Joy Global Inc.
JOY GLOBAL INC (Form: 10-K, Received: 12/19/2014 16:10:27)
Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED October 31, 2014
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)
 
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   ý     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   ý
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   ý     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   ý     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.   ý
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
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 Act).    Yes   ¨     No   ý
The aggregate market value of the voting and non-voting common stock held by non-affiliates as of May 2, 2014 , the last business day of our most recently completed second fiscal quarter, was approximately $5.9 billion , based on a closing price of $59.25 per share.
The number of shares outstanding of registrant’s common stock as of December 12, 2014 was 97,371,112 .
 
 
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 2015 annual meeting of stockholders.


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Joy Global Inc.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended October 31, 2014
 
 
 
 
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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 on 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:

risks associated with international operations, including regional or country specific conditions and fluctuations in currency exchange rates;
cyclical economic conditions affecting the global mining industry and competitive pressures and changes affecting our industry, including demand for coal, copper, iron ore and other commodities;
general economic conditions, including those affecting the global mining industry;
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
challenges arising from acquisitions, including 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 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. (the "Company," “we” and “us”) 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 parts and perform services for both underground and surface mining, as well as 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 ("Underground") and Surface Mining Equipment ("Surface"). 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 copper, coal and other minerals and ores and 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 Alabama, Pennsylvania, Texas and Wisconsin, and internationally, including facilities in Australia, Canada, China, South Africa and the United Kingdom.
Sales of original equipment for the mining industry, as a class of products, accounted for 31% , 45% and 48% of our consolidated net sales for fiscal 2014 , 2013 and 2012 , respectively. Service sales, which include revenues from maintenance and

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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.
On May 30, 2014, we closed on the purchase of certain assets of Mining Technologies International Inc. ("MTI") for $44.4 million. MTI is a Canadian manufacturer of underground hard rock mining equipment serving the North American markets and a world leading supplier of raise bore drilling consumables. We have acquired substantially all of the assets associated with MTI's hard rock drilling, loaders, dump trucks, shaft sinking and raise bore product lines. MTI's results of operations have been included as part of the Underground segment from the acquisition date forward.
During fiscal 2011 and 2012, we completed a series of transactions that resulted in our acquisition of International Mining Machinery Holdings Limited (“IMM”), a leading designer and manufacturer of underground mining equipment in China. IMM's operations are included in our Underground segment.
Underground
We are the world’s largest producer of high productivity underground mining machinery for the extraction of coal, potash, salt, platinum and other bedded materials. We have manufacturing facilities in Australia, Canada, China, South Africa, the United Kingdom and the United States, as well as sales offices and service facilities in India, Poland and Russia. 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:
Armored face conveyors – Armored face conveyors are used in longwall mining to transport material cut by the shearer away from the longwall face.
Battery haulers – Battery haulers transport material from continuous miners to the feeder breaker 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 – Continuous chain haulage systems transport material from continuous miners to main mine belts on a continuous basis. 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.
Continuous miners – Electric crawler mounted continuous miners cut material using carbide-tipped bits on a horizontal rotating cutterhead. The continuous miner is also configured in some applications with roof bolters to place roof bolts when advancing the cut. 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.
Conveyor systems – Conveyor systems are used in both underground and surface 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.
Feeder breakers – Feeder breakers are used in both underground and surface applications. A feeder breaker is a form of crusher that uses a rotating drum with carbide-tipped bits to break down the size of the mined material for loading onto a conveyor system 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.
Flexible conveyor trains ("FCT") – An FCT is an electric-powered, single operator, self-propelled conveyor system that provides 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 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.
Hard rock mining products - We provide a complete range of hard rock mining products including raised boring products, blast hole drilling products, buckets and lip systems, hydraulic jumbo drills, production drills, loaders, trucks, shaft sinking and blasthole products. In addition, we provide service to support this equipment.
High angle conveyors – High angle conveyors are used in both underground and surface applications. They provide a versatile method for elevating or lowering materials continuously from one level to another at extremely steep angles. One of the

