Joy Global Inc.
JOY GLOBAL INC (Form: 10-K, Received: 12/18/2012 06:02:02)
Table of Contents

 

 

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 26, 2012

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD From              to             

Commission File number 001-09299

 

 

JOY GLOBAL INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   39-1566457
(State of Incorporation)   (I.R.S. Employer Identification No.)
100 East Wisconsin Ave, Suite 2780, Milwaukee, Wisconsin   53202
(Address of principal executive offices)   (Zip Code)

Registrant’s Telephone Number, Including Area Code: (414) 319-8500

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

 

Name of each exchange on which registered

Common Stock, par value $1 per share   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   x     No   ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   x

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).    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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filed or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨     No   x

The aggregate market value of the voting and non-voting common stock held by non-affiliates, as of April 27, 2012 the last business day of our most recently completed second fiscal quarter, was approximately $7.6 billion, based on a closing price of $71.60 per share.

The number of shares outstanding of registrant’s common stock, as of December 7, 2012, was 105,994,248.

 

 

Documents Incorporated by Reference

The information required by Part III of Form 10-K, is incorporated herein by reference to the definitive proxy statement for the registrant’s 2013 annual meeting of stockholders.

 

 

 


Table of Contents

Joy Global Inc.

INDEX TO

ANNUAL REPORT ON FORM 10-K

For The Year Ended October 26, 2012

 

              Page  

PART I

       
  Item 1.   

Business

     5   
  Item 1A.   

Risk Factors

     12   
  Item 1B.   

Unresolved Staff Comments

     19   
  Item 2.   

Properties

     20   
  Item 3.   

Legal Proceedings

     22   
  Item 4.   

Reserved

     22   
    

Executive Officers of the Registrant

     23   

PART II

       
  Item 5.   

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     24   
  Item 6.   

Selected Financial Data

     26   
  Item 7.   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     27   
  Item 7A.   

Quantitative and Qualitative Disclosures About Market Risk

     40   
  Item 8.   

Financial Statements and Supplementary Data

     42   
  Item 9.   

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     43   
  Item 9A.   

Controls and Procedures

     43   
  Item 9B.   

Other Information

     43   

PART III

       
  Item 10.   

Directors, Executive Officers and Corporate Governance

     44   
  Item 11.   

Executive Compensation

     44   
  Item 12.   

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     44   
  Item 13.   

Certain Relationships, Related Transactions and Director Independence

     44   
  Item 14.   

Principal Accounting Fees and Services

     44   

PART IV

       
  Item 15.   

Exhibits and Financial Statement Schedules

     45   


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PART I

This document contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives, pending acquisitions, expected operating results and other non-historical information, and the assumptions upon which those statements are based. These statements constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are identified by forward-looking terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “indicate,” “intend,” “may be,” “objective,” “plan,” “potential,” “predict,” “should,” “will be” and similar expressions. Forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from any forward-looking statement. In addition, certain market outlook information and other market statistical data contained herein is based on third party sources that we cannot independently verify, but that we believe to be reliable. Important factors that could cause our actual results to differ materially from the results anticipated by the forward-looking statements include:

 

 

general economic conditions;

 

 

changes affecting our industry, including demand for coal, copper, iron ore and other commodities, cyclical demand for equipment we manufacture and competitive pressures;

 

 

risks associated with international operations, including country specific or regional economic conditions and fluctuations in currency exchange rates;

 

 

our ability to develop products to meet the needs of our customers and the mining industry generally;

 

 

changes affecting our customers, including access to capital and regulations pertaining to mine safety, the environment or greenhouse gas emissions;

 

 

changes in laws and regulations or their interpretation and enforcement, including with respect to environmental matters;

 

 

changes in tax rates;

 

 

availability and cost of raw materials and manufactured components from third party suppliers;

 

 

our ability to protect our intellectual property;

 

 

our ability to hire and retain qualified employees and to avoid labor disputes and work stoppages;

 

 

our ability to generate cash from operations, obtain external funding on favorable terms and manage liquidity needs;

 

 

changes in interest rates;

 

 

changes in accounting standards or practices;

 

 

failure or breach in security of our information technology systems; and

 

 

our ability to integrate businesses that we acquire.

In addition to the foregoing factors, the forward-looking statements contained herein are qualified with respect to the risks disclosed elsewhere in this document, including in Item 1A, “Risk Factors,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 7A, “Quantitative and

 

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Qualitative Disclosures about Market Risk.” Any or all of these factors could cause our results of operations, financial condition or liquidity for future periods to differ materially from those expressed in or implied by any forward-looking statement. Furthermore, there may be other factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events, except as required by law.

 

Item 1. Business

General

Joy Global Inc. (“we” and “us”) is a leading manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. Our equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands, and other minerals. Our Underground Mining Machinery segment is a major manufacturer of underground mining equipment for the extraction of coal and other bedded minerals and offers comprehensive service locations near major mining regions worldwide. Our Surface Mining Equipment segment 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. Sales of original equipment for the mining industry, as a class of products, accounted for 48%, 41% and 40% of our consolidated net sales for fiscal 2012, 2011 and 2010, respectively. Aftermarket sales, which includes revenues from maintenance and repair services, diagnostic analysis, fabrication, mining equipment and electric motor rebuilds, equipment erection services, training, and sales of replacement parts, account for the remainder of our consolidated sales for each of those years. We are the direct successor to a business begun over 125 years ago and were known as Harnischfeger Industries, Inc. until July 2001.

During the third quarter of fiscal 2011, we completed the acquisition of LeTourneau Technologies, Inc. (“LeTourneau”). LeTourneau historically operated three businesses, mining equipment, steel products and drilling products. Subsequent to the acquisition, we entered into an agreement to sell the drilling products business of LeTourneau and completed this sale in the fourth quarter of fiscal 2011. The results of operations for LeTourneau are included in the accompanying consolidated financial statements with the mining equipment and steel products businesses included in our Surface Mining Equipment segment and the drilling products business reflected as results of discontinued operations.

On July 11, 2011, we entered into a Share Purchase Agreement (“SPA”) with TJCC Holdings Limited, a corporation controlled by The Jordan Company, L.P., to acquire approximately 41.1%, of International Mining Machinery Holdings Limited (“IMM”). IMM is a leading designer and manufacturer of underground coal mining equipment in China. On July 28, 2011, August 16, 2011 and September 2, 2011 we purchased shares on the open market representing an aggregate of approximately 28.1% of the total outstanding shares of IMM. On December 20, 2011, the Anti-monopoly Bureau of the Ministry of Commerce of the People’s Republic of China approved the purchase of IMM shares covered by the SPA and the acquisition closed on December 29, 2011. At such time, we acquired a controlling interest in IMM which, when aggregated with earlier open market purchases, was approximately 69.2% of IMM’s outstanding common stock. Upon closing, we recognized a $19.4 million gain on the re-measurement of our pre-existing equity interest in IMM. On January 6, 2012, in accordance with Rule 26.1 of the Hong Kong Takeovers Code, we commenced an unconditional cash tender offer to purchase the remaining outstanding IMM shares and options to purchase IMM shares that we did not own. On February 10, 2012, we completed the tender offer. As a result of the tender offer, our beneficial ownership of IMM common stock increased to approximately 98.9%, for which we had paid aggregate consideration of approximately $1.4 billion. On July 25, 2012, we effected the compulsory acquisition of the remaining shares under applicable provisions of the Cayman Island Companies Law, under which IMM is incorporated. We paid consideration of approximately $16.2 million to complete the compulsory acquisition, using the remaining cash which had been placed in escrow to finance the purchase of IMM shares. The combined effect of these transactions resulted in our beneficial ownership of 100% of the common stock of IMM.

 

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Underground Mining Machinery

We are the world’s largest producer of high productivity underground mining machinery for the extraction of coal and other bedded materials. We have manufacturing facilities in Australia, South Africa, the United Kingdom, China, and the United States as well as sales offices and service facilities in India, Poland, and Russia. Our products include: continuous miners; road headers; shuttle cars; flexible conveyor trains; complete longwall mining systems (consisting of powered roof supports, an armored face conveyor, and a longwall shearer); continuous haulage systems; battery haulers; roof bolters; crushing equipment; and conveyor systems. We also maintain an extensive network of service and distribution centers to rebuild and service equipment and to sell replacement parts and consumables in support of our installed base. This network includes five service centers in the United States and eight outside the United States, all of which are strategically located in major underground mining regions.

Products and Services:

Continuous miners – Electric, crawler mounted continuous miners cut material using carbide-tipped bits on a horizontal rotating cutterhead. Once cut, the material is gathered onto an internal conveyor and loaded into a haulage vehicle or continuous haulage system for transportation to the feeder breaker.

Longwall shearers – A longwall shearer moves back and forth on an armored face conveyor parallel to the material face. Using carbide-tipped bits on cutting drums at each end, the shearer cuts 1.2 to 8.0 meters high on each pass and simultaneously loads the material onto the armored face conveyor for transport through the stageloader to the conveyor belt.

Powered roof supports – Roof supports use hydraulic cylinders to perform a jacking-like function that supports the mine roof during longwall mining. The supports self-advance with the longwall shearer and armored face conveyors, resulting in controlled caving behind the supports. A longwall face may range up to 400 meters in length.

Armored face conveyors – Armored face conveyors are used in longwall mining to transport material cut by the shearer away from the longwall face.

Shuttle cars – Shuttle cars, a type of rubber-tired haulage vehicle, are electric-powered using an umbilical cable. Their purpose is to transport material from continuous miners to the feeder-breaker where chain conveyors in the shuttle cars unload the material. Some models of Joy shuttle cars can carry up to 22 metric tons of coal.

Flexible conveyor trains (FCT) – FCT’s are electric-powered, single operator, self-propelled conveyor systems that provide continuous haulage of material from a continuous miner to the main mine belt. The FCT uses a rubber belt similar to a standard fixed conveyor. The FCT’s conveyor operates independently from the track crawler system, allowing the FCT to move and convey material simultaneously. Available in lengths of up to 570 feet, the FCT is able to negotiate multiple 90-degree turns in an underground mine infrastructure.

Roof bolters – Roof bolters are drills used to bore holes in the mine roof and to insert long metal bolts into the holes to reinforce the mine roof. Roof bolters are available track mounted, wheel mounted, machine mounted or mounted to devices that operate on longwalls.

Battery haulers – Battery haulers perform a similar function to shuttle cars and are powered by portable rechargeable batteries. Battery haulers feature a flexible center joint allowing them to maneuver in tight conditions and do not use a trailing cable, which allows for maximum flexibility in the mining process.

Continuous chain haulage systems – The continuous chain haulage system provides a similar function as the FCT, transporting material from the continuous miner to the main mine belts on a continuous basis, versus the batch process used by shuttle cars and battery haulers, but it does so with different technology. The continuous chain haulage system is made up of a series of connected bridge structures that utilize chain conveyors that transport the coal from one bridge structure to the next bridge structure and ultimately to the main mine belts.

 

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Feeder breakers – A feeder breaker is a form of crusher that uses rotating drums with carbide-tipped bits to break down the size of the mined material for loading onto conveyor systems or feeding into processing facilities. Mined material is typically loaded into the feeder breaker by a shuttle car or battery hauler in underground applications and by haul trucks in surface applications.

Road headers – Crawler mounted road headers cut material using carbide-tipped bits on a boom mounted cutting head. Once cut, the material is gathered using a loading device usually involving a conveyor.

Conveyor systems – Conveyor systems are used in both above and underground applications. The primary components of a conveyor system are the idlers, idler structure, and the terminal which itself consists of a drive, discharge, take-up and tail loading section.

High angle conveyors – The high angle conveyor provides a versatile method for elevating or lowering materials continuously from one level to another at extremely steep angles. One of the differentiating factors of our conveyor technology is the use of a proprietary fully equalized pressing mechanism which secures material toward the center of the belt while gently, but effectively, sealing the belt edges together. The high angle conveyor has throughput rates ranging from 0.30 to 4,400 tons per hour.

Smart services – A service offering that gathers relevant information real time and uses this information to deliver services that are pre-emptive and predictive, which enables our customers to maximize the productivity and value of their assets by providing better machine availability, utilization, and reduced costs.

Smart facilities – We maintain customer care centers that are linked directly to the customer and close to the mine site in order to provide machine monitoring and reporting, field engineering, customer training, and productivity consulting, as well as life cycle management services.

Our direct customer service and support infrastructure quickly and efficiently provides customers with high-quality parts, exchange components, repairs, rebuilds, whole machine exchanges, and services. Our Life Cycle Management program objective is to provide a range of products and services that achieves the lowest cost per ton over the life of the equipment. Our Life Cycle Management arrangements include cost per ton, cost per hour, component exchange programs, and parts contracts. Cost per ton and cost per hour programs allow our customers to pay fixed prices for each ton of material mined or each hour of machine time utilized in order to match equipment costs with revenues, and our component exchange programs minimize production disruptions for repair or scheduled rebuilds. These programs reduce customer capital requirements and ensure quality aftermarket parts and services for the life of the contract. We sell our products and services directly to our customers through a global network of sales and marketing personnel.

The Underground Mining Machinery segment has demonstrated cyclicality over the years. The primary drivers of this cyclicality are commodity prices (particularly coal prices) and coal production levels. Our Underground Mining Machinery segment is particularly sensitive to conditions in the coal mining industry, which accounts for a substantial portion of all underground sales. Other drivers of cyclicality include product life cycles, new product introductions, governmental regulations, competitive pressures and industry consolidation.

Surface Mining Equipment

We are the world’s largest producer of electric mining shovels and a leading producer of wheel loaders, rotary blasthole drills, and walking draglines for open-pit mining operations. We have facilities in Australia, Brazil, Canada, Chile, China, South Africa, and the United States, as well as sales offices in India, Mexico, Peru, Russia, the United Kingdom, and Venezuela. Our products are used in the mining of copper, coal, iron ore, oil sands, silver, gold, diamonds, phosphate, and other minerals and ores. We also provide logistics and a full range of life cycle management service support for our customers through a global network of strategically located operations within major mining regions. In some markets, we also provide electric motor rebuilds and other selected products and services to the non-mining industrial segment and sell used electric mining shovels, drills and parts.

 

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Products and Services:

Electric mining shovels – Mining shovels are used primarily to load copper ore, coal, iron ore, oil sands, gold, and other mineral-bearing materials and overburden into trucks or other conveyances. Electric mining shovels typically feature larger dippers, allowing them to load greater volumes of material at the lowest cost per ton of mineral mined. Its use is determined by the size of the mining operation and the availability of electricity. Dippers can range in size from 12 to 82 cubic yards.

Blasthole drills – Most surface mines require breakage or blasting of rock, overburden, or ore using explosives. A blasthole drill creates a pattern of holes to contain the explosives. Drills are usually described in terms of the diameter of the hole they bore. Our blasthole drills bore holes range in size from 9.875 to 17.5 inches in diameter and can exert a pull down force up to 150,000 pounds.

Wheel Loaders – Loaders are generally used in coal, copper, and iron ore mines, and utilize a proprietary diesel-electric drive system with digital controls. This proprietary system allows our equipment to stop, start and reverse direction without gear shifting and high-maintenance braking. Loaders feature bucket capacities up to 53 cubic yards, which are the largest in the industry, and can load rear-dump trucks in the 85-ton to 400-ton range.

Walking draglines – Draglines are primarily used to remove overburden to uncover coal or mineral deposits and then to replace the overburden as part of the reclamation activities. Our draglines are equipped with bucket sizes ranging from 30 to 160 cubic yards.

Lifecycle management – The term “life cycle management” refers to our strategy to maximize the productivity of our equipment over the equipment’s entire operating life cycle through the optimization of the equipment, its operating and maintenance procedures, and its upgrade and refurbishment. Each life cycle management program is specifically designed for a particular customer and that customer’s application of our equipment. Under each program, we provide aftermarket products and services to support the equipment during its operating life cycle. Under some of the programs, the customer pays us an amount based upon hours of operation or units of production achieved by the equipment. The amount to be paid per unit is determined by the economic model developed on a case-by-case basis, and is set at a rate designed to include both the estimated costs and anticipated profit.

In addition to life cycle management support, our surface mining equipment segment provides equipment assemblies, relocations, inspections, service, repairs, rebuilds, upgrades, used equipment, parts, enhancement kits and training to customer globally.

Our personnel and distribution centers are strategically located close to customers in major mining centers around the world. We sell our products and services directly to customers through a global network of sales and marketing personnel. The Surface Mining Equipment segment distribution organization also represents other leading providers of equipment and services to the mining and associated industries, which we refer to as “Alliance Partners.” Some of the Alliance Partner relationships include the following companies:

 

•      Berkley Forge and Tool Inc.

