
in applying generally accepted accounting principles to revenue recognition
in financial statements. The SEC staff expressed its view that revenue
generally is realized or realizable and earned when all of the following
criteria are met: persuasive evidence of an arrangement exists; delivery
has occurred or services have been rendered; the seller's price to the
buyer is fixed or determinable; and collectibility is reasonably assured.
Implementation of SAB 101 is required for fiscal years beginning after
December 15, 1999. The Company plans to implement SAB 101 in fiscal year
2001. It is not expected to have a significant effect on the Company's
financial statements.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133") was issued and was effective for all
fiscal years beginning after June 15, 1999. SFAS No. 133 was subsequently
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133" and
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities-An Amendment of FASB Statement No. 133". SFAS No. 133
(as amended by SFAS No. 137 and SFAS No. 138) is now effective for fiscal
years beginning after June 15, 2000, with early adoption permitted. SFAS
No. 133 requires that all derivative instruments be recorded on the balance
sheet at their fair values. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether the derivative is part of a hedge transaction and the
type of hedge transaction. For fair-value hedge transactions in which the
Company is hedging changes in an asset's, liability's or firm commitment's
fair value, changes in the fair value of the derivative instrument will
generally be offset in the income statement by changes in the fair value of
the hedged item. For cash-flow hedge transactions, in which the Company is
hedging the variability of cash flows related to a variable rate asset,
liability or forecasted transaction, changes in the fair value of the
derivative instrument will be reported in other comprehensive income. The
gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the periods in
which earnings are impacted by the variability of the cash flows of the
hedged item. The ineffective portion of all hedges will be recognized in
current period earnings. The Company plans to adopt SFAS No. 133 in fiscal
2001. Based upon the Company's current derivative and hedging activities,
management believes that SFAS No. 133 will not have a significant effect on
its results of operations.
Reclassifications: Reclassifications have been made to the financial
statements of prior periods to conform to the current period presentation.
3. Discontinued Operations
Beloit Segment
In light of continuing losses at Beloit and following an evaluation of the
prospects of reorganizing its pulp and paper machinery segment owned by
Beloit and its subsidiaries (the "Beloit Segment"), on October 8, 1999 the
Company announced its plan to dispose of the Beloit 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 January
11, 2001, all approved sales of domestic assets had taken place, as had
sales of the majority of Beloit's foreign subsidiaries. Beloit expects that
closings on the remaining approved sales of foreign subsidiaries will occur
by the middle of fiscal 2001.
The Company classified the Beloit Segment as a discontinued operation in
its consolidated financial statements as of October 31, 2000 and 1999 and
has accordingly restated the Company's consolidated statements of
operations for all periods presented. The Company has not restated its
consolidated balance sheets or consolidated statements of cash flows for
periods prior to fiscal 1999. Revenues for the Beloit Segment were $170.4
million for fiscal 2000 and $684.0 million for fiscal 1999. Income (loss)
from and net gain (loss) on disposal of discontinued operations relating to
the Beloit Segment was $294.2 million, ($1,327.2 million) and ($188.8
million) in 2000, 1999 and 1998, respectively.
During the fourth quarter of fiscal 2000, the Company completed the sale of
certain Beloit domestic and foreign subsidiaries, resolved disputed matters
with APP, and negotiated the resolution of certain other obligations.
Accordingly, the fourth quarter of fiscal 2000 included income from
discontinued operations of $66.2 million and a gain on disposal of
discontinued operations of $228.0 million. These gains are comprised of the
following:
In thousands
----------------------------------------------------------------------
APP settlement $ 62,000
Norscan settlement 4,200
---------
Income from discontinued operations 66,200
---------
Foreign liabilities released 227,467
Domestic liabilities released 8,130
Partial release from Princeton Paper lease reserve 15,000
Loss on domestic entities sold (22,620)
---------
Net gain on the disposal of discontinued operations 227,977
---------
Income from and net gain on disposal of
discontinued operations $ 294,177
=========
The elements of the income and gain are discussed below:
The $62.0 million APP income included $33.0 million of cash receipts and
the release of a $46.0 million bank guarantee offset by a $17.0 million
draw upon an outstanding bank guarantee by APP. See Note 9 - Liabilities
Subject to Compromise. The $4.2 million represents a cash settlement of
litigation with Norscan.
The $228.0 million gain on disposal of discontinued operations included (i)
$227.5 million gain associated with the Company's release from liabilities
of foreign subsidiaries that were disposed of during fiscal 2000, (ii)
$15.0 million reduction in a long-term facility lease obligation for a
domestic business that was sold, (iii) settlements of obligations at less
than recorded amounts, and (iv) losses in excess of established reserves
related to the sale of domestic entities.
The loss from discontinued operations of $798.2 million in fiscal 1999
included (i) allocated interest expense of approximately $30.0 million
based on Beloit's portion of the consolidated debt, (ii) restructuring
charges of $78.7 million in the third quarter and $3.6 million in the
fourth quarter, (iii) additional estimated losses on APP contracts of $87.0
million in the second quarter and $163.5 million in the third quarter, (iv)
additional expenses of $143.1 million in the third quarter reflecting the
effects of changes in other accounting estimates and (v) reorganization
expenses of $136.1 million in the third quarter associated with the closing
of a pulp and paper mill and the related rejection of a 15-year operating
lease. The Company did not record an income tax benefit with respect to the
1999 loss. See Note 12 - Income Taxes. The elements of the 1999 loss from
discontinued operations are discussed below.
|X| The restructuring charges primarily related to a strategic
reorganization of Beloit. This reorganization rationalized certain
product offerings from a full breadth of product lines to more
specific offerings. As part of the restructuring, outsourcing was
expected to increase significantly. The charge consisted of facility
closure charges including estimated amounts for reductions in assets
to net realizable values of $74.1 million and accruals for closing and
disposal costs of $8.2 million related to closing certain
manufacturing facilities, engineering offices and research and
development centers. In connection with these restructuring charges,
the Company expected to reduce headcount at Beloit by at least 600
employees. These actions included staff reductions in manufacturing,
engineering, marketing, product development and administrative support
functions.
|X| The additional estimated losses on APP contracts primarily related to
the Company's efforts to mitigate damages with respect to the APP
matter more fully discussed below and to improve short-term liquidity.
Beloit's Asian subsidiaries had sought to sell the assets associated
with two papermaking machines to alternative customers. The Company
recorded an $87.0 million reserve in the second quarter against the
decrease in realizable value of certain paper machines for Asian
customers, primarily the second two paper machines ordered by APP. The
Company recorded an additional $147.7 million reserve in the third
quarter to reflect the Company's determination that the foreseeable
market conditions for this type of large paper machine did not support
valuing these machines at greater than estimated liquidation values.
The Company also recorded a $15.8 million charge in the third quarter
for changes in estimates of costs associated with the first two
machines sold to APP.
|X| The additional estimated losses on contracts and other expenses
reflecting changes in other accounting estimates related to the
Company's provisions for excess and obsolete inventory, doubtful
accounts receivable, and anticipated losses on contracts. These
changes in estimates were based on the Company's best estimates of
costs to complete contracts, customer demand for new machines,
rebuilds and services, costs of financing, material and labor costs,
and overall levels of customer satisfaction with machine performance.
The need for these changes in estimates arose as a result of the
Chapter 11 filing and a combination of adverse factors impacting the
Company during the third quarter, including reductions in product line
offerings and material supply delays caused by prepetition liquidity
limitations and postpetition resupply timing difficulties. The third
quarter charges were originally classified in the consolidated
statement of operations as follows:
In thousands
--------------------------------------------------------------------
Charged to product development,
selling, and administrative expenses:
Allowance for doubtful accounts $ 35,900
---------
Charged to cost of sales:
Warranties and other 32,400
Excess and obsolete inventory 25,000
Losses on contracts 49,800
----------
107,200
----------
$ 143,100
==========
|X| Reorganization expenses of $136.1 million related to Princeton Paper
Company, LLC, ("Princeton Paper"), a subsidiary of Beloit and one of
the Debtors, who had, until July 1999, operated a pulp and paper mill
located in Fitchburg, Massachusetts (the "Mill"). Beloit originally
became responsible for the operations of Princeton Paper and the Mill
in 1997 through settlement of a dispute with the former owner of the
Mill and the holders of bonds which had been issued to finance the
Mill. Under that settlement, Princeton Paper committed to make lease
payments under a fifteen-year operating lease of the Mill. Beloit
guaranteed those obligations. On July 8, 1999, the Company obtained
authority from the Bankruptcy Court for Princeton Paper to fully cease
operating, and shortly thereafter the Mill was shut down.
Subsequently, the Company rejected the lease and settlement agreement,
pursuant to the Bankruptcy Code. The Company recorded a charge of
$82.1 million relating to the decision to close Princeton Paper
including a charge of $54.0 million relating to the rejection of the
lease.
During 1999, the Company recorded an estimated loss of $529.0 million on
the disposal of the Beloit Segment. The Company did not record an income
tax benefit associated with this estimated loss. See Note 12 - Income
Taxes. This estimated loss was comprised of the following:
In thousands
- ----------------------------------------------------------------------------
Estimated loss on the disposal of the businesses and assets $(472,118)
Accrued estimated operating losses and facility wind-down costs (43,304)
Accrued postpetition letters of credit, guarantees and sureties (12,500)
Accrued post-closing environmental costs (7,000)
Accrued employee termination costs (12,000)
Gain on curtailment of defined benefit pension plans 17,922
----------
Net estimated loss on the disposal of discontinued operations $(529,000)
=========
The elements of the estimated loss on the disposal of the segment are discussed
below.
|X| The estimated loss on the disposal of the Beloit businesses and assets of
$472.1 million anticipated that there would be approximately $243.2 million
in sales proceeds from the five sales agreements approved under the Court
Sales Procedure and an additional $34.4 million in proceeds, based
primarily on appraisals, from the disposition of the remaining 13 domestic
and 18 international operations to be sold or liquidated by the end
of the wind-down process.
|X| The accrual for estimated operating losses and wind-down costs represented
approximately $28.3 million in estimated operating losses from October 31,
1999 until sale of the facilities or operations otherwise cease and
approximately $15.0 million for the wind-down costs for facilities to be
sold or liquidated.
|X| The accrual for estimated additional costs under postpetition letters of
credit, guarantees and sureties of $12.5 million represented estimated
additional customer contract claims as a result of the divestiture plan.
|X| The accrual for estimated employee termination costs reflected estimated
severance and related benefits costs with respect to approximately 1,071
employees, the majority of whom received applicable notifications during
January 2000.
|X| The accrual for estimated post-closing environmental costs of $7.0 million
related to (i) cost estimates for the removal of asbestos and hazardous
wastes at certain facilities to be sold or closed and (ii) increased
estimated costs associated with the completion of certain remediation
activities at one of Beloit's domestic manufacturing facilities assuming
the activities would be performed by a buyer or subcontracted to a
third-party.
|X| The gain on the curtailment of defined benefit plans of $17.9 million
reflected the elimination of future years of service accruals.
At October 31, 2000, Beloit was contingently liable to banks, financial
institutions, and others for approximately $84.4 million for outstanding letters
of credit and bank guarantees. This amount was all issued by U.S. banks for U.S.
Beloit subsidiaries. Beloit also may have guaranteed performance of its
equipment at levels specified in sales contracts without the requirement of
letters of credit.
The assets and liabilities of discontinued operations are comprised of the
following:
In thousands October 31
- ---------------------------------------------------------------------------------------
2000 1999
--------- ---------
Assets:
Cash and cash equivalents $ 9,622 $ 19,290
Accounts receivable - net 17,642 153,761
Inventories 5,531 110,770
Other current assets 6,524 18,662
Property, plant and equipment - net 31,396 311,424
Other non-current assets 1,006 39,691
Goodwill and other intangibles -- 96,520
Allowance for estimated loss on disposal (56,490) (472,118)
--------- ---------
Total assets, representing estimated disposal cash proceeds $ 15,231 $ 278,000
========= =========
Liabilities:
Postpetition liabilities:
Trade accounts payable $ (12,351) $ (57,111)
Employee compensation and benefits (14,420) (14,605)
Accrued contract losses, restructuring costs and other (8,016) (76,859)
Funded debt and capitalized lease obligations -- (24,080)
Operating losses and facility wind-down costs (10,519) (43,304)
Postpetition letters of credit, guarantees and sureties (10,974) (12,500)
Employee termination costs -- (12,000)
Post-closing environmental costs (7,677) (7,000)
--------- ---------
Total postpetition liabilities (63,957) (247,459)
--------- ---------
Prepetition liabilities:
Trade accounts payable (89,438) (145,955)
Funded debt (2,471) (14,128)
Advance payments and progress billings (24,883) (125,696)
Accrued warranties (25,000) (34,054)
Princeton Paper lease (39,000) (54,000)
APP claims -- (46,000)
Pension and other (47,339) (53,437)
Minority interest (18,023) (21,536)
--------- ---------
Total prepetition liabilities (246,154) (494,806)
--------- ---------
Total liabilities, including liabilities subject to compromise $(310,111) $(742,265)
========= =========
* Total assets as of October 31, 2000 exclude a $16 million postpetition
intercompany receivable from Harnischfeger Industries, Inc. and the APP
Note. See Note 9 - Liabilities Subject to Compromise.
All intercompany accounts, including Beloit intracompany accounts, have been
eliminated in the Consolidated Financial Statements in accordance with generally
accepted accounting principles and are not included in the numbers above. While
such intercompany obligations are eliminated in the preparation of consolidated
financial statements, they remain obligations on a separate legal entity basis.
On September 21, 2000, the committee to represent the interests of creditors of
Harnischfeger and its non-Beloit subsidiaries and the committee appointed to
represent the interests of the creditors of Beloit and its subsidiaries reached
agreement to settle certain intercompany and intercreditor issues. The committee
settlement agreement has been incorporated into the Debtors' proposed plan of
reorganization. Under the committee settlement agreement, the Company and its
non-Beloit subsidiaries will receive nothing on account of their prepetition
intercompany claims, including the Company's $780 million claim against Beloit.
Beloit will receive nothing on account of its $9.95 million claim against P&H.