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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.
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.
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.
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.
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 shuttle cars can carry up to 30 metric tons of coal.
Life cycle management We offer life cycle management programs for both underground and surface applications. These programs help our customers to optimize the productivity and cost effective use of our equipment over the life of the equipment. Each life cycle management program is specifically designed for a particular customer’s application of our equipment. Under each program, we provide products and services to support the equipment during its operating life cycle. Our life cycle management arrangements include cost per ton, component exchange programs and parts contracts. Cost per ton programs allow our customers to pay fixed prices for each ton of material mined in order to match equipment costs with revenues, and our component exchange programs and parts contracts minimize production disruptions for repair or scheduled rebuilds.
In addition to life cycle management support, our Underground segment provides equipment assemblies, service, repairs, rebuilds, parts, enhancement kits and training to customers globally.
Project management – Our project management services provide a single point of contact for our comprehensive set of services, from contract origination to operational completion.
Smart Services – Smart Services are a full service support offering that gathers relevant information real time and uses this information to deliver services that are preemptive and predictive, which enables our customers to maximize the productivity and value of their assets by providing better machine availability, utilization and reduced costs. The services include equipment monitoring, predictive diagnostics, service training support and parts management.
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 our customers through a global network of sales and marketing personnel. Our direct customer service and support infrastructure quickly and efficiently provide customers with high-quality parts, exchange components, repairs, rebuilds, whole machine exchanges and services.
Surface
We are the world’s largest producer of electric mining shovels and a leading producer of blasthole drills, walking draglines and wheel loaders 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 and processing of coal, copper, iron ore, oil sands, gold 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, loaders and parts.
Products and Services:
Blasthole drills – Most surface mines require explosives to break or blast rock, overburden or ore. A blasthole drill creates a pattern of holes to contain the explosives. Our blasthole drills range in size from 7.875 to 17.5 inches in diameter and can exert a maximum pull down force of up to 150,000 pounds.

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Conveyor systems – Conveyor systems are used in both underground and surface 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.
Electric mining shovels – Mining shovels are used primarily to load copper, coal, iron ore, oil sands, gold and other mineral-bearing materials and overburden into trucks. Electric mining shovels feature large dippers, allowing them to load great volumes of material at a low operating cost. Dippers can range in size from 10 to 90 cubic yards.
Feeder breakers – Feeder breakers are used in both underground and surface applications. A feeder breaker is a form of crusher that uses a rotating drum with carbide-tipped bits to break down the size of the mined material for loading onto a conveyor system 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.
High angle conveyors – High angle conveyors are used in both underground and surface applications. They provide 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.
Walking draglines – Draglines are primarily used to remove overburden in order 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.
Wheel loaders – Loaders are generally used in coal, copper, gold and iron ore mines, and they 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 or high-maintenance braking. We have five loaders with capacities up to 53 cubic yards, which are the largest in the industry, and can load rear-dump trucks in the 85 to 400 ton range.
Life cycle management – We offer life cycle management programs for both underground and surface applications. These programs help our customers to optimize the productivity and cost effective use of our equipment over the life of the equipment. Each life cycle management program is specifically designed for a particular customer’s application of our equipment. Under each program, we provide products and services to support the equipment during its operating life cycle. 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 and parts contracts minimize production disruptions for repair or scheduled rebuilds.
In addition to life cycle management support, our Surface segment provides equipment assemblies, relocations, inspections, service, repairs, rebuilds, upgrades, used equipment, parts, enhancement kits and training to customers globally.
Project management – Our project management services provide a single point of contact for our comprehensive set of services, from contract origination to operational completion.
Smart Services – Smart Services are a full service support offering that gathers relevant information real time and uses this information to deliver services that are preemptive and predictive, which enables our customers to maximize the productivity and value of their assets by providing better machine availability, utilization and reduced costs. The services include equipment monitoring, predictive diagnostics, service training support and parts management.
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 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:
•      Berkeley Forge and Tool Inc.
 
•      Phillippi-Hagenbach Inc.
 
 
 
•      Bridon American Corporation
 
•      Prodinsa Wire Rope
 
 
 
•      Towhaul Corporation
 
•      Wire Rope Industries Ltd.
 
 
 
•      Hensley Industries Inc.
 