  

•      Phillippi-Hagenbach Inc.

•       Bridon American Corporation

  

•       Prodinsa Wire Rope

•       Dux Machinery

  

•       Wire Rope Industries Ltd.

•       Hensley Industries Inc.

  

•       Wire Rope Corporation of America, Inc.

•       Hitachi Mining Division

  

•       ESCO Corporation

For each Alliance Partner, we typically enter into an agreement that provides us with the right to distribute certain Alliance Partners’ products in specified geographic territories. Specific sales of new equipment are typically based on “buy and resell” arrangements or are a direct sale from the Alliance Partner to the ultimate customer with a commission paid to us. The type of sales arrangement is typically agreed at the time of the customer’s commitment to purchase. Our aftermarket sales of parts produced by Alliance Partners are generally made under “buy and resell” arrangements. To support Alliance Partners’ products in certain geographic regions, we typically hold parts and components in inventory.

 

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The Surface Mining Equipment segment is subject to cyclical movements in the markets. Sales of original equipment are driven to a large extent by commodity prices and demand. Rising commodity prices and demand typically lead to the expansion of existing mines, opening of new mines, or re-opening of less efficient mines. Aftermarket sales are less cyclical, although severe reductions in commodity prices and/or demand can result in the removal of machines from mining production, and thus dampen demand for parts and services. Conversely, significant increases in commodity prices and/or demand can result in higher use of equipment and generate requirements for more parts and services. Copper, coal, oil sands, gold and iron ore mining accounted for approximately 90% of total surface sales in recent years.

Operational Excellence – Joy Global Business System

In order to provide world class service to the mining industry, we have developed the Joy Global Business System as an extension of our operational excellence initiatives.

The Joy Global Business System consists of:

 

   

Developing world class products, processes and people;

 

   

Building on common global processes, methods and metrics; and

 

   

Servicing and adapting to local customer needs.

The major objectives of the Joy Global Business System are:

 

   

Safety – establishment of a zero-harm mentality;

 

   

Velocity – cycle time reductions and on time/on specification;

 

   

Productivity – doing more with less by working and investing smarter;

 

   

Quality – flawless execution in everything we do; and

 

   

Customer Satisfaction – every customer is a reference for our products.

Seasonality

All of our business segments are subject to moderate seasonality, with the first quarter of our fiscal year generally experiencing lower sales and profitability due to a decrease in working days caused by the U.S. Thanksgiving and calendar year-end holidays.

Financial Information

Financial information about our business segments and geographic areas of operation is contained in Item 8 – Financial Statements and Supplementary Data and Item 15 – Exhibits and Financial Statement Schedules .

Employees

As of October 26, 2012, we employed approximately 18,019 employees worldwide, with approximately 6,739 employed in the United States. Collective bargaining agreements or similar arrangements cover 30% of our U.S. workforce and 16% of our international employees. In 2013, union agreements are set to expire for 4% of our employees with the largest covering the United Steel Workers union at our Winfield, Alabama facility.

 

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Customers

We sell our products primarily to large global and regional mining companies. No customer or affiliated group of customers accounted for 10% or more of our 2012 consolidated net sales.

Competitive Conditions

The Underground Mining Machinery and Surface Mining Equipment segments 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. The customers for these products are generally large mining companies with substantial purchasing power.

The Underground Mining Machinery segment’s continuous miners, road headers, longwall shearers, powered roof supports, armored face conveyors, continuous haulage systems, shuttle cars, crushers, conveyers, and battery haulers compete with similar products made by a number of established and emerging worldwide manufacturers of such equipment. Our rebuild services compete with a large number of local repair shops and also compete with various regional suppliers in the sale of replacement parts for our equipment.

The Surface Mining Equipment segment’s shovels and draglines compete with similar products produced by one significant competitor and with hydraulic excavators, large rubber-tired front-end loaders, and bucket wheel excavators made by several international manufacturers. Our large rotary blasthole drills compete with several worldwide drill manufacturers. As high productivity mining becomes more common internationally, especially in emerging markets, global manufacturing capability is becoming a competitive advantage; however, it is still important to have repair and rebuild capability near the customer’s operations. In this regard, we compete with a large number of primarily regional suppliers in the sale of parts.

The Underground Mining Machinery segment and Surface Mining Equipment segment compete on the basis of providing superior productivity, reliability, and service that lowers the overall cost of production for our customers. Both segments compete with local and regional service providers in the provision of maintenance, rebuild and other services to mining equipment users.

Backlog

Backlog represents unfilled customer orders for our original equipment and aftermarket products and services. Customer orders included in backlog as of October 26, 2012 represent contracts to purchase specific original equipment, products or services by customers who have satisfied our credit review procedures. The following table provides backlog by business segment as of our fiscal year end. These backlog amounts exclude customer arrangements under long-term equipment life cycle management programs. Such programs extend for up to 17 years and totaled approximately $1.6 billion as of October 26, 2012. The amounts shown also exclude sales already recognized by fiscal year end under the percentage-of-completion method of accounting.

 

In thousands

   2012     2011     2010  

Underground Mining Machinery

   $ 1,341,097      $ 1,739,932      $ 1,208,181   

Surface Mining Equipment

     1,333,098        1,560,393        637,050   

Eliminations

     (109,644     (46,991     (24,973
  

 

 

   

 

 

   

 

 

 

Total Backlog

   $ 2,564,551      $ 3,253,334      $ 1,820,258   
  

 

 

   

 

 

   

 

 

 

Of the $2.6 billion of backlog, approximately $203.8 million is expected to be recognized as revenue beyond fiscal 2013.

 

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The decrease in Surface Mining Equipment backlog as of October 26, 2012 compared to October 28, 2011 reflects the negative book to bill ratio. The decrease in Underground Mining Machinery backlog as of October 26, 2012 compared to October 28, 2011 is primarily related to significant prior year original equipment orders in the U.S. and Australia, as well as the negative book to bill ratio. The IMM acquisition added $45.2 million to the Underground Mining Machinery backlog as of October 26, 2012.

The increase in Surface Mining Equipment backlog as of October 28, 2011 compared to October 29, 2010 reflects the positive book to bill ratio across all regions. The LeTourneau acquisition added $43.7 million to the Surface Mining Equipment backlog as of October 28, 2011. The increase in Underground Mining Machinery backlog as of October 28, 2011 compared to October 29, 2010 is primarily related to significant original equipment orders in the U.S. and Australia.

Eliminations include the surface applications of crushing and conveying included in both operating segments.

Raw Materials

The Underground Mining Machinery segment purchases electric motors, gears, hydraulic parts, electronic components, castings, forgings, steel, clutches, and other components and raw materials from outside suppliers. The Surface Mining Equipment segment 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 a group of pre-qualified suppliers.

We utilize a supplier risk management monitoring process to analyze our suppliers to determine the risk of production disruption as it relates to procurement of raw materials. Based on the results of continuous evaluations, we partner with our suppliers to address potential issues as they are identified. We believe this process provides greater clarity with respect to drivers of supplier performance and provides us with an earlier indication of potential supplier issues.

Patents and Trademarks

We own numerous patents and trademarks and we license technology from others that we utilize in our products and manufacturing methods. We continue to develop intellectual property and we file new patent applications to protect our ongoing research and development activities. We have also granted patent and trademark licenses to other manufacturers and receive royalties under most of these licenses. While we do not consider any particular patent or license or group of patents or licenses to be material to our business segments, we believe that in the aggregate our patents and licenses are significant in distinguishing many of our product lines from those of our competitors. The recorded cost of patents and trademarks by segment are as follows:

 

In thousands

   Underground
Mining
Machinery
    Surface
Mining
Equipment
    Consolidated  

Patents

      

Gross Carrying Value

   $ 21,284      $ 69,900      $ 91,184   

Accumulated Amortization

     (10,044     (4,660     (14,704
  

 

 

   

 

 

   

 

 

 

Net Carrying Value

   $ 11,240      $ 65,240      $ 76,480   
  

 

 

   

 

 

   

 

 

 

Trademarks

   $ 151,600      $ 37,200      $ 188,800   
  

 

 

   

 

 

   

 

 

 

 

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Research and Development

We are strongly committed to pursuing technological development through the engineering of new products and systems, the improvement and enhancement of licensed technology, and related acquisitions of technology. Research and development expenses totaled $47.8 million, $40.4 million, and $29.8 million for 2012, 2011, and 2010, respectively.

Environmental, Health and Safety Matters

Our domestic activities are regulated by federal, state, and local statutes, regulations, and ordinances relating to 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. Our foreign operations are subject to similar requirements as established by the jurisdictions in which they are located. We believe that we have substantially satisfied these diverse requirements.

Compliance with environmental laws and regulations did not have a material effect on capital expenditures, earnings, or our competitive position in 2012. Because these requirements are complex and, in many areas, rapidly evolving, there can be no guarantee against the possibility of additional costs of compliance. However, we do not expect that our future compliance with environmental laws and regulations will have a material effect on our capital expenditures, earnings or competitive position, and do not expect to make any material capital expenditures for environmental control facilities in fiscal 2013.

Our 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.

International Operations

For information on the risks faced by our international operations, see Item 1A. Risk Factors.

Available Information

Our internet address is: www.joyglobal.com. We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

 

Item 1A. Risk Factors

Our international operations are subject to many uncertainties, and a significant reduction in international sales of our products could adversely affect us.

Our international operations are subject to various economic, political and other uncertainties that could adversely affect our business. In our fiscal years 2012, 2011, and 2010, approximately 55%, 54%, and 56%, respectively, of our sales were derived from sales outside the United States, and economic conditions in the countries and regions in which we operate significantly affect our profitability and growth prospects. A reduction in our international business due to any of the following risks would adversely affect our business, financial condition and results of operations:

 

 

regional or country specific economic downturns;

 

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fluctuations in currency exchange rates, particularly the Australian dollar, Chinese renminbi, Canadian dollar; Chilean peso, Indian rupee, South African rand, and British pound sterling;

 

 

complications in complying with a variety of foreign laws and regulations, including with respect to environmental matters, which may adversely affect our operations and ability to compete effectively in certain jurisdictions or regions;

 

 

international political and trade issues and tensions;

 

 

unexpected changes in regulatory requirements, up to and including the risk of nationalization or expropriation by foreign governments;

 

 

higher tax rates and potentially adverse tax consequences including restrictions on repatriating earnings, adverse tax withholding requirements and double taxation;

 

 

greater difficulties protecting our intellectual property;

 

 

increased risk of litigation and other disputes with customers;

 

 

fluctuations in our operating performance based on our geographic mix of sales;

 

 

longer payment cycles and difficulty in collecting accounts receivable;

 

 

costs and difficulties in integrating, staffing and managing international operations, especially in rapidly growing economies such as China;

 

 

transportation delays and interruptions;

 

 

natural disasters and the greater difficulty in recovering from them in some of the foreign countries in which we operate, especially in countries prone to earthquakes, such as China, Chile, India, and Indonesia;

 

 

uncertainties arising from local business practices and cultural considerations;

 

 

customs matters and changes in trade policy, tariff regulations or other trade restrictions; and

 

 

national and international conflicts, including terrorist acts.

We expect that the percentage of our sales occurring outside the United States will increase over time largely due to increased activity in China, India and other emerging markets. The foregoing risks may be particularly acute in emerging markets, where our operations are subject to greater uncertainty due to increased volatility associated with the developing nature of the economic, legal and governmental systems of these countries. If we are unable to successfully manage the risks associated with expanding our global business or to adequately manage operational fluctuations, it could adversely affect our business, financial condition or results of operations.

The cyclical nature of our original equipment manufacturing business could cause fluctuations in our operating results.

Our business, in particular our original equipment manufacturing business, is cyclical in nature. The cyclicality of original equipment sales for our Underground and Surface segments is driven primarily by volatility of commodity prices, including prices for coal, copper, and iron ore, product life cycles, competitive pressures and other economic factors affecting the mining industry such as company consolidation. Falling commodity prices have in the past and may in the future lead to reductions in the production levels of existing mines, a contraction in the number of existing mines, and the closure of less efficient mines. Decreased mining activity is likely to lead to a

 

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decrease in demand for new mining machinery. As a result of this cyclicality, we have previously experienced fluctuation in our business, results of operations and financial condition. We expect that cyclicality in our equipment manufacturing business may cause us to experience further significant fluctuation in our business, financial condition or results of operations.

Our global operations are subject to extensive trade and anti-corruption laws and regulations.

Due to the international scope of our operations, we are subject to a complex system of import- and export-related laws and regulations, including U.S. regulations issued by Customs and Border Protection, the Bureau of Industry and Security, the Office of Antiboycott Compliance, the Directorate of Defense Trade Controls and the Office of Foreign Assets Control, as well as the counterparts of these agencies in other countries. Any alleged or actual violations may subject us to government scrutiny, investigation and civil and criminal penalties, and may limit our ability to import or export our products or to provide services outside the United States. We cannot predict the nature, scope or effect of future regulatory requirements to which our operations might be subject or the manner in which existing laws might be administered or interpreted.

In addition, the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business, or obtaining an unfair advantage. Recent years have seen a substantial increase in the global enforcement of anti-corruption laws. Our continued operation and expansion outside the United States, including in developing countries, could increase the risk of such violations. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business, and result in an adverse effect on our reputation, business and results of operations or financial condition.

We face risks from currency exchange rate fluctuations because our international operations are conducted in various local currencies, while our consolidated financial results are reported in U.S. dollars.

Our significant foreign subsidiaries use local currencies as their functional currency. Because our financial reporting currency is the U.S. dollar, preparation of our consolidated financial statements requires that we translate the assets, liabilities, expenses and revenues of these subsidiaries into U.S. dollars at applicable exchange rates. Accordingly, fluctuations in the exchange rates between the U.S. dollar and the currencies of the other countries in which we conduct business may affect our assets, earnings and cash flows. In addition, currency exchange rate fluctuations may affect the comparative prices between products we sell and products our foreign competitors sell in the same market, which may adversely affect demand for our equipment. Substantial exchange rate fluctuations, particularly due to strengthening of the U.S. dollar, may have a material adverse effect on our results of operations, financial condition and cash flows, as well as the comparability of our consolidated financial statements between reporting periods. While we attempt to reduce the risks from exchange rate fluctuations by entering into hedging arrangements, these arrangements may not be effective or may only delay or temporarily mitigate the adverse effect of fluctuations in exchange rates.

We operate in a highly competitive environment, which could adversely affect our sales and pricing.

Our domestic and foreign manufacturing and service operations are subject to significant competitive pressures. We compete globally on the basis of product performance, customer service and aftermarket support, availability, reliability, productivity and price. Most of our customers are large global mining companies that have substantial bargaining power, and some of our sales require us to participate in competitive bidding where we must compete on the basis of various factors, including performance guarantees and price. We compete directly and indirectly with other manufacturers of surface and underground mining equipment and with manufacturers of parts and components for such products. Some of our competitors are larger than us and, as a result, may have broader product offerings and greater access to financial resources. Certain of our competitors also may pursue aggressive pricing or product strategies that may cause us to reduce the prices we charge for our original equipment and aftermarket products and services or lose sales. These actions may lead to reduced revenues, lower margins and/or a decline in market share, any of which may adversely affect our business, financial condition and results of operations.

 

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We may acquire businesses, dispose of businesses or engage in other transactions for which we may not realize anticipated benefits, or it may take longer than expected to realize such benefits, which may adversely affect our operating results, financial condition and existing business.

From time to time, we may explore and pursue transaction opportunities that may complement our core businesses, and we may also consider divesting businesses or assets that we do not regard as part of our core businesses. These transaction opportunities may come in the form of acquisitions, joint ventures, start-ups or other structures. For example, in 2012, we completed the acquisition of IMM and during 2011 we acquired LeTourneau and subsequently divested its drilling products business. There are risks associated with acquisition and disposition of business transactions, including, without limitation, general business risk, integration risk, technology risk, market acceptance risk, litigation risk, environmental risk, regulatory approval risk and risks associated with the failure to close or consummate announced transactions. In the case of acquisitions, we may not be able to discover, during the due diligence process or otherwise, all known and unknown risks associated with the business we are acquiring. In the case of dispositions, we may agree to indemnify acquiring parties for known or unknown liabilities arising from our former businesses.

Undiscovered factors may result in our incurring financial or other liabilities, which could be material. In addition, completion of a transaction may require us to incur debt, issue equity, utilize other capital resources, make expenditures, provide guarantees or indemnification and/or agree to other terms, and may also consume a substantial portion of our management’s time and attention. These transactions may not ultimately create value for us or our stockholders, and may adversely affect our business, financial condition or results of operations.

We are subject to environmental and health and safety laws and regulations that impose significant compliance costs and may expose us to substantial liability if we fail to comply.