The committee settlement agreement also provides for (i) a sharing of
professional fees and expenses relating to the Beloit bankruptcy filing, (ii) an
agreement to limit claims against officers and directors, (iii) an agreement
that none of the Debtors will be substantively consolidated, (iv) an agreement
that Beloit and its subsidiaries are not entitled to compensation for certain
tax attributes, including tax loss carryforwards, and (v) an agreement by the
Company not to require the separation or termination of two pension plans
covering employees of Beloit and its subsidiaries. The committee settlement
agreement contemplates that the Company's plan be effective on or before March
15, 2001.
Other Beloit Matters:
[X] The Potlatch lawsuit, filed originally in 1995, related to a 1989 purchase
of pulp line washers supplied by Beloit for less than $15 million. In June
1997, a Lewiston, Idaho jury awarded Potlatch $95 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. Potlatch filed a motion with the
Bankruptcy Court to lift the stay. The Company opposed this motion and the
motion was denied.
[X] 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. Omega has
represented to the Bankruptcy Court that it is seeking a total of $36
million in damages. As of October 31, 2000, the Company was not able to
assess its ultimate liability, if any, in the matter.
Material Handling Segment
On March 30, 1998, the Company completed the sale of approximately 80% of the
common stock of the Company's P&H material handling ("Material Handling")
segment to Chartwell Investments, Inc. in a leveraged recapitalization
transaction. As such, the accompanying financial statements have been
reclassified to reflect Material Handling as a discontinued operation. The
Company retained approximately 20% of the outstanding common stock and 11% of
the outstanding voting securities of Material Handling and held one director
seat in the new company until December, 2000. In addition, the Company licensed
Material Handling to use the "P&H" trademark on existing Material
Handling-produced products on a worldwide basis for periods specified in the
agreement for a royalty fee payable over a ten year period. The material
handling segment recorded revenues of $130.5 million in 1998 prior to the
divestiture. Income (loss) from discontinued operations for the company for
fiscal 1999 included income of $4.4 million in 1998 derived from this segment.
The Company reported a $151.5 million after-tax gain on the sale of this
discontinued operation in the second quarter of fiscal 1998. Proceeds consisted
of $341.0 million in cash and preferred stock, originally valued at $4.8
million, with a 12.25% payment-in-kind dividend, and $7.2 million in common
stock that was not reflected in the Company's balance sheet or gain calculations
due to the nature of the leveraged recapitalization transaction. Material
Handling subsequently issued additional shares of common stock, reducing the
Company's holding to 15.6% of the outstanding common stock. In view of
continuing operating losses by Material Handling, the Company reduced to zero
the $5.4 million carrying value of its investment in this business during the
third quarter of 1999. Material Handling filed for Chapter 11 bankruptcy
protection on May 17, 2000.
Material Handling and its affiliates have asserted more than 200 claims against
the Debtors in their bankruptcy cases and Debtors have filed a similar number of
claims against Material Handling in Material Handling's bankruptcy case. Most of
Material Handling's claims against the Debtors are duplicative and the Company
has objected to many of these claims. The liquidated claimed amount is
approximately $0.5 million, although all of the claims assert additional
unliquidated amounts. In addition, Material Handling has advised Debtors that it
may assert additional claims for approximately $340 million based on theories
that the transactions in which Material Handling was sold to Chartwell
Investments, Inc. are voidable. The Company disputes the assertion of any such
claims.
4. Changes in Estimates
The Company's provisions for excess and obsolete inventory, warranties and
doubtful accounts receivable are based on the Company's best estimates of
customer demand for new machines, rebuilds and services, costs of
financing, material and labor costs, and overall levels of customer
satisfaction with machine performance. The Chapter 11 filing in the third
quarter of fiscal 1999 impacted operating results in several ways. Supplier
shipments in the latter part of fiscal 1999 were lower than expected
resulting in lost sales and production inefficiencies. The decision was
made to discontinue several equipment models that were either not required
by customers or that no longer provided sufficient margins to be
attractive. Collection difficulties increased in the latter part of fiscal
1999 and continued in fiscal 2000 as some customers delayed paying
outstanding receivables due to their own operating difficulties and their
concerns about the Company's financial condition and continued ability to
fulfill commitments.
The charges during the third quarter of fiscal 1999 were as follows:
In thousands
-------------------------------------------------------------
Charged to product development,
selling, and administrative expenses:
Allowance for doubtful accounts $ 5,300
----------
Charged to cost of sales:
Warranties and other 25,000
Excess and obsolete inventory 38,200
---------
63,200
---------
$ 68,500
=========
5. Strategic and Financing Initiatives
The Company incurred $7.7 million of charges in fiscal 1999 related to
certain consulting and legal costs associated with strategic financing and
business alternatives investigated prior to the Chapter 11 filing.
6. Reorganization Items
Reorganization expenses are comprised of items of income, expense and loss
that were realized or incurred by the Company as a result of its decision
to reorganize under Chapter 11 of the Bankruptcy Code. Reorganization
expenses and cash payments related to continuing operations during fiscal
2000 and fiscal 1999 were as follows:
In thousands
- -----------------------------------------------------------------------------------------------
Expenses Cash payments
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
Professional fees directly related to the filing $ 39,061 $ 14,457 $ 33,644 $ 2,567
Amortization of DIP financing costs 10,602 3,125 2,563 15,000
Accrued retention plan costs 3,603 730 2,350 --
Write-down of property to be sold 9,000 -- -- --
Settlement of performance guarantees 2,991 -- 2,991 --
Rejected equipment leases 1,399 2,322 -- --
Interest earned on DIP proceeds (1,268) (330) (1,268) (330)
-------- -------- -------- --------
$ 65,388 $ 20,304 $ 40,280 $ 17,237
======== ======== ======== ========
7. Charge Related to Executive Changes
A charge to earnings of $19.1 million was made in fiscal 1999 in connection
with certain management organizational changes that occurred during the
third quarter of that year. The charge was primarily associated with
supplemental retirement, restricted stock, and long-term compensation plan
obligations. This charge consisted of $0.6 million paid prior to the
Chapter 11 filing, adjustments of $10.0 million reducing the carrying value
of the applicable plan assets, and an accrued liability of $8.5 million
which has been classified in the consolidated balance sheet as part of the
liabilities subject to compromise.
8. Restructuring Charges
During fiscal 1999, restructuring charges of $12.0 million were recorded
for rationalization of certain of Joy's original equipment manufacturing
facilities and the reorganization and reduction of its operating structure
on a global basis. Costs of $7.3 million were charged 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
(third quarter $0.9 million; fourth quarter $3.8 million) were made for
severance of approximately 240 employees.
During fiscal 2000, additional charges amounting to $6.1 million were
recorded, primarily for severance associated with facilities
rationalization and to a lesser extent for severance associated with global
operating structure reorganization and reduction. A prior reserve amounting
to $1.6 million was reversed as they were no longer needed for facility
rationalization.
The Company anticipates that the restructuring reserves will be
substantially utilized within the next year.
Details of these restructuring charges are as follows:
In thousands
- --------------------------------------------------------------------------------
Original Reserve 10/31/99 Reserve Reserve 10/31/00
Reserve Utilized Reserve Adjusment Utilized Reserve
------- ------- -------- ------- -------- -------
Employee severance $ 4,727 $ 718 $ 4,009 $ 6,107 $ 8,580 $ 1,536
Facility closures 7,270 -- 7,270 (1,589) 5,520 161
------- ------- ------- ------- ------- -------
Total $11,997 $ 718 $11,279 $ 4,518 $14,100 $ 1,697
======= ======= ======= ======= ======= =======
9. Liabilities Subject to Compromise
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All
amounts below 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 Company. Under a
confirmed plan of reorganization, prepetition claims may be paid and
discharged at amounts substantially less than their allowed amounts. Under
Debtors' proposed plan of reorganization, payment of prepetition claims of
some Debtors will 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:
October 31, 2000
----------------------------------------
Continuing Discontinued
In thousands Operations Operations Total
- ---------------------------------------------- ----------- ------------- ------------
Trade accounts payable $ 103,085 $ 70,645 $ 173,730
Accrued interest expense, as of June 6, 1999 17,285 - 17,285
Accrued executive changes expense 8,518 - 8,518
Put obligation to preferred shareholders
of subsidiary 5,457 - 5,457
8.9% Debentures, due 2022 75,000 - 75,000
8.7% Debentures, due 2022 75,000 - 75,000
7.25% Debentures, due 2025
(net of discount of $1,224 and $1,218) 148,776 - 148,776
6.875% Debentures, due 2027
(net of discount of $102 and $100) 149,898 - 149,898
Senior Notes, Series A through D, at
interest rates of
between 8.9% and 9.1%,
due 1999 to 2006 69,546 - 69,546
Revolving credit facility 500,000 - 500,000
IRC lease (Princeton Paper) - 39,000 39,000
APP claims - - -
Industrial Revenue Bonds, at interest
rates of between
5.9% and 8.8%, due 1999 to 2017 18,615 2,471 21,086
Notes payable 20,000 - 20,000
Other 12,495 - 12,495
Advance payments and progress billing - 24,883 24,883
Accrued warranties - 25,000 25,000
Accrued project costs - - -
Minority interest - 18,023 18,023
Pension and other - 66,132 66,132
APP letter of credit 17,000 - 17,000
----------- ------------- ------------
$ 1,220,675 $ 246,154 $ 1,466,829
=========== ============= ============
October 31, 1999
-------------------------------------
Continuing Discontinued
In thousands Operations Operations Total
- ---------------------------------------------- ----------- ------------- ---------
Trade accounts payable $ 95,950 $ 106,729 $202,679
Accrued interest expense, as of June 6, 1999 17,315 15 17,330
Accrued executive changes expense 8,518 -- 8,518
Put obligation to preferred shareholders
of subsidiary 5,457 -- 5,457
8.9% Debentures, due 2022 75,000 -- 75,000
8.7% Debentures, due 2022 75,000 -- 75,000
7.25% Debentures, due 2025
(net of discount of $1,224 and $1,218) 148,782 -- 148,782
6.875% Debentures, due 2027
(net of discount of $102 and $100) 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
Revolving credit facility 500,000 -- 500,000
IRC lease (Princeton Paper) - 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 14,128 32,743
Notes payable 20,000 -- 20,000
Other 9,471 -- 9,471
Advance payments and progress billing - 125,696 125,696
Accrued warranties - 34,054 34,054
Accrued project costs - 39,226 39,226
Minority interest - 21,536 21,536
Pension and other - 53,422 53,422
APP letter of credit - -- --
----------- ------------ ---------
$ 1,193,554 $ 494,806 $1,688,360
=========== ============ ==========
As a result of the bankruptcy filing, principal and interest payments may
not be made on prepetition debt without Bankruptcy Court approval or until
a reorganization plan defining the repayment terms has been confirmed. The
differences in recorded prepetition liabilities subject to compromise as of
October 31, 2000 as compared to October 31, 1999 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 October 31, 2000 was $101.7 million of
which $70.5 million relates to 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 postpetition
interest with respect to unsecured prepetition claims.
Contingent Liabilities:
Contingent liabilities as of the Chapter 11 filing date are subject to
compromise. At October 31, 2000, the Company was contingently liable to
banks, financial institutions and others for approximately $191.9 million
for outstanding letters of credit, bank guarantees and surety bonds
securing performance of sales contracts and other guarantees in the
ordinary course of business. Of the $191.9 million, approximately $84.5
million was issued at the request of the Company on behalf of Beloit and
approximately $107.4 million was issued at the request of Debtor entities
prior to the bankruptcy filing. Included in the $191.9 million outstanding
as of October 31, 2000 were $35.5 million issued under the DIP Facility
(See Note 10 - Borrowings and Credit Facilities). Additionally, at October
31, 2000, there were $22.2 million of outstanding letters of credit or
other guarantees issued by non-U.S. banks for non-U.S. subsidiaries.
As of January 11, 2001, 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. Accordingly, it is 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
Debtors' proposed plan of reorganization provides for the rejection of
virtually all of Beloit's prepetition executory contracts.
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 material adverse effect on the
Company's consolidated financial position. Generally, litigation against
Debtors related to "claims", as defined by the Bankruptcy Code, 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 January 11, 2001, the Company
believes APP is not in default with respect to the receivables. On October
25, 2000, the Bankruptcy Court approved a settlement with APP which
resolved disputes that had arisen between Beloit's Asian subsidiaries and
APP in connection with its contracts for the first two paper making
machines. Under this settlement, APP and certain of its affiliates drew $17
million from two letters of credit issued on behalf of the Company and APP
and certain of its affiliates agreed to pay Beloit $0.8 million.
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 in
the form of $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%. On October 2, 2000,
Beloit received the first interest payment of $8.3 million. Beloit retained
Merrill Lynch to assist in a possible sale of the note. In view of the
possible sale of 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 October 31, 2000. The value of the note and its effect on
the financial statements will be recognized in the period that the note is
sold or as amortization payments are made under the terms of the note. 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 rights to take possession of
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.
10. Borrowings and Credit Facilities
Direct borrowings and capital lease obligations at October 31, consisted of
the following:
In thousands 2000 1999
------------------------------------------- ---------- ----------
Domestic:
DIP Facility $ 30,000 $ 167,000
Capital leases 2,259 227
Foreign:
Australian term loan, due 2001 47,106 57,734
Short term notes payable and bank overdrafts 30,965 86,539
Capital leases 1,568 1,165
--------- ---------
111,898 312,665
Less: Amounts due within one year (108,774) (144,568)
--------- ---------
Long-term Obligations $ 3,124 $ 168,097
========= =========
DIP Facility
On July 8, 1999 the Bankruptcy Court approved a two-year, $750 million
Revolving Credit, Term Loan and Guarantee Agreement underwritten by the
Chase Manhattan Bank (the "DIP Facility"). In May, 2000, the Company
voluntarily reduced the size of the DIP Facility to $350 million and on
July 6, 2000 an order was entered by the Bankruptcy Court approving an
amendment to the DIP Facility modifying the DIP Facility to consist of a
Tranche A sub-facility of $250 million and a Tranche B sub-facility of $100
million. The Tranche A sub-facility has a final maturity of June 6, 2001
(the original maturity date), and the Tranche B sub-facility matured on
December 31, 2000. Additionally, as permitted by the original order
authorizing the DIP Facility, on August 3, 2000 the DIP Facility was
further amended to, among other things, effect the syndication of the DIP
Facility among a group of nine lenders, with Chase Manhattan Bank retaining
the agent role.
Proceeds from the DIP Facility may be used to fund postpetition working
capital and for other general corporate purposes during the term of the DIP
Facility and to pay up to $35 million of prepetition claims of critical
vendors. Approximately $8.3 million of such disbursements have been made.
