Joy Global Inc.
JOY GLOBAL INC (Form: 10-Q, Received: 02/28/2013 16:09:27)
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________ 
FORM 10-Q
____________________________________________  
(MARK ONE)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED January 25, 2013
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)
(414) 319-8500
(Registrant’s Telephone Number, Including Area Code)
____________________________________________ 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
LARGE ACCELERATED FILER
ý
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 Exchange Act).    Yes   ¨     No   ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
Class
 
February 22, 2013
Common Stock, $1 par value
 
106,205,603
 
 
 
 
 



Table of Contents

JOY GLOBAL INC.

FORM 10-Q INDEX
January 25, 2013
 
PAGE NO.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Table of Contents

Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results and the assumptions upon which those statements are based, are “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 our expectations and assumptions at the time they are made and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. 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 and industry conditions in the markets in which we operate, risks associated with conducting business in foreign countries, risks associated with acquisitions, and the risks discussed in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for our fiscal year ended October 26, 2012 , and in other filings that we make with the U.S. Securities and Exchange Commission. Any or all of these factors could cause our actual results and financial or legal status for future periods to differ materially from those expressed or referred to in any forward-looking statement. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.




Table of Contents

PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
 
 
Quarter ended
 
January 25,
2013
 
January 27,
2012
Net sales
$
1,149,877

 
$
1,136,201

Costs and expenses:
 
 
 
Cost of sales
773,149

 
772,776

Product development, selling and administrative expenses
157,281

 
171,356

Other income
(1,705
)
 
(21,677
)
Operating income
221,152

 
213,746

Interest income
1,801

 
1,193

Interest expense
(16,954
)
 
(17,270
)
Income from continuing operations before income taxes
205,999

 
197,669

Provision for income taxes
63,860

 
55,150

Income from continuing operations
142,139

 
142,519

Income from continuing operations attributable to noncontrolling interest

 
(109
)
Income from continuing operations attributable to Joy Global Inc.
142,139

 
142,410

Loss from discontinued operations, net of income taxes
(2
)
 
(58
)
Net income
142,137

 
142,461

Net income attributable to noncontrolling interest

 
(109
)
Net income attributable to Joy Global Inc.
$
142,137

 
$
142,352

Basic earnings per share:
 
 
 
Continuing operations
$
1.34

 
$
1.35

Discontinued operations

 

Net income
$
1.34

 
$
1.35

Diluted earnings per share:
 
 
 
Continuing operations
$
1.33

 
$
1.33

Discontinued operations

 

Net income
$
1.33

 
$
1.33

Dividends per share
$
0.175

 
$
0.175

Weighted average shares outstanding:
 
 
 
Basic
106,242

 
105,405

Diluted
107,237

 
106,752

See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
 
Quarter ended
 
January 25,
2013
 
January 27,
2012
Net income
$
142,137

 
$
142,461

Other comprehensive income:
 
 
 
Change in pension liability, net of taxes
6,892

 
8,719

Derivative instrument fair market value adjustment, net of taxes
(3,002
)
 
760

Currency translation adjustment
(660
)
 
7,316

Total other comprehensive income, net of taxes
3,230

 
16,795

Comprehensive income
145,367

 
159,256

Comprehensive income attributable to noncontrolling interest

 
(109
)
Comprehensive income attributable to Joy Global Inc.
$
145,367

 
$
159,147

See Notes to Condensed Consolidated Financial Statements.


5

Table of Contents

JOY GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 
 
January 25, 2013
 
October 26, 2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
269,895

 
$
263,873

Accounts receivable, net
1,144,098

 
1,229,083

Inventories
1,439,622

 
1,415,455

Other current assets
283,166

 
247,666

Total current assets
3,136,781

 
3,156,077

Property, plant and equipment, net
864,794

 
832,862

Other intangible assets, net
504,220

 
589,224

Goodwill
1,481,689

 
1,382,358

Deferred income taxes
52,149

 
67,101

Other non-current assets
137,165

 
114,881

Total assets
$
6,176,798

 
$
6,142,503

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term notes payable, including current portion of long-term obligations
$
60,724

 
$
65,316

Trade accounts payable
390,732

 
452,236

Employee compensation and benefits
111,257

 
156,867

Advance payments and progress billings
712,548

 
669,792

Accrued warranties
87,427

 
100,646

Other accrued liabilities
342,191

 
322,813

Current liabilities of discontinued operations
11,581

 
13,147

Total current liabilities
1,716,460

 
1,780,817

Long-term obligations
1,294,200

 
1,306,625

Accrued pension costs
292,623

 
335,813

Other liabilities
160,966

 
142,059

Total liabilities
3,464,249

 
3,565,314

Shareholders’ equity
2,712,549

 
2,577,189

Total liabilities and shareholders’ equity
$
6,176,798

 
$
6,142,503

See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Quarter ended
 
January 25,
2013
 
January 27,
2012
Operating Activities:
 
 
 
Net income
$
142,137

 
$
142,461

Loss from discontinued operations
2

 
58

Adjustments to continuing operations:
 
 
 
Depreciation and amortization
20,095

 
26,779

Deferred income taxes
7,993

 
(2,558
)
Excess income tax benefit from share-based payment awards
(1,522
)
 
(17,500
)
Contributions to defined benefit employee pension plans
(46,355
)
 
(45,864
)
Defined benefit employee pension plan expense
6,768

 
14,621

Other, net
(2,086
)
 
(33,755
)
Changes in Working Capital Items Attributed to Continuing Operations, net of acquisition:
 
 
 
Accounts receivable, net
100,405

 
38,988

Inventories, net
(29,327
)
 
(167,210
)
Other current assets
(33,369
)
 