We are subject to a variety of federal, state, local and foreign environmental laws and regulations, including those relating to employee health and safety, environmental permitting and licensing, air (including greenhouse gas) emissions, water discharges, remediation of soil and groundwater contamination, and the generation, use, storage, treatment and disposal of hazardous materials. Some environmental laws impose strict, retroactive, and joint and several liability for the remediation of the release of hazardous substances, even for conduct that was lawful at the time it occurred, or for the conduct of, or conditions caused by, prior operators, predecessors, or other third parties. Failure to comply with environmental laws could expose us to penalties or clean-up costs, civil or criminal liability, and sanctions on certain of our activities, as well as damage to property or natural resources. These liabilities, sanctions, damages and remediation efforts related to any non-compliance with such laws and regulations could negatively impact our ability to conduct our operations and our financial condition and results of operations. In addition, our various prior and future acquisitions and divestitures may have resulted or could result in environmental liabilities unknown to us at the time of acquisition or divestiture or other additional environmental liabilities.

Moreover, environmental laws and regulations, and the interpretation and enforcement thereof, change frequently and have tended to become more stringent over time. Future environmental laws and regulations could require us to acquire costly equipment or to incur other significant expenses in connection with our business. For example, increased regulation of greenhouse gas emissions could adversely affect our business, financial condition, results of operations or product demand.

We are largely dependent on the continued demand for coal, which is subject to economic and climate related risks.

Approximately two-thirds of our revenues come from our coal-mining customers. Many of these customers supply coal for steel production and/or as fuel for the production of electricity. Demand for steel is affected by the global level of economic activity and economic growth. The pursuit of the most cost effective form of electricity generation continues to take place throughout the world and coal-fired electric generation faces intense price competition from other fuel sources, particularly natural gas. Coal combustion generates significant greenhouse gas emissions and governmental and private sector goals and mandates to reduce greenhouse gas emissions may increasingly affect the mix of electricity generation sources. Further developments in connection with legislation, regulations or other limits on greenhouse gas emissions and other environmental impacts or costs from coal

 

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combustion, both in the United States and in other countries, could diminish demand for coal as a fuel for electricity generation. If lower greenhouse gas emitting forms of electricity generation, such as nuclear, solar, natural gas or wind power, become more prevalent or cost effective, or diminished economic activity reduces demand for steel, demand for coal will decline. When demand for coal is reduced, the demand for our mining equipment could be adversely affected.

Environmental regulations impacting the mining industry may adversely affect demand for our products.

We supply original equipment and aftermarket services to mining companies operating in major mining regions throughout the world. Our customers’ operations are subject to or affected by a wide array of regulations in the jurisdictions where they operate, including those directly impacting mining activities and those indirectly affecting their businesses, such as applicable environmental laws. In addition, new environmental legislation or administrative regulations relating to mining or affecting demand for mined materials, or more stringent interpretations of existing laws and regulations, may require our customers to significantly change or curtail their operations. The high cost of compliance with environmental regulations may discourage our customers from expanding existing mines or developing new mines, and may also cause customers to limit or even discontinue their mining operations. As a result of these factors, demand for our mining equipment and the aftermarket services we provide could be adversely affected by environmental regulations directly or indirectly impacting the mining industry. Any reduction in demand as a result of environmental regulations is likely have an adverse effect on our business, financial condition or results of operations.

We require cash to service our indebtedness, which reduces the cash available to finance our business, and the terms of our debt agreements require us to comply with financial and other covenants.

Our ability to service our indebtedness depends on our financial performance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors. Some of these factors are beyond our control. If we cannot generate sufficient cash flow from operations to service our indebtedness and to meet our other obligations and commitments, we might be required to refinance our debt or to dispose of assets to obtain funds for such purpose. There is no assurance that refinancings or asset dispositions could be effected on a timely basis or on satisfactory terms, if at all, particularly if credit market conditions deteriorate. Furthermore, there can be no assurance that refinancings or asset dispositions would be permitted by the terms of our credit agreements or debt instruments.

Our existing credit agreements contain, and any future debt agreements we may enter into may contain, certain financial tests and other covenants that limit our ability to incur indebtedness, acquire other businesses and impose various other restrictions. Our ability to comply with financial tests may be adversely affected by changes in economic or business conditions beyond our control, and these covenants may limit our ability to take advantage of potential business opportunities as they arise. We cannot be certain that we will be able to comply with the financial tests and other covenants, or, if we fail to do so, that we will be able to obtain waivers or amended terms from our lenders. An uncured default with respect to one or more of the covenants could result in the amounts outstanding under one or more of the agreements being declared immediately due and payable, which may also trigger an obligation to redeem our outstanding debt securities and repay all other outstanding indebtedness. Any such acceleration of our indebtedness would have a material adverse effect on our business, financial condition and results of operations.

Significant changes in our actual investment return on pension assets, discount rates and other factors could affect our results of operations, equity and pension funding requirements in future periods.

Our results of operations may be affected by the amount of income or expense that we record for our defined benefit pension plans and certain other retirement benefits. We measure the valuation of our pension plans annually as of our fiscal year end in order to determine the funded status of and our funding obligation with respect to such plans. This annual valuation of our pension plans is highly dependent on certain assumptions used in actuarial valuations, which include actual and expected return on pension assets and discount rates. These assumptions take into account current and expected financial market data, other economic conditions such as interest rates and inflation, and other factors such as plan asset allocation and future salary increases. If actual rates of return on

 

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pension assets materially differ from assumptions, our pension funding obligations may increase or decrease significantly. Our funding obligation is determined under governmental regulations and is measured based on the value of our assets and liabilities. An adverse change in our funded status due to the volatility of returns on pension assets and the discount rate could increase our required future contributions to our plans, which may adversely affect our results of operations and financial condition.

Our continued success depends on our ability to protect our intellectual property, which cannot be assured.

Our future success depends in part upon our ability to protect our intellectual property. We rely principally on nondisclosure agreements and other contractual arrangements and trade secret law and, to a lesser extent, trademark and patent law, to protect our intellectual property. However, these measures may be inadequate to protect our intellectual property from infringement by others or prevent misappropriation of our proprietary rights. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as do U.S. laws. Our inability to protect our proprietary information and enforce our intellectual property rights through infringement proceedings could adversely affect our business, financial condition or results of operations.

Demand for our products may be adversely impacted by regulations related to mine safety.

Our principal customers are surface and underground mining companies. The mining industry has encountered increased scrutiny as it relates to safety regulations primarily due to recent high profile mine accidents. Current or proposed legislation and regulations on safety standards and the increased cost of compliance may induce customers to discontinue or limit their mining operations, and may discourage companies from developing new mines, which in turn could diminish demand for our products.

Our manufacturing operations are dependent upon third party suppliers, making us vulnerable to supply shortages and price increases, and we are also limited by our plant capacity constraints.

In the manufacture of our products, we use large amounts of raw materials and processed inputs including steel, copper, engine components, and electronic controls. We obtain raw materials and certain manufactured components from third party suppliers. Our ability to grow revenues is constrained by the capacity of our plants, our ability to supplement that capacity with outside sources, and our success in securing critical raw materials such as steel and copper. To reduce material costs and inventories, we rely on supplier arrangements with preferred vendors as a source for “just in time” delivery of many raw materials and manufactured components. Because we maintain limited raw material and component inventories, even brief unanticipated delays in delivery by suppliers, including those due to capacity constraints, labor disputes, impaired financial condition of suppliers, weather emergencies, or other natural disasters, may adversely affect our ability to satisfy our customers on a timely basis and thereby affect our financial performance. If we are not able to pass raw material or component price increases on to our customers, our margins could be adversely affected. Any of these events could adversely affect our business, financial condition or results of operations.

Labor disputes and increasing labor costs could adversely affect us.

Many of our principal domestic and foreign operating subsidiaries are parties to collective bargaining agreements with their employees. As of October 26, 2012, collective bargaining agreements or similar type arrangements cover 30% of our U.S. workforce and 16% of our international employees. We cannot provide assurance that disputes, work stoppages, or strikes will not arise in the future. In addition, when existing collective bargaining agreements expire, we cannot be certain that we will be able to reach new agreements with our employees. In 2013, union agreements are to expire for 4% of our employees with the largest covering the United Steel Workers union at our Winfield, Alabama facility. New collective bargaining agreements may be on substantially different terms and may result in increased direct and indirect labor costs. Future disputes with our employees could adversely affect our business, financial condition or results of operations.

 

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A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.

We produce most of our original equipment and aftermarket parts for each product type at a limited number of principal manufacturing facilities. If operations at one or more of these significant facilities were to be disrupted as a result of equipment failures, natural disasters, power outages or other reasons, our business, financial condition or results of operations could be adversely affected. Interruptions in production could increase costs and delay delivery of some units. Production capacity limits could cause us to reduce or delay sales efforts until capacity is available.

Our business could be adversely affected by our failure to develop new technologies.

The mining industry is a capital-intensive business, with extensive planning and development necessary to open a new mine. The success of our customers’ mining projects is largely dependent on the efficiency with which the mine operates. If we are unable to provide continued technological improvements in our equipment that meet the needs and expectations of our customers and the broader industry on mine productivity, safety and efficiency, the demand for our mining equipment would be adversely affected which would negatively impact our business, financial condition and results of operations.

We may be adversely affected by litigation or contractual obligations entered into in the ordinary course of our business.

We and our subsidiaries are involved in various unresolved legal matters that arise in the normal course of operations, the most prevalent of which relate to product liability (including asbestos and silica related liability), employment and commercial matters. In addition, we and our subsidiaries become involved from time to time in proceedings relating to environmental matters. Also, as a normal part of their operations, our subsidiaries may undertake contractual obligations, warranties, and guarantees in connection with the sale of products or services. Some of these claims and obligations involve significant potential liability, which may adversely affect our business, financial condition or results of operations.

Product liability claims could adversely affect us.

The manufacture and sale of mining equipment entails an inherent risk of product liability and other claims related to the performance of our equipment. Although we maintain product liability insurance covering certain types of claims, our policies are subject to substantial deductibles. We cannot be certain that the coverage limits of our insurance policies will be adequate or that our policies will cover any particular loss. Insurance can be expensive, and we may not always be able to purchase insurance on commercially acceptable terms, if at all. Claims brought against us that are not covered by insurance or that result in recoveries in excess of insurance coverage could adversely affect our business, financial condition or results of operations.

If we are unable to hire and retain qualified employees, our growth may be hindered.

Our ability to provide high quality products and services depends in part on our ability to hire and retain skilled personnel in the areas of senior management, product engineering, manufacturing, servicing and sales. Competition for such personnel is intense and our competitors can be expected to attempt to hire our skilled employees from time to time. In particular, our results of operations could be adversely affected if we are unable to retain customer relationships and technical expertise provided by our management team and our professional personnel.

We rely on significant customers, the loss of one or more of which could adversely affect our operating results, financial condition and existing business.

We are dependent on maintaining significant customers by delivering reliable, high performance mining equipment and other products on a timely basis. We do not consider ourselves to be dependent upon any single customer; however, our top ten customers collectively accounted for approximately 38% of our sales for fiscal 2012. Our sales have become more concentrated in recent years as consolidation has occurred in the mining industry. The consolidation and divestitures in the mining industry may result in different equipment preferences among current and former significant customers. The loss of one or more of our significant customers could, at least on a short-term basis, have an adverse effect on our business, financial condition or results of operations.

 

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Increased IT security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services.

We rely upon information technology (IT) systems and networks in connection with a variety of business activities, and we collect and store sensitive data. Increased IT security threats and more sophisticated computer crime, including advanced persistent threats, pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. A failure of or breach in security could expose us and our customers, dealers and suppliers to risks of misuse of information or systems, the compromising of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions, which in turn could adversely affect our reputation, competitive position, business and results of operations. In addition, such breaches in security could result in litigation, regulatory action and potential liability and the costs and operational consequences of implementing further data protection measures.

New regulations related to conflict-free minerals may force us to incur additional expenses.

In August 2012, the SEC adopted disclosure requirements related to certain minerals sourced from the Democratic Republic of Congo or adjoining countries, as required by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rules impose diligence and disclosure obligations with respect to “conflict minerals,” defined as tin, tantalum, tungsten and gold, which are necessary to the functionality of a product manufactured, or contracted to be manufactured, by an SEC reporting company. If “conflict minerals” necessary to the functionality of a product manufactured by an SEC reporting company originated in the Democratic Republic of Congo or an adjoining country, the final rules require the issuer to prepare and file a report addressing its efforts to exercise due diligence on the minerals’ source and chain of custody. Our supply chain is complex and we may incur significant costs to determine the source and custody of any “conflict minerals” necessary to the functionality of our equipment. We may also face reputational challenges if we are unable to verify the origins for all conflict minerals used in our equipment, or if we are unable to certify that our products are “conflict free.” Implementation of this rulemaking may also affect the sourcing and availability of some minerals necessary to the manufacture of our products, and may affect the availability and price of conflict minerals capable of certification as “conflict-free.” Accordingly, we may incur significant costs as a consequence of this rulemaking, which may adversely affect our business, financial condition or results of operations.

 

Item 1B. Unresolved Staff Comments

None.

 

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Item 2. Properties

As of October 26, 2012, the following principal properties of our operations were owned, except as indicated. Our worldwide corporate headquarters are currently housed in 13,000 square feet of leased space in Milwaukee, Wisconsin. All of these properties are generally suitable for the operations currently conducted at them.

Underground Mining Machinery Locations

 

   

Location

  

Floor Space

(Sq. Ft.)

   

Land Area
(Acres)

    

Principal Operations

*   Warrendale, Pennsylvania      71,250        13       Administration
  Franklin, Pennsylvania      830,900        58       Manufacturing
*   Homer City, Pennsylvania      91,124        10       Repairs and rebuilds
*   Meadowlands, Pennsylvania      117,900        12       Distribution
  Reno, Pennsylvania      121,400        22       Manufacturing
  Winfield, Alabama      250,000        33       Manufacturing, sales, engineering, and administration
  Lebanon, Kentucky      88,250        12       Repairs and rebuilds
*   Millersburg, Kentucky      119,100        14       Manufacturing and administration
  Salyersville, Kentucky      125,842        14       Manufacturing
  Brook Park, Ohio      85,000        4       Manufacturing
  Solon, Ohio      101,200        11       Manufacturing
  Belton, South Carolina      191,000        24       Manufacturing, sales, and administration
*   Wellington, Utah      76,250        60       Repairs and rebuilds
*   Bluefield, Virginia      102,160        15       Repairs and rebuilds
*   Duffield, Virginia      101,310        11       Repairs and rebuilds
*   Braemer, Australia      21,528  (1)       Manufacturing
*   Minto, Australia      23,024        4       Manufacturing
  Moss Vale, Australia      97,392        33       Manufacturing, repairs, and rebuilds
*   Moss Vale, Australia      38,750  (1)      13       Administration
  Parkhurst, Australia      76,639        19       Repairs and rebuilds
  Somersby, Australia      49,655        3       Manufacturing, repairs, engineering, and administration
  Wollongong, Australia      27,717  (6)       Engineering, administration, and smart services
  Wollongong, Australia      26,996  (1)      4       Repairs and rebuilds
  Wollongong, Australia      5,797  (1)       Engineering and administration
  Baotou, China      104,162  (7)      6       Repairs and rebuilds
# *   Huainan, China      349,257        9       Manufacturing and administration
# *   Jiamusi, China      1,161,900        24       Manufacturing and administration
# *   Jixi, China      929,916        18       Manufacturing and administration
# *   Qingdao, China      117,693        1       Manufacturing and administration
  Tianjin, China      205,645  (10)      8       Manufacturing
  Wuxi, China      185,421        26       Manufacturing and after-market services
  Pinxton, England      76,000        10       Repairs and rebuilds
  Wigan, England      60,000  (4)      3       Engineering and administration
*   Worcester, England      178,000        14       Manufacturing and repairs
  Nagpur, India      8,053  (3)       Manufacturing
*   Tychy, Poland      52,312        8       Manufacturing, repairs, and rebuilds
*   Kuzbass, Russia      15,750        3       Repairs and rebuilds
*   Steeledale, South Africa      250,381        13       Manufacturing and repairs
*   Wadeville, South Africa      421,773        29       Manufacturing, repairs, and rebuilds
  Witbank, South Africa      21,506        1       Smart services and training
  Sunderland, United Kingdom      100,850  (10)      5       Manufacturing, engineering, sales and administration

 

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Surface Mining Equipment Locations

 

   

Location

  

Floor Space
(Sq. Ft.)