Under the amended terms of the DIP Facility, the Company is permitted to
make loans and issue letters of credit in favor of or on behalf of foreign
subsidiaries for specified limited purposes, including individual limits
for loans and advances of up to $75 million for working capital needs and
$100 million for loans and letters of credit used for support or repayment
of existing foreign credit facilities, and an aggregate limit of $150
million for all such loans and letters of credit, including any stand-by
letters of credit issued to support foreign business opportunities.
Beginning June 1, 2000, the amended DIP Facility imposed monthly minimum
EBITDA tests and quarterly limits on capital expenditures.
DIP Facility lenders 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 DIP Facility, payable monthly
in arrears. The DIP Facility matures on the earlier of the substantial
consummation of a plan of reorganization or June 6, 2001.
In proceedings filed with the Bankruptcy Court, the Company 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:
|X| The Company 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 in an aggregate amount in
excess of $90 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 stipulated $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 Creditors Committee regarding the Beloit divestiture
and liquidation process. All such reports and notices have been
provided to the Creditors Committee as agreed.
|X| In addition, the Company 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. In accordance with this requirement, the Company has
provided such notice in connection with the refinancing of the credit
facilities of certain foreign subsidiaries.
|X| The Company also 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 Funds would be entitled to receive periodic financial
statements for Joy. As of October 31, 1999, MFS Funds is entitled to
receive periodic financial statements for Joy.
As of January 31, 2000, the Company and the Chase Manhattan Bank entered
into a Waiver and Amendment Letter which waived compliance with certain
negative covenants of the DIP Facility as they related to the sale of the
assets of Beloit and among other things, amended the EBITDA tests in the
DIP Facility to levels that are appropriate for the Company's continuing
businesses. Continuation of unfavorable business conditions or other events
could require the Company to seek further modifications or waivers of
certain covenants of the DIP Facility. In such event, there is no certainty
that the Company 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 the sale of Beloit assets. While
the Company expects that cash flows from operations and the DIP Facility
will provide sufficient working capital to operate its businesses, there
can be no assurances that such sources will prove to be sufficient. The
Debtors are jointly and severally liable under the DIP Facility. At October
31, 2000, $30 million in direct borrowings had been drawn under the DIP
Facility and are classified as a short-term obligation on the Company's
Balance Sheet. Additionally, letters of credit in the face amount of $35.6
million had been issued under the DIP Facility.
Foreign Credit Facilities
As of October 31, 2000, short-term bank credit lines of foreign
subsidiaries amounted to $81.6 million. Outstanding borrowings against
these were $38.1 million at a weighted-average interest rate of 9.29%.
There were no compensating balance requirements under these lines of
credit.
One of the Company's Australian subsidiaries maintains a A$90.0 million (US
$47.1 million) 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. As of October 31, 2000, the loan was fully drawn. The
loan matures in October, 2001.
11. Acquisitions
On March 19, 1998, the Company completed the acquisition of Horsburgh &
Scott ("H&S") for a purchase price of $40.2 million. H&S is a manufacturer
of gears and gear cases, and is also involved in the distribution of parts
and service to the mining industry. The acquisition was accounted for as a
purchase transaction, with the purchase price allocated to the fair value
of specific assets acquired and liabilities assumed. Resultant goodwill of
$31.7 million is being amortized over 40 years.
12. Income Taxes
The consolidated provision (benefit) for income taxes included in the
Consolidated Statement of Operations for the years ended October 31
consisted of the following:
In thousands
-----------------------------------------------------------------
2000 1999 1998
--------- --------- ---------
Current provision (benefit):
Federal $ (15,000) $ -- $ 2,081
State 850 230 4,633
Foreign 11,150 7,836 5,998
--------- --------- ---------
Total current (3,000) 8,066 12,712
--------- --------- ---------
Deferred provision (benefit):
Federal -- 101,824 (108,564)
State and foreign -- 112,410 (17,193)
--------- --------- ---------
Total deferred -- 214,234 (125,757)
--------- --------- ---------
Total consolidated income tax
provision (benefit) $ (3,000) $ 222,300 $(113,045)
========= ========= =========
During the fourth quarter of fiscal 2000, the Company recorded a $15
million tax benefit related to a reduction in unallocated tax reserves.
This benefit results from favorable developments and settlements of various
foreign tax issues.
The income tax provision (benefit) included in the Consolidated Statement
of Operations for the years ended October 31 consisted of the following:
In thousands
--------------------------------------------------------------------------
2000 1999 1998
-------- --------- ----------
Continuing operations $ (3,000) $ 220,448 $ (24,608)
Income (loss) from and net gain
(loss) on disposal of
discontinued operations -- 1,852 (88,437)
--------- --------- ---------
$ (3,000) $ 222,300 $(113,045)
========= ========= =========
The components of income (loss) for the Company's domestic and foreign
operations for the years ended October 31 were as follows:
In thousands
----------------------------------------------------------------
2000 1999 1998
--------- --------- ---------
Domestic income (loss) $ (54,111) $ (83,462) $ (25,284)
Foreign income (loss) 22,782 (48,221) 16,077
--------- --------- ---------
Pre-tax income (loss) from
continuing operations $ (31,329) $(131,683) $ (9,207)
========= ========= =========
A reconciliation between the income tax provision (benefit) recognized in
the Company's Consolidated Statement of Operations and the income tax
provision (benefit) computed by applying the statutory federal income tax
rate to the income (loss) from continuing operations for the years ended
October 31 were as follows:
In thousands
-----------------------------------------------------------------------
2000 1999 1998
--------- --------- ----------
Income tax computed at federal
statutory tax rate $ (10,965) $ (46,089) $ (3,223)
Goodwill amortization not
deductible for tax purposes 968 968 3,290
Differences in foreign and U.S.
tax rates (4,080) 17,726 (1,896)
Difference in Foreign Sales
Corporation and U.S. tax rate -- -- (2,738)
State income taxes, net of federal
tax impact 552 150 878
General business and foreign tax
credits utilized -- (1,500) (1,500)
Resolution of foreign tax issues (15,000) -- (10,600)
Benefit related to capital
transaction -- -- (15,410)
Other items - net 546 1,088 6,591
Valuation allowance 24,979 248,105 --
--------- --------- ---------
$ (3,000) $ 220,448 $ (24,608)
========= ========= =========
Temporary differences and carryforwards, which gave rise to the net
deferred tax asset at October 31, are as follows:
In thousands
------------------------------------------------------------------
2000 1999
--------- ---------
Inventories $ 3,863 $ (1,863)
Reserves not currently deductible 21,280 9,327
Depreciation and amortization in excess of
book expense (7,776) (21,716)
Employee benefit related items 30,947 25,119
Tax credit carryforwards 42,496 43,627
Tax loss carryforwards 532,983 464,792
Other - net (139,933) (131,965)
Valuation allowance (483,860) (387,321)
--------- ---------
Net deferred tax asset $ -- $ --
========= =========
At October 31, 1999, the Company had general business tax credits of $11.0
million expiring in 2011 through 2013, foreign tax credit carryforwards of
$22.8 million expiring in 2002 through 2003, and alternative minimum tax
credit carryforwards of $8.7 million which do not expire. In addition, tax
loss carryforwards consisted of federal carryforwards of $869.1 million
expiring in 2018 through 2019, tax benefits related to foreign
carryforwards of $26.4 million with various expiration dates, and tax
benefits related to state carryforwards of $94.9 million with various
expiration dates. The Company estimates for the year ended October 31,
2000, that it will generate tax loss carryforwards consisting of federal
carryforwards of $300 million expiring in 2020, tax benefits related to
foreign carryforwards of $2.2 million with various expiration dates, and
tax benefits related to state carryforwards of $21.5 million with various
expiration dates. The carryforwards will be available for the reduction of
future income tax liabilities of the Company and its subsidiaries. These
carryforwards may be reduced upon emergence from bankruptcy due to the
rules and regulations in the Internal Revenue Code. A valuation allowance
has been recorded against all of these carryforwards because of possible
reduction and uncertain utilization. Because the Company's proposed plan of
reorganization provides for certain substantial changes in the Company's
ownership, there will be annual limitations on the amount of the federal
carryforwards which the Company may be able to utilize on its income tax
returns. This annual limitation is an amount equal to the value of the
stock of the Company immediately before the ownership change adjusted to
reflect the increase in value of the Company, resulting from the
cancellation of creditors' claims, multiplied by a federally mandated
long-term tax exempt rate.
The Company believes that realization of net operating loss and tax credit
benefits in the near term is unlikely. If the Company's proposed plan of
reorganization is confirmed, it will result in a significantly modified
capital structure and SOP 90-7 will require the Company to apply "fresh
start" accounting. 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.
U.S. income taxes, net of foreign taxes paid or payable, have been provided
on the undistributed profits of foreign subsidiaries, except in those
instances where such profits are expected to be permanently reinvested.
Such unremitted earnings of subsidiaries which have been or are intended to
be permanently reinvested were $276 million at October 31, 2000. If for
some reason not presently contemplated such profits were to be remitted or
otherwise become subject to U.S. income tax, the Company expects to incur
tax at substantially less than the U.S. income tax rate as a result of net
operating loss carryforwards and foreign tax credits that would be
available.
Net income tax refunds were $9.8 million in fiscal 2000. Income taxes paid
were $1.1 million and $45.0 million for fiscal 1999 and 1998, respectively.
13. Accounts Receivable
Accounts receivable at October 31 consisted of the following:
In thousands
-----------------------------------------------
2000 1999
--------- ---------
Trade receivables $ 156,792 $ 181,355
Unbilled receivables 28,490 33,195
Allowance for doubtful
accounts (8,131) (11,720)
--------- ---------
$ 177,151 $ 202,830
========= =========
Harnischfeger Industries, Inc.
(Debtor-in-Possession as of June 7, 1999)
Notes to Consolidated Financial Statements
October 31, 2000
- --------------------------------------------------------------------------------
14. Inventories
Consolidated inventories at October 31 consisted of the following:
In thousands
-----------------------------------------------------------------
2000 1999
--------- ---------
Finished goods $ 208,473 $ 205,959
Work in process and purchased parts 224,554 256,697
Raw materials 29,127 34,271
--------- ---------
Total (approximates current cost) 462,154 496,927
Less excess of current cost over stated
LIFO value (51,823) (49,272)
--------- ---------
$ 410,331 $ 447,655
========= =========
Inventories valued using the LIFO method represented approximately 64% and
71% of consolidated inventories at October 31, 2000 and 1999, respectively.
15. Interest Expense - Net
Net interest expense for the twelve months ended October 31 consists of the
following:
In thousands
---------------------------------------------------------
2000 1999 1998
-------- -------- --------
Interest income $ 4,479 $ 2,283 $ 3,763
Interest expense (28,440) (31,148) (74,363)
-------- -------- --------
Interest expense - net $(23,961) $(28,865) $(70,600)
======== ======== ========
Net interest expense does not include contractual interest expense of
$70.5 million and $31.2 million for fiscal 2000 and 1999, respectively,
relative to prepetition obligations. 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. Cash paid for interest in
2000, 1999 and 1998 was $30.5 million, $22.0 million and $86.3 million,
respectively.
16. 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:
In thousands except per share amounts October 31,
- ----------------------------------------------------------------------------------------------
2000 1999 1998 (1)
------------ ------------ -----------
Basic Earnings (Loss):
- --------------------------------------------
Income (loss) from continuing operations $ (29,553) $ (353,088) $ 14,366
Income (loss) from discontinued operations 66,200 (798,180) (184,399)
Net gain (loss) on disposal of discontinued
operations 227,977 (529,000) 151,500
----------- ----------- ---------
Net income (loss) $ 264,624 $(1,680,268) $ (18,533)
=========== =========== =========
Basic weighted average common shares outstanding 46,717 46,329 46,445
----------- ----------- ---------
Basic Earnings (Loss) Per Share:
- --------------------------------------------
Income (loss) from continuing operations $ (0.63) $ (7.62) $ 0.31
Income (loss) from and net gain (loss) on disposal
of discontinued operations 6.30 (28.65) (0.71)
----------- ----------- ---------
Net income (loss) $ 5.67 $ (36.27) $ (0.40)
=========== =========== =========
Diluted Earnings (Loss):
- --------------------------------------------
Income (loss) from continuing operations $ (29,553) $ (353,088) $ 14,366
Income (loss) from discontinued operations 66,200 (798,180) (184,399)
Net gain (loss) on disposal of
discontinued operations 227,977 (529,000) 151,500
---------- ----------- --------
Net income (loss) $ 264,624 $(1,680,268) $ (18,533)
=========== =========== =========
Basic weighted average common shares outstanding 46,717 46,329 46,445
Assumed exercise of stock options -- -- --
----------- ----------- ---------
Diluted weighted average common shares outstanding 46,717 46,329 46,445
----------- ----------- ---------
Diluted Earnings (Loss) Per Share:
- --------------------------------------------
Income (loss) from continuing operations $ (0.63) $ (7.62) $ 0.31
Income (loss) from and net gain (loss) on
disposal of discontinued operation 6.30 (28.65) (0.71)
----------- ----------- ---------
Net income (loss) $ 5.67 $ (36.27) $ (0.40)
=========== =========== =========
_______________
(1) Amounts for 1998 have been restated to reflect the Beloit discontinued
operation.
Options to purchase approximately 663,000 and 1,523,000 shares of common
stock were outstanding at October 31, 2000 and 1999, respectively, but were
not included in the computation of diluted earnings per share because the
additional shares would reduce the (loss) per share amount from continuing
operations, and therefore, the effect would be anti-dilutive.
17. Pensions and Other Employee Benefits
The Company and its subsidiaries have a number of defined benefit, defined
contribution and government mandated pension plans covering substantially
all employees. Benefits from these plans are based on factors which include
various combinations of years of service, fixed monetary amounts per year
of service, employee compensation during the last years of employment and
the recipient's social security benefit. The Company's funding policy with
respect to its qualified plans is to contribute annually not less than the
minimum required by applicable law and regulation nor more than the amount
which can be deducted for income tax purposes. The Company also has a
nonqualified supplemental pension plan which is based on credited years of
service and compensation during the last years of employment.
Certain foreign plans, which supplement or are coordinated with government
plans, many of which require funding through mandatory government
retirement or insurance company plans, have pension funds or balance sheet
accruals which approximate the actuarially computed value of accumulated
plan benefits as of October 31, 2000 and 1999.