•      Wire Rope Corporation of America, Inc.
 
 
 
•      Hitachi Mining Division
 
•      ESCO Corporation

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For each Alliance Partner, we typically enter into an agreement that provides us with the right to distribute certain products from the Alliance Partner 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 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.
Cyclicality
Changes in economic conditions affecting the global mining industry can occur abruptly and unpredictably, which may have significant effects on our sales of original equipment and services. Cyclicality for original equipment sales is driven primarily by price volatility of the commodities that our equipment is used to mine, including coal, copper, iron ore and oil, as well as product life cycles, competitive pressures and other economic factors affecting the mining industry, such as company consolidation and increased regulation and competition affecting demand for commodities, and the broader economy, including changes in government monetary or fiscal policies and from market expectations with respect to such policies. Falling commodity prices have in the past and may in the future lead to reduced capital expenditures by our customers, reductions in the production levels of existing mines, a contraction in the number of existing mines and the closure of less efficient mines. Reduced capital expenditures and decreased mining activity by our customers are likely to lead to a decrease in demand for new mining machinery. However, in the down cycle, our customers increase their rebuild, parts and repair activity which could result in an increase in our service revenue stream. Conversely, rising commodity prices typically lead to the expansion of existing mines, opening of new mines or re-opening of less efficient mines. Increased mining activity typically leads to an increase in demand for new mining machinery.
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 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 31, 2014 , we employed approximately 15,400 employees worldwide, with approximately 5,500 employed in the United States. Collective bargaining agreements or similar arrangements cover 31% of our U.S. workforce and 22% of our international employees. In 2015 , union agreements are set to expire for 7% of our employees, with the largest agreement covering our union in Chile.
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 2014 consolidated net sales.
Competitive Conditions
The domestic and foreign manufacturing and service operations of our Underground and Surface segments are subject to significant competitive pressures. We compete globally on the basis of product performance, customer service, support, availability, reliability, productivity, total cost of ownership and price. Most of our customers are large global mining companies that have substantial bargaining power, and most of our sales require us to participate in competitive bidding due in part to the current pressure on our customers to cut costs. We compete directly and indirectly with other manufacturers of surface and underground mining equipment and with manufacturers of parts and components for such products.
The Underground segment's products 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 segment’s shovels and draglines compete with similar products produced by two significant competitors and compete with hydraulic excavators, large rubber-tired front-end loaders and bucket wheel excavators made by several international manufacturers. Our 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

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advantage. However, it is still important to have repair and rebuild capability near the customers' operations. In this regard, we compete with a large number of primarily regional suppliers in the sale of parts.
Both segments compete on the basis of providing superior productivity, reliability and service that lowers the overall cost of production for our customers. We 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 service, exclusive of long-term maintenance and repair arrangements and life cycle management arrangements. Such life cycle management programs extend for up to 17 years and totaled approximately $1.5 billion as of October 31, 2014 . Customer orders included in backlog represent contracts to purchase specific original equipment or services by customers who have satisfied our credit review procedures. The backlog amounts reported exclude sales already recognized by fiscal year end under the percentage-of-completion method of accounting. The following table provides backlog by business segment as of each of our last three fiscal year ends:
In thousands
October 31,
2014
 
October 25,
2013
 
October 26,
2012
Underground
$
729,791

 
$
951,227

 
$
1,341,097

Surface
629,861

 
554,971

 
1,269,825

Eliminations
(26,269
)
 
(29,367
)
 