(14,862
)
Trade accounts payable
(56,717
)
 
(51,789
)
Employee compensation and benefits
(45,868
)
 
(49,804
)
Advance payments and progress billings
43,812

 
121,894

Other accrued liabilities
(13,903
)
 
24,397

Net cash provided (used) by operating activities of continuing operations
92,065

 
(14,144
)
Net cash used by operating activities of discontinued operations
(1,571
)
 
(4,363
)
Net cash provided (used) by operating activities
90,494

 
(18,507
)
Investing Activities:
 
 
 
Property, plant and equipment acquired
(54,588
)
 
(49,435
)
Acquisition of controlling interest in International Mining Machinery, net of cash acquired

 
(513,761
)
Withdrawal of cash held in escrow

 
589,686

Other, net
2,846

 
151

Net cash (used) provided by investing activities
(51,742
)
 
26,641

Financing Activities:
 
 
 
Share-based payment awards
4,534

 
19,476

Dividends paid
(18,542
)
 
(18,397
)
Change in short and long-term obligations, net
(17,202
)
 
(10,571
)
Financing fees

 
(1,628
)
Net cash used by financing activities
(31,210
)
 
(11,120
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(1,520
)
 
(2,089
)
Increase (Decrease) in Cash and Cash Equivalents
6,022

 
(5,075
)
Cash and Cash Equivalents at Beginning of Period
263,873

 
288,321

Cash and Cash Equivalents at End of Period
$
269,895

 
$
283,246


See Notes to Condensed Consolidated Financial Statements.

7

Table of Contents

JOY GLOBAL INC.
CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.
Description of Business
Joy Global Inc. (the “Company”) is a leading manufacturer and servicer of high-productivity mining equipment for the extraction of coal and other minerals and ores. We manufacture and market original equipment and aftermarket parts and services for both underground and surface mining and certain industrial applications. Our equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands, gold and other minerals. We operate in two business segments: Underground Mining Machinery and Surface Mining Equipment. We are a major manufacturer of underground mining machinery for the extraction of coal and other bedded minerals and offer comprehensive service locations near major mining regions worldwide. We are also a major producer of surface mining equipment for the extraction of ores and minerals and we provide extensive operational support for many types of equipment used in surface mining. Our principal manufacturing facilities are located in the United States, including facilities in Pennsylvania, Wisconsin, Kentucky, Texas and Alabama and international facilities in China, the United Kingdom, South Africa, and Australia.

2.
Basis of Presentation
The Condensed Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited and have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. In our opinion, all adjustments necessary for the fair presentation on a going concern basis of the results of operations, cash flows and financial position for all periods presented have been made. All such adjustments made are of a normal recurring nature. The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts could differ from the estimates.
These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 26, 2012 . The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

3.
Acquisitions
Acquisition of International Mining Machinery Holdings Limited
On December 29, 2011 , we completed the purchase of 534.8 million shares of International Mining Machinery Holdings Limited (“IMM”). The shares, which represented approximately 41.1% of IMM’s outstanding common stock, were purchased pursuant to a stock purchase agreement, dated July 11, 2011, as amended and restated on July 14, 2011. The shares were purchased for HKD 8.50 per share, or approximately $584.6 million . As a result of this and prior open market purchases, we acquired a controlling interest on such date of approximately 69.2% of IMM’s outstanding common stock and were required by Rule 26.1 of the Hong Kong Takeovers Code to commence a tender offer to purchase all of the outstanding shares of IMM common stock and options to purchase IMM common stock that we did not already own. The tender offer commenced on January 6, 2012 and we completed the tender offer on February 10, 2012. As a result of the tender offer, we beneficially owned approximately 98.9% of IMM’s outstanding common stock. 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. The combined effect of these transactions resulted in our beneficial ownership of 100% of the common stock of IMM.
Prior to obtaining control on December 29, 2011, our investment in IMM had been accounted for under the equity method. Upon obtaining control, we applied the acquisition method of accounting, re-measured the preexisting interest at fair value and recorded a gain of $19.4 million . The gain is reported in the Condensed Consolidated Statement of Income under “other income” for the quarter ended January 27, 2012 . The results of operations for IMM have been included in the accompanying Condensed Consolidated Financial Statements from December 29, 2011 forward as part of the Underground Mining Machinery segment.
The allocation of the purchase price was finalized in the first quarter of fiscal 2013. The allocation of the purchase price to the assets acquired and liabilities assumed is based on the estimated fair values at the date of acquisition. The excess of the purchase price over the net tangible and identifiable intangible assets is reflected as goodwill. Adjustments have been made in the current quarter to reflect updated fair value estimates for intangible assets and to adjust for receivables and and other liabilities. The following table summarizes the estimates of fair value of the assets acquired and the liabilities assumed as of the acquisition date:
 

8


(in thousands)
 
Assets Acquired:
 
Cash and cash equivalents
$
72,912

Accounts receivable
227,825

Inventories
91,176

Other current assets
15,622

Property, plant and equipment
125,600

Other intangible assets and goodwill
1,160,211

Other non-current assets
34,078

Total assets acquired
1,727,424

Liabilities Assumed:
 
Short-term notes payable
(14,666
)
Accounts payable
(87,305
)
Employee compensation and benefits
(6,458
)
Advance payments and progress billings
(6,122
)
Other accrued liabilities
(64,916
)
Other non-current liabilities
(124,519
)
Total liabilities assumed
(303,986
)
 
$
1,423,438

The fair value for identified intangible assets was primarily determined based on discounted expected cash flows. Of the $1.2 billion of intangible assets and goodwill, $72.5 million has been assigned to indefinite-lived intangible assets and $80.0 million has been assigned to intangible assets which are being amortized over a weighted average life of 13.8 years. The determination of the useful life was based upon historical experience, economic factors, and future cash flows of the assets acquired.
We have incurred total acquisition costs of $24.3 million related to IMM, of which $0.2 million is recognized in fiscal 2013 and $15.6 million was recognized in fiscal 2012. All other acquisition costs were recognized prior to fiscal 2012.
The following unaudited pro forma financial information for the quarter ended January 27, 2012 reflects the results of continuing operations of the Company as if the acquisition of IMM had been completed on October 28, 2011 . Pro forma adjustments have been made for changes in depreciation and amortization expenses related to the valuation of the acquired tangible and intangible assets at fair value, the elimination of non-recurring items and the addition of incremental costs related to debt used to finance the acquisition.
 