The Company recorded additional minimum pension liabilities of $5.2 million
and $7.1 million in 2000 and 1999, respectively, to recognize the unfunded
accumulated benefit obligations of certain plans. Corresponding amounts are
required to be recognized as intangible assets to the extent of the
unrecognized prior service cost and the unrecognized net transition
obligation on an individual plan basis. Any excess of the minimum pension
liability above the intangible asset is recorded as a separate component
and reduction in shareholders equity. Intangible pension assets of $0.5
million and $0.7 million were recognized in 2000 and 1999, respectively.
The balance of $4.6 million and $6.4 million in 2000 and 1999,
respectively, was charged to shareholders equity.
Prior period financial statements included amounts for Sandusky
International Inc. and subsidiaries ("Sandusky"), a 50% owned consolidated
subsidiary of Beloit. Due to the classification of Beloit as a discontinued
operation, amounts related to Sandusky have been excluded from current and
prior period amounts.
Total pension (income) expense for all defined benefit plans was ($4.7
million), $1.9 million and $5.3 million in 2000, 1999 and 1998,
respectively. Total pension expense for all defined contribution plans was
$1.3 million, $5.6 million and $6.0 million in 2000, 1999 and 1998,
respectively.
Net periodic pension costs for U.S. plans and plans of subsidiaries outside
the United States included the following components:
In thousands
- -------------------------------------------------------------------------------------------------------------------
U.S. Defined Non-U.S. Defined
Benefit Plans Benefit Plans
--------------------------------- -------------------------------
--------------------------------- -------------------------------
Components of Net 2000 1999 1998 2000 1999 1998
Periodic Benefit Cost
Service cost $ 9,900 $ 14,453 $ 14,667 $ 5,162 $ 6,721 $ 7,632
Interest cost 35,994 35,580 34,355 22,285 27,182 28,031
Expected return on assets (45,548) (42,577) (39,981) (36,394) (42,245) (39,547)
Amortization of:
Transition obligation(asset) 325 580 580 (363) (746) (753)
Prior service cost 2,290 3,958 3,048 222 203 203
Actuarial (gain)loss 32 276 331 106 144 133
------- -------- -------- -------- -------- --------
Periodic benefit cost before
curtailment and termination
charges (credits) 2,993 12,270 13,000 (8,982) (8,741) (4,301)
Curtailment and termination
charges (credits):
Special termination benefit
charge(credit) -- 1,150 793 -- -- --
Curtailment charge(credit) -- (17,922) (311) (2,466) -- --
Settlement charge(credit) -- -- -- 16,265 -- --
------- ------- ------- ------- ------ -------
Total net periodic benefit cost 2,993 (4,502) 13,482 4,817 (8,741) (4,301)
(Charges) credits allocated to
discontinued operations 1,385 10,856 (7,096) (15,313) 1,791 1,097
------- -------- -------- -------- ------- --------
Total net periodic benefit cost
of continuing operations $ 4,378 $ 6,354 $ 6,386 $(10,496) $(6,950) $ (3,204)
======= ======== ======== ======== ======= ========
In thousands
- ----------------------------------------------------------------------------------------------------------
U.S. Nonqualified
Benefit Plans Total
------------------------------ ------------------------------
Components of Net 2000 1999 1998 2000 1999 1998
Periodic Benefit Cost
Service cost $ 295 $ 520 $ 439 $ 15,357 $ 21,694 $ 22,738
Interest cost 666 792 1,022 58,945 63,554 63,408
Expected return on assets -- -- -- (81,942) (84,822) (79,528)
Amortization of:
Transition obligation(asset) 46 46 73 8 (120) (100)
Prior service cost 60 60 96 2,572 4,221 3,347
Actuarial (gain)loss 315 509 455 453 929 919
------- -------- -------- ------- ------- -------
Periodic benefit cost before 1,382 1,927 2,085 (4,607) 5,456 10,784
curtailment and termination
charges (credits)
Curtailment and termination
charges (credits):
Special termination benefit
charge(credit) -- -- -- -- 1,150 793
Curtailment charge(credit) -- -- -- (2,466) (17,922) (311)
Settlement charge(credit) -- (3,214) -- 16,265 (3,214) --
------- -------- -------- ------- ------- ------
Total net periodic benefit cost 1,382 (1,287) 2,085 9,192 (14,530) 11,266
(Charges) credits allocated to
discontinued operations -- -- -- (13,928) 12,647 (5,999)
------- -------- -------- ------- ------- -------
Total net periodic benefit cost
of continuing operations $ 1,382 $ (1,287) $ 2,085 $ (4,736) $ (1,883) $ 5,267
======== ======== ======= ======== ======== =======
Changes in the projected benefit obligations and pension plan assets
relating to the Company's defined benefit pension plans, together with a
summary of the amounts recognized in the Consolidated Balance Sheet as of
October 31 are set forth in the following table:
US Defined Non-US Defined
In thousands Benefit Plans Benefit Plans
- ------------------------------------------------------------------------------------- ------------------------------
2000 1999 2000 1999
Change in Benefit Obligation
Net benefit obligation at beginning of year $ 467,938 $ 508,347 $ 411,528 $ 423,471
Service cost 9,900 14,453 5,162 6,721
Interest cost 35,994 35,580 22,285 27,182
Plan participants' contributions - - 1,448 2,673
Plan amendments 3,120 - - (10,163)
Actuarial (gain)loss 3,264 (30,590) 11,062 (5,937)
Currency fluctuations - - (44,012) (7,744)
Acquisitions/divestitures - - (84,840) -
Curtailments - (33,937) - -
Special termination benefits - 1,150 - -
Gross benefits paid (32,270) (27,065) (20,401) (24,675)
--------- --------- --------- ---------
Net benefit obligation at end of year $ 487,946 $ 467,938 $ 302,232 $ 411,528
========= ========= ========= =========
Change in Plan Assets
Fair value of plan assets at beginning of year $ 489,396 $ 457,414 $ 462,198 $ 418,245
Actual return on plan assets 35,756 57,129 49,633 66,884
Currency fluctuations - - (49,804) (7,910)
Employer contributions 6,310 1,918 4,610 6,980
Plan participants' contributions - - 1,448 2,673
Acquisitions/divestitures - - (99,090) -
Gross benefits paid (32,270) (27,065) (20,401) (24,675)
--------- --------- ---------- ---------
Fair value of plan assets at end of year $ 499,192 $ 489,396 $ 348,594 $ 462,197
========= ========= ========= =========
Funding Status, Realized and Unrealized Amounts
Funded status at end of year $ 11,246 $ 21,458 $ 46,361 $ 50,669
Unrecognized net actuarial (gain)loss (15,384) (28,409) (8,206) (3,959)
Unrecognized prior service cost 22,363 21,533 1,971 3,677
Unrecognized net transition obligation(asset) 169 494 (757) (5,412)
-------- -------- --------- --------
Net amount recognized at end of year $ 18,394 $ 15,076 $ 39,369 $ 44,975
======== ======== ======== ========
Amounts recognized in the Consolidated
Balance Sheet consist of:
Prepaid benefit cost $ 18,394 $ 4,971 $ 44,222 $ 37,084
Accrued benefit liability - - (4,853) (5,821)
Additional minimum liability (1,448) (2,211) (650) (943)
Intangible asset - - 89 150
Accumulated other comprehensive income 1,448 2,211 561 793
-------- ------- -------- --------
18,394 4,971 39,369 31,263
Discontinued operations - 10,105 - 13,712
-------- ------- -------- --------
Net amount recognized at the end of year $ 18,394 $15,076 $39,369 $44,975
======== ======= ======= =======
U.S. Nonqualified
In thousands Benefit Plans Total
- ---------------------------------------------------------------------------------------- -----------------------
2000 1999 2000 1999
Change in Benefit Obligation
Net benefit obligation at beginning of year $ 10,971 $ 15,978 $ 890,437 $ 947,796
Service cost 295 520 15,357 21,694
Interest cost 667 792 58,946 63,554
Plan participants' contributions - - 1,448 2,673
Plan amendments - - 3,120 (10,163)
Actuarial (gain)loss (1,975) (948) 12,351 (37,475)
Currency fluctuations - - (44,012) (7,744)
Acquisitions/divestitures - (4,804) (84,840) (4,804)
Curtailments - - - (33,937)
Special termination benefits - - - 1,150
Gross benefits paid (597) (567) (53,268) (52,307)
------- -------- --------- ---------
Net benefit obligation at end of year $ 9,361 $ 10,971 $ 799,539 $ 890,437
======= ======== ========= =========
Change in Plan Assets
Fair value of plan assets at beginning of year $ - $ - $ 951,594 $ 875,659
Actual return on plan assets - - 85,389 124,013
Currency fluctuations - - (49,804) (7,910)
Employer contributions 597 567 11,517 9,465
Plan participants' contributions - - 1,448 2,673
Acquisitions/divestitures - - (99,090) -
Gross benefits paid (597) (567) (53,268) (52,307)
------- -------- --------- ---------
Fair value of plan assets at end of year $ - $ - $ 847,786 $ 951,593
======= ======== ========= =========
Funding Status, Realized and Unrealized Amounts
Funded status at end of year $ (9,361) $ (10,971) $ 48,246 $ 61,156
Unrecognized net actuarial (gain)loss 3,425 5,715 (20,165) (26,653)
Unrecognized prior service cost 418 478 24,752 25,688
Unrecognized net transition obligation(asset) 46 92 (542) (4,826)
-------- --------- --------- ---------
Net amount recognized at end of year $ (5,472) $ (4,686) $ 52,291 55,365
======== ========= ========= =========
Amounts recognized in the Consolidated
Balance Sheet consist of:
Prepaid benefit cost $ 45 $ 155 $ 62,661 $ 42,210
Accrued benefit liability (5,517) (4,841) (10,370) (10,662)
Additional minimum liability (3,088) (3,932) (5,186) (7,086)
Intangible asset 464 570 553 720
Accumulated other comprehensive income 2,624 3,362 4,633 6,366
-------- --------- --------- ---------
(5,472) (4,686) 52,291 31,548
Discontinued Operations - - - 23,817
-------- --------- --------- ---------
$ (5,472) $ (4,686) $ 52,291 $ 55,365
======== ========= ========= =========
Pension plan assets consist primarily of trust funds with diversified
portfolios of primarily equity and fixed income investments.
The projected benefit obligations, accumulated benefits obligations and
fair value of plan assets for underfunded and overfunded plans have been
combined for disclosure purposes. The projected benefit obligation,
accumulated benefit obligation, and fair value of assets for pension plans
with the accumulated benefit obligations in excess of plan assets were
$20.1 million, $19.1 million and $4.7 million, respectively, as of October
31, 2000, and $25.2 million, $22.7 million and $6.5 million, respectively,
as of October 31, 1999.
The principal assumptions used in determining the funding status and net
periodic benefit cost of the Company's pension plans are set forth in the
following table. The assumptions for non-U.S. plans were developed on a
basis consistent with that for U.S. plans, adjusted to reflect prevailing
economic conditions and interest rate environments.
U.S. Qualified Non-U.S. Defined Benefit Plans U.S. Nonqualified
Defined Benefit Plans Defined Benefit Plans
2000 1999 1998 2000 1999 1998 2000 1999 1998
------------------------- ------------------------------------------ ----------------------
Discount rate 7.75% 7.50% 7.00% 6.0% - 15.0% 6.0% - 15.0% 6.0% - 15.0% 7.75% 7.50% 7.00%
Expected return on plan assets 9.50% 10.00% 10.00% 10.0% - 16.0% 10.0% - 16.0% 10.0% - 16.0% 9.50% 10.00% 10.00%
Rate of compensation increase 4.50% 4.50% 4.00% 4.0% - 12.0% 2.0% - 12.0% 2.0% - 12.0% 4.50% 4.50% 4.00%
The discontinuance of Beloit's operations resulted in a curtailment of
several of the Company's defined benefit pension plans due to the
termination of employees' services earlier than originally expected. In
accordance with SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits", the Company recognized a gain of $2.5 million and $17.9 million
in 2000 and 1999, respectively, representing the decrease in the projected
benefit obligations of the plans affected by the curtailment. The gains for
2000 and 1999 have been included in the gain (loss) from discontinued
operations in the 2000 and 1999 Consolidated Statement of Operations,
respectively.
The Company has a bonus plan which covers substantially all domestic
employees except certain employees covered by collective bargaining
agreements and employees of subsidiaries with separate defined contribution
plans. For 2000, payments to participants in the plan were based on the
Company's earnings before interest, taxes, depreciation and amortization
(EBITDA). For 1999 and 1998, payments to participants in the plan were
based on the Company's economic value added ("EVA") performance. Bonus
expense was $8.4 million in 2000, $5.0 million in 1999 and $0 million in
1998.
18. Postretirement Benefits Other Than Pensions
In 1993, the Board of Directors of the Company approved a general approach
that culminated in the elimination of all Company contributions towards
postretirement health care benefits. Increases in costs paid by the Company
were capped for certain plans beginning in 1994 extending through 1998 and
Company contributions were eliminated as of January 1, 1999 for most
employee groups, excluding Joy, certain early retirees and specific
discontinued operation groups. For Joy, based upon existing plan terms,
future eligible retirees will participate in a premium cost-sharing
arrangement which is based upon age as of March 1, 1993 and position at the
time of retirement. Active employees under age 45 as of March 1, 1993 and
any new hires after April 1, 1993 will be required to pay 100% of the
applicable premium.