   

Land Area
(Acres)

    

Principal Operations

  Milwaukee, Wisconsin      684,000        46       Manufacturing and administration
*   Milwaukee, Wisconsin      180,000        13       Engineering
  Milwaukee, Wisconsin      89,500  (2)       Assembly
  Mesa, Arizona      40,000        5       Rebuilds
*   Portland, Oregon      26,586        6       Sales, after-market services, and administration
*   Elko, Nevada      30,000        5       Rebuilds
  Elko, Nevada      28,000  (3)      4       Manufacturing
  Kilgore, Texas      12,400        4       Rebuilds
*   Longview, Texas      1,400,000        2,105       Manufacturing, administration, engineering, and sales
*   Gillette, Wyoming      60,000        6       Rebuilds
*   Gillette, Wyoming      16,000        3       Administration
  Evansville, Wyoming      25,000        6       Rebuilds
*   Bassendean, Australia      72,500        5       Manufacturing
*   Brisbane, Australia      29,000  (4)      1       Rebuilds and administration
  East Maitland, Australia      32,916  (2)      1       Rebuilds
*   Hemmant Australia      23,724        2       Rebuilds
*   Mackay, Australia      36,425        3       Manufacturing
*   Mackay, Australia      5,016  (2)      1       Assembly and administration
  Murarrie, Australia      15,000  (2)      1       Administration
*   Muswellrook, Australia      60,837        2       Manufacturing, assembly, and administration
*   Perth, Australia      29,116  (8)      1       Assembly, rebuilds, and administration
*   Rutherford, Australia      15,640  (2)      4       Rebuilds
*   Belo Horizonte, Brazil      37,700         Manufacturing
*   Calgary, Canada      31,499  (3)      1       Manufacturing
  Edmonton, Canada      32,581  (1)      6       Rebuilds
*   Fort McMurray, Canada      68,000        5       Rebuilds
*   Antofagasta, Chile      25,000        14       Manufacturing and administration
  Santiago, Chile      10,000  (1)       Sales and administration
*   Santiago, Chile      6,800  (1)      1       After-market services
*   Dalian, China      14,962  (1)       Assembly and administration
  Tianjin, China      130,000  (10)       Manufacturing
  Kolkata, India      3,100        1       Sales
  Jakarta, Indonesia      1,000  (3)       Administration and sales
  Guadalajara, Jalisco, Mexico      5,823  (5)       Sales
*   Cananea, Sonora, Mexico      15,000  (3)       After-market services and administration

* – Property includes a warehouse.

# – Property acquired with the acquisition of International Mining Machinery Holdings Limited on December 29, 2011.

 

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(1) Under a month-to-month lease
(2) Under a lease expiring in 2013
(3) Under a lease expiring in 2014
(4) Under a lease expiring in 2015
(5) Under a lease expiring in 2016
(6) Under a lease expiring in 2017
(7) Under a lease expiring in 2018
(8) Under a lease expiring in 2019
(9) Under a lease expiring in 2020
(10) Under a lease expiring in 2021
(11) Under a lease expiring in 2022
(12) Under a lease expiring in 2023
(13) Under a lease expiring in 2024
(14) Under a lease expiring in 2025

Underground Mining Machinery also operates warehouses in Eighty Four, Pennsylvania; Brookwood, Alabama; Winfield, Alabama; Nashville, Illinois; Henderson, Kentucky; Lovely, Kentucky; Salyersville, Kentucky; Carlsbad, New Mexico; Price, Utah; Norton, Virginia; Pineville, West Virginia; Green River, Wyoming; Moss Vale, Australia, and Witbank, South Africa. All warehouses are owned except for the warehouses in Eighty Four, Winfield, Nashville, Henderson, Lovely, Salyersville, Price, and Moss Vale which are leased. In addition, Underground Mining Machinery has leased sales offices in Benton, Illinois; Mt. Vernon, Illinois; Corbin, Kentucky; Eagle Pass, Texas; Hyderabad, India; and Secunda, South Africa.

Surface Mining Equipment also operates warehouses in Cleveland, Ohio; Coeur d’ Alene, Idaho; Hibbing and Virginia, Minnesota; Charleston, West Virginia; Negaunee, Michigan; Gilbert, Arizona; Hinton, Sparwood, Labrador City, Sept Iles, and Saskatoon, Canada; Antofagasta and Calama, Chile; Blackwater, Australia; Parauapebas, Brazil; Johannesburg, South Africa; Puerto Ordaz, Venezuela; and Mackay and Rutherford, Australia. The warehouses in Hibbing, Johannesburg, and Calama are owned, while the others are leased. In addition, Surface Mining Machinery leases additional sales offices throughout the United States and in principal surface mining locations in other countries.

 

Item 3. Legal Proceedings

We and our subsidiaries are involved in various unresolved legal matters that arise in the normal course of operations, the most prevalent of which relate to product liability (including approximately 2,500 asbestos and silica-related cases), employment, and commercial matters. Also, as a normal part of operations, our subsidiaries undertake contractual obligations, warranties, and guarantees in connection with the sale of products or services. Although the outcome of these matters cannot be predicted with certainty and favorable or unfavorable resolutions may affect the results of operations on a quarter-to-quarter basis, we believe that the outcome of such legal and other matters will not have a materially adverse effect on our consolidated financial position, results of operations, or liquidity.

 

Item 4. Mine Safety Disclosures

Not applicable.

 

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Executive Officers of the Registrant

The following table shows certain information for each of our executive officers, including position with the corporation and business experience. Our executive officers are elected each year at the organizational meeting of our Board of Directors, which follows the annual meeting of shareholders, and at other meetings as needed.

 

Name

  

Age

  

Current Office and Principal Occupation

  

Years as
Officer

Michael W. Sutherlin    66    President and Chief Executive Officer and a director of Joy Global Inc. since 2006. He was Executive Vice President of the corporation and President and Chief Operating Officer of Joy Mining Machinery from 2003 to 2006.    10
Michael S. Olsen    61    Executive Vice President and Chief Financial Officer of Joy Global Inc. from December 2011. Mr. Olsen was the corporation’s Executive Vice President, Chief Financial Officer and Treasurer from 2008 to 2011. He was Vice President and Chief Accounting Officer from 2007 to November 2008. Mr. Olsen was Senior Vice President of Finance for Joy Mining Machinery from 1998 to 2008. Mr. Olsen will retire on February 1, 2013.    6
James M. Sullivan    52    Executive Vice President of Joy Global Inc. since October 2012. He previously served as Chief Financial Officer of Solutia, Inc. from 2004 until July 2012. Mr. Sullivan also served as Solutia’s Executive Vice President from 2009 until his departure and previously served as Senior Vice President from 2004 through 2009 and Treasurer from 2004 through 2011. The Board of Directors expects to appoint Mr. Sullivan as Chief Financial Officer prior to Mr. Olsen’s retirement.    < 1
Randal W. Baker    49    Executive Vice President of Joy Global Inc. and President and Chief Operating Officer of P&H Mining Equipment since 2009. From 2004 to 2009 he served as President and CEO of Case IH Agriculture Inc. From 2000 to 2004 he served as Vice President and General Manager of Komatsu Mining Systems.    4
Edward L. Doheny II    50    Executive Vice President of Joy Global Inc. and President and Chief Operating Officer of Joy Mining Machinery since 2006. Prior to joining Joy Global, Mr. Doheny was with Ingersoll-Rand Corporation, where he was President of Industrial Technologies from 2003 to 2005 and President of Shared Services in 2003.    7
Sean D. Major    48    Executive Vice President, General Counsel and Secretary of Joy Global Inc. since 2007.    6
Dennis R. Winkleman    62    Executive Vice President – Administration of Joy Global Inc. since March 2010. Mr. Winkleman was Executive Vice President Human Resources from 2000 to 2010. Mr. Winkleman will retire on February 1, 2013.    12
Johan S. Maritz    53    Executive Vice President, Human Resources, for Joy Global Inc. since December 4, 2012. From February 2007 to December 2012 he served as Vice President, Human Resources of Joy Mining Machinery.    < 1

 

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Table of Contents

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock, par value $1.00 per share, began trading on the New York Stock Exchange on December 6, 2011 under the symbol “JOY.” Our common stock had previously traded on the NASDAQ Global Select Market under the symbol “JOYG”. The table below sets forth the high and low sales price and dividend payments for our common stock during the periods indicated. As of November 30, 2012, there were approximately 122,455 shareholders of record.

 

     Price per Share      Dividends
Per Share
 
     High      Low     

Fiscal 2012

        

Fourth Quarter

   $ 64.13       $ 48.20       $ 0.175   

Third Quarter

   $ 71.49       $ 47.69       $ 0.175   

Second Quarter

   $ 95.98       $ 70.01       $ 0.175   

First Quarter

   $ 96.00       $ 72.59       $ 0.175   

Fiscal 2011

        

Fourth Quarter

   $ 95.99       $ 57.48       $ 0.175   

Third Quarter

   $ 102.12       $ 82.61       $ 0.175   

Second Quarter

   $ 103.44       $ 85.55       $ 0.175   

First Quarter

   $ 93.50       $ 69.58       $ 0.175   

The following graph sets forth the cumulative total shareholder return, including reinvestment of dividends on a quarterly basis, on common stock during the preceding five years, as compared to the cumulative total returns of the Standard and Poor’s (“S&P”) 500 Composite Stock Index and the Dow Jones United States Commercial Vehicle Truck Index (“DJUSHR”). This graph assumes $100 was invested on October 26, 2007 in Common Stock or on October 31, 2007 in the S&P 500 Composite Stock Index and the DJUSHR.

 

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Table of Contents

LOGO

 

     10/26/2007      10/31/2008      10/30/2009      10/29/2010      10/28/2011      10/26/2012  

Joy Global Inc.

     100         52         93         133         173         118   

S&P 500

     100         64         70         82         88         102   

DJUSHR

     100         48         67         102         111         110   

 

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Item 6. Selected Financial Data

The following table sets forth certain selected historical financial data on a consolidated basis. The selected consolidated financial data was derived from our Consolidated Financial Statements. Our fiscal year end is the last Friday in October and each of our fiscal quarters consists of 13 weeks, except for any fiscal years consisting of 53 weeks which will have one additional week in the first quarter. The selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements appearing in Item 8 – Financial Statements and Supplementary Data and Item 15 – Exhibits and Financial Statement Schedules.

RESULTS OF OPERATIONS

 

In thousands except per share amounts

   Year Ended
October 26,
2012
(1)
    Year Ended
October 28,
2011
(2)
    Year Ended
October 29,
2010
     Year Ended
October 30,
2009
     Year Ended
October 31,
2008
(3)
 

Net sales

   $ 5,660,889      $ 4,403,906      $ 3,524,334       $ 3,598,314       $ 3,418,934   

Operating income

     1,172,559        920,179        697,103         702,312         551,204   

Income from continuing operations attributable to Joy Global Inc.

   $ 767,081      $ 631,002      $ 461,499       $ 454,650       $ 373,137   

Income (loss) from discontinued operations

     (5,060     (21,346     —           —           1,141   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income attributable to Joy Global Inc.

   $ 762,021      $ 609,656      $ 461,499       $ 454,650       $ 374,278   

Basic Earnings Per Share

            

Income from continuing operations

   $ 7.25      $ 6.01      $ 4.47       $ 4.44       $ 3.47   

Income (loss) from discontinued operations

     (0.05     (0.20     —           —           0.01   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income per common share

   $ 7.20      $ 5.81      $ 4.47       $ 4.44       $ 3.48   

Diluted Earnings Per Share

            

Income from continuing operations

   $ 7.18      $ 5.92      $ 4.40       $ 4.41       $ 3.44   

Income (loss) from discontinued operations

     (0.05     (0.20     —           —           0.01   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Net income per common share

   $ 7.13      $ 5.72      $ 4.40       $ 4.41       $ 3.45   

Dividends Per Common Share

   $ 0.70      $ 0.70      $ 0.70       $ 0.70       $ 0.625   

Working capital excluding cash held in escrow

   $ 1,388,407      $ 1,000,475      $ 1,338,603       $ 1,023,243       $ 597,778   

Total assets

   $ 6,142,503      $ 5,426,354      $ 3,271,013       $ 2,995,251       $ 2,631,285   

Total long-term obligations

   $ 1,357,092      $ 1,388,167      $ 396,668       $ 542,217       $ 559,330   

(1) – In December 2011, we acquired IMM, a leading designer and manufacturer of underground coal mining equipment in China.

(2) – In June 2011, we acquired LeTourneau, a worldwide leader in earthmoving equipment and in October 2011 we completed the sale of its drilling products business. The drilling products business is accounted for as discontinued operations.

(3) – In February 2008, we acquired N.E.S. Investment Co. and its wholly owned subsidiary, Continental Global Group, Inc., a worldwide leader in conveyor systems for bulk material handling in mining and industrial applications.

 

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Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes. References made to years are for fiscal year periods. Dollar amounts are in thousands, except share and per-share data and as indicated.

The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Joy Global Inc. and its subsidiaries for 2012, 2011, and 2010. For a more complete understanding of this discussion, please read the Notes to Consolidated Financial Statements included in this report.

Overview

We have been manufacturing mining equipment for over 125 years. We operate in two business segments: Underground Mining Machinery and Surface Mining Equipment. We are a leading manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. Our Underground Mining Machinery segment is a major manufacturer of underground mining equipment for the extraction of coal and other bedded minerals. Our Surface Mining Equipment segment 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. Both segments offer comprehensive service locations near major mining regions worldwide.

In addition to selling original equipment, we provide parts, components, repairs, rebuilds, diagnostic analysis, training, and other aftermarket services for our installed base of machines. We also provide aftermarket services for equipment manufactured by other companies, including manufacturers with which we have ongoing relationships and which we refer to as “Alliance Partners.” We emphasize our aftermarket products and services as an integral part of lowering our customers’ cost per unit of production and are focused on continuing to grow this part of our business.

LeTourneau Technologies, Inc.

On June 22, 2011 we purchased LeTourneau Technologies, Inc. for approximately $1.1 billion. We purchased all of the outstanding capital stock. LeTourneau designs, builds and supports equipment for the mining industry and has been a leader in the earthmoving equipment industry since the 1920s. LeTourneau operated in three business segments, mining, steel products and drilling products. The mining products business is the world’s leading manufacturer of large wheel loaders for surface mining, providing the industry’s largest model sizes and payload capacities.

On October 24, 2011 we completed the sale of LeTourneau Technologies Drilling Systems, Inc. to Cameron International Corporation for $375.0 million in cash, subject to a post-closing working capital adjustment of which $56.3 million was paid in 2012. The LeTourneau facilities in Houston, Texas and Vicksburg, Mississippi were sold to Cameron International Corporation in conjunction with this transaction. We entered into a Transition Manufacturing and Supply Agreement to allow for the orderly transfer of drilling products production from Longview and a Steel Supply Agreement to allow the buyer time to develop other sources. In conjunction with our entrance into the Transition Manufacturing and Supply Agreement, we recognized an upfront loss and related liability of $23.3 million in our 2011 fiscal year for unreimbursable manufacturing costs. The results of the drilling products business are included in discontinued operations on the accompanying consolidated statement of income and the assets and liabilities of the drilling products business are reflected as assets and liabilities of discontinued operations on the accompanying consolidated balance sheet. The results of the mining and steel businesses (collectively “the mining equipment business”) are included in our Surface Mining Equipment segment. From the date of acquisition until our 2011 fiscal year end, the mining equipment business of LeTourneau had net sales of $144.9 million and operating income of $23.2 million. 2011 operating income was reduced by $8.8 million for non-recurring purchase accounting charges, of which $7.7 million was attributable to acquired inventory. In fiscal year 2012, the mining equipment business of LeTourneau had net sales of $451.4 million and operating income of $73.8 million. 2012 operating income was reduced by $13.7 million for non-recurring purchase accounting charges, of which $11.5 million was attributable to acquired inventory.

 

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Table of Contents

International Mining Machinery

On July 11, 2011, we entered into an SPA with TJCC Holdings Limited, a corporation controlled by The Jordan Company, L.P., to acquire approximately 41.1%, of IMM. IMM is a leading designer and manufacturer of underground coal mining equipment in China. On July 28, 2011, August 16, 2011 and September 2, 2011 we purchased shares on the open market representing an aggregate of 28.1% of the total outstanding shares of IMM. On December 20, 2011, the Anti-monopoly Bureau of the Ministry of Commerce of the People’s Republic of China approved the purchase of IMM shares covered by the SPA and the acquisition closed on December 29, 2011. At such time, we acquired a controlling interest in IMM which, when aggregated with earlier open market purchases, was 69.2% of IMM’s outstanding common stock. Upon closing, we recognized a $19.4 million gain on the re-measurement of our pre-existing equity interest in IMM. On January 6, 2012, in accordance with Rule 26.1 of the Hong Kong Takeovers Code, we commenced an unconditional cash tender offer to purchase the remaining outstanding IMM shares and options to purchase IMM shares that we did not own. On February 10, 2012, we completed the tender offer. As a result of the tender offer, our beneficial ownership of IMM common stock increased to 98.9%, for which we had paid aggregate consideration of approximately $1.4 billion. On July 25, 2012, we effected the compulsory acquisition of the remaining shares under applicable provisions of the Cayman Island Companies Law, under which IMM is incorporated. We paid consideration of approximately $16.2 million to complete the compulsory acquisition, using the remaining cash which had been placed in escrow to purchase IMM shares. The combined effect of these transactions resulted in our beneficial ownership of 100% of the common stock of IMM. From December 29, 2011, the date we acquired control of IMM, until our fiscal year end, IMM had net sales of $219.0 million and operating income of $9.4 million. Operating income was reduced by $27.4 million for non-recurring purchase accounting charges, of which $20.9 million was attributable to acquired inventory.