(46,371
)
Total Backlog
$
1,333,383

 
$
1,476,831

 
$
2,564,551

Of the $1.3 billion of backlog, we expect to recognize approximately $227.3 million as revenue beyond fiscal 2015 .
The decrease in backlog for Underground was driven by continued softness in coal markets, resulting in an orders booked to net sales ratio of less than one. The increase in backlog for Surface was driven by orders for equipment into oil sands, iron ore and copper mines, resulting in an orders booked to net sales ratio of greater than one.
Eliminations primarily consist of the surface applications of crushing and conveying included in both operating segments.
Raw Materials
In the manufacture of our products, we use large amounts of raw materials and processed inputs, including steel, copper and engine and electronic components. We obtain raw materials and certain manufactured components from third party suppliers. 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. We continuously monitor supplier arrangements to seek to identify and address risks of supply disruptions.
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 licenses to certain of our patents and trademarks to other manufacturers and receive royalties under most of these licenses. While we do not consider any particular patent or trademark or group of patents or trademarks to be material to our business segments, we believe that in the aggregate our patents and trademarks are significant in distinguishing many of our product lines from those of our competitors.
In the fourth quarter of fiscal 2013, we reviewed our brand portfolio and developed a strategy to increase the visibility of our core brands in furtherance of our One Joy Global initiative. During this review, we determined that the indefinite life assumption was no longer appropriate for most of our previously acquired trademarks.
In connection with the review of our brand portfolio, we worked with a third party appraisal firm to develop new estimates of fair value of our trademark portfolio using discounted cash flow models. In connection with obtaining an independent third party valuation, management provided certain information and assumptions that were utilized in the fair value calculation. Assumptions critical to the process included forecasted financial information, discount rates, royalty rates and growth rates. Estimates of the fair value of each trademark were based on the best information currently available. However, further adjustments may be necessary in the future if conditions differ substantially from the assumptions utilized.
The remaining value of the trademarks that were replaced are being amortized over the new estimated useful life. For those trademarks that were not replaced, our strategy is to co-brand these products, and we revalued these trademarks based on that assumption. The co-branded trademarks continue to have an indefinite life. As a result, a non-cash impairment charge of $155.2

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million was recorded in the fourth quarter of fiscal 2013, of which $130.2 million was recorded by our Underground segment and $25.0 million was recorded by our Surface segment. This charge is recorded in the fiscal 2013 Consolidated Statement of Income under the heading Intangible asset impairment charges . Going forward, the amortization of the remaining carrying value associated with the trademarks that were replaced is being recorded in the Consolidated Statements of Income under the heading Product development, selling and administrative expenses .
In thousands
Underground
 
Surface
 
Consolidated
Patents
 
 
 
 
 
Gross Carrying Value at October 31, 2014
$
21,069

 
$
69,900

 
$
90,969

Accumulated Amortization
(11,974
)
 
(11,650
)
 
(23,624
)
Net Carrying Value
$
9,095

 
$
58,250

 
$
67,345

 
 
 
 
 
 
Trademarks
 
 
 
 
 
Gross Carrying Value at October 31, 2014
$
17,755

 
$
12,200

 
$
29,955

Accumulated Amortization

 
(2,440
)
 
(2,440
)
Net Carrying Value
$
17,755

 
$
9,760

 
$
27,515

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 $40.6 million , $49.0 million , and $47.8 million for fiscal 2014 , 2013 and 2012 , 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 fiscal 2014 . Because these requirements are complex and subject to change, 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 we do not expect to make any material capital expenditures for environmental control facilities in fiscal 2015 .
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, proxy statements, 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.