The components of the net periodic benefit cost associated with the
Company's postretirement benefit plans (other than pensions), all of which
relate to operations in the U.S., are as follows:
In thousands October 31,
- ---------------------------------------------------------------------------
2000 1999 1998
-------- -------- ----------
Components of
net periodic benefit cost
Service cost $ 123 $ 192 $ 173
Interest cost 3,056 3,112 3,849
Amortization of:
Prior service cost - - (11,903)
Actuarial (gain)loss 1,638 3,217 (6,736)
-------- -------- ---------
4,817 6,521 (14,617)
Costs allocated to discontinued operations 327 1,180 -
-------- -------- ---------
Total net periodic benefit cost (credit)
of continuing operations $ 4,490 $ 5,341 $ (14,617)
======== ======== =========
The following table sets forth the benefit obligations, plan assets, funded
status and amounts recognized in the Company's Consolidated Balance Sheet
as of October 31:
In thousands
- -------------------------------------------------------------------------------------------
2000 1999
---------- ---------
Change in Benefit Obligation
Net benefit obligation at beginning of year $ 42,708 $ 50,730
Service cost 123 192
Interest cost 3,056 3,112
Actuarial (gain)loss 6,802 (2,404)
Gross benefits paid (4,475) (8,922)
-------- --------
Net benefit obligation at end of year $ 48,214 $ 42,708
======== ========
Change in Plan Assets
Fair value of plan assets at beginning of year $ - $ -
Actual return on plan assets 4,475 8,922
Gross benefits paid (4,475) (8,922)
-------- --------
Fair value of plan assets at end of year $ - $ -
======== ========
Funding Status, Recognized and Unrecognized Amounts
Funded status at end of year $(48,214) $ (42,708)
Unrecognized net actuarial (gain)loss 10,584 5,419
-------- ---------
Net amount recognized at end of year $(37,630) $ (37,289)
======== =========
Amounts recognized in the Consolidated
Balance Sheet consist of:
Accrued benefit liability
- short term portion $ (5,299) $ (5,299)
- long term portion (32,331) (31,990)
--------- ---------
Net amount recognized at end of year $ (37,630) $ (37,289)
========= =========
For post retirement benefit obligation measurement purposes, the weighted
average discount rate is 7.75% and 7.5% for 2000 and 1999, respectively,
and the assumed annual rate of increase in the per capita cost of covered
health care benefits is 10% (1999 5.2% to 7.0%). These rates were assumed
to decrease gradually to 5.0% for most participants by 2005 and remain at
that level thereafter. The health care cost trend rate assumption has an
effect on the amounts reported. A one percentage point increase in the
assumed health care cost trend rates each year would increase the
accumulated postretirement benefit obligation as of October 31, 2000 by
$3.7 million and the aggregate service cost and interest cost components of
the net periodic postretirement benefit cost for the year by $0.3 million.
A one percentage point decrease in the assumed health care cost trend rates
each year would decrease the accumulated postretirement benefit obligation
as of October 31, 2000 by $3.4 million and the aggregate service cost and
interest cost components of the net periodic postretirement benefit cost
for the year by $0.2 million. Postretirement life insurance benefits have a
minimal effect on the total benefit obligation.
19. Shareholders' Equity and Stock Options
The Company's authorized common stock amounts to 150,000,000 shares. A
preferred stock purchase right is attached to each share of common stock
which entitles a shareholder to exercise certain rights in the event a
person or group acquires or seeks to acquire 15% or more of the outstanding
common stock of the Company.
The Company has a Stock Incentive Plan that was approved by shareholders in
1996 and which superceded the Incentive Stock Plans of 1978 and 1988. The
1996 plan provides for the granting, up to April 9, 2006, of qualified and
non-qualified options, stock appreciation rights, restricted stock and
performance units to key employees for not more than 2,000,000 shares of
common stock. No options were granted under the 1996 plan in 2000.
The Debtors' proposed plan of reorganization provides that holders of
Harnischfeger common stock and holders of options to purchase Harnischfeger
common stock will receive no property or interest in property on account of
their shares of common stock and options to purchase common stock. If the
Debtors' proposed plan of reorganization is approved by creditors and the
Bankruptcy Court, the existing Harnischfeger common stock will be
cancelled, the holders of existing Harnischfeger common stock or of options
to purchase Harnischfeger common stock will receive nothing, and new common
stock in reorganized Harnischfeger will be issued to Harnischfeger's
creditors.
Certain information regarding stock options is as follows:
Weighted Average
Number Option Exercise
of Shares Price Per Share
--------------- ------------------
Outstanding at October 31, 1997 1,159,771 30.78
Granted 1,133,302 17.73
Exercised (61,767) 21.33
Cancelled or expired (120,276) 34.52
Outstanding at October 31, 1998 2,111,030 23.84
Granted 3,000 9.41
Exercised - -
Cancelled or expired (591,139) 30.14
Outstanding at October 31, 1999 1,522,891 21.36
Granted - -
Exercised - -
Cancelled or expired (744,116) 16.25
Outstanding at October 31, 2000 778,775 26.25
Exercisable at October 31, 2000 663,150 27.00
Since the inception of the 1978 and 1988 Incentive Stock Plans and the 1996
Stock Incentive Plan, options for the purchase of 5,296,707 shares have
been granted at option exercise prices ranging from $6.75 to $47.00 per
share. At October 31, 2000, 778,775 of the options were outstanding,
1,962,842 had been exercised and 2,555,090 had expired. Generally the
options become exercisable in cumulative installments of one fourth of the
shares in each year beginning six months from the date of the grant.
The weighted average contractual life of options outstanding at October 31,
2000 is 5.98 years with exercise prices ranging from $6.85 to $42.75 per
share.
Following a "Dutch auction" self-tender offer in 1993, the Company
purchased for cash 2,500,000 shares of common stock, or approximately 9% of
shares of common stock outstanding at that time, at $19-5/8 per share, in
conjunction with the establishment of the Harnischfeger Industries, Inc.
Stock Employee Compensation Trust ("SECT"). Concurrent with the purchase,
the Company sold 2,547,771 shares of common stock held in treasury to the
SECT, amounting to $50.0 million at $19-5/8 per share. The purchase of the
treasury shares reduced shareholders' equity. The sale of the treasury
shares to the SECT had no impact on such equity. Subject to certain
limitations, shares in the SECT were available to be used to fund employee
benefit obligations under plans that required shares of Company common
stock.
Shares owned by the SECT are accounted for as treasury stock until issued
to existing benefit plans; they are reflected as a reduction to
shareholders' equity. Shares owned by the SECT are valued at the closing
market price each period, with corresponding changes in the SECT balance
reflected in capital in excess of par value. Shares in the SECT are not
considered outstanding for computing earnings per share.
20. Operating Leases
The Company leases certain plant, office and warehouse space as well as
machinery, vehicles, data processing and other equipment. Certain of the
leases have renewal options at reduced rates and provisions requiring the
Company to pay maintenance, property taxes and insurance. Generally, all
rental payments are fixed. The Company's assets and obligations under
capital lease arrangements are not significant.
Total rental expense under operating leases, excluding maintenance, taxes
and insurance, was $11.2 million, $18.8 million, and $15.3 million in 2000,
1999 and 1998, respectively.
At October 31, 2000, the future payments for all operating leases with
remaining lease terms in excess of one year, and excluding maintenance,
taxes and insurance were as follows:
In thousands
------------------------------------------------------
2001 $ 9,431
2002 6,980
2003 5,314
2004 3,621
2005 and thereafter 1,121
21. Commitments, Contingencies and Off-Balance-Sheet Risks
Contingent liabilities as of the Chapter 11 filing date are subject to
compromise. At October 31, 2000, the Company was contingently liable to
banks, financial institutions and others for approximately $191.9 million
for outstanding letters of credit, bank guarantees and surety bonds
securing performance of sales contracts and other guarantees in the
ordinary course of business. Of the $191.9 million, approximately $84.5
million was issued at the request of the Company on behalf of Beloit and
approximately $107.4 million was issued at the request of Debtor entities
prior to the bankruptcy filing. Included in the $191.9 million outstanding
as of October 31, 2000 were $35.5 million issued under the DIP Facility
(See Note 10 - Borrowings and Credit Facilities). Additionally, at October
31, 2000, there were $22.2 million of outstanding letters of credit or
other guarantees issued by non-U.S. banks for non-U.S. subsidiaries.
The Company and its subsidiaries are a party to litigation matters and
claims that are normal in the course of its operations. Also, as a normal
part of their operations, the Company's subsidiaries undertake certain
contractual obligations, warranties and guarantees in connection with the
sale of products or services. Although the outcome of these matters cannot
be predicted with certainty and favorable or unfavorable resolution may
affect 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.
The Company and its 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 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.
The Company has entered into various forward foreign exchange contracts
with major international financial institutions for the purpose of hedging
its risk of loss associated with changes in foreign exchange rates. These
contracts involve off-balance-sheet market and credit risk. As of October
31, 2000 the nominal or face value of forward foreign exchange contracts to
which the Company was a party, in absolute U.S. dollar equivalent terms,
was $158.4 million.
Forward exchange contracts are entered into to protect the value of
committed future foreign currency receipts and disbursements and
consequently any market related loss on the forward contract will be offset
by changes in the value of the hedged item. As a result, the Company is not
exposed to net market risk associated with these instruments.
The Company is exposed to credit-related losses in the event of
non-performance by counterparties to its forward exchange contracts, but it
does not expect any counterparties to fail to meet their obligations. A
contract is generally subject to credit risk only when it has a positive
fair value and the maximum exposure is the amount of the positive fair
value. The Company is authorized to enter into various foreign exchange
contracts under authority granted by the Bankruptcy Court and as provided
in the DIP Facility. Consequently, there is a concentration of these
contracts held with The Chase Manhattan Bank.
It is the Company's policy not to enter into highly leveraged transactions
or other "derivative" instruments.
22. Disclosure About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents: The carrying value approximates fair value
because of the short maturity of those instruments.
DIP Facility: The carrying value of the DIP Facility approximates fair
value as the facility bears a floating rate of interest expressed in
relation to LIBOR. Consequently, the cost of this instrument always
approximates the market cost of borrowing for an equivalent maturity and
risk class.
Other Borrowings: The carrying value of the Company's other borrowings
approximates fair value because of the predominantly short-term nature of
these instruments and because predominantly all the instruments bear
interest at floating rates.
Liabilities Subject to Compromise: The liabilities subject to compromise
under Chapter 11 proceedings are not actively traded on any financial
market, nor, given their nature, is there a reliable financial model
available for determining their fair value. Consequently, it is considered
impracticable and inappropriate to estimate the fair value of these
financial instruments. (See Note 9 - Liabilities Subject to Compromise).
Forward Exchange Contracts: The fair value of forward exchange contracts
represents the estimated amounts the Company would receive (pay) to
terminate such contracts at the reporting date based on foreign exchange
market prices at that date.
The estimated fair values of the Company's financial instruments at October
31, 2000 and 1999 are as follows:
In thousands
- -------------------------------------------------------------------------------
2000 Carrying Value Fair Value
- --------------------------------- ------------------- ----------------
Cash and Cash Equivalents $ 72,123 $ 72,123
DIP Facility 30,000 30,000
Other borrowings 81,898 81,898
Forward Exchange Contracts - 97
1999 Carrying Value Fair Value
- --------------------------------- ------------------- ----------------
Cash and Cash Equivalents $ 57,453 $ 57,453
DIP Facility 167,000 167,000
Other borrowings 145,665 145,665
Forward Exchange Contracts - 819
The fair value of the Company's forward exchange contracts at October 31,
2000 is analyzed in the following table of dollar equivalent terms:
In thousands
--------------------------------------------------
Maturing in 2001
---------------------
Buy Sell
U.S. Dollar $1,616 $ (713)
Australian Dollar (168) -
German Deutschemark (19) 46
British Pound (666) -
As part of ongoing control procedures, the Company monitors concentrations
of credit risk associated with financial institutions with which it
conducts business. Credit risk is minimal as credit exposure limits are
established to avoid a concentration with any single financial institution.
The Company also monitors the creditworthiness of its customers to which it
grants credit terms in the normal course of business. The Company's
customers are, almost exclusively, in the mining industry but the Company's
concentrations of credit risk associated with its trade receivables are
considered minimal due to the broad customer base and the generally sound
financial standing of its major customers. Bad debts have not been
significant in the Company's mining equipment businesses. The Company often
requires and receives letters of credit or bank guarantees as collateral
for its credit sales, especially when the customer is located outside the
United States and other developed markets.
23. Transactions With Affiliated Companies
On March 30, 1998, the Company completed the sale of approximately 80% of
the common stock of the Company's P&H material handling ("Material
Handling") segment to Chartwell Investments, Inc. in a leveraged
recapitalization transaction. The Company retained approximately 20% of the
outstanding common stock and 11% of the outstanding voting securities. See
Note 3 - Discontinued Operations. The Company provides certain
administrative functions to Material Handling.
During fiscal 2000, P&H owned a 49% interest in ABB Harnco, Inc. ("ABB
Harnco"), an electrical control equipment company controlled by ABB
Automation, Inc. P&H purchased electrical control equipment from ABB Harnco
for use in electric mining shovels.
Kobe Steel, Ltd. of Japan ("Kobe") owns a 25% interest in a subsidiary of
the Company. The Company entered into a technical services agreement with
Kobe, expiring in 2010. Kobe pays technical service fees on P&H mining
equipment produced and sold under license from P&H.
Transactions with related parties for the years ending October 31 were as
follows:
In thousands 2000 1999 1998
---------------------------- ---------- ---------- ----------
Sales $ 361 $ -- $ --
Purchases 7,748 3,812 961
License income 1,281 2,212 828
Other income (expense) 525 3,099 2,716
Receivables 971 787 1,480
Payables 1,197 1,055 140
The Company believes that its transactions with all related parties were
competitive with alternate sources of supply for each party involved.
24. Segment Information
Business Segment Information
At October 31, 2000, the Company had two reportable segments, surface
mining equipment (P&H) and underground mining machinery (Joy). P&H is a
major producer of surface mining equipment for the extraction of ores and
minerals and provides extensive operational support for many types of
equipment used in surface mining. Joy is a major manufacturer of
underground mining equipment for the extraction of bedded minerals and
offers comprehensive service locations near major mining regions worldwide.
The accounting policies of the segments are the same as those described in
Note 2 - Significant Accounting Policies. Operating income (loss) of
segments do not include interest income or expense and provision (benefit)
for income taxes. There are no intersegment sales. Identifiable assets are
those used in the Company's operations in each segment. Corporate assets
consist primarily of property, deferred financing costs, pension assets and
cash.