Operating Results

Bookings for 2012 were approximately $5.1 billion, a decrease of 9.3% from the prior year. Underground original equipment bookings, which included $217.6 million from IMM, were down $316.6 million, or 20.6%, when compared to the prior year. When excluding the impact of the IMM acquisition, these bookings decreased in all regions except for Africa due to the weakening coal market in the U.S. and China, as well as significant orders from customers in Australia and Russia in the prior year that did not repeat in 2012. Underground Mining Machinery aftermarket bookings were substantially flat compared to the prior year. Increases in aftermarket bookings in China, Africa, and Australia were partially offset by declining orders in the U.S. and Eurasia. Surface Mining Equipment original equipment orders, which included an incremental $236.3 million increase from the acquisition of LeTourneau, were down $221.5 million, or 16.7%, when compared to the prior year. These bookings were down in all regions except Africa and Australia due to weaker markets and the record bookings in the prior year. Surface Mining Equipment aftermarket bookings increased $186.6 million, or 14.0%. These bookings increased in South America, Australia, and Eurasia due to increased demand for parts and services. All other regions experienced declining aftermarket orders. Compared to last year, fiscal year 2012 bookings included a $97.1 million unfavorable effect of foreign currency translation.

Net sales for 2012 totaled approximately $5.7 billion compared to $4.4 billion in 2011, an increase of 28.5%. In 2012, IMM had sales of $219.0 million and LeTourneau’s sales increased by $306.5 million. Aftermarket sales increased $332.4 million, or 12.7%, when compared to the prior year due to increased parts sales and machine assemblies for both the Underground Mining Machinery and Surface Mining Equipment segments. Original equipment sales increased $924.6 million, or 51.8%, when compared to the prior year due to last year’s strong order rate flowing to this year’s sales. Foreign currency translation unfavorably impacted sales by $51.4 million.

Operating income in 2012 was $1.2 billion compared to prior year operating income of $920.2 million, an increase of 27.4%. Operating income in 2012 and 2011 was reduced by $41.1 million and $8.8 million in non-recurring purchase accounting charges, respectively. The increase in operating income was primarily the result of increased sales volume, offset by pension curtailment charges, restructuring costs and an increase in unfavorable manufacturing variances. Foreign currency translation unfavorably impacted operating income by $11.6 million.

 

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Table of Contents

The results of LeTourneau’s mining equipment business are included in our Surface Mining Equipment segment. In fiscal year 2012, LeTourneau’s mining equipment business had bookings of $495.1 million, net sales of $451.4 million and operating income of $73.8 million. Operating income was reduced by $26.1 million for purchase accounting charges. Non-recurring purchase accounting charges amounted to $13.7 million, of which $11.5 million was attributable to acquired inventory.

The results of IMM are included in our Underground Mining Machinery segment. From December 29, 2011 through the end of our fiscal year, IMM had bookings of $217.6 million, net sales of $219.0 million and operating income of $9.4 million, Operating income was reduced by $40.1 million for purchase accounting charges. Non-recurring purchase accounting charges amounted to $27.4 million, of which $20.9 million was attributable to acquired inventories for which amortization ended in 2012.

Income from continuing operations attributable to Joy Global Inc. was approximately $767.1 million, or $7.18 per diluted share, in 2012 compared to $631.0 million, or $5.92 per diluted share, in 2011.

Results of Operations

2012 Compared with 2011

Sales

The following table sets forth 2012 and 2011 net sales as derived from our Consolidated Statement of Income:

 

                 $     %  

In thousands

   2012     2011     Change     Change  

Net Sales

        

Underground Mining Machinery

   $ 3,107,488      $ 2,576,625      $ 530,863        20.6

Surface Mining Equipment

     2,737,488        1,959,353        778,135        39.7

Eliminations

     (184,087     (132,072     (52,015  
  

 

 

   

 

 

   

 

 

   

Total

   $ 5,660,889      $ 4,403,906      $ 1,256,983        28.5
  

 

 

   

 

 

   

 

 

   

Underground Mining Machinery net sales for 2012 were $3.1 billion compared to $2.6 billion for 2011, and included a $136.2 million increase in aftermarket sales, a $175.7 million increase in original equipment sales and $219.0 million in sales from the acquisition of IMM. Aftermarket sales increased in China and Australia by $111.5 million and $46.6 million, respectively, primarily due to increased demand for parts. Original equipment sales increased in Australia and Eurasia by $214.8 million and $36.0 million, respectively, primarily due to increased roof support sales in both regions and increased bolter miner and conveyor system sales in Australia. The increase in original equipment sales from Australia and Eurasia was partially offset by decreases in sales from China and North America. Foreign currency translation unfavorably impacted sales by $39.7 million.

Surface Mining Equipment net sales for 2012 were $2.7 billion compared to $2.0 billion for 2011, which included a $93.8 million increase in aftermarket sales, a $377.9 million increase in original equipment sales and a $306.4 million increase in sales from the acquisition of LeTourneau. Aftermarket sales increased in all regions except China primarily due to increased demand for parts. Original equipment sales increased in all regions except Africa, primarily due to last year’s strong order rate flowing to this year’s sales. Foreign currency translation unfavorably impacted sales by $11.7 million.

 

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Table of Contents

Operating Income

The following table sets forth 2012 and 2011 operating income as derived from our Consolidated Statement of Income:

 

     2012     2011  
     Operating     %     Operating     %  

In thousands

   Income (loss)     of Net Sales     Income (loss)     of Net Sales  

Operating income (loss):

        

Underground Mining Machinery

   $ 671,797        21.6   $ 595,262        23.1

Surface Mining Equipment

     592,687        21.7     422,472        21.6

Corporate Expenses

     (51,079       (65,693  

Eliminations

     (40,846       (31,862  
  

 

 

     

 

 

   

Total

   $ 1,172,559        20.7   $ 920,179        20.9
  

 

 

     

 

 

   

Operating income for the Underground Mining Machinery segment was $671.8 million in fiscal 2012, compared to operating income of $595.3 million in fiscal 2011. The Underground Mining Machinery segment return on sales was reduced by 1.3 points from a year ago due to IMM, including the non-recurring purchase accounting charges of $27.4 million from the acquisition. In addition to the $9.4 million attributable to IMM, operating income was favorably impacted by $127.1 million due to higher sales volumes, which was partially offset by $23.2 million of increased period costs, $6.5 million of restructuring costs, and $2.1 million due to pension curtailment and special termination benefit charges. Foreign currency translation unfavorably impacted operating income by $11.5 million.

Operating income for the Surface Mining Equipment segment was $592.7 million in fiscal 2012, compared to operating income of $422.5 million in fiscal 2011. Operating income in 2012 increased $50.6 million from the acquisition of LeTourneau. LeTourneau’s 2012 and 2011 operating income was reduced by $13.7 million and $8.8 million, respectively, for non-recurring purchase accounting charges. In addition to the $50.6 million increase from LeTourneau, operating income was favorably impacted by $148.3 million due to higher sales volumes, which was partially offset by $37.2 million of increased period costs, $10.3 million due to pension curtailment and special termination benefit charges, and $2.4 million of restructuring charges.

Corporate expense decreased by $14.6 million primarily due to the IMM remeasurement gain of $19.4 million upon obtaining a controlling interest in IMM in December 2011.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense was $736.8 million, or 13.0% of sales, in 2012, compared to $602.0 million, or 13.7% of sales, in 2011. The inclusion of LeTourneau and IMM increased product development, selling and administrative expenses by $74.6 million. In addition to the $74.6 million attributable to the acquisitions’ operations, product development costs increased by an additional $9.6 million driven by research and development activities on new or existing products and increased personnel for smart services activities. Selling costs increased by $13.3 million to support increased sales volumes and aftermarket infrastructure. The increase in administrative expenses of $37.1 million relates to restructuring charges of $9.9 million and increased performance based compensation of $8.0 million.

 

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Table of Contents

Net Interest Expense

Net interest expense was $67.4 million in 2012, compared to $24.3 million in 2011. Net interest expense increased as a result of borrowings used to fund the acquisitions. We entered into a $500.0 million term loan dated June 16, 2011 for the acquisition of LeTourneau, issued $500.0 million of Senior Notes on October 12, 2011 in anticipation of completing the IMM transaction, and on February 10, 2012 we drew on an additional term loan of $250.0 million for the acquisition of IMM.

Provision for Income Taxes

Income tax expense for 2012 was $337.9 million as compared to $264.8 million in 2011. The effective income tax rates from continuing operations were 30.6% and 29.6% for 2012 and 2011, respectively. The main drivers of the variance in tax rates when compared to the statutory rate of 35% were the geographic mix of earnings with the corresponding net favorable differences in foreign statutory tax rates.

Net discrete tax benefits of $7.6 million were recorded in 2012 as compared to net discrete tax benefits of $5.4 million in 2011.

2011 Compared with 2010

Sales

The following table sets forth 2011 and 2010 net sales as derived from our Consolidated Statement of Income:

 

                 $     %  

In thousands

   2011     2010     Change     Change  

Net Sales

        

Underground Mining Machine

   $ 2,576,625      $ 2,126,788      $ 449,837        21.2

Surface Mining Equipment

     1,959,353        1,518,605        440,748        29.0

Eliminations

     (132,072     (121,059     (11,013  
  

 

 

   

 

 

   

 

 

   

Total

   $ 4,403,906      $ 3,524,334      $ 879,572        25.0
  

 

 

   

 

 

   

 

 

   

Underground Mining Machinery net sales for 2011 were $2.6 billion compared to $2.1 billion for 2010, and included a $287.7 million increase in aftermarket sales and a $162.1 million increase in original equipment sales. Aftermarket sales increased across all regions. Specifically, aftermarket sales increased in the U.S. and Australasia by $113.5 million and $55.6 million, respectively, primarily due to the strengthening of the parts and rebuild markets in these regions. Additionally, strong parts demand in China caused aftermarket sales to increase by 56.8%, or $52.1 million. The increase in original equipment sales was led primarily by increased room and pillar sales in both the U.S. and South Africa and by roof support sales for longwall application equipment orders in Australasia. These increases were partially offset by decreased longwall equipment volumes in Eurasia and China. Foreign currency translation favorably impacted sales by $77.4 million.

Surface Mining Equipment net sales for 2011 were $2.0 billion compared to $1.5 billion for 2010, which included a $189.2 million increase in aftermarket sales, a $106.6 million increase in original equipment sales and $144.9 million in sales from the mining equipment business of LeTourneau. Aftermarket sales increased across all regions and were led by increased sales in North and South America of $64.5 million and $91.6 million, respectively. Original equipment sales of electric mining shovels and drills increased across all regions, with the exception of North America. Foreign currency translation favorably impacted sales by $31.9 million.

 

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Table of Contents

Operating Income

The following table sets forth 2011 and 2010 operating income as derived from our Consolidated Statement of Income:

 

     2011     2010  
     Operating     %     Operating     %  

In thousands

   Income (loss)     of Net Sales     Income (loss)     of Net Sales  

Operating income (loss):

        

Underground Mining Machinery

   $ 595,262        23.1   $ 433,902        20.4

Surface Mining Equipment

     422,472        21.6     336,236        22.1

Corporate Expense

     (65,693       (43,126  

Eliminations

     (31,862       (29,909  
  

 

 

     

 

 

   

Total

   $ 920,179        20.9   $ 697,103        19.8
  

 

 

     

 

 

   

Operating income for the Underground Mining Machinery segment was $595.3 million in fiscal 2011, compared to operating income of $433.9 million in fiscal 2010. Operating income was favorably impacted by $175.1 million due to higher sales volumes, $52.2 million due to favorable manufacturing overhead absorption and $45.4 million in favorable overall price realization. These increases were partially offset by $67.9 million of unfavorable changes in material price variances due to rising steel costs and other surcharges, $49.4 million of increased product development, selling and administrative expenses and $6.6 million from a prior year foreign currency gain that was not repeated in the current year. Foreign currency translation favorably impacted operating income by $17.9 million.

Operating income for the Surface Mining Equipment segment was $422.5 million in fiscal 2011, compared to operating income of $336.2 million in fiscal 2010. Operating income was favorably impacted by $172.4 million due to higher sales volumes, $17.7 million due to favorable manufacturing overhead absorption and $11.3 million of cancellation charges. Operating income in 2011 includes $23.2 million from LeTourneau’s mining equipment business which includes purchase accounting charges of $12.2 million. Partially offsetting these increases were $41.1 million of unfavorable changes in material price variances due to rising material costs and surcharges and $48.0 million of increased product development, selling and administrative expense.

Corporate expense increased due to acquisition transaction costs of $19.7 million.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense was $602.0 million, or 13.7% of sales, in 2011, compared to $480.6 million, or 13.6% of sales, in 2010. Before acquisition transaction costs of $19.7 million in 2011, product development, selling and administrative expenses totaled $582.3 million, or 13.2% of sales. Product development costs increased by $20.8 million, which is attributable to research and development activities on new or existing products and increased personnel for smart services activities. Selling costs increased by $34.0 million due to travel, warehouse costs to support increased parts volumes and the inclusion of $5.6 million from LeTourneau’s mining equipment business. Administrative expenses increased primarily due to acquisition transaction costs.

 

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Net Interest Expense

Net interest expense was $24.3 million in 2011, compared to $16.8 million in 2010. Net interest expense increased as a result of additional borrowings. We entered into a $500.0 million term loan dated June 16, 2011 for the acquisition of LeTourneau and issued $500.0 million of Senior Notes on October 12, 2011 in anticipation of completing the IMM transaction.

Provision for Income Taxes

Income tax expense for 2011 was $264.8 million, as compared to $217.5 million in 2010. The effective income tax rates from continuing operations were 29.6% and 32.0%, for 2011 and 2010, respectively. The main drivers of the variance in tax rates when compared to the statutory rate of 35% were the geographic mix of earnings with the corresponding net favorable differences in foreign statutory tax rates and the utilization of tax credits and tax holidays, offset by increased state income taxes and the establishment of valuation reserves.

A net discrete tax benefit of $5.4 million was recorded in 2011 as compared to a net discrete tax benefit of $3.4 million in 2010. A review of uncertain income tax positions was performed throughout 2011 and 2010 as part of the overall income tax provision and a net benefit of $2.9 million and $4.4 million, respectively, was recorded on a global basis.

Reorganization Items

Reorganization items include income, expenses, and losses that were realized or incurred by our predecessor as a result of its decision to reorganize under Chapter 11 of the Bankruptcy Code. We emerged from protection under Chapter 11 of the U.S. Bankruptcy Code on July 12, 2001.

Net reorganization items for 2012, 2011, and 2010 consisted of the following:

 

In thousands

   2012      2011     2010  

Professional fees directly related to the reorganization

     —           (35     (1,310
  

 

 

    

 

 

   

 

 

 

Net reorganization expense

   $ —         $ (35   $ (1,310
  

 

 

    

 

 

   

 

 

 

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments, including those related to bad debts, excess inventory, warranty, intangible assets, income taxes, and contingencies. We base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

We believe the accounting policies described below are the policies that most frequently require us to make estimates and judgments, and therefore are critical to the understanding of our results of operations.

 

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Revenue Recognition

We recognize revenue on aftermarket products and services when the following criteria are satisfied: persuasive evidence of an arrangement exists, product delivery and title transfer has occurred or the services have been rendered, the price is fixed and determinable, and collectability is reasonably assured. We recognize revenue on long-term contracts, such as for the manufacture of mining shovels, draglines, roof support systems and conveyor systems, using the percentage-of-completion method. When using the percentage-of-completion method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Sales and gross profit are adjusted prospectively for revisions in estimated total contract costs and contract values. Estimated losses are recognized in full when identified. Approximately 82% of our sales in 2012 were recorded at the time of shipment of the product or delivery of the service, with the remaining 18% of sales recorded using percentage of completion accounting.