Quarter ended
(in thousands, except per share data)
January 27,
2012
Net sales
$
1,222,046

Income from continuing operations
$
135,122

Basic earnings per share from continuing operations
$
1.28

Diluted earnings per share from continuing operations
$
1.26

The unaudited pro forma financial information is presented for information purposes only. It is not necessarily indicative of what our financial position or results of operations actually would have been had we completed the acquisition at the date indicated, nor does it purport to project the future financial position or operating results of the combined company.

4.
Inventories

Consolidated inventories consisted of the following:
 

9


(in thousands)
January 25, 2013
 
October 26, 2012
Finished goods
$
932,913

 
$
762,853

Work in process
323,964

 
437,234

Raw materials
182,745

 
215,368

 
$
1,439,622

 
$
1,415,455


5.
Warranties
We provide for the estimated costs that may be incurred under product warranties to remedy deficiencies of quality or performance of our products. These product warranties extend over either a specified period of time, units of production or machine hours, depending on the product subject to the warranty. We accrue a provision for estimated future warranty costs based on the historical relationship of warranty costs to sales. We periodically review the adequacy of the accrual for product warranties and adjust the warranty percentage and accrued warranty reserve for actual experience as necessary.
The following table reconciles the changes in the product warranty reserve:
 
Quarter ended
(in thousands)
January 25, 2013
 
January 27, 2012
Balance, beginning of period
$
100,646

 
$
82,737

Accrual for warranty expensed during the period
12,479

 
11,355

Settlements made during the period
(25,252
)
 
(8,306
)
Effect of foreign currency translation
(446
)
 
(617
)
Adjusted acquired warranty accrual

 
16,647

Balance, end of period
$
87,427

 
$
101,816

An adjustment was made in the first quarter of fiscal 2012 to reflect a change in the liability of $10.0 million for pre-existing warranties related to the mining equipment business of LeTourneau Technologies, Inc., which was acquired in fiscal 2011.

6.
Borrowings and Credit Facilities
Direct borrowings and capital lease obligations consisted of the following:
 
(in thousands)
January 25, 2013
 
October 26, 2012
Domestic:
 
 
 
Term Loan due 2016
$
450,000

 
$
462,500

6.0% Senior Notes due 2016
248,452

 
248,360

5.125% Senior Notes due 2021
496,174

 
496,088

6.625% Senior Notes due 2036
148,472

 
148,466

Other secured borrowings
1,533

 
1,637

Foreign:
 
 
 
Capital leases
37

 
41

Short-term notes payable
10,256

 
14,849

 
1,354,924

 
1,371,941

Less: Amounts due within one year
(60,724
)
 
(65,316
)
Long-term obligations
$
1,294,200

 
$
1,306,625


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 the terms and conditions contained in the Credit Agreement. The Credit Agreement simultaneously replaced the $700.0 million revolving credit agreement dated October 27, 2010 (the "Prior Credit Agreement"), that was set to expire on November 3, 2014 . Under the terms of the Credit Agreement, we pay a commitment fee ranging from 0.1% to 0.325% on the unused portion of the revolving credit facility based on our credit rating. Letters of credit issued under

10


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 or two weeks or one, two, three, or six months thereafter, as selected by the Company, at the corresponding Eurodollar rate plus a margin of 1.0% to 2.0% depending on the Company's credit rating. 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 the Company's credit rating. Swing Line Loans will bear interest at either the Base Rate described above or the Daily Floating Eurodollar rate plus the applicable margin, as selected by the Company. 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 January 25, 2013 , we were in compliance with all financial covenants of the Credit Agreement and had no restrictions on the payment of dividends or returns 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 January 25, 2013 , 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 $309.2 million . At January 25, 2013 , there was $690.8 million available for borrowings under the Credit Agreement.
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 fiscal 2011 acquisition of LeTourneau. The Term Loan requires quarterly principal payments. 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 January 25, 2013 , 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 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 of 1933, as amended (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 (the “2016 Notes” and “2036 Notes,” respectively). Interest on the 2016 Notes and 2036 Notes is paid semi-annually in arrears on May 15 and November 15 of each year, and the 2016 Notes and 2036 Notes are guaranteed by each of our current and future material domestic subsidiaries. The 2016 Notes and 2036 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 2016 Notes and 2036 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 2016 Notes and 2036 Notes at a redemption price of the greater of 100% of the principal amount of the 2016 Notes and 2036 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.
     
7.
Share-Based Compensation
The total share-based compensation expense we recognized for the quarters ended January 25, 2013 and January 27, 2012 was $7.6 million and $7.2 million , respectively. The total share-based compensation expense is reflected in our Condensed Consolidated Statement of Cash Flows in Operating Activities under the heading Other, net. The corresponding deferred tax asset recognized related to the share-based compensation expense was $2.2 million for the quarters ended January 25, 2013 and January 27, 2012 .