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Our international operations are subject to various economic, political and other uncertainties that could adversely affect our business. In fiscal 2014 , 2013 and 2012 , approximately 69% , 72% and 69% of our sales, respectively, 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. The following risks are associated with doing business internationally and could adversely affect our business, financial condition and results of operations:
regional or country specific economic downturns;
fluctuations in currency exchange rates, particularly the Australian dollar, British pound sterling, Canadian dollar, Chilean peso, Chinese renminbi and South African rand;
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;
customs matters and changes in trade policy, tariff regulations or other trade restrictions;
economic or political instability or tensions, trade disputes and the introduction of economic sanctions;
terrorist attacks and international or civil conflicts that affect international trade or the mining industry, including the ongoing conflict in Ukraine;
unexpected changes in regulatory requirements, up to and including nationalization or expropriation by foreign governments;
higher tax rates and potentially adverse tax changes, including restrictions on repatriating offshore 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 greater 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 Chile, China, India and Indonesia; and
uncertainties arising from local business practices and cultural considerations.
We expect that the percentage of our sales occurring outside the United States will continue to increase over time largely due to increased activity in China, India and other emerging markets relative to that in the United States. 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.
Our business is materially impacted by cyclical economic conditions affecting the global mining industry.
Changes in economic conditions affecting the global mining industry can occur abruptly and unpredictably, which may have significant effects on our sales of original equipment and services. Cyclicality for original equipment sales is driven primarily by price volatility of the commodities that our equipment is used to mine, including coal, copper, iron ore and oil, as well as product life cycles, competitive pressures and other economic factors affecting the mining industry, such as company consolidation and increased regulation and competition affecting demand for commodities, and the broader economy, including changes in government monetary or fiscal policies and from market expectations with respect to such policies. Falling commodity prices have in the past and may in the future lead to reduced capital expenditures by our customers, reductions in the production levels of existing mines, a contraction in the number of existing mines and the closure of less efficient mines. Reduced capital expenditures and decreased mining activity by our customers are likely to lead to a decrease in demand for new mining machinery, and may result in a decrease in demand for parts and services as our customers are likely to reduce inventories, redistribute parts from closed mines and delay rebuilds during industry downturns. In addition to declining orders for our products and services, adverse economic conditions for our customers may make it more difficult for us to collect accounts receivable in a timely manner, or at all, which may adversely affect our working capital. As a result of this cyclicality in the global mining industry, we have experienced significant fluctuations in our business, results of operations and financial condition, and we expect our business to continue to be subject to these fluctuations in the future.
We are largely dependent on the continued demand for coal, which is subject to economic and climate related risks.
Approximately 61% of our revenues come from our thermal and metallurgical coal-mining customers. Many of these customers supply coal for the generation of electricity and/or steel production. 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 electricity generation faces intense price competition from other fuel sources, particularly

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natural gas. In addition, 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, international agreements or other limits on greenhouse gas emissions and other environmental impacts or costs from coal 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. Reduced demand for coal would result in reduced demand for our mining equipment and services and adversely affect our business, financial condition and results of operations.
Environmental regulations impacting the mining industry may adversely affect demand for our products.
We supply original equipment and 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 services we provide could be adversely affected by environmental regulations directly or indirectly impacting the mining industry. Any reduction in demand for our products and services as a result of environmental regulations is likely have an adverse effect on 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 mining accidents. New legislation or regulations relating to mine safety standards and the increased cost of compliance with such standards 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.
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, notably including the Australian dollar, British pound sterling, Canadian dollar, Chilean peso, Chinese renminbi and South African rand, 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.
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 of applicable laws or regulations may subject us to government scrutiny, investigation, litigation 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 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

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sanctions, could disrupt our business and may result in an adverse effect on our reputation, business and results of operations or financial condition.
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 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. 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, 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.
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 also may 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, investments, start-ups, divestitures or other structures. 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 complete 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 divestitures, we may agree to indemnify acquiring parties for known or unknown liabilities arising from the businesses we are divesting.
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 harm our reputation and adversely affect our business, financial condition or results of operations.
We may acquire companies or make investments or otherwise enter into new markets in which we have little or no experience, which may lead us to fail to realize the anticipated benefits of such entry and which may adversely affect our financial condition and results of operations .
From time to time we may acquire or make investments in companies or businesses to gain access to, or otherwise seek to enter, new product or geographic markets in which we have no, or only limited, familiarity and experience. In addition, we may acquire companies engaged in the manufacture of mining equipment that have substantial operations in other lines of business in which we have no prior experience, that we may be unwilling, or unable on commercially reasonable terms, to divest, or for which we may incur significant costs to divest. Our recent acquisition activity has included transactions of both types, including our 2014 purchase of MTI, which marked our entry into the market for underground hard rock mining equipment, and our 2011 acquisition of LeTourneau, which included a drilling products business that we subsequently divested and a steel products business that we retained. While our entry into new markets may in many cases involve operations that appear complementary to our own, we may lack familiarity with the design, manufacture, sale or maintenance of equipment produced for such market, with the needs or expectations of customers operating in such markets, or with regulatory requirements affecting such markets. In addition, our competitors in new markets will have greater experience and may have greater resources than we do. As a result of these factors, we may fail to achieve the business objectives that we intended to achieve at the time we entered into a new market, which may have a material adverse effect on our reputation, 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