We have life cycle management contracts with customers to supply parts and service for terms of 1 to 17 years. These contracts are established based on the conditions the equipment will be operating in, the time horizon that the contracts will cover, and the expected operating cycle that will be required for the equipment. Based on this information, a model is created representing the projected costs and revenues of servicing the respective machines over the specified contract terms. Accounting for these contracts requires us to make various estimates, including estimates of the relevant machine’s long-term maintenance requirements. Under these contracts, customers are generally billed monthly based on hours of operation or units of production achieved by the equipment, with the respective deferred revenues recorded when billed. Revenue is recognized in the period in which parts are supplied or services provided. These contracts are reviewed quarterly by comparison of actual results to original estimates or most recent analysis, with revenue recognition adjusted appropriately for future estimated costs. If a loss is expected at any time, the full amount of the loss is recognized immediately.

We have certain customer agreements that are multiple element arrangements as defined by the Accounting Standards Codification No. 605-25, “Multiple-Element Arrangements.” The agreements are assessed for multiple elements based on the following criteria: the delivered item has value to the customer on a standalone basis, there is objective and reliable evidence of the fair value of the undelivered item, and the arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor. Revenue is then allocated to each identified unit of accounting based on our estimate of their relative fair values.

Revenue recognition involves judgments, including assessments of expected returns, the likelihood of nonpayment, and estimates of expected costs and profits on long-term contracts. We analyze various factors, including a review of specific transactions, historical experience, credit-worthiness of customers, and current market and economic conditions, in determining when to recognize revenue. Changes in judgments on these factors could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated income.

Inventories

Inventories are carried at the lower of cost or net realizable value using the first-in, first-out method for all inventories. We evaluate the need to record valuation adjustments for inventory on a regular basis. Our policy is to evaluate all inventories including raw material, work-in-process, finished goods, and spare parts. Inventory in excess of our estimated usage requirements is written down to its estimated net realizable value. Inherent in the estimates of net realizable value are estimates related to our future manufacturing schedules, customer demand, possible alternative uses, and ultimate realization of potentially excess inventory.

Goodwill and Other Intangible Assets

Intangible assets include drawings, patents, trademarks, technology, customer relationships and other specifically identifiable assets. Indefinite-lived intangible assets are not being amortized. Indefinite-lived intangible assets are evaluated for impairment annually or more frequently if events or changes occur that suggest impairment in carrying value, such as a significant adverse change in the business climate. As part of the impairment analysis, we use the discounted cash flow model based on royalties estimated to be derived in the future use of the asset were we to license the use of the indefinite-lived asset. No impairment was identified as part of

 

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our fourth quarter impairment testing of our indefinite-lived intangible assets. Finite-lived intangible assets are amortized to reflect the pattern of economic benefits consumed, which is principally the straight-line method. Intangible assets that are subject to amortization are evaluated for potential impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. No impairment was identified related to our finite-lived intangible assets.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is assigned to specific reporting units, which we have identified as our operating segments, and tested for impairment at least annually, during the fourth quarter of our fiscal year, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Goodwill is evaluated for impairment by comparing the fair value of each of our reporting units to their book value. We first determine, based on a qualitative assessment, whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that this is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we determine the fair value of the reporting unit based on a discounted cash flow model. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of the reporting unit exceeds its fair value, the impairment test continues by comparing the carrying value of the reporting unit’s goodwill to the implied fair value of goodwill. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the fair value of the individual assets acquired and liabilities assumed were being determined initially. If goodwill is impaired, we recognize an impairment loss based on the amount by which the book value of goodwill exceeds its implied fair value.

The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. Qualitative assessments regarding goodwill involve a high degree of judgment and can entail subjective considerations. The discounted cash flow model involves many assumptions, including operating results forecasts and discount rates. Inherent in the operating results forecasts are certain assumptions regarding revenue growth rates, projected cost saving initiatives and projected long-term growth rates in the determination of terminal values. We performed our goodwill impairment testing in the fourth quarter of 2012 and no impairment was identified.

Accrued Warranties

We record accruals for potential warranty claims based on prior claim experience. Warranty costs are accrued at the time revenue is recognized. These warranty costs are based upon management’s assessment of past claims and current experience. However, actual claims could be higher or lower than amounts estimated, as the amount and value of warranty claims are subject to variation as a result of many factors that cannot be predicted with certainty.

Pension and Postretirement Benefits and Costs

Pension and other postretirement benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected return on plan assets, mortality rates and rate of compensation increases, discussed below:

Discount rates: We generally estimate the discount rate for pension and other postretirement benefit obligations using a process based on a hypothetical investment in a portfolio of high-quality bonds that approximate the estimated cash flows of the pension and other postretirement benefit obligations. We believe this approach permits a matching of future cash outflows related to benefit payments with future cash inflows associated with bond coupons and maturities.

Expected return on plan assets: Our expected return on plan assets is derived from reviews of asset allocation strategies and anticipated future long-term performance of individual asset classes weighted by the allocation of our plan assets. Our analysis gives appropriate consideration to recent plan performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return.

 

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Mortality rates: Mortality rates are based on the IRS prescribed annuitant and non-annuitant mortality for 2012 under the Pension Protection Act of 2006.

Rate of compensation increase: The rate of compensation increase reflects our long-term actual experience and its outlook, including consideration of expected rates of inflation.

Actual results that differ from the assumptions are accumulated and amortized over future periods, and therefore, generally affect recognized expense and the recorded obligation in future periods. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our pension and other postretirement plan obligations and future expense.

Future changes affecting the above assumptions will change the related pension benefit or expense. As such, a 0.25% change in the discount rate and rate of return on net assets would have the following effects on projected benefit obligation and pension expense, respectively, as of and for the fiscal year ended October 26, 2012:

 

     0.25% Increase     0.25% Decrease  
           Expected            Expected  
     Discount     long-term     Discount      long-term  
In thousands    rate     rate of return     rate      rate of return  

U.S. Pension Plans:

         

Net pension (benefit) expense

   $ (1,217   $ (2,257   $ 1,190       $ 2,255   

Projected (decrease) increase in benefit obligation

     (36,559     —          37,662         —     

Non U.S. Pension Plans:

         

Net pension (benefit) expense

     (2,104     (1,299     1,986         1,300   

Projected (decrease) increase in benefit obligation

     (26,549     —          27,599         —     

Other Postretirement Benefit Plans:

         

Net pension (benefit) expense

     (20     (13     21         13   

Projected (decrease) increase in benefit obligation

     (557     —          567         —     

Income Taxes

Deferred taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using current statutory tax rates. Deferred income tax provisions are based on changes in the deferred tax assets and liabilities from period to period. Additionally, we analyze our ability to recognize the net deferred tax assets created in each jurisdiction in which we operate to determine if valuation allowances are necessary based on the “more likely than not” criteria.

As required under the application of fresh start accounting, the release of pre-emergence tax valuation reserves was not recorded in the income statement but instead was treated first as a reduction of excess reorganization value until exhausted, then intangibles until exhausted, and thereafter reported as additional paid in capital. Consequently, a net tax charge will be incurred in future years when these tax assets are utilized. We will continue to monitor the appropriateness of the existing valuation allowances and determine annually the amount of valuation allowances that are required to be maintained. As of October 26, 2012, there were $62.4 million of valuation allowances against pre-emergence net operating loss carryforwards. All future reversals of pre-emergence valuation allowances will be recorded to additional paid in capital.

We estimate the effective tax rate expected to be applicable for the full year on an interim basis. The estimated effective tax rate contemplates the expected jurisdiction where income is earned (e.g., United States compared to non-United States) as well as tax planning strategies. If the actual results are different from these estimates, adjustments to the effective tax rate may be required in the period such determination is made. Additionally, discrete items are treated separately from the effective rate analysis and are recorded

 

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separately as an income tax provision or benefit at the time they are recognized. To the extent recognized, these items will impact the effective tax rate in aggregate but will not adjust the amount used for future periods within the same year.

Liquidity and Capital Resources

The following table summarizes the major elements of our working capital as of:

 

In thousands    October 26, 2012     October 28, 2011  

Accounts receivable

   $ 1,229,083      $ 884,696   

Inventories

     1,415,455        1,334,134   

Accounts payable

     (452,236     (452,519

Advance payments

     (669,792     (771,841
  

 

 

   

 

 

 

Trade Working Capital

   $ 1,522,510      $ 994,470   

Other current assets

     247,666        190,568   

Short-term notes payable

     (65,316     (35,895

Employee compensation and benefits

     (156,867     (147,664

Accrued warranties

     (100,646     (82,737

Other current liabilities

     (322,813     (206,588
  

 

 

   

 

 

 

Working Capital Excluding Cash and Cash Equivalents

   $ 1,124,534      $ 712,154   

Cash and Cash Equivalents

     263,873        288,321   
  

 

 

   

 

 

 

Working Capital

   $ 1,388,407      $ 1,000,475   
  

 

 

   

 

 

 

IMM added $173.6 million to trade working capital at October 26, 2012.

We currently use trade working capital and cash flow from operations as two financial measurements to evaluate the performance of our operations and our ability to meet our financial obligations. We require trade working capital investment because our service model requires us to maintain certain inventory levels in order to maximize our customers’ machine availability. This information also provides management with a focus on our receivable terms and collectability efforts and our ability to obtain advance payments on original equipment orders. As part of our continuous improvement of purchasing and manufacturing processes, we continue to strive for alignment of inventory levels with customer demand and current production schedules.

Cash provided by continuing operations for 2012 was $463.9 million as compared to $499.7 million provided by operations for 2011. The decrease in cash provided by continuing operations was the result of increases in accounts receivables due to the timing of sales, increased inventory to support the strong sales activity, reduced accounts payable and by a reduction in advance payments resulting from a decline in new original equipment order activity. Cash provided by continuing operations was favorably impacted by increases in accrued liabilities due to a change in the timing of tax payments.

Cash used by investing activities was $378.3 million in 2012 compared to $2.0 billion used by investing activities for 2011. Investing activities in 2012 primarily related to the $955.9 million investment in IMM, which was funded in the prior year with a $866.0 million cash deposit that was placed into an escrow account in anticipation of completing the IMM transaction. Investing activities in 2011 primarily related to the $1.0 billion acquisition of LeTourneau, the $376.7 million investment in IMM shares, and the $866.0 million escrow deposit for the anticipated acquisition of IMM, partially offset by the $375.0 million sale of the LeTourneau drilling business.

Cash used by financing activities for 2012 was $81.6 million compared to cash provided by financing activities of $976.7 million for 2011. The difference was driven by the prior year entrance into a new $500.0 million term loan for the acquisition of LeTourneau and the prior year issuance of $500.0 million of senior notes in anticipation of completing the IMM acquisition. In 2012, financing activities consisted primarily of the borrowing and subsequent repayment of a $250.0 million note for the acquisition of IMM, as well as the payment of $74.0 million in dividends.

 

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We expect 2013 capital spending to be approximately $200 million. Capital projects will be focused on expanding service center capabilities globally and the increase of our manufacturing capabilities in the emerging markets.

During each quarter of fiscal 2012 we declared a cash dividend of $0.175 per outstanding share of common stock and we paid $74.0 million in dividends during the fiscal year.

For fiscal year 2013 we expect to contribute $180.0 million to $190.0 million to our employee pension plans. As of October 26, 2012 we have a net unfunded pension and other postretirement liability of $367.0 million.

We believe our liquidity and capital resources are adequate to meet our projected needs. We have $263.9 million of unrestricted cash and cash equivalents at October 26, 2012, of which $253.7 million is held for foreign entities. We expect to meet our U.S. funding needs without repatriating undistributed profits that are indefinitely reinvested outside the U.S. Requirements for working capital, dividends, pension contributions, capital spending, acquisitions and principal and interest payments on our term loan and senior notes will be adequately funded by cash on hand, continuing operations and supplemented by short and long term borrowings, as required.

Credit Facilities and Senior Notes

On October 12, 2012, we entered into a $1.0 billion unsecured revolving credit facility that matures on November 12, 2017 (the “Credit Agreement”). Under the Credit Agreement, we also may request an increase of up to $250.0 million of additional aggregate revolving commitments, subject to terms and conditions contained in the Credit Agreement. The Credit Agreement simultaneously replaced the $700.0 million revolving credit agreement, dated as of October 27, 2010 (the “Prior Credit Agreement”) that was to have matured in November 2014. Under the terms of the Credit Agreement we pay a commitment fee ranging from 0.10% to 0.325% on the unused portion of the revolving credit facility based on our credit rating. Letters of credit issued under applicable provisions of the Credit Agreement represent an unfunded utilization of the Credit Agreement for purposes of calculating the periodic commitment fee due. Eurodollar Rate Loans will bear interest for a period from the applicable borrowing date until a date one week, two weeks or one, two, three or six months thereafter, as selected by us, at the corresponding Eurodollar rate plus a margin of 1.00% to 2.00% depending upon our credit rating, and Base Rate Loans will bear interest from the applicable borrowing date at a rate equal to (i) the highest of (a) the federal funds rate plus 0.5%, (b) the rate of interest in effect for such day as publicly announced by the administrative agent as its “prime rate,” and (c) a daily rate equal to the one-month Eurodollar rate plus 1.0%, plus (ii) a margin that varies according to our credit rating. Swing Line Loans will bear interest at either the Base Rate described above or the Daily Floating Eurodollar Rate, which is a one-month Eurodollar rate plus the applicable margin, as selected by us. The Credit Agreement requires the maintenance of certain financial covenants including leverage and interest coverage ratios. The Credit Agreement also restricts payment of dividends or other return of capital when the consolidated leverage ratio exceeds a stated level amount. At October 26, 2012, we were in compliance with all financial covenants of the Credit Agreement and had no restrictions on the payment of dividends or return of capital.

In connection with our entry into the Credit Agreement, we terminated the Prior Credit Agreement and used a portion of the proceeds available under the Credit Agreement to repay our $250.0 million term loan credit agreement, dated as of October 31, 2011 (the “Further Term Loan”), which was to have matured in June 2016. The Further Term Loan was drawn in full on February 10, 2012, in conjunction with the settlement of the IMM tender offer. Following our entry into the Credit Agreement, all amounts outstanding under the Prior Credit Agreement and Further Term Loan were repaid in full.

At October 26, 2012, there were no direct borrowings under the Credit Agreement. Outstanding letters of credit issued under the Credit Agreement, which count toward the $1.0 billion credit limit, totaled $279.0 million. At October 26, 2012, there was $721.0 million available for borrowings under the Credit Agreement.

 

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On June 16, 2011, we entered into a credit agreement, which matures June 16, 2016, and provided for a $500.0 million term loan commitment (the “Term Loan”), which was drawn in full to partially finance the acquisition of LeTourneau. The Term Loan requires quarterly principal payments that began in the fourth quarter of fiscal year 2011. The Term Loan contains terms and conditions that are substantially similar to the terms and conditions of the Credit Agreement. The Term Loan is guaranteed by each of our current and future material domestic subsidiaries and requires the maintenance of certain financial covenants, including leverage and interest coverage ratios. At October 26, 2012, we were in compliance with all financial covenants of the Term Loan.

On October 12, 2011, we issued $500.0 million aggregate principal amount of the 5.125% Senior Notes due in 2021 (the “2021 Notes”) at a discount of $4.2 million in an offering that was registered under the Securities Act. Interest on the 2021 Notes is paid semi-annually in arrears on October 15 and April 15 of each year and the 2021 Notes are guaranteed by each of our current and future material domestic subsidiaries. At our option, we may redeem some or all of the 2021 Notes at a redemption price of the greater of 100% of the principal amount of the 2021 Notes to be redeemed or the sum of the present values of the principal amounts and the remaining scheduled interest payments using a discount rate equal to the sum of a Treasury rate of a comparable Treasury issue plus 0.5%.

In November 2006, we issued $250.0 million aggregate principal amount of 6.0% Senior Notes due 2016 and $150.0 million aggregate principal amount of 6.625% Senior Notes due 2036 (“Notes”). Interest on the Notes is paid semi-annually in arrears on May 15 and November 15 of each year and the Notes are guaranteed by each of our current and future material domestic subsidiaries. The Notes were issued in a private placement under an exemption from registration provided by the Securities Act. In the second quarter of fiscal 2007, the Notes were exchanged for substantially identical notes in an exchange that was registered under the Securities Act. At our option, we may redeem some or all of the Notes at a redemption price of the greater of 100% of the principal amount of the Notes to be redeemed or the sum of the present values of the principal amounts and the remaining scheduled interest payments using a discount rate equal to the sum of a treasury rate of a comparable treasury issue plus 0.3% for the 2016 Notes and 0.375% for the 2036 Notes.