In thousands
Operating Depreci- Capital
Net Income ation and Expendi- Identifiable
Sales (Loss) Amortization tures Assets
---------- ------------ ------------- ---------- -------------
2000
----
Surface Mining $ 506,311 $ 57,432 $ 16,062 $ 17,744 $ 423,944
Underground Mining 611,644 16,956(1) 29,598 14,666 821,168
---------- ---------- ---------- ---------- ----------
Total continuing operations 1,117,955 74,388 45,660 32,410 1,245,112
Discontinued operations -- -- -- -- 15,231
Reorganization item -- (65,388) -- -- --
Corporate -- (16,368) 11,729 -- 32,585
---------- ---------- ---------- ---------- ----------
Consolidated Total $1,117,955 $ (7,368) $ 57,389 $ 32,410 $1,292,928
========== ========== ========== ========== ==========
1999
----
Surface Mining $ 498,343 $ 33,976(2)$ 17,238 $ 8,971 $ 412,681
Underground Mining 615,803 (65,893)(2) 28,829 17,564 930,588
---------- ---------- ---------- ---------- ----------
Total continuing operations 1,114,146 (31,917) 46,067 26,535 1,343,269
Discontinued operations -- -- -- -- 278,000
Strategic and financing initiatives -- (7,716) -- -- --
Reorganization item -- (20,304) -- -- --
Charge related to executive changes -- (19,098) -- -- --
Corporate -- (23,783)(3) 4,473 75 90,544
---------- ---------- ---------- ---------- ----------
Consolidated Total $1,114,146 $ (102,818) $ 50,540 $ 26,610 $1,711,813
========== ========== ========== ========== ==========
1998
----
Surface Mining $ 443,330 $ 31,416 $ 16,717 $ 15,123 $ 396,962
Underground Mining 768,977 50,568 26,298 38,336 1,010,231
---------- ---------- ---------- ---------- ----------
Total continuing operations 1,212,307 81,984 43,015 53,459 1,407,193
Discontinued operations -- -- 42,371 80,289 1,326,722
Corporate -- (20,591) 1,374 177 53,344
---------- ---------- ---------- ---------- ----------
Consolidated Total $1,212,307 $ 61,393 $ 86,760 $ 133,925 $2,787,259
========== ========== ========== ========== ==========
(1) After net restructuring charge of $4.5 million (see Note 8).
(2) After restructuring charge of $12.0 million for underground mining
machinery (see Note 8) and additional third quarter expenses of $63.5
million for underground mining machinery and $5.0 million for surface
mining machinery (see Note 4).
(3) After a $5.4 million charge related to the Material Handling preferred
stock (see Note 3).
Geographical Segment Information
In thousands
- --------------------------------------------------------------------------------------------------
Sales to
Total Interarea Unaffiliated Operating Identifiable
Sales Sales Customers Income (Loss) Assets
----------- ------------ ----------- ------------- -----------
2000
----
United States $ 809,237 $ (116,684) $ 692,553 $ 42,787 $ 1,313,687
Europe 160,921 (62,757) 98,164 20,866 307,703
Other Foreign 347,539 (20,301) 327,238 37,839 259,252
Interarea Eliminations (199,742) 199,742 -- (27,104) (635,530)
----------- ----------- ----------- ----------- -----------
$ 1,117,955 $ -- $ 1,117,955 $ 74,388 $ 1,245,112
=========== =========== =========== =========== ===========
1999
----
United States $ 767,843 $ (133,597) $ 634,246 $ 3,310 $ 1,321,514
Europe 85,045 (19,377) 65,668 (129) 342,845
Other Foreign 473,784 (59,552) 414,232 (176) 311,527
Interarea Eliminations (212,526) 212,526 -- (34,922) (632,617)
----------- ----------- ----------- ----------- -----------
$ 1,114,146 $ -- $ 1,114,146 $ (31,917) $ 1,343,269
=========== =========== =========== =========== ===========
1998
----
United States $ 847,074 $ (208,366) $ 638,708 $ 30,617 $ 1,230,448
Europe 136,934 (15,364) 121,570 22,752 373,154
Other Foreign 538,885 (86,856) 452,029 27,843 333,400
Interarea Eliminations (310,586) 310,586 -- 772 (529,809)
----------- ----------- ----------- ----------- -----------
$ 1,212,307 $ -- $ 1,212,307 $ 81,984 $ 1,407,193
=========== =========== =========== =========== ===========
25. Condensed Combined Financial Statements
The following condensed combined financial statements are presented in
accordance with SOP 90-7:
CONDENSED COMBINED CONSOLIDATING
--------------------------------
STATEMENT OF OPERATIONS
-----------------------
In thousands Year ended October 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------
Entities in Entities not in
Reorganization Reorganization Combined
Proceedings Proceedings Eliminations Consolidated
-------------- ---------------- ------------ ------------
Revenues
Net sales $ 809,237 $ 508,460 $ (199,742) $ 1,117,955
Other income 5,751 1,109 - 6,860
--------- --------- ---------- -----------
814,988 509,569 (199,742) 1,124,815
Cost of sales 631,128 394,854 (172,638) 853,344
Product, development, selling and administrative expenses 157,441 51,492 - 208,933
Reorganization items 61,472 3,916 - 65,388
Restructuring charges - 4,518 - 4,518
Charge related to executive changes - - - -
Strategic and financing initiatives - - - -
--------- --------- ---------- -----------
850,041 454,780 (172,638) 1,132,183
--------- --------- ---------- -----------
Operating income (loss) (35,053) 54,789 (27,104) (7,368)
Interest income (expense) - net (excludes contractual interest
expense of $70,531 and $31,230 for 2000 and 1999,
respectively) (27,537) (32,007) 35,583 (23,961)
--------- --------- ---------- -----------
Income (loss) before (provision) benefit for income taxes
and minority interest (62,590) 22,782 8,479 (31,329)
(Provision) Benefit for income taxes 13,204 (10,204) - 3,000
Minority interest - - (1,224) (1,224)
Equity in income (loss) of subsidiaries 37,288 903 (38,191) -
--------- --------- ---------- -----------
Income (loss) from continuing operations (12,098) 13,481 (30,936) (29,553)
Income (loss) form discontined operations, net of applicable
income taxes 66,200 - - 66,200
Gain (loss) on disposal of discontinued operations 227,977 - - 227,977
--------- --------- ---------- -----------
Net income (loss) $ 282,079 $13,481 $ (30,936) $ 264,624
========= ========= ========== ===========
In thousands Year ended October 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Entities in Entities not in
Reorganization Reorganization Combined
Proceedings Proceedings Eliminations Consolidated
----------- ----------- ------------ ------------
Revenues
Net sales $ 774,221 $ 552,451 $ (212,526) $ 1,114,146
Other income (10,959) (17,649) 32,517 3,909
--------- --------- ---------- -----------
763,262 534,802 (180,009) 1,118,055
Cost of sales 625,650 474,761 (177,605) 922,806
Product, development, selling and administrative expenses 173,826 65,126 - 238,952
Reorganization items 20,304 - - 20,304
Restructuring charges - 11,997 - 11,997
Charge related to executive changes 19,098 - - 19,098
Strategic and financing initiatives 7,716 - - 7,716
--------- --------- ---------- -----------
846,594 551,884 (177,605) 1,220,873
--------- --------- ---------- -----------
Operating income (loss) (83,332) (17,082) (2,404) (102,818)
Interest income (expense) - net (excludes contractual interest
expense of $70,531 and $31,230 for 2000 and 1999,
respectively) (19,092) (9,773) - (28,865)
--------- --------- ---------- -----------
Income (loss) before (provision) benefit for income taxes
and minority interest (102,424) (26,855) (2,404) (131,683)
(Provision) Benefit for income taxes (204,985) (15,463) - (220,448)
Minority interest - - (957) (957)
Equity in income (loss) of subsidiaries (1,397,768) 804 1,396,964 -
--------- --------- ---------- -----------
Income (loss) from continuing operations (1,705,177) (41,514) 1,393,603 (353,088)
Income (loss) form discontined operations, net of applicable
income taxes (742,307) (55,873) (798,180)
Gain (loss) on disposal of discontinued operations (529,000) - - (529,000)
--------- --------- ---------- -----------
Net income (loss) $(2,976,484) $ (97,387) $ 1,393,603 $ (1,680,268)
============ ========= =========== ============
CONDENSED COMBINED CONSOLIDATING
--------------------------------
BALANCE SHEET
-------------
In thousands As of October 31, 2000
- ---------------------------------------------------------------------------------------------------------
Entities in Entities Not in
Reorganization Reorganization Combined
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
Assets
Current Assets
Cash and cash equivalents $ 21,241 $ 50,882 $ -- $ 72,123
Accounts receivable-net 98,930 78,221 -- 177,151
Intercompany receivables 1,744,829 274,140 (2,018,969) --
Inventories 272,773 163,514 (25,956) 410,331
Other current assets 10,797 39,027 (5) 49,819
Prepaid income taxes (2,543) 2,543 -- --
----------- ----------- ----------- ----------
2,146,027 608,327 (2,044,930) 709,424
Assets of Discontinued Beloit Operations 15,231 -- -- 15,231
Property, Plant and Equipment - Net 128,605 48,808 -- 177,413
Intangible Assets 143,365 207,538 (125) 350,778
Deferred Income Taxes -- -- -- --
Investment in Subsidiaries 796,008 970,008 (1,763,769) 2,247
Other Assets 25,504 12,293 38 37,835
----------- ----------- ----------- -----------
Total Assets $ 3,254,740 $ 1,846,974 $(3,808,786) $ 1,292,928
=========== =========== =========== ===========
In thousands As of October 31, 1999
- --------------------------------------------------------------------------------------------------------
Entities in Entities Not in
Reorganization Reorganization Combined
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
Assets
Current Assets
Cash and cash equivalents $ 30,175 $ 27,278 $ -- $ 57,453
Accounts receivable-net 127,990 82,005 (7,165) 202,830
Intercompany receivables 1,649,370 306,314 (1,955,684) --
Inventories 274,624 199,730 (26,699) 447,655
Other current assets 13,790 36,660 (3) 50,447
Prepaid income taxes (4,170) 4,170 -- --
----------- ----------- ----------- ----------
2,091,779 656,157 (1,989,551) 758,385
Assets of Discontinued Beloit Operations 278,000 -- -- 278,000
Property, Plant and Equipment - Net 143,860 66,887 -- 210,747
Intangible Assets 163,348 242,126 (9,590) 395,884
Deferred Income Taxes (572) -- 572 --
Investment in Subsidiaries 1,312,782 833,097 (2,145,879) --
Other Assets 65,543 2,914 340 68,797
----------- ----------- ---------- ----------
Total Assets $ 4,054,740 $ 1,801,181 $(4,144,108) $1,711,813
=========== =========== =========== ==========
CONDENSED COMBINED CONSOLIDATING
--------------------------------
BALANCE SHEET
-------------
In thousands As of October 31, 2000
- --------------------------------------------------------------------------------------------------------------
Entities in Entities Not in
Reorganization Reorganization Combined
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 30,668 $ 78,106 $ -- $ 108,774
Trade accounts payable 31,793 40,698 -- 72,491
Intercompany accounts payable 1,637,360 372,829 (2,010,189) --
Employee compensation and benefits 38,819 8,092 5,299 52,210
Advance payments and progress billings 2,137 8,915 -- 11,052
Accrued warranties 23,230 11,711 -- 34,941
Restructuring charges and other 162,035 62,415 (13,290) 211,160
----------- ----------- ----------- ------------
1,926,042 582,766 (2,018,180) 490,628
Long-term Obligations 1,591 1,533 -- 3,124
Liability for Postretirement Benefits
and Accrued Pension Costs 48,902 2,466 (5,299) 46,069
Deferred Income Taxes (1,846) 1,846 -- --
Other Liabilities 5,841 25 -- 5,866
Liabilities Subject to Compromise 1,220,675 -- -- 1,220,675
Liabilities of Discontinued Operations,
including liabilities subject to compromise
of $246,154 and $494,806 301,105 25,963 (12,343) 314,725
Minority Interest -- -- 6,533 6,533
Shareholders' Equity (Deficit)
Common stock 55,983 689,244 (693,558) 51,669
Capital in excess of par value 2,194,684 355,802 (1,986,944) 563,542
Retained earnings (2,227,903) 326,990 696,599 (1,204,314)
Cumulative translation adjustments (169,631) (145,016) 204,406 (110,241)
Pension adjustments (4,633) -- -- (4,633)
Less: Stock Employee Compensation Trust (100) -- -- (100)
Treasury stock (90,615) -- -- (90,615)
----------- ----------- ----------- -----------
(242,215) 1,227,020 (1,779,497) (794,692)
----------- ----------- ----------- -----------
$ 3,260,095 $ 1,841,619 $(3,808,786) $ 1,292,928
=========== =========== =========== ===========
In thousands As of October 31, 1999
- -------------------------------------------------------------------------------------------------------------
Entities in Entities Not in
Reorganization Reorganization Combined
Proceedings Proceedings Eliminations Consolidated
-------------- --------------- ------------ ------------
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current
portion of long-term obligations $ 6 $ 144,562 $ -- $ 144,568
Trade accounts payable 25,822 44,190 -- 70,012
Intercompany accounts payable 1,575,756 379,928 (1,955,684) --
Employee compensation and benefits 34,523 9,356 -- 43,879
Advance payments and progress billings 17,801 27,539 -- 45,340
Accrued warranties 26,336 13,530 -- 39,866
Restructuring charges and other 179,632 58,475 (10,556) 227,551
---------- ----------- ----------- -----------
1,859,876 677,580 (1,966,240) 571,216
Long-term Obligations 167,220 959 (82) 168,097
Liability for Postretirement Benefits
and Accrued Pension Costs 52,613 3,216 (8,374) 47,455
Deferred Income Taxes (2,397) 2,353 44 --
Other Liabilities 7,780 75 -- 7,855
Liabilities Subject to Compromise 1,193,554 -- -- 1,193,554
Liabilities of Discontinued Operations,
including liabilities subject to compromise
of $246,154 and $494,806 543,494 198,771 -- 742,265
Minority Interest -- -- 6,522 6,522
Shareholders' Equity (Deficit)
Common stock 55,482 693,993 (697,806) 51,669
Capital in excess of par value 2,027,380 77,854 (1,532,661) 572,573
Retained earnings (1,656,836) 182,232 5,666 (1,468,938)
Cumulative translation adjustments (92,931) (35,852) 48,823 (79,960)
Pension adjustments -- -- -- --
Less: Stock Employee Compensation Trust (1,612) -- -- (1,612)
Treasury stock (98,883) -- -- (98,883)
----------- ----------- ----------- ---------
232,600 918,227 (2,175,978) (1,025,151)
----------- ----------- ----------- -----------
$ 4,054,740 $ 1,801,181 $(4,144,108) $ 1,711,813
=========== =========== =========== ===========
COMBINED CONSOLIDATING
STATEMENT OF CASH FLOW
In thousands As of October 31, 2000
- ------------------------------------------------------------------------------------------------------
Entities in Entities Not in
Reorganization Reorganization Combined
Proceedings Proceedings Consolidated
-------------- -------------- ------------
Net cash provided (used) by Continuing Operations $ 15,947 $ 52,645 $ 36,698
Investment and other transactions:
Property, plant and equipment acquired (24,791) (7,619) (32,410)
Property, plant and equipment retired 11,427 11,359 22,786
Deposit related to APP letters of credit and other 10,526 11,180 21,706
--------- -------- ---------
Net cash provided (used) by investment and other
transactions (2,838) 14,920 12,082
--------- -------- ---------
Financing Activities:
Dividends paid -- -- --
Financing fees related to DIP Facility (2,563) -- (2,563)
Borrowings under DIP Facility 115,000 -- 115,000
Repayment of borrowings under DIP Facility (252,000) -- (252,000)
Issuance of long-term obligations 2,043 -- 2,043
Payments on long-term obligations (11) (47,554) (47,565)
Increase (decrease) in short-term notes payable- net -- 3,345 3,345
--------- --------- ---------
Net cash provided (used) by financing activities (137,531) (44,209) (181,740)
--------- --------- ---------
Effect of Exchange Rate Changes on Cash and Cash Equivalents -- (3,952) (3,952)
--------- --------- ---------
Cash Provided (Used) by Discontinued Operations 147,382 4,200 151,582
Increase (Decrease) in Cash and Cash Equivalents (8,934) 23,604 14,670
Cash and Cash Equivalents at Beginning of Year 30,175 27,278 57,453
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 21,241 $ 50,882 $ 72,123
========= ========= =========
In thousands As of October 31, 1999
- ------------------------------------------------------------------------------------------------------------
Entities in Entities Not in
Reorganization Reorganization Combined
Proceedings Proceedings Consolidated
-------------- --------------- ------------
Net Cash Provided (Used) by Continuing Operations $ (12,778) $ 23,346 $ 10,568
Investment and other transactions:
Property, plant and equipment acquired (17,117) (9,493) (26,610)
Property, plant and equipment retired 2,313 10,005 12,318
Deposit related to APP letters of credit and other
transactions (16,434) -- (16,434)
--------- --------- ---------
Net cash provided (used) by investment and
other transactions (31,238) 512 (30,726)
--------- --------- ---------
Financing Activities:
Dividends paid (4,592) (4,592)
Financing fees related to DIP Facility (15,000) (15,000)
Borrowings under DIP Facility 167,000 167,000
Repayment of borrowings under DIP Facility -- --
Issuance of long-term obligations 125,000 125,000
Payments on long-term obligations (25) (2,088) (2,113)
Increase (decrease) in short-term notes payable- net (21,610) 40,520 18,910
--------- --------- ---------
Net cash provided (used) by financing activities 250,773 38,432 289,205
--------- --------- ---------
Effect of Exchange Rate Changes on Cash and Cash Equivalents -- (93) (93)
--------- --------- ---------
Cash Provided (Used) by Discontinued Operations (180,909) (60,604) (241,513)
Increase (Decrease) in Cash and Cash Equivalents 25,848 1,593 27,441
Cash and Cash Equivalents at Beginning of Year 4,327 25,685 30,012
--------- --------- ---------
$ 30,175 $ 27,278 $ 57,453
Cash and Cash Equivalents at End of Year ========= ========= =========
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St.