8.
Retiree Benefits
The components of the net periodic pension and other postretirement benefits expense recognized are as follows:
 

11


 
Pension Benefits
Quarter Ended
 
Postretirement Benefits
Quarter Ended
(in thousands)
January 25,
2013
 
January 27,
2012
 
January 25,
2013
 
January 27,
2012
Service cost
$
2,848

 
$
5,413

 
$
355

 
$
250

Interest cost
19,511

 
21,187

 
302

 
363

Expected return on assets
(25,604
)
 
(24,423
)
 
(112
)
 
(90
)
Amortization of:
 
 
 
 
 
 
 
Prior service cost
153

 
361

 
42

 
13

Actuarial loss (gain)
9,860

 
12,083

 
(231
)
 
(299
)
Net periodic benefit cost
$
6,768

 
$
14,621

 
$
356

 
$
237


The actuarial loss (gain) arises from differences in estimates and actual experiences for certain assumptions including changes in discount rate and expected return on assets. Through January 25, 2013 , we have contributed $46.4 million to our defined benefit employee pension plans in fiscal 2013 and we plan to contribute approximately $180.0 million to $190.0 million for the full fiscal year.

9.
Derivatives
We enter into derivative contracts, primarily foreign currency forward contracts, to hedge the risks of certain identified and anticipated transactions in currencies other than the functional currency of the respective operating unit. The types of risks hedged are those arising from the variability of future earnings and cash flows caused by fluctuations in foreign currency exchange rates. These contracts are for forecasted transactions and committed receivables and payables denominated in foreign currencies and are not entered into for speculative purposes.
We are exposed to certain foreign currency risks in the normal course of our global business operations. For derivative contracts that are designated and qualify for a cash flow hedge, the effective portion of the gain or loss of the derivative contract is recorded as a component of other comprehensive income, net of tax. This amount is reclassified into the income statement on the line associated with the underlying transaction for the period(s) in which the hedged transaction affects earnings. The amounts recorded in accumulated other comprehensive income for existing cash flow hedges are generally expected to be reclassified into earnings within one year and all of the existing hedges will be reclassified into earnings by June 2014. Ineffectiveness related to these derivative contracts was recorded in the Condensed Consolidated Statement of Income as a gain of $0.3 million and $1.2 million for the quarters ended January 25, 2013 and January 27, 2012 , respectively.
For derivative contracts that are designated and qualify as a fair value hedge, gain or loss is recorded in the Condensed Consolidated Statement of Income under the heading Cost of Sales. For the quarters ended January 25, 2013 and January 27, 2012 , we recorded losses of $0.6 million and $0.9 million , respectively, in the Condensed Consolidated Statement of Income related to fair value hedges which were offset by foreign exchange fluctuations of the underlying receivables.
For derivative contracts that are not designated as a fair value hedge or a cash flow hedge, the gain or loss is recorded in the Condensed Consolidated Statement of Income under the heading Cost of Sales. For the quarter ended January 25, 2013 , we recorded a $1.5 million loss in the Condensed Consolidated Statement of Income related to undesignated hedges which was offset by foreign exchange fluctuations. There was no gain or loss related to undesignated hedges for the quarter ended January 27, 2012 .
The following table summarizes the effect of cash flow hedges on the Condensed Consolidated Financial Statements:
 
(in thousands)
Effective Portion
 
Amount of Gain/(Loss) Recognized in Other Comprehensive Income
 
Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings
Derivative Hedging Relationship
 
Location
 
Amount
Foreign currency forward contracts
 
 
 
 
 
Quarter ended January 25, 2013
$
(3,308
)
 
Cost of sales
 
$
1,214

 
 
 
Sales
 
8

Quarter ended January 27, 2012
$
1,734

 
Cost of sales
 
$
800

 
 
 
Sales
 
(234
)
We are exposed to credit risk in the event of nonperformance by counterparties to the forward contracts. The contract amount, along with other terms of the forward, determines the amount and timing of amounts to be exchanged, and the contract is generally subject to credit risk only when the contract has a positive fair value.

12


Forward exchange contracts are entered into to protect the value of forecasted transactions and committed future foreign currency receipts and disbursements and consequently any market-related loss on the forward contract would be offset by changes in the value of the hedged item. As a result, we are generally not exposed to net market risk associated with these instruments.

10.
Equity and Noncontrolling Interest
We had noncontrolling interests of $430.7 million as of January 27, 2012 . Changes in equity attributable to the noncontrolling interest consisted of the following:
 
Quarter ended
 
January 27,
2012
Beginning balance
$

Acquisition of controlling interest in IMM
437,654

Net income attributable to noncontrolling interest
109

Purchase of IMM shares from noncontrolling interest
(7,111
)
Ending balance
$
430,652


We completed the compulsory acquisition of IMM on July 25, 2012, which eliminated the noncontrolling interest.

11.
Basic and Diluted Net Income Per Share
Basic net income per share is computed by dividing net income attributable to the Company by the weighted-average number of shares outstanding during each period. Diluted net income per share is computed by dividing net income attributable to the Company by the weighted-average number of shares outstanding during each period, plus dilutive potential shares considered outstanding during the period.
The following table sets forth the computation of basic and diluted net income per share.
 