Advance Payments and Progress Billings

As part of the negotiation process associated with original equipment orders, advance payments and contracts generally require progress payments from our customers to support the procurement of inventory and other resources. As of October 26, 2012, advance payments and progress billings were $669.8 million. As orders are shipped or costs incurred, the advanced payments and progress billings are recognized as revenue in the consolidated income statement.

Retiree Benefits

We sponsor pension plans in both the U.S. and other countries. The significance of the funding requirements of these plans are largely dependent on the actual value of the plan assets, the investment returns on the plan assets, actuarial assumptions, including discount rates, and the impact of the Pension Protection Act of 2006. In the second quarter of 2012 a modification was made to the Joy Global Pension Plan freezing benefits for all salaried and non-bargained hourly participants effective May 1, 2012. In addition, in the fourth quarter of 2012 a modification was made to the Joy Global Pension Plan freezing benefits for certain bargained hourly participants effective in 2013. We recorded curtailment charges of $1.1 million and $10.4 million in the second and fourth quarters of fiscal 2012, respectively, in conjunction with the freezes.

Off-Balance Sheet Arrangements

We lease various assets under operating leases. The aggregate payments under operating leases as of October 26, 2012 are disclosed in the table of Disclosures about Contractual Obligations and Commercial Commitments below. No significant changes to lease commitments have occurred during 2012. We have no other off-balance sheet arrangements.

 

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Disclosures about Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations and commercial commitments as of October 26, 2012:

 

            Less Than      1 - 3      3 - 5      More than  

In thousands

   Total      1 Year      Years      Years      5 Years  

Long Term Debt*

   $ 1,905,731       $ 100,988       $ 202,048       $ 656,414       $ 946,281   

Capital Lease Obligations*

     45         45         —           —           —     

Purchase Obligations

     84,480         56,802         27,054         624         —     

Operating Leases

     121,392         34,613         48,340         23,071         15,368   

Other Long Term Obligations**

     89,166         72,943         4,382         3,981         7,860   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,200,814       $ 265,391       $ 281,824       $ 684,090       $ 969,509   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Includes interest
** Includes minimum required contributions to our pension and other postretirement benefit plans and required contributions for our unfunded other postretirement benefit plans.

New Accounting Pronouncements

Our new accounting pronouncements are set forth under Item – 15 Exhibits and Financial Statements Schedules of this annual report and are incorporated herein by reference.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to fluctuations in earnings and cash flows due to volatility in interest rates, commodity prices and foreign currency exchange rates. We monitor our risks on a continuous basis and generally enter into derivative instruments to minimize our foreign currency exposures. We do not engage in speculation in our derivative strategy. We assess effectiveness of our hedging relationships on an ongoing basis to ensure the transactions are highly effective in offsetting changes in cash flows or fair values of the hedged item.

Interest Rate Risk

We are exposed to market risk from changes in interest rates on long-term debt obligations. We have a combination of fixed and variable rate debt (See Note 10, “Borrowings and Credit Facilities”) and interest rate movements impact the value of fixed-rate debt and cash flows on variable-rate debt. At October 26, 2012, we were not party to any interest rate derivative contracts.

Commodity Price Risk

We purchase certain raw materials, including steel and copper, that are subject to price volatility caused by systematic risks. Although future movements in raw material prices are unpredictable, we manage this risk through periodic purchases of raw materials and passing some or all price increases to our customers. At October 26, 2012, we were not a party to any commodity forward contracts.

 

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Foreign Currency Risk

We have a risk-averse Foreign Exchange Risk Management Policy under which significant exposures that impact earnings and cash flows are hedged. Exposures that impact only equity or do not have a cash flow impact are generally not hedged with derivatives. We hedge two categories of foreign exchange exposures: assets and liabilities denominated in a foreign currency, which include future committed receipts or payments denominated in a foreign currency, and certain U.S. functional currency entity balance sheet accounts denominated in local currencies. These exposures normally arise from the import and export of goods and from intercompany trade and lending activity.

For consolidation purposes, assets and liabilities are translated at month-end exchange rates and income and expense are translated at average exchange rates. Translation gains and losses on asset and liabilities are not included in determining net income (loss) but are accumulated as a separate component of shareholders’ equity. Exchange gains or losses incurred on transactions conducted by one of our operations in a currency other than the operation’s functional currency are included in determining net income (loss). During 2012, we realized a loss of $1.4 million arising from foreign currency transactions. Foreign exchange derivatives at October 26, 2012 were in the form of forward exchange contracts executed over the counter.

The fair value of our forward exchange contracts at October 26, 2012 is analyzed in the following table of dollar equivalent terms:

 

     Fair Value  

In thousands

   Buy     Sell  

Australian Dollar

   $ 5      $ 11   

British Pound Sterling

     4,466        (1,124

Canadian Dollar

     (6     274   

Chilean Peso

     (19     791   

Euro

     118        16   

Japanese Yen

     (20     —     

Polish Zloty

     230        —     

South African Rand

     (735     109   

U.S. Dollar

     460        5,110   
  

 

 

   

 

 

 

Total

   $ 4,499      $ 5,187   
  

 

 

   

 

 

 

 

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Item 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements are included with Item 15 of this Form 10-K beginning on page F-1.

Unaudited Quarterly Financial Data

The following table sets forth certain unaudited quarterly financial data for our fiscal years ended October 26, 2012 and October 28, 2011.

 

     2012 Fiscal Quarter Ended  

(In thousands except per share amounts)

   January 27  (1)     April 27     July 27     October 26  

Net sales

   $ 1,136,201      $ 1,541,060      $ 1,388,723      $ 1,594,905   

Gross profit

     363,425        510,371        475,784        527,507   

Operating income

     213,746        333,437        299,475        325,901   

Income from continuing operations, net of tax

     142,410        217,919        194,344        212,408   

Income (loss) from discontinued operations, net of tax

     (58     (4,331     (826     155   

Net income attributable to Joy Global Inc.

     142,352        213,588        193,518        212,563   

Basic Earnings Per Share:

        

Continuing operations

   $ 1.35      $ 2.06      $ 1.83      $ 2.00   

Discontinued operations

     —          (0.04     (0.01     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1.35      $ 2.02      $ 1.82      $ 2.00   

Diluted Earnings Per Share:

        

Continuing operations

   $ 1.33      $ 2.04      $ 1.82      $ 1.99   

Discontinued operations

     —          (0.04     (0.01     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1.33      $ 2.00      $ 1.81      $ 1.99   

Dividends Per Share

   $ 0.175      $ 0.175      $ 0.175      $ 0.175   

 

     2011 Fiscal Quarter Ended  

(In thousands except per share amounts)

   January 28      April 29      July 29  (2)      October 28  (3)  

Net sales

   $ 869,532       $ 1,062,729       $ 1,136,352       $ 1,335,293   

Gross profit

     285,401         372,871         396,726         451,303   

Operating income

     153,798         234,062         235,992         296,327   

Income from continuing operations, net of tax

     102,232         161,972         171,805         194,993   

Income (loss) from discontinued operations, net of tax

     —           —           1,300         (22,646

Net income

     102,232         161,972         173,105         172,347   

Basic Earnings Per Share:

           

Continuing operations

   $ 0.98       $ 1.54       $ 1.63       $ 1.85   

Discontinued operations

     —           —           0.01         (0.22
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 0.98       $ 1.54       $ 1.64       $ 1.63   

Diluted Earnings Per Share:

           

Continuing operations

   $ 0.96       $ 1.52       $ 1.61       $ 1.83   

Discontinued operations

     —           —           0.01         (0.21
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 0.96       $ 1.52       $ 1.62       $ 1.62   

Dividends Per Share

   $ 0.175       $ 0.175       $ 0.175       $ 0.175   

 

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(1) In the first quarter of fiscal 2012, we acquired International Mining Machinery Holdings Ltd.
(2) In the third quarter of fiscal 2011, we acquired LeTourneau Technologies, Inc.
(3) In the fourth quarter of fiscal 2011, we sold the drilling products business of LeTourneau Technologies, Inc.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

 

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of October 26, 2012. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective (1) in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and (2) to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

(b) Management’s Report on Internal Control over Financial Reporting

Our management’s annual report on internal control over financial reporting is set forth under Item 8 of this annual report and is incorporated herein by reference.

(c) Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information

None

 

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PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

We incorporate by reference herein the sections entitled “ELECTION OF DIRECTORS,” “CORPORATE GOVERNANCE,” “BOARD OF DIRECTORS; AUDIT COMMITTEE FINANCIAL EXPERT” and “OTHER INFORMATION – Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement to be mailed to stockholders in connection with our 2013 annual meeting.

Information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3) and incorporated herein by reference.

Our Code of Ethics for CEO and Senior Financial Officers is available on our website. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website.

 

Item 11. Executive Compensation

We incorporate by reference herein the section entitled “EXECUTIVE COMPENSATION” in our Proxy Statement to be mailed to stockholders in connection with our 2013 annual meeting.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We incorporate by reference herein the section entitled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” and “EXECUTIVE COMPENSATION – Equity Compensation Plan Information” in our Proxy Statement to be mailed to stockholders in connection with our 2013 annual meeting.

 

Item 13. Certain Relationships, Related Transactions and Director Independence

We incorporate by reference herein the section entitled “EXECUTIVE COMPENSATION – Related Party Transactions” and “CORPORATE GOVERNANCE” in our Proxy Statement to be mailed to stockholders in connection with our 2013 annual meeting.

 

Item 14. Principal Accounting Fees and Services

We incorporate by reference herein the section entitled “AUDITORS, AUDIT FEES AND AUDITOR INDEPENDENCE” in our Proxy Statement to be mailed to stockholders in connection with our 2013 annual meeting.

 

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PART IV

 

Item 15. Exhibits and Financial Statement Schedules

 

(a) The following documents are filed as part of this report:

 

  (1) Financial Statements:

The response to this portion of Item 15 is submitted in a separate section of this report. See the audited Consolidated Financial Statements and Financial Statement Schedule of Joy Global Inc. attached hereto and listed on the index to this report.

 

  (2) Financial Statement Schedules:

The response to this portion of Item 15 is submitted in a separate section of this report. See the audited Consolidated Financial Statements and Financial Statement Schedule of Joy Global Inc. attached hereto and listed on the index to this report.

 

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Table of Contents

Exhibits

 

Number

  

Exhibit

    2.1    Share Purchase Agreement, dated July 11, 2011, between TJCC Holdings Limited, Newco Hong Kong 123 Limited and Joy Global Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed July 15, 2011, File No. 001-09299).
    2.2    Amended and Restated Share Purchase Agreement, dated July 14, 2011, between TJCC Holdings Limited, Newco Hong Kong 123 Limited and Joy Global Inc. (incorporated by reference to Exhibit 2.2 to Current Report on Form 8-K filed July 15, 2011, File No. 001-09299).
    3.1    Amended and Restated Certificate of Incorporation of Joy Global Inc. (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed March 6, 2012, File No. 001-09299).
    3.2    Amended and Restated Bylaws of Joy Global Inc. as amended on December 18, 2006 (incorporated by reference to Exhibit 3.2 to Annual Report on Form 10-K for the year ended October 28, 2006, File No. 001-09299).
    4.1    Specimen common stock certificate of Joy Global Inc. (incorporated by reference to Exhibit 4.2 to Registration Statement on Form S-3 filed October 6, 2011, File No. 333-177189).
    4.2    Indenture, dated as of November 10, 2006, among Joy Global Inc. and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated November 16, 2006, File No. 001-09299).
    4.3    Supplemental Indenture, dated as of November 10, 2006, entered into by and among Joy Global Inc. and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated November 16, 2006, File No. 001-09299).
    4.4    Fourth Supplemental Indenture, dated as of October 12, 2011, entered into by and among Joy Global Inc., the guarantors and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated October 12, 2011, File No. 001-09299).
    4.5    Form of 6.000% Senior Notes due 2016 and 6.625% Senior Notes due 2036 (incorporated by reference to Exhibit 4.5 to Current Report on Form 8-K dated November 16, 2006, File No. 001-09299).
    4.6    Form of 5.125% Senior Notes due 2021 (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated October 12, 2011, File No. 001-09299).
  10.1    Form of change of control Employment Agreement entered into between Joy Global Inc. and each of its executive officers (incorporated by reference to Exhibit 10(t) to Annual Report on Form 10-K for the year ended November 1, 2003, File No. 001-09299).*
  10.2    Form of Indemnification Agreement entered into between Joy Global Inc. and each of its executive officers and non-employee directors (incorporated by reference to Exhibit 10.2 to Annual Report on Form 10-K for the year ended October 28, 2011, File No. 001-09299).*
  10.3    Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended April 27, 2007, File No. 001-09299).*
  10.4    Amendment No. 1 to the Joy Global Inc. 2007 Stock Incentive Plan.
  10.5    Joy Global Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.2 to Registration Statement on Form S-8, filed March 31, 2011, File No. 333-173214).
  10.6    Amendment No. 1 to the Joy Global Inc. Employee Stock Purchase Plan.
  10.7    Joy Global Inc. International Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-8, filed August 6, 2012, File No. 333-183103).
  10.8    Form of Nonqualified Stock Option Agreement, dated December 6, 2010, between the registrant and each of its executive officers in connection with nonqualified stock options granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended January 28, 2011, File No. 001-09299).*
  10.9    Form of Performance Share Agreement, dated December 6, 2010, between the registrant and each of its executive officers in connection with performance share awards granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended January 28, 2011, File No. 001-09299).*
  10.10    Form of Restricted Stock Unit Award Agreement, dated December 6, 2010, between the registrant and each of its executive officers in connection with restricted stock unit awards granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended January 28, 2011, File No. 001-09299).*

 

46


Table of Contents
  10.11    Form of Nonqualified Stock Option Agreement, dated December 5, 2011, between the registrant and each of its executive officers in connection with nonqualified stock options granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended January 27, 2012, File No. 001-09299).*
  10.12    Form of Performance Share Agreement, dated December 5, 2011, between the registrant and each of its executive officers in connection with performance share awards granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended January 27, 2012, File No. 001-09299).*
  10.13    Form of Restricted Stock Unit Award Agreement, dated December 5, 2011, between the registrant and each of its executive officers in connection with restricted stock unit awards granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended January 27, 2012, File No. 001-09299).*
  10.14    Form of Restricted Stock Unit Award Agreement, dated March 8, 2011, between the registrant and each of its non-employee directors in connection with restricted stock unit awards granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended April 29, 2011, File No. 001-09299).*
  10.15    Form of Restricted Stock Unit Award Agreement, dated March 6, 2012, between the registrant and each of its non-employee directors in connection with restricted stock unit awards granted under the Joy Global Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended April 27, 2012, File No. 001-09299).*
  10.16    Credit Agreement, dated as of June 16, 2011 among Joy Global Inc., as Borrower, certain of its domestic subsidiaries, as Guarantors, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed June 22, 2011, File No. 001-09299).
  10.17    Credit Agreement, dated as of October 31, 2011, among Joy Global Inc., as Borrower, certain of its domestic subsidiaries, as Guarantors, Bank of America, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 1, 2011, File No. 001-09299).
  10.18    Amended and Restated Credit Agreement, dated as of October 12, 2012, among Joy Global Inc., as Borrower, certain of its domestic subsidiaries, as Guarantors, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, JPMorgan Chase Bank, N.A., as Swing Line Lender and an L/C Issuer, JPMorgan Chase Bank, N.A. and Mizuho Corporate Bank (USA), as Co-Syndication Agents, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed October 12, 2012, File No. 001-09299).
  10.19    Bridge Loan Agreement, dated as of July 11, 2011, among Joy Global Inc., as Borrower, the Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Goldman Sachs Bank USA and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Syndication Agents, and J.P. Morgan Securities LLC, Goldman Sachs Bank USA and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 15, 2011, File No. 001-09299).
  10.20    Amendment No. 1 to Bridge Loan Agreement, dated as of July 14, 2011, among Joy Global Inc., as Borrower, the Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Goldman Sachs Bank USA and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Syndication Agents, and J.P. Morgan Securities LLC, Goldman Sachs Bank USA and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed July 15, 2011, File No. 001-09299).
  10.21    Settlement, Waiver and Release Agreement.
  21    Subsidiaries of the Registrant.
  23    Consent of Ernst & Young LLP.
  24    Power of Attorney (included on signature page).
  31.1    Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certifications.
  31.2    Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certifications.
  32    Section 1350 Certifications.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document

 

47


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101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Indicates a management contract or compensatory plan or arrangement.

 

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This Page

Intentionally

Left Blank

 

49


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Joy Global Inc.