Francis, Wisconsin, on the ____th day of January, 2001.
HARNISCHFEGER INDUSTRIES, INC.
------------------------------
(Registrant)
/s/ JOHN NILS HANSON
---------------------------
John Nils Hanson
Chairman, President
And Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on January 11, 2001.
Signature Title
/s/ JOHN NILS HANSON Chairman, President and
----------------------- Chief Executive Officer
John Nils Hanson
/s/ KENNETH A. HILTZ Senior Vice President and
----------------------- Chief Financial Officer
Kenneth A. Hiltz
/s/ MICHAEL S. OLSEN Vice President and Controller
-----------------------
Michael S. Olsen
(1) Director
-----------------------
Donna M. Alvarado
(1) Director
-----------------------
John D. Correnti
(1) Director
-----------------------
Harry L. Davis
(1) Director
-----------------------
Robert M. Gerrity
(1) Director
-----------------------
Robert Hoffman
(1) Director
-----------------------
Jean-Pierre Labruyere
(1) Director
-----------------------
L. Donald LaTorre
(1) Director
-----------------------
Stephen M. Peck
(1) Director
-----------------------
Leonard E. Redon
(1) John Nils Hanson, by signing his name hereto, does hereby sign and execute
this report on behalf of each of the above-named Directors of Harnischfeger
Industries, Inc. pursuant to powers of attorney executed by each of such
Directors and filed with the Securities and Exchange Commission as an
exhibit to this report.
January 11, 2001
By: /s/ JOHN NILS HANSON
----------------------------------
John Nils Hanson, Attorney-in-fact
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Harnischfeger Industries, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 12, 2001 appearing in this Annual Report on Form 10-K of
Harnischfeger Industries, Inc. also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. As noted in our report, the
company filed for Chapter 11 Bankruptcy protection on June 7, 1999, and filed a
Joint Plan of Reorganization and Disclosure Statement, as amended, with the
Bankruptcy Court on October 26, 2000, which raises substantial doubt about its
ability to continue as a going concern and the recorded amounts and
classification of assets and liabilities. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
/S/PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 11, 2001
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Additions Additions Currency Balance At
Beginning by Charged Translation Discontinued End of
Classification of Year Acquisiton to Expense Deductions (1) Effects Operations Year
- ------------------------------------ ------------ ---------- ----------- --------------- ------------ ------------- ---------
Allowance Deducted in
Balance Sheet from
Accounts Receivable:
For the year ended October 31, 2000
Doubtful accounts $ 11,720 $ -- $ (763) $ (2,310) $ (516) $ -- $ 8,131
========== =========== ========== ============== ============= ======= ========
For the year ended October 31, 1999
Doubtful accounts $ 9,889 $ -- $ 8,602 $ (1,710) $ 12 $(5,073) $ 11,720
========== =========== ========== ============== ============= ======= ========
For the year ended October 31, 1998
Doubtful accounts $ 8,319 $ 350 $ 4,311 $ (1,374) $ (22) $(1,695) $ 9,889
========== =========== ========== ============== ============= ======= ========
- ---------------------------------------
(1) Represents write-off of bad debts, net of recoveries.
Allowance Deducted in Balance Sheet from Deferred Tax Assets:
Balance at Additions Additions Balance
Beginning by Charged at End
of Year Acquisiton to Expense of Year
---------- ---------- ---------- --------
For the year ended October 31, 2000 $ 387,321 $ -- $ 96,539 $483,860
========== ========== ========== ========
For the year ended October 31, 1999 $ 47,038 $ -- $ 340,283 $387,321
========== ========== ========= ========
For the year ended October 31, 1998 $ 34,895 $ 12,143 $ -- $ 47,038
========== ======== ======== ========
EXHIBIT 10(p)
EMPLOYMENT, CONSULTING, WAIVER AND RELEASE AGREEMENT
AGREEMENT by and between Harnischfeger Industries, Inc., a Delaware
corporation (the "Company"), and Mark E. Readinger (the "Executive"), dated as
of November 30, 2000 (the "Effective Date").
WHEREAS, the Executive has been employed as Senior Vice President of the
Company and President of Beloit Corporation; and
WHEREAS, the Company desires Executive to perform certain work and services
hereafter described, on the terms and conditions hereafter set forth; and
WHEREAS, by mutual agreement between the parties hereto, the Executive
shall hereby resign, effective as of the Date of Termination, his positions
Senior Vice President of the Company and as an officer and director of any
subsidiary or affiliate of the Company for which he is serving in such
positions.
NOW, THEREFORE, BE IT RESOLVED, that the Company and the Executive, in
consideration of the covenants herein set forth, hereby agree as follows:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company and Beloit Corporation, on the terms and
conditions set forth in this Agreement, for the Employment Period (as defined in
the next sentence). The "Employment Period" shall mean the period beginning on
the Effective Date and ending January 2, 2001, unless earlier terminated as set
forth herein.
2. Position and Duties.
(a) During the Employment Period, the Executive shall continue to
serve as Senior Vice President of the Company and President of Beloit
Corporation reporting to the Chief Executive Officer of the Company and
with the principal duties of managing the Beloit Corporation wind down
process and supporting the Company's reorganization process and Beloit
Corporation's liquidation process.
(b) During the Employment Period, the Executive shall devote
reasonable attention and time during normal business hours to the business
and affairs of the Company and Beloit Corporation and its subsidiaries and,
to the extent necessary to discharge duties and the responsibilities
assigned to the Executive under this Agreement, use the Executive's
reasonable best efforts to carry out such duties and responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, (C) manage personal investments and (D)
continue to search for new employment; provided, that such activities do
not significantly interfere with the performance of the Executive's duties
and responsibilities as an employee of the Company in accordance with this
Agreement, do not violate Section 11 of this Agreement or any corporate
policy of the Company and, with respect to service on corporate boards of
directors, are approved by the Company.
(c) During the period following the Date of Termination and ending on
the earlier of (i) the effective date of the confirmation of the plan of
reorganization of Beloit Corporation providing for the liquidation of
Beloit Corporation or (i) June 30, 2001, (the "Consulting Period"),
Executive agrees to provide reasonable consulting services to the Company
from time to time upon the request of the Company's Chief Executive Officer
or General Counsel. Executive agrees to make himself reasonably available
to the Company to respond to requests by the Company for information
concerning matters involving facts or events relating to Beloit Corporation
or any Beloit Corporation subsidiary that may be within the Executive's
knowledge and to assist the Company and its subsidiaries as reasonably
requested in connection with the Beloit Corporation wind down process,
Company's reorganization process, and Beloit Corporation's liquidation
process. Except for the reimbursement of expenses as provided in Section
3(c) and the other benefits expressly provided in this Agreement, Executive
shall receive no additional compensation for services provided during the
Consulting Period.
3. Compensation.
(a) Salary. During the Employment Period, the Executive shall receive
a monthly salary ("Monthly Salary") from Beloit Corporation of $30,000.00
(thirty thousand dollars).
(b) Other Benefits. During the Employment Period, the Executive and,
if applicable, the Executive's family, shall be eligible for participation
in, and shall receive all benefits under, all welfare benefit plans,
practices, policies and programs provided by the Company (including,
without limitation, medical, prescription, dental, disability, senior
employee life insurance, group life insurance, accidental death and travel
accident insurance plans and programs) to the same extent as generally
applicable to other senior executives employed by the Company.
(c) Expenses. During the Employment Period and the Consulting Period,
the Executive shall be entitled to receive prompt reimbursement from Beloit
Corporation for all reasonable business expenses incurred by the Executive
in accordance with the Company's policies, practices and procedures for
reimbursement of business expenses.
4. Termination of Employment.
(a) Expiration of Employment Period. The Executive's employment shall
terminate automatically at the end January 2, 2001, unless earlier
terminated as set forth herein.
(b) By the Company. The Company may terminate the Executive's
employment during the Employment Period for Cause or without Cause. "Cause"
means:
A. the willful and continued failure of the Executive substantially
to perform the Executive's duties under this Agreement (other
than as a result of physical or mental illness or injury), after
the Board of Directors of the Company (the "Board") or the
President and Chief Operating Officer of the Company delivers to
the Executive a written demand for substantial performance that
specifically identifies the manner in which the Board or the
President and Chief Operating Officer believes that the Executive
has not substantially performed the Executive's duties under this
Agreement; or
B. willful illegal conduct or gross misconduct by the Executive,
that results in material and demonstrable damage to the business
or reputation of the Company or its subsidiaries; or
C. any willful violation of Section 6 of this Agreement; or
D. the Executive's conviction of, or plea of guilty or nolo
contendere to, a felony; or
E. any willful illegal conduct or gross misconduct by the Executive
in connection with the Company or its affiliates, any material
dishonesty by the Executive in connection with his employment and
any material failure by the Executive to comply with the
Company's employment policies, rules or regulations. No act or
failure to act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act that is based upon authority
given pursuant to a resolution duly adopted by the Board, the
instructions of the President and Chief Operating Officer or a
senior officer of the Company, or the advice of counsel for the
Company, shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests
of the Company.
(c) Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Period.
(d) Notice of Termination. Any termination by the Company of
Executive's employment prior to January 2, 2001 shall be communicated by
Notice of Termination to Executive given in accordance with Section 13(b)
of this Agreement. A "Notice of Termination" means a written notice which
(i) states that the Company is terminating Executive's employment, and (ii)
specifies the termination date (such date or January 2, 2001, whichever
occurs first, shall be the "Date of Termination").
5. Obligations of the Company Upon Termination of Employment or Expiration
of Employment Period. Upon expiration of the Employment period, Executive's
death during the Employment Period, or if the Company terminates the Executive's
employment without cause prior to the expiration of the Employment Period as
provided herein, the Company shall provide to the Executive the following
payments and benefits:
(i) Within 5 days following the Date of Termination, a lump sum
cash payment equal to the sum of (A) the Executive's Monthly Salary
through the Date of Termination, and (B) the value of the Executive's
accrued, but unused, vacation days, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (A) and
(B) shall be hereinafter referred to as the "Accrued Obligations") and
(C) twenty-four (24) times the Executive's Monthly Salary.
(ii) For a period of twenty-four (24) months following the Date
of Termination (the "Continuation Period"), the Company shall provide
the Executive and, if applicable, the Executive's family with medical,
dental and life insurance benefits at least as favorable as those that
would have been provided to them under Section 3(b) of this Agreement
if the Executive's employment with the Company had continued until the
end of the Continuation Period, at the same cost to the Executive as
if the Executive had continued employment; provided, however, that
during any period when the Executive is eligible to receive such
benefits under another employer-provided plan, the benefits provided
by the Company under this subparagraph may be made secondary to those
provided under such other plan.
(iii) For purposes of the Company's Supplemental Retirement Plan
(or any successor plan with the same general purpose as the
Supplemental Retirement Plan), Executive shall be deemed to have been
employed by the Company and to have received the Monthly Salary during
the Continuation Period.