 
Quarter ended
(in thousands, except per share data)
January 25,
2013
 
January 27,
2012
Numerator:
 
 
 
Income from continuing operations available to common shareholders
$
142,139

 
$
142,410

Loss from discontinued operations available to common shareholders
(2
)
 
(58
)
Net income available to common shareholders
$
142,137

 
$
142,352

Denominator:
 
 
 
Denominator for basic net income per share -
 
 
 
Weighted average shares
106,242

 
105,405

Effect of dilutive securities:
 
 
 
Stock options, restricted stock units and performance shares
995

 
1,347

Denominator for diluted net income per share -
 
 
 
Adjusted weighted average shares and assumed conversions
107,237

 
106,752

Basic earnings per share:
 
 
 
Continuing operations
$
1.34

 
$
1.35

Discontinued operations

 

Net income
$
1.34

 
$
1.35

Diluted earnings per share:
 
 
 
Continuing operations
$
1.33

 
$
1.33

Discontinued operations

 

Net income
$
1.33

 
$
1.33

Options to purchase a weighted average of 0.9 million and 0.7 million shares were excluded from the quarters ended January 25, 2013 and January 27, 2012 calculations of diluted net income per share, respectively, as the effect would have been antidilutive.

13



12.
Fair Value Measurements
GAAP establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:
Level 1: Quoted prices in active markets for identical instruments
Level 2: Inputs, other than quoted prices in active markets, that are observable for the instrument either directly or indirectly or quoted prices for similar instruments in active markets
Level 3: Unobservable inputs for the instrument where there is little or no market data, which requires the reporting entity to develop its own assumptions
GAAP requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The following tables present the fair value hierarchy for those assets and liabilities measured at fair value and disclose the fair value of long-term obligations recorded at cost as of January 25, 2013 and October 26, 2012 . As of January 25, 2013 and October 26, 2012 , we did not have any Level 3 assets or liabilities.
Fair Value Measurements
at January 25, 2013
(in thousands)
Carrying
Value
 
Total Fair
Value
 
Level 1
 
Level 2
Current Assets
 
 
 
 
 
 
 
Cash equivalents
$
50,095

 
$
50,095

 
$
50,095

 
$

Other Current Assets
 
 
 
 
 
 
 
Derivatives
$
14,000

 
$
14,000

 
$

 
$
14,000

Other Accrued Liabilities
 
 
 
 
 
 
 
Derivatives
$
9,393

 
$
9,393

 
$

 
$
9,393

Long-term Obligations Including
 
 
 
 
 
 
 
Amounts due within One Year
 
 
 
 
 
 
 
Term Loan due 2016
$
450,000

 
$
459,634

 
$

 
$
459,634

6.0% Senior Notes due 2016
$
248,452

 
$
288,275

 
$

 
$
288,275

5.125% Senior Notes due 2021
$
496,174

 
$
548,800

 
$

 
$
548,800

6.625% Senior Notes due 2036
$
148,472

 
$
169,365

 
$

 
$
169,365

Fair Value Measurements
at October 26, 2012
(in thousands)
Carrying
Value
 
Total Fair
Value
 
Level 1
 
Level 2
Current Assets
 
 
 
 
 
 
 
Cash equivalents
$
49,513

 
$
49,513

 
$
49,513

 
$

Other Current Assets
 
 
 
 
 
 
 
Derivatives
$
16,780

 
$
16,780

 
$

 
$
16,780

Other Accrued Liabilities
 
 
 
 
 
 
 
Derivatives
$
7,095

 
$
7,095

 
$

 
$
7,095

Long-term Obligations Including
 
 
 
 
 
 
 
Amounts due within One Year
 
 
 
 
 
 
 
Term Loan due 2016
$
462,500

 
$
458,954

 
$

 
$
458,954

6.0% Senior Notes due 2016
$
248,360

 
$
285,500

 
$

 
$
285,500

5.125% Senior Notes due 2021
$
496,088

 
$
552,150

 
$

 
$
552,150

6.625% Senior Notes due 2036
$
148,466

 
$
175,605

 
$

 
$
175,605

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.
Cash equivalents : The carrying value approximates fair value based on the short-term nature of these instruments.

14


Derivatives : The fair value of forward foreign exchange contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.
Senior Notes : The fair market value of the Senior Notes is estimated based on market quotations of similar instruments at the respective period end.
Term Loan : The fair value of our Term Loan is estimated using discounted cash flows and market conditions.

13.
Contingent Liabilities
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 2,700 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.
On January 25, 2013 , we were contingently liable to banks, financial institutions, and others for approximately $329.3 million for outstanding letters of credit, bank guarantees, and surety bonds securing performance of sales contracts and other guarantees in the ordinary course of business. Of the $329.3 million , approximately $14.5 million relates to surety bonds and $7.2 million relates to outstanding letters of credit or other guarantees issued by non-U.S. banks for non-U.S. subsidiaries under locally provided credit facilities.
From time to time we and our subsidiaries become involved in proceedings relating to environmental matters. We believe that the resolution of such environmental matters will not have a materially adverse effect on our consolidated financial position, results of operations or liquidity.

14.
Segment Information
We operate in two reportable segments: Underground Mining Machinery and Surface Mining Equipment. Crushing and conveying operating results related to surface applications are reported as part of the Surface Mining Equipment segment, while total crushing and conveying operating results are included with the Underground Mining Machinery segment. Eliminations consist of the surface applications of crushing and conveying included in both operating segments. On December 29, 2011, we obtained control of IMM. IMM is a leading designer and manufacturer of underground coal mining equipment in China. The results of operations for IMM have been included in the Underground Mining Machinery segment from December 29, 2011 .