Form 10-K Item 8 and Items 15(a)(1) and 15(a)(2)

Index to Consolidated Financial Statements

And Financial Statement Schedule

The following Consolidated Financial Statements of Joy Global Inc. and the related Reports of Independent Registered Public Accounting Firm are included in Item 8 – Financial Statements and Supplementary Data and Item 15 – Exhibits and Financial Statement Schedules :

 

Item 15(a) (1):

   Page in This
Form 10-K

Reports of Independent Registered Public Accounting Firm

   F-2, F-3

Management’s Report on Internal Control Over Financial Reporting

   F-4

Consolidated Statement of Income for the fiscal years ended October 26, 2012, October  28, 2011 and October 29, 2010

   F-5

Consolidated Balance Sheet at October 26, 2012 and October 28, 2011

   F-6, F-7

Consolidated Statement of Cash Flows for the fiscal years ended October 26, 2012, October  28, 2011 and October 29, 2010

   F-8

Consolidated Statement of Shareholders’ Equity for the fiscal years ended October 26, 2012,  October 28, 2011 and October 29, 2010

   F-9, F-10

Notes to Consolidated Financial Statements

   F-11

The following Consolidated Financial Statement schedule of Joy Global Inc. is included in Item 15(a)(2):

  

Schedule II. Valuation and Qualifying Accounts

   F-55

All other schedules are omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto.

  

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Joy Global Inc.

We have audited the accompanying consolidated balance sheets of Joy Global Inc. as of October 26, 2012 and October 28, 2011, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended October 26, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Joy Global Inc. at October 26, 2012 and October 28, 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 26, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Joy Global Inc.’s internal control over financial reporting as of October 26, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 17, 2012 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

December 17, 2012

 

F-2


Table of Contents

Report of Independent Registered Public Accounting Firm on Internal

Control Over Financial Reporting

The Board of Directors and Shareholders

Joy Global Inc.

We have audited Joy Global Inc.’s internal control over financial reporting as of October 26, 2012, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Joy Global Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of International Mining Machinery Holdings, Ltd. which is included in the 2012 consolidated financial statements of Joy Global Inc. and constituted 27.1% and 55.4% of total and net assets, respectively, as of October 26, 2012 and 3.9% and 0.8% of net sales and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of Joy Global Inc. also did not include an evaluation of the internal control over financial reporting of International Mining Machinery Holdings, Ltd.

In our opinion, Joy Global Inc. maintained, in all material respects, effective internal control over financial reporting as of October 26, 2012, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2012 consolidated financial statements of Joy Global Inc. and our report dated December 17, 2012 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

December 17, 2012

 

F-3


Table of Contents

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. As allowed by the SEC guidance, management excluded from its assessment International Mining Machinery Holdings, Ltd., which was acquired in 2012 and constituted 27.1% and 55.4% of total and net assets, respectively, as of October 26, 2012 and 3.9% and 0.8% of net sales and net income, respectively, for the year then ended. Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of October 26, 2012.

Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the effectiveness of our internal control over financial reporting.

 

F-4


Table of Contents

Joy Global Inc.

Consolidated Statements of Income

(In thousands, except per share data)

 

 

     Fiscal Years Ended  
     October 26,
2012
    October 28,
2011
    October 29,
2010
 

Net sales

   $ 5,660,889      $ 4,403,906      $ 3,524,334   

Cost of sales

     3,783,802        2,897,605        2,350,708   

Product development, selling and administrative expenses

     736,776        602,010        480,636   

Other income

     (32,248     (15,888     (4,113
  

 

 

   

 

 

   

 

 

 

Operating income

     1,172,559        920,179        697,103   

Interest income

     5,831        13,869        13,195   

Interest expense

     (73,259     (38,180     (29,964

Reorganization items

     —          (35     (1,310
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     1,105,131        895,833        679,024   

Provision for income taxes

     337,870        264,831        217,525   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations

     767,261        631,002        461,499   

Income from continuing operations attributable to non-controlling interest

     (180     —          —     
  

 

 

   

 

 

   

 

 

 

Income from continuing operations attributable to Joy Global Inc.

     767,081        631,002        461,499   
  

 

 

   

 

 

   

 

 

 

Loss from discontinued operations, net of income taxes

     (5,060     (21,346     —     

Loss from discontinued operations, net of income taxes attributable to non-controlling interest

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Loss from discontinued operations, net of income taxes attributable to Joy Global Inc.

     (5,060     (21,346     —     
  

 

 

   

 

 

   

 

 

 

Net income

     762,201        609,656        461,499   

Net income attributable to non-controlling interest

     (180     —          —     
  

 

 

   

 

 

   

 

 

 

Net income attributable to Joy Global Inc.

   $ 762,021      $ 609,656      $ 461,499   
  

 

 

   

 

 

   

 

 

 

Basic earnings per share:

      

Income from continuing operations

   $ 7.25      $ 6.01      $ 4.47   

Loss from discontinued operations

     (0.05     (0.20     —     
  

 

 

   

 

 

   

 

 

 

Net income

   $ 7.20      $ 5.81      $ 4.47   
  

 

 

   

 

 

   

 

 

 

Diluted earnings per share:

      

Income from continuing operations

   $ 7.18      $ 5.92      $ 4.40   

Loss from discontinued operations

     (0.05     (0.20     —     
  

 

 

   

 

 

   

 

 

 

Net income

   $ 7.13      $ 5.72      $ 4.40   
  

 

 

   

 

 

   

 

 

 

Dividends per share

   $ 0.70      $ 0.70      $ 0.70   
  

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

      

Basic

     105,862        104,916        103,196   
  

 

 

   

 

 

   

 

 

 

Diluted

     106,889        106,537        104,905   
  

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-5


Table of Contents

Joy Global Inc.

Consolidated Balance Sheets

(In thousands, except share data)

 

 

     October 26,
2012
    October 28,
2011
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 263,873      $ 288,321   

Cash held in escrow

     —          866,000   

Accounts receivable, net

     1,229,083        884,696   

Inventories

     1,415,455        1,334,134   

Other current assets

     247,666        190,568   

Current assets of discontinued operations

     —          288   
  

 

 

   

 

 

 

Total Current Assets

     3,156,077        3,564,007   

Property, Plant and Equipment:

    

Land and improvements

     71,796        39,588   

Buildings

     343,154        196,714   

Machinery and equipment

     826,519        625,371   

Software

     87,701        80,460   
  

 

 

   

 

 

 
     1,329,170        942,133   

Accumulated depreciation

     (496,308     (402,562
  

 

 

   

 

 

 

Total Property, Plant and Equipment

     832,862        539,571   
  

 

 

   

 

 

 

Other Assets:

    

Investment in unconsolidated affiliate

     —          380,114   

Other intangible assets, net

     589,224        385,441   

Goodwill

     1,382,358        428,478   

Deferred income taxes

     67,101        73,123   

Other non-current assets

     114,881        55,448   

Non-current assets of discontinued operations

     —          172   
  

 

 

   

 

 

 

Total Other Assets

     2,153,564        1,322,776   
  

 

 

   

 

 

 

Total Assets

   $ 6,142,503      $ 5,426,354   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-6


Table of Contents

Joy Global Inc.

Consolidated Balance Sheets

(In thousands, except share data)

 

 

     October 26,
2012
    October 28,
2011
 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current Liabilities:

    

Short-term notes payable, including current portion of long-term obligations

   $ 65,316      $ 35,895   

Trade accounts payable

     452,236        452,519   

Employee compensation and benefits

     156,867        147,664   

Advance payments and progress billings

     669,792        771,841   

Accrued warranties

     100,646        82,737   

Other accrued liabilities

     322,813        206,588   

Current liabilities of discontinued operations

     13,147        27,327   
  

 

 

   

 

 

 

Total Current Liabilities

     1,780,817        1,724,571   

Long-term Obligations

     1,306,625        1,356,412   

Other Non-current Liabilities:

    

Liabilities for postretirement benefits

     25,564        24,055   

Accrued pension costs

     335,813        332,452   

Other

     116,495        37,069   
  

 

 

   

 

 

 

Total Other Non-current Liabilities

     477,872        393,576   
  

 

 

   

 

 

 

Commitments and Contingencies

     —          —     

Shareholders’ Equity:

    

Common stock, $1 par value (authorized 150,000,000 shares; 129,799,524 and 128,986,923 shares issued at October 26, 2012 and October 28, 2011, respectively)

     129,800        128,987   

Capital in excess of par value

     1,140,680        1,090,774   

Retained earnings

     2,931,981        2,244,740   

Treasury stock (23,873,159 shares)

     (1,116,623     (1,116,623

Accumulated other comprehensive loss

     (508,649     (396,083
  

 

 

   

 

 

 

Total Shareholders’ Equity

     2,577,189        1,951,795   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 6,142,503      $ 5,426,354   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-7


Table of Contents

Joy Global Inc.

Consolidated Statement of Cash Flows

(In thousands)

 

 

     Fiscal Years Ended  
     October 26,
2012
    October 28,
2011
    October 29,
2010
 

Operating Activities:

      

Net income

   $ 762,201      $ 609,656      $ 461,499   

Loss from discontinued operations

     5,060        21,346        —     

Adjustments to Continuing Operations:

      

Depreciation and amortization

     152,840        79,110        59,749   

Change in deferred income taxes

     22,663        76,784        8,262   

Contributions to retiree benefit plans

     (187,961     (184,268     (117,361

Retiree benefit plan expense

     48,341        51,244        52,749   

Gain on remeasurement of IMM shares upon obtaining control

     (19,435     —          —     

Stock based compensation expense

     27,476        25,622        25,012   

Excess income tax benefit from exercise of stock options

     (21,250     (14,982     (8,072

Other, net

     (25,811     (7,718     (15,132

Changes in Working Capital Items Attributed to Continuing Operations, Net of Acquisitions

      

Accounts receivable, net

     (162,876     (112,910     (66,247

Inventories

     (84,514     (391,129     (6,059

Other current assets

     (27,696     (42,798     (16,044

Trade accounts payable

     (81,517     120,745        83,368   

Employee compensation and benefits

     6,227        7,608        10,270   

Advance payments and progress billings

     (91,378     301,818        46,530   

Other accrued liabilities

     141,545        (40,402     64,965   
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities - continuing operations

     463,915        499,726        583,489   

Net cash (used) provided by operating activities - discontinued operations

     (21,054     4,967        —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     442,861        504,693        583,489   
  

 

 

   

 

 

   

 

 

 

Investing Activities:

      

Acquisition of businesses, net of cash acquired

     (955,917     (1,048,908     —     

Property, plant and equipment acquired

     (241,527     (110,523     (73,474

Proceeds from sale of property, plant and equipment

     7,917        6,160        418   

(Working capital adjustment) proceeds from sale of LeTourneau Technologies Drilling Systems, Inc.

     (56,270     375,000        —     

Equity investment in IMM shares

     —          (376,724     —     

Withdrawals (deposits) of cash into escrow

     866,000        (866,000     —     

Other, net

     1,468        (882     (1,859
  

 

 

   

 

 

   

 

 

 

Net cash used by investing activities - continuing operations

     (378,329     (2,021,877     (74,915

Net cash used by investing activities - discontinued operations

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Net cash used by investing activities

     (378,329     (2,021,877     (74,915
  

 

 

   

 

 

   

 

 

 

Financing Activities:

      

Share-based payment awards

     33,398        68,323        36,419   

Dividends paid

     (73,961     (73,262     (72,088

Issuance of senior notes

     —          495,755        —     

Borrowings under term loans

     250,000        500,000        —     

Repayments of term loans

     (281,250     (6,250     —     

Change in short and long-term obligations, net

     (4,492     5,210        (146,176

Financing fees

     (5,304     (13,060     (3,211
  

 

 

   

 

 

   

 

 

 

Net cash (used) provided by financing activities - continuing operations

     (81,609     976,716        (185,056

Net cash provided by financing activities - discontinued operations

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Net cash (used) provided by financing activities

     (81,609     976,716        (185,056
  

 

 

   

 

 

   

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

     (7,371     13,208        20,378   
  

 

 

   

 

 

   

 

 

 

(Decrease) Increase in Cash and Cash Equivalents

     (24,448     (527,260     343,896   

Cash and Cash Equivalents at Beginning of Year

     288,321        815,581        471,685   
  

 

 

   

 

 

   

 

 

 

Cash and Cash Equivalents at End of Year

   $ 263,873      $ 288,321      $ 815,581   
  

 

 

   

 

 

   

 

 

 

Supplemental cash flow information:

      

Interest paid

   $ 69,743      $ 33,505      $ 28,732   

Income taxes paid

     178,729        217,418        147,954   

See Notes to Consolidated Financial Statements

 

F-8


Table of Contents

Joy Global Inc.

Consolidated Statements of Shareholders’ Equity

(In thousands, except per share data)

 

 

    Common
Stock
Amount
    Capital in
Excess of
Par Value
    Retained
Earnings
    Treasury
Stock
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interest
    Total  

Balance at October 30, 2009

  $ 126,286      $ 943,046      $ 1,320,226      $ (1,116,623   $ (472,224   $ —        $ 800,711   

Comprehensive income (loss):

             

Net income

    —          —          461,499        —          —          —          461,499   

Change in pension liability, net of taxes

    —          —          —          —          64,542        —          64,542   

Derivative instrument fair market value adjustment, net of taxes

    —          —          —          —          3,249        —          3,249   

Currency translation adjustment

    —          —          —          —          24,791        —          24,791   
             

 

 

 

Total comprehensive income

                554,081   
             

 

 

 

Share based payment award expense

    —          25,012        —          —          —          —          25,012   

Dividends ($0.70 per share)

    —          578        (72,666     —          —          —          (72,088

Issuance of share based payment awards

    69        (1,838     —          —          —          —          (1,769

Exercise of stock options

    1,048        27,299        —          —          —          —          28,347   

Tax benefit from share based payment awards

    —          8,072        —          —          —          —          8,072   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at October 29, 2010

  $ 127,403      $ 1,002,169      $ 1,709,059      $ (1,116,623   $ (379,642   $ —        $ 1,342,366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss):

             

Net income

    —          —          609,656        —          —          —          609,656   

Change in pension liability, net of taxes

    —          —          —          —          (20,190     —          (20,190

Derivative instrument fair market value adjustment, net of taxes

    —          —          —          —          (1,992     —          (1,992

Currency translation adjustment

    —          —          —          —          5,741        —          5,741   
             

 

 

 

Total comprehensive income

                593,215   
             

 

 

 

Share based payment award expense

    —          25,507        —          —          —          —          25,507   

Dividends ($0.70 per share)

    —          713        (73,975     —          —          —          (73,262

Issuance of share based payment awards

    141        (4,662     —          —          —          —          (4,521

Exercise of stock options

    1,431        51,302        —          —          —          —          52,733   

Shares issued under employee stock purchase plan

    12        763        —          —          —          —          775   

Tax benefit from share based payment awards

    —          14,982        —          —          —          —          14,982   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at October 28, 2011

  $ 128,987      $ 1,090,774      $ 2,244,740      $ (1,116,623   $ (396,083   $ —        $ 1,951,795   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-9


Table of Contents

Joy Global Inc.

Consolidated Statements of Shareholders’ Equity

(In thousands, except per share data)

 

 

    Common
Stock
Amount
    Capital in
Excess of
Par Value
    Retained
Earnings
    Treasury
Stock
    Accumulated
Other
Comprehensive
Income (Loss)
    Noncontrolling
Interest
    Total  

Balance at October 28, 2011

  $ 128,987      $ 1,090,774      $ 2,244,740      $ (1,116,623   $ (396,083   $ —        $ 1,951,795   

Acquisition of controlling interest in IMM

    —          —          —          —          —          437,654        437,654   

Comprehensive income (loss):

             

Net income

    —          —          762,021        —          —          180        762,201   

Change in pension liability, net of taxes

    —          —          —          —          (103,158     —          (103,158

Derivative instrument fair market value adjustment, net of taxes

    —          —          —          —          4,212        —          4,212   

Currency translation adjustment

    —          —          —          —          (13,620     —          (13,620
             

 

 

 

Total comprehensive income

                649,635   
             

 

 

 

Purchase of IMM shares from non-controlling interest

    —          —          —          —          —          (437,834     (437,834

Share based payment award expense

    —          27,381        —          —          —          —          27,381   

Dividends ($0.70 per share)

    —          819        (74,780     —          —          —          (73,961

Issuance of share based payment awards

    429        (11,403     —          —          —          —          (10,974

Exercise of stock options

    342        9,292        —          —          —          —          9,634   

Shares issued under employee stock purchase plan

    42        2,567        —          —          —          —          2,609   

Tax benefit from share based payment awards

    —          21,250        —          —          —          —          21,250   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at October 26, 2012

  $ 129,800      $ 1,140,680      $ 2,931,981      $ (1,116,623   $ (508,649   $ —        $ 2,577,189