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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, or their interpretation, 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 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.
A downgrade to our credit ratings would increase our cost of borrowing under our credit facility and adversely affect our ability to access the capital markets.
Our cost of borrowing under our unsecured revolving credit facility that matures on July 29, 2019 (the “Credit Agreement”) and our ability and the terms under which we may access the capital markets are affected by credit ratings assigned to our indebtedness by the major credit rating agencies. These ratings are premised on our performance under assorted financial metrics, such as leverage and interest coverage ratios and other measures of financial strength, business and financial risk, industry conditions, transparency with rating agencies and timeliness of financial reporting. Our current ratings have served to lower our borrowing costs and facilitate access to a variety of lenders. However, there can be no assurance that our credit ratings or outlook will not be lowered in the future in response to adverse changes in these metrics caused by our operating results, by our market outlook or by actions that we take, such as incurring additional indebtedness or by returning excess cash to shareholders through dividends or under our share repurchase program. A downgrade of our credit ratings would increase our cost of borrowing under the Credit Agreement, negatively affect our ability to access the capital markets on advantageous terms, or at all, negatively affect the trading price of our securities and have a material adverse effect 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 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 applied could increase our required future contributions to our plans, which may adversely affect our results of operations and financial condition.

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We may record future goodwill impairment charges or other asset impairment charges, which could have a material adverse impact on our financial results.
A significant portion of our assets consists of goodwill and other intangible assets, the carrying value of which may be reduced if we determine that those assets are impaired. As of October 31, 2014 , goodwill and other intangible assets totaled $1.8 billion and represented approximately 33% of our total assets. We evaluate our finite-lived intangible assets for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. We evaluate our goodwill and long-lived intangible assets for impairment annually in our fourth quarter, or more frequently if events or changes in circumstances suggest that impairment may exist. Our evaluation of impairment requires us to make certain estimates and assumptions including projections of future results. After performing our evaluation for impairment, we will record an impairment loss when the carrying value of the reporting unit or underlying asset exceeds its fair value. In the fourth quarter of fiscal 2013, we recorded an impairment charge of $155.2 million for trade name intangibles related to our rebranding strategy. Because of the significance of our goodwill and other intangible assets, any future impairment of our goodwill or other intangible assets could have a material adverse effect on our results of operations and financial condition.
We may incur additional tax expense or become subject to additional tax exposure.
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our domestic and international tax liabilities are dependent on the location of earnings among these different jurisdictions. Our provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors, including income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws and regulations. In addition, as of October 31, 2014 , our foreign subsidiaries held $196.5 million of cash and cash equivalents that would be subject to U.S. taxation if repatriated to the United States. We are also subject to the continuous examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities. The results of audit and examination of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on the company’s provision for income taxes and cash tax liability.
Our continued success depends on our ability to protect our intellectual property, which cannot be assured.
Our future success depends in part on 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.
Our manufacturing operations are dependent on third party suppliers, making us vulnerable to supply shortages and price increases.
In the manufacture of our products, we use large amounts of raw materials and processed inputs including steel, copper and engine and electronic components. We obtain raw materials and certain manufactured components from third party suppliers. Our financial performance is constrained by our ability to secure critical raw materials such as steel and copper at prices that support our cost structure, or that can be passed along to our customers through increases in the price of the equipment that we manufacture. 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 31, 2014 , collective bargaining agreements or similar type arrangements cover 31% of our U.S. workforce and 22% 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 fiscal 2015 , union agreements are to expire for 7% of our employees, with the largest agreement covering our union in Chile. New collective bargaining agreements may be on substantially different terms and may