6. Waiver of Other Payments and Benefits. The compensation and benefits
arrangements set forth in this Agreement are in lieu of any rights or claims
that the Executive may have with respect to severance, retention or other
benefits, or any other form of remuneration from the Company or any of its
subsidiaries or affiliates (the "Company Entities"), other than benefits under
any tax-qualified employee pension benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended (including the Company's
401(k) plan and tax-qualified pension plan) and the Company's Supplemental
Retirement Plan (or any successor plan with the same general purpose as the
Supplemental Retirement Plan). Without limiting the generality of the foregoing,
the Executive hereby expressly waives any right or claims that he may have or
could assert to payment for salary, bonuses, payments under supplemental
retirement plans and incentive plans (including without limitation
(i) the Change in Control Agreement made and entered into as of
September 30, 1999 by and between the Company and Executive,
(ii) the Harnischfeger Industries, Inc. Long-Term Compensation
Plan for Key Executives, and
(iii) any executive or employee retention plans),
life insurance benefits, perquisites, expenses and attorneys' fees, except as
otherwise expressly provided in this Agreement or as mandated under applicable
law.
7. No Admission of Wrongdoing. Nothing contained in this Agreement shall be
construed in any way as an admission by any of the parties of any act, practice
or policy of discrimination or breach of contract in violation of applicable law
or otherwise.
8. Waiver and Release.
(a) In consideration of the payments and benefits set forth in this
Agreement, except for the payment and benefits expressly provided herein
the Executive, for himself, his heirs, administrators, representatives,
executors, successors and assigns (collectively "Releasors") does hereby
irrevocably and unconditionally release, acquit and forever discharge the
Company Entities and their trustees, officers, security holders, partners,
agents, and former and current employees and directors, including without
limitation all persons acting by, through, under or in concert with any of
them (collectively, Releasees"), from any and all charges, complaints,
claims, liabilities, obligations, promises, agreements, controversies,
damages, remedies, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs) of
any nature whatsoever, known or unknown, whether in law or equity and
whether arising under federal, state or local law and in particular
including any claim for discrimination based upon race, color, ethnicity,
sex, age (including the Age Discrimination in Employment Act of 1967) (the
"ADEA Release"), national origin, religion, disability, or any other lawful
criterion or circumstance, which the Releasors had, now have, or may have
in the future, against each or any of the Releasees from the beginning of
the world until the date of the execution of this Agreement. The Executive
acknowledges and agrees that if he or any other Releasor should hereafter
make any claim or demand or commence or threaten to commence any action,
claim or proceeding against the Releasees with respect to any cause, matter
or thing which is the subject of this Section (5)(d), this Agreement may be
raised as a complete bar to any such action, claim or proceeding, and the
applicable Releasee may recover from the Executive all costs incurred in
connection with such action, claim or proceeding, including attorneys'
fees.
(b) The Executive affirms that prior to the execution of this
Agreement and the waiver and release in Section 8(b), the Executive was
advised by the Company to consult with an attorney of the Executive's
choice concerning the terms and conditions set forth herein, and that the
Executive was given up to 21 days to consider executing this Agreement,
including the ADEA Release in Section 8(b). The Executive has 7 days
following his execution of this Agreement to revoke the ADEA Release. In
the event the Executive Revokes the ADEA Release, the Executive shall
return to the Company any amounts paid to the Executive under this
Agreement.
9. Resignation of Offices. By mutual agreement with the Company, the
Executive hereby resigns, effective as of the Date of Termination, from his
position as Senior Vice President of the Company and from all other positions
the Executive may currently hold as an officer or member of the board of
directors of any of the Company Entities. The Executive shall sign and deliver
to the Company such other documents as may be necessary to effect or reflect
such resignations.
10. Cause. If the Executive's employment is terminated by the Company for
Cause during the Employment Period, the Company shall pay the Executive the
Executive's Accrued Obligations in a lump sum within 5 days following the Date
of Termination through the Date of Termination to the extent not yet paid, and
the Company shall have no further obligations under this Agreement.
11. Confidential Information; Noncompetition; Nonsolicitation.
(a) The Executive shall hold in a fiduciary capacity for the benefit
of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies and their
respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is
not public knowledge (other than as a result of the Executive's violation
of this Section 11(a)) ("Confidential Information"). The Executive shall
not communicate, divulge or disseminate Confidential Information at any
time during or after the Executive's employment with the Company, except
with the prior written consent of the Company or as otherwise required by
law or legal process. All computer software, business cards, telephone
lists, customer lists, price lists, contract forms, catalogs, the Company
books, records, files and know-how acquired while an employee of the
Company are acknowledged to be the property of the Company and shall not be
duplicated, removed from the Company's possession or premises or made use
of other than in pursuit of the Company's business or as may otherwise be
required by law or any legal process, or as is necessary in connection with
any adversarial proceeding against the Company and, upon termination of
employment for any reason, the Executive shall deliver to the Company,
without further demands, all copies thereof which are then in his
possession or under his control.
(b) During the Noncompetition Period (as defined below), the Executive
shall not, without the prior written consent of the Board, engage in or
become associated with a Competitive Activity. For purposes of this Section
11(b), (i) the "Noncompetition Period" means the period during which the
Executive is employed by the Company pursuant to this Agreement and one
year following the Date of Termination; (ii) a "Competitive Activity" means
any business or other endeavor that is in substantial competition with any
business conducted by the Company at such time; and (iii) the Executive
shall be considered to have become "associated with a Competitive Activity"
if he becomes directly or indirectly involved as an owner, shareholder,
employee, officer, director, independent contractor, agent, partner,
advisor, or in any other capacity calling for the rendition of the
Executive's personal services, with any individual, partnership,
corporation or other organization that is engaged in a Competitive
Activity. Notwithstanding the foregoing, the Executive may make and retain
investments during the Noncompetition Period in not more than three percent
of the equity of any entity engaged in a Competitive Activity, if such
equity is listed on a national securities exchange or regularly traded in
an over-the-counter market.
(g) During the Noncompetition Period, the Executive will not, directly
or indirectly, solicit for employment by other than the Company any person
(other than any personal assistant hired to work directly for the
Executive) employed by the Company, nor will the Executive, directly or
indirectly, solicit for employment by other than the Company any person
known by the Executive (after reasonable inquiry) to be employed at the
time by the Company.
(h) The Executive shall continue to be subject to the terms of the
Harnischfeger Industries, Inc. Employee Proprietary Rights and
Confidentiality Agreement pursuant to the terms of such agreement.
Following a Change of Control, the Executive shall be subject to the
provisions set forth below in this Section 11(d) with respect to the
Company. The Executive shall promptly communicate to the Company all ideas,
discoveries and inventions which are or may be useful to the Company or its
business. The Executive acknowledges that all ideas, discoveries,
inventions, and improvements which heretofore have been or are hereafter
made, conceived, or reduced to practice by him at any time during his
employment with the Company or heretofore or hereafter gained by him at any
time during his employment with the Company are the property of the
Company, and the Executive hereby irrevocably assigns all such ideas,
discoveries, inventions, and improvements to the Company for its sole use
and benefit, without additional compensation. The provisions of this
Section 11(d) shall apply whether such ideas, discoveries, inventions, or
improvements were or are conceived, made or gained by him along or with
others, whether during or after usual working hours, whether on or off the
job, whether applicable to matters directly or indirectly related to the
Company's business interests (including potential business interests), and
whether or not within the specific realm of his duties. The Executive
shall, upon request of the Company, but at no expense to the Executive, at
any time during or after his employment with the Company, sign all
instruments and documents reasonably requested by the Company and otherwise
cooperate with the Company to protect its right to such ideas, discoveries,
inventions, or improvements including applying for, obtaining, and
enforcing patents and copyrights thereon in such countries as the Company
shall determine.
(i) The provisions of Sections 11(a), (b), (c) and (d) of this
Agreement shall remain in full force and effect until the expiration of the
period specified herein notwithstanding the earlier termination of the
Executive's employment hereunder. For purposes of this Section 7, the
"Company" shall include all subsidiaries of the Company other than Beloit
Corporation and its subsidiaries.
(j) In the event of a breach of the Executive's covenants under this
Section 7, it is understood and agreed that the Company shall be entitled
to injunctive relief, as well as any other legal or equitable remedies.
12. Successors. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable
by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
13. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Wisconsin, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Mark E. Readinger
244 Mary Street
Winnetka/Glencoe, IL 60093
If to the Company:
Harnischfeger Industries, Inc.
3600 S. Lake Drive
St. Francis, WI 53235
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this Section 13. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Any dispute or controversy between the parties relating to or
arising out of this Agreement or any amendment or modification hereof shall
be determined by arbitration in Milwaukee, Wisconsin by and pursuant to the
rules then prevailing of the American Arbitration Association, other than
claims for injunctive relief under Section 6. The arbitration award shall
be final and binding upon the parties and judgment may be entered thereon
by any court of competent jurisdiction. The service of any notice, process,
motion or other document in connection with any arbitration under this
Agreement or the enforcement of any arbitration award hereunder may be
effectuated either by personal service upon a party or by certified mail
duly addressed to him or to his executors, administrators, personal
representatives, next of kin, successors or assigns, at the last known
address or addresses of such party or parties.
(e) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state,
local and foreign taxes that are required to be withheld by applicable laws
or regulations.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement.
(g) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute
but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and
the Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written.
------------------------------
Mark E. Readinger
Harnischfeger Industries, Inc.
By____________________________
EXHIBIT 21
HARNISCHFEGER INDUSTRIES, INC.
Subsidiaries as of October 31, 2000
Harnischfeger Industries, Inc. is publicly held and has no parent. The
following subsidiaries are wholly-owned except as noted below. Certain
subsidiaries, which if considered in the aggregate as a single subsidiary would
not constitute a significant subsidiary, are omitted from this list. Where the
name of the subsidiary is indented, it is wholly-owned by the entity above it at
the next outermost margin, unless otherwise indicated.
Jurisdiction
------------
Harnischfeger Corporation (d.b.a. P&H Mining Equipment) Delaware
Harnischfeger Corporation of Canada Ltd. (1) Canada
HCHC, Inc. Delaware
Harnischfeger de Chile Ltda. (2) Chile
Comercial Otero S.A. (3) Chile
Harnischfeger of Australia Pty. Ltd. (4) Australia
Harnischfeger do Brasil Comercio e Industria Ltda. (5) Brazil
The Horsburgh & Scott Company Ohio
American Alloy Company Ohio
Joy Technologies Inc. (d.b.a. Joy Mining Machinery) Delaware
Harnischfeger (South Africa) (Proprietary) Ltd. South Africa
HCHC UK Holdings, Inc. Delaware
Harnischfeger ULC (6) United Kingdom
Harnischfeger Ventures Ltd. United Kingdom
Harnischfeger Industries Ltd. United Kingdom
Joy Mining Machinery Ltd. United Kingdom
Joy Manufacturing Company Pty. Ltd. Australia
Cram Australia Pty. Ltd. Australia
JTI UK Holdings, Inc. Delaware
Beloit Corporation (7) Delaware
- -------------------
(1) Harnischfeger Corporation owns 77.272% and Joy Technologies Inc. owns
22.728% of the voting securities of Harnischfeger Corporation of Canada
Ltd.
(2) HCHC, Inc. owns 90% and Harnischfeger Corporation owns 10% of the voting
securities of Harnischfeger de Chile Ltda.
(3) Harnischfeger de Chile Ltda. owns 99.999% and Harnischfeger Corporation
owns .001% of the voting securities of Comercial Otero S.A.
(4) HCHC, Inc. owns 75% of the voting securities of Harnischfeger of Australia
Pty. Ltd.
(5) HCHC, Inc. owns 99.999% and Harnischfeger Corporation owns .001% of
Harnischfeger do Brasil Comercio e Industria Ltda.
(6) HCHC UK Holdings, Inc. owns 85% and JTI UK Holdings, Inc. owns 15% of the
voting securities of Harnischfeger ULC.
(7) Harnischfeger Industries, Inc. owns 80% of the voting securities of Beloit
Corporation. Beloit Corporation is a discontinued unit.
EXHIBIT 23
HARNISCHFEGER INDUSTRIES, INC.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 and in the
Registration Statements on Form S-8 listed below of Harnischfeger Industries,
Inc. of our report dated January 11, 2001 appearing in this Annual Report on
Form 10-K.
1. Registration Statement on Form S-8 (Registration No. 33-42833)
2. Registration Statement on Form S-8 (Registration No. 33-23985)
3. Registration Statement on Form S-8 (Registration No. 33-46738)
4. Registration Statement on Form S-8 (Registration No. 33-46739)
5. Registration Statement on Form S-8 (Registration No. 33-46740)
6. Registration Statement on Form S-8 (Registration No. 33-57209)
7. Registration Statement on Form S-3 (Registration No. 33-57979)
8. Registration Statement on Form S-8 (Registration No. 33-58087)
9. Registration Statement on Form S-8 (Registration No. 333-01703)
10. Registration Statement on Form S-8 (Registration No. 333-01705)
11. Registration Statement on Form S-3 (Registration No. 333-02401)
12. Registration Statement on Form S-8 (Registration No. 333-10327)
13. Registration Statement on Form S-8 (Registration No. 333-10329)
14. Registration Statement on Form S-3 (Registration No. 333-46429)
15. Registration Statement on Form S-8 (Registration No. 333-65577)
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 11, 2001
EXHIBIT 24
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as her attorney, with full power to act for her and in her name, place
and stead, to sign her name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal this
___ day of December, 2000.
/s/ (SEAL)
Donna M. Alvarado
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
13th day of December, 2000.
/s/ (SEAL)
Harry L. Davis
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
___ day of December, 2000.
/s/ (SEAL)
Stephen M. Peck
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
___ day of December, 2000.
/s/ (SEAL)
John D. Correnti
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
15th day of December, 2000.
/s/ (SEAL)
Robert B. Hoffman
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
___ day of December, 2000.
/s/ (SEAL)
Jean-Pierre Labruyere
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
___ day of December, 2000.
/s/ (SEAL)
Robert M. Gerrity
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
11th day of December, 2000.
/s/ (SEAL)
L. Donald LaTorre
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), will file with the Securities
and Exchange Commission, under the provisions of the Securities Exchange Act of
1934, a Form 10-K Annual Report for the fiscal year ended October 31, 2000; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N.
Hanson as his attorney, with full power to act for him and in his name, place
and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this
13th day of December, 2000.
/s/ (SEAL)
Leonard E. Redon