15


In thousands
Underground
Mining
Machinery
 
Surface
Mining
Equipment
 
Corporate
 
Eliminations
 
Total
Quarter ended January 25, 2013
 
 
 
 
 
 
 
 
 
Net sales
$
590,110

 
$
605,483

 
$

 
$
(45,716
)
 
$
1,149,877

Operating income (loss)
111,883

 
135,680

 
(12,832
)
 
(13,579
)
 
221,152

Interest

 

 
(15,153
)
 

 
(15,153
)
Income (loss) from continuing operations before income taxes
$
111,883

 
$
135,680

 
$
(27,985
)
 
$
(13,579
)
 
$
205,999

Depreciation and amortization
$
6,542

 
$
12,842

 
$
711

 
$

 
$
20,095

Capital expenditures
39,443

 
13,728

 
1,417

 

 
54,588

Total assets
3,860,301

 
2,179,929

 
136,568

 

 
6,176,798

Quarter ended January 27, 2012
 
 
 
 
 
 
 
 
 
Net sales
$
639,303

 
$
532,306

 
$

 
$
(35,408
)
 
$
1,136,201

Operating income (loss)
131,508

 
97,210

 
(6,859
)
 
(8,113
)
 
213,746

Interest

 

 
(16,077
)
 

 
(16,077
)
Income (loss) from continuing operations before income taxes
$
131,508

 
$
97,210

 
$
(22,936
)
 
$
(8,113
)
 
$
197,669

Depreciation and amortization
$
9,975

 
$
16,757

 
$
47

 
$

 
$
26,779

Capital expenditures
15,926

 
31,908

 
1,601

 

 
49,435

Total assets
3,680,747

 
2,031,243

 
454,546

 

 
6,166,536


15.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, " Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. " ASU No. 2013-02 requires presentation, either in a single note or parenthetically on the face of the financial statements, of the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, cross references to the related footnote for additional information would be appropriate. ASU 2013-02 will be effective for the second quarter of fiscal 2013. The adoption of this guidance will have no impact on our financial condition or results of operations but will impact the presentation of the financial statements. We are currently evaluating our presentation options.
In July 2012, the FASB issued ASU No. 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” ASU No. 2012-02 provides us the option to perform a qualitative assessment to determine whether further indefinite-lived intangible asset impairment testing is necessary. If, as a result of the qualitative assessment, it is determined that it is more likely than not that an indefinite-lived intangible asset is impaired, the quantitative impairment test is required. Otherwise, no further testing is required. ASU 2012-02 will be effective for the indefinite-lived impairment tests performed in the fourth quarter of fiscal 2013, with early adoption permitted. The adoption is not expected to have any impact on our financial condition or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity or in the footnotes. All non-owner changes in shareholder's equity instead must be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 was effective for the Company beginning on October 27, 2012. The adoption of this guidance had no impact on our financial condition or results of operations but impacted the presentation of comprehensive income in the financial statements.

16.
Subsidiary Guarantors
The following tables present condensed consolidated financial information of continuing operations as of January 25, 2013 and October 26, 2012 and for the quarters ended January 25, 2013 and January 27, 2012 for: (a) the Company; (b) on a combined basis, the guarantors of the Term Loan and 2016 Notes and 2036 Notes issued in November 2006, which include the significant domestic operations of Joy Technologies LLC, P&H Mining Equipment Inc., N.E.S. Investment Co., Continental Crushing & Conveying Inc., LeTourneau Technologies LLC, and certain immaterial wholly owned subsidiaries of LeTourneau Technologies LLC (the “Subsidiary Guarantors”); and (c) on a combined basis, the non-guarantors, which include all of our foreign subsidiaries and a number of small domestic subsidiaries (the “Non-Guarantor Subsidiaries”).

16


The borrowings are fully and unconditionally guaranteed on a joint and several unsecured basis by the Subsidiary Guarantors, which are direct and indirect 100% owned subsidiaries of the Company. We conduct all of our business and derive essentially all of our income from our subsidiaries. Therefore, our ability to make payments on the obligations is dependent on the earnings and distribution of funds from our subsidiaries. There are no restrictions on the ability of any of our domestic subsidiaries to transfer funds to the parent company. Separate financial statements of the Subsidiary Guarantors are not presented because we believe such separate statements or disclosures would not be useful to investors.

Condensed Consolidating Statements of Income
Quarter ended January 25, 2013
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
604,662

 
$
873,815

 
$
(328,600
)
 
$
1,149,877

Cost of sales

 
417,652

 
614,111

 
(258,614
)
 
773,149

Product development, selling and administrative expenses
12,802

 
74,444

 
70,035

 

 
157,281

Other (income) expense

 
9,052

 
(10,757
)
 

 
(1,705
)
Operating income (loss)
(12,802
)
 
103,514

 
200,426

 
(69,986
)
 
221,152

Intercompany items
31,120

 
(19,848
)
 
(35,657
)
 
24,385

 

Interest income (expense), net
(22,570
)
 
71

 
7,346

 

 
(15,153
)
Income (loss) from continuing operations before income taxes and equity
(4,252
)
 
83,737

 
172,115

 
(45,601
)
 
205,999

Provision (benefit) for income taxes
(9,276
)
 
56,257

 
16,879

 

 
63,860

Equity in income of subsidiaries
137,115

 
92,701

 

 
(229,816
)
 

Income from continuing operations
$
142,139

 
$
120,181

 
$
155,236

 
$
(275,417
)
 
$
142,139


Quarter ended January 27, 2012
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
708,243

 
$
751,944

 
$
(323,986
)
 
$
1,136,201

Cost of sales

 
489,349

 
537,889

 
(254,462
)
 
772,776

Product development, selling and administrative expenses
26,995

 
82,703

 
61,658

 

 
171,356

Other (income) expense

 
7,864

 
(29,541
)
 

 
(21,677
)
Operating income (loss)
(26,995
)
 
128,327

 
181,938

 
(69,524
)
 
213,746

Intercompany items
14,723

 
(7,435
)
 
(32,753
)
 
25,465

 

Interest income (expense), net
(16,693
)
 
102

 
514

 

 
(16,077
)
Income (loss) from continuing operations before income taxes and equity
(28,965
)
 
120,994

 
149,699

 
(44,059
)
 
197,669

Provision (benefit) for income taxes
(13,242
)
 
47,367

 
21,025

 

 
55,150

Equity in income of subsidiaries
158,242

 
57,563

 

 
(215,805
)
 

Income from continuing operations
142,519

 
131,190

 
128,674

 
(259,864
)
 
142,519

Income from continuing operations attributable to noncontrolling interest
(109
)
 
$

 
$
(109
)
 
$
109

 
$
(109
)
Income from continuing operations attributable to Joy Global Inc.
$
142,410

 
$
131,190

 
$
128,565

 
$
(259,755
)
 
$
142,410



17


Condensed Consolidating Balance Sheets:
As of January 25, 2013
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets
$
136,126

 
$
1,146,315

 
$
2,059,427

 
$
(205,087
)
 
$
3,136,781

Property, plant and equipment, net
13,221

 
382,830

 
468,743

 

 
864,794

Intangible assets, net

 
816,809

 
1,169,100

 

 
1,985,909

Other assets
4,223,489

 
2,558,668

 
1,961,199

 
(8,554,042
)
 
189,314

Total assets
$
4,372,836

 
$
4,904,622

 
$
5,658,469

 
$
(8,759,129
)
 
$
6,176,798

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities
$
111,417

 
$
699,601

 
$
974,527

 
$
(69,085
)
 
$
1,716,460

Long-term debt
1,293,098

 
1,102

 

 

 
1,294,200

Accrued pension costs
279,112

 
6,445

 
7,066

 

 
292,623

Other non-current liabilities
(23,340
)
 
10,393

 
173,913

 

 
160,966

Total liabilities
1,660,287

 
717,541

 
1,155,506

 
(69,085
)
 
3,464,249

Shareholders’ equity
2,712,549

 
4,187,081

 
4,502,963

 
(8,690,044
)
 
2,712,549

Total liabilities and shareholders’ equity
$
4,372,836

 
$
4,904,622

 
$
5,658,469

 
$
(8,759,129
)
 
$
6,176,798


As of October 26, 2012
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets
$
97,443

 
$
1,145,051

 
$
2,134,636

 
$
(221,053
)
 
$
3,156,077

Property, plant and equipment, net
12,515

 
378,274

 
442,073

 

 
832,862

Intangible assets, net

 
818,435

 
1,153,147

 

 
1,971,582

Other assets
4,178,760

 
2,528,849

 
1,803,046

 
(8,328,673
)
 
181,982

Total assets
$
4,288,718

 
$
4,870,609

 
$
5,532,902

 
$
(8,549,726
)
 
$
6,142,503

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities
$
106,207

 
$
704,191

 
$
1,038,751

 
$
(81,479
)
 
$
1,767,670

Current liabilities of discontinued operations

 
46,693

 
(33,546
)
 

 
13,147

Long-term debt
1,305,413

 
1,212

 

 

 
1,306,625

Accrued pension costs
322,310

 
6,589

 
6,914

 

 
335,813

Other non-current liabilities
(22,401
)
 
10,205

 
154,255

 

 
142,059

Total liabilities
1,711,529

 
768,890

 
1,166,374

 
(81,479
)
 
3,565,314

Shareholders’ equity
2,577,189

 
4,101,719

 
4,366,528

 
(8,468,247
)
 
2,577,189

Total liabilities and shareholders’ equity
$
4,288,718

 
$
4,870,609

 
$
5,532,902

 
$
(8,549,726
)
 
$
6,142,503


18


Condensed Consolidating Statements of Cash Flows:
Quarter ended January 25, 2013
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Consolidated
Net cash provided by operating activities of continuing operations
$
51,491

 
$
11,155

 
$
29,419

 
$
92,065

Net cash used by operating activities of discontinued operations

 

 
(1,571
)
 
(1,571
)
Net cash provided by operating activities
51,491

 
11,155

 
27,848

 
90,494

Net cash used by investing activities
(1,449
)
 
(14,095
)
 
(36,198
)
 
(51,742
)
Net cash used by financing activities
(26,508
)
 
(104
)
 
(4,598
)
 
(31,210
)
Effect of exchange rate changes on cash and cash equivalents

 

 
(1,520
)
 
(1,520
)
Increase (decrease) in cash and cash equivalents
23,534

 
(3,044
)
 
(14,468
)
 
6,022

Cash and cash equivalents at beginning of period
3,459

 
6,628

 
253,786

 
263,873

Cash and cash equivalents at end of period
$
26,993

 
$
3,584

 
$
239,318

 
$
269,895


Quarter ended January 27, 2012
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Consolidated
Net cash (used) provided by operating activities of continuing operations
$
(19,035
)
 
$
28,333

 
$
(23,442
)
 
$
(14,144
)
Net cash used by operating activities of discontinued operations

 

 
(4,363
)
 
(4,363
)
Net cash (used) provided by operating activities
(19,035
)
 
28,333

 
(27,805
)
 
(18,507
)
Investing Activities:
 
 
 
 
 
 
 
Acquisition of controlling interest in International Mining Machinery, net of cash acquired
(589,686
)
 

 
75,925

 
(513,761
)
Withdrawal of cash held in escrow
589,686

 

 

 
589,686

Other investing activities
(1,641
)
 
(31,666
)
 
(15,977
)
 
(49,284
)
Net cash (used) provided by investing activities
(1,641
)
 
(31,666
)
 
59,948

 
26,641

Net cash used by financing activities
(6,799
)
 
(100
)
 
(4,221
)
 
(11,120
)
Effect of exchange rate changes on cash and cash equivalents

 

 
(2,089
)
 
(2,089
)
(Decrease) increase in cash and cash equivalents
(27,475
)
 
(3,433
)
 
25,833

 
(5,075
)
Cash and cash equivalents at beginning of period
100,181

 
16,152

 
171,988

 
288,321

Cash and cash equivalents at end of period
$
72,706

 
$
12,719

 
$
197,821

 
$
283,246


17.
Supplemental Subsidiary Guarantors
The following tables present condensed consolidated financial information as of January 25, 2013 and October 26, 2012 and for the quarters ended January 25, 2013 and January 27, 2012 for: (a) the Company; (b) on a combined basis, the guarantors of the Credit Agreement and the 2021 Notes issued in October 2011, which include Joy Technologies LLC, P&H Mining Equipment Inc., N.E.S. Investment Co., Continental Crushing & Conveying Inc. and LeTourneau Technologies LLC (the “Supplemental Subsidiary Guarantors”); and (c) on a combined basis, the non-guarantors, which include all of our foreign subsidiaries and a number of small domestic subsidiaries (“Non-Guarantor Subsidiaries”).
The borrowings are fully and unconditionally guaranteed on a joint and several unsecured basis by the Supplemental Subsidiary Guarantors, which are direct and indirect 100% owned subsidiaries of the Company. We conduct all of our business and derive essentially all of our income from our subsidiaries. Therefore, our ability to make payments on the obligations is dependent on the earnings and distribution of funds from our subsidiaries. There are no restrictions on the ability of any of our

19


domestic subsidiaries to transfer funds to the parent company. Separate financial statements of the Supplemental Subsidiary Guarantors are not presented because we believe such separate statements or disclosures would not be useful to investors.

Condensed Consolidating Statements of Income
Quarter ended January 25, 2013
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
600,956

 
$
877,521

 
$
(328,600
)
 
$
1,149,877

Cost of sales

 
410,643

 
621,120

 
(258,614
)
 
773,149

Product development, selling and administrative expenses
12,802

 
74,117

 
70,362

 

 
157,281

Other (income) expense

 
9,176

 
(10,881
)
 

 
(1,705
)
Operating income (loss)
(12,802
)
 
107,020

 
196,920

 
(69,986
)
 
221,152

Intercompany items
31,120

 
(19,848
)
 
(35,657
)
 
24,385

 

Interest income (expense), net
(22,570
)
 
97

 
7,320

 

 
(15,153
)
Income (loss) from continuing operations before income taxes and equity
(4,252
)
 
87,269

 
168,583

 
(45,601
)
 
205,999

Provision (benefit) for income taxes
(9,276
)
 
57,046

 
16,090

 

 
63,860

Equity in income of subsidiaries
137,115

 
89,958

 

 
(227,073
)
 

Income from continuing operations
$
142,139

 
$
120,181

 
$
152,493

 
$
(272,674
)
 
$
142,139


Quarter ended January 27, 2012
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$

 
$
692,872

 
$
767,315

 
$
(323,986
)
 
$
1,136,201

Cost of sales

 
478,418

 
548,820

 
(254,462
)
 
772,776

Product development, selling and administrative expenses
26,995

 
80,815

 
63,546

 

 
171,356

Other (income) expense

 
7,970

 
(29,647
)
 

 
(21,677
)
Operating income (loss)
(26,995
)
 
125,669

 
184,596

 
(69,524
)
 
213,746

Intercompany items
14,723

 
(7,435
)
 
(32,753
)
 
25,465

 

Interest income (expense), net
(16,693
)
 
110

 
506

 

 
(16,077
)
Income (loss) from continuing operations before income taxes and equity
(28,965
)
 
118,344

 
152,349

 
(44,059
)
 
197,669

Provision (benefit) for income taxes
(13,242
)
 
47,334

 
21,058

 

 
55,150

Equity in income of subsidiaries
158,242

 
57,563

 

 
(215,805
)
 

Income from continuing operations
142,519

 
128,573

 
131,291

 
(259,864
)
 
142,519

Income from continuing operations attributable to noncontrolling interest
(109
)
 

 
(109
)
 
109

 
(109
)
Income from continuing operations attributable to Joy Global Inc.
$
142,410

 
$
128,573

 
$
131,182

 
$
(259,755
)
 
$
142,410



20


Condensed Consolidating Balance Sheets:
As of January 25, 2013
(In thousands)
 
 
Parent
Company
 
Subsidiary
Guarantors
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
Current assets
$
136,126

 
$
1,131,131

 
$
2,074,611

 
$
(205,087
)
 
$
3,136,781

Property, plant and equipment, net
13,221

 
378,880

 
472,693

 

 
864,794

Intangible assets, net

 
816,809

 
1,169,100

 

 
1,985,909

Other assets
4,223,489

 
2,546,838

 
1,973,029

 
(8,554,042
)
 
189,314

Total assets
$
4,372,836

 
$
4,873,658

 
$
5,689,433

 
$
(8,759,129
)
 
$
6,176,798

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities
$
111,417

 
$
697,086

 
$
977,042

 
$
(69,085
)
 
$
1,716,460

Long-term debt
1,293,098

 
1,102

 

 

 
1,294,200

Accrued pension costs
279,112

 
6,445

 
7,066

 

 
292,623

Other non-current liabilities
(23,340
)
 
10,393

 
173,913

 

 
160,966

Total liabilities
1,660,287

 
715,026

 
1,158,021

 
(69,085
)
 
3,464,249

Shareholders’ equity
2,712,549

 
4,158,632

 
4,531,412

 
(8,690,044
)
 
2,712,549

Total liabilities and shareholders’ equity
$
4,372,836

 
$
4,873,658

 
$
5,689,433

 
$
(8,759,129
)
 
$
6,176,798