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result in increased direct and indirect labor costs. Future disputes with our employees could adversely affect our business, financial condition or results of operations.
Increased IT security threats and sophisticated computer crime pose a risk to our systems, networks, products and services.
We rely on information technology ("IT") systems and networks in connection with a variety of our business activities, and we collect and store sensitive data. IT security threats and sophisticated computer crime, including advanced persistent threats such as attempts to gain unauthorized access to our systems, are increasing in sophistication and frequency. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. We have experienced, and expect to continue to confront, attempts from hackers and other third parties to gain unauthorized access to our IT systems and networks. Although these attacks to date have not had a material impact on us, we could in the future experience attacks that could have a material adverse effect on our financial condition, results of operations or liquidity. While we actively manage IT risks within our control, we can provide no assurance that our actions will be successful in eliminating or mitigating risks to our systems, networks and data. A failure of or breach in IT security could expose us and our customers, dealers and suppliers to risks of misuse of information or systems, the compromise of confidential information, manipulation and destruction of data, defective products, production downtimes and operations disruptions. Any of these events 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, as well as the costs and operational consequences of implementing further data protection measures.
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 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.
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.
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 and others 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 on any single customer; however, our top ten customers collectively accounted for approximately 38% of our net sales for fiscal 2014 . 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.
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 rule requires us to perform due diligence, and report whether “conflict minerals,” which are defined as tin, tantalum, tungsten and gold, necessary to the functionality of a product we manufacture originated from the Democratic Republic of Congo or an adjoining country. We filed our initial specialized disclosure report on Form SD with the SEC regarding such matters on May 30, 2014, and we will be required to prepare and file such a report on an annual basis in the future. We also may become subject to similar regulatory initiatives in other jurisdictions. As our supply chain is complex, we may incur significant costs to determine the source and custody of conflict minerals that we use in order to comply with these regulatory requirements. We may

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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 conclude that our products are “conflict free.” Over time, conflict minerals reporting requirements may affect the sourcing, price and availability of some minerals which are necessary to the manufacture of our products, and may affect the availability and price of conflict minerals that are certified as conflict free. Accordingly, we may incur significant costs as a consequence of regulations related to conflict-free minerals, which may adversely affect our business, financial condition or results of operations.
We may be adversely affected by litigation or contractual obligations that give rise to liability.
We and our subsidiaries are involved in various unresolved legal matters that arise in the ordinary course of operations, the most prevalent of which relate to product liability (including asbestos and silica related liability), employment and commercial matters. We and our subsidiaries also become involved from time to time in proceedings relating to environmental matters and litigation arising outside the ordinary course of business. While we maintain insurance coverage with respect to certain claims, our policies are subject to substantial deductibles. Furthermore, 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 for which our insurers refuse to provide coverage) or that result in recoveries in excess of insurance coverage could adversely affect our business, financial condition or results of operations.
We establish reserves based on our assessment of contingencies related to legal claims asserted against us, as required by accounting principles generally accepted in the United States (“GAAP”). Developments during the course of legal proceedings may affect our assessments and estimates of our contingencies, which in turn may require us to record or change the amount of a reserve, or make a payment in excess of an amount that we have reserved. Changes to reserves and payments that are greater than reserved amounts may have an adverse effect on our financial condition and results of operations.
In addition, as a normal part of operations, our subsidiaries 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.
We are the subject of an ongoing SEC investigation, which could divert management’s attention and result in substantial investigation expenses, monetary fines and other possible remedies.
We disclosed on November 6, 2014 that we had received a subpoena from the SEC’s Division of Enforcement concerning our 2012 acquisition of IMM and related accounting matters. We are cooperating with the SEC regarding this investigation, which is ongoing. Responding to the SEC’s investigation could divert management’s attention from other matters relating to our business, result in substantial investigation expenses and otherwise harm our business and reputation. In addition, if the SEC were to commence legal action, we could be subject to monetary fines and other possible remedies. We are unable to predict what consequences, if any, the SEC investigation may have on us, or the timing of its resolution. Although we currently do not expect the investigation to have a material adverse effect on our consolidated results of operations, financial position or liquidity, the timing, resolution and impact of this matter is unknown.
 
Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
As of October 31, 2014 , the following principal properties of our operations were owned, except as indicated. Our worldwide corporate headquarters is currently housed in 31,690 square feet and 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 Locations
Location
 
Floor Space
(Sq. Ft.)
 
 
 
Land Area
(Acres)
 
Principal Operations
United States
 
 
 
 
 
 
 
 
Warrendale, Pennsylvania
 
71,250

 
  
 
13

 
Administration, engineering
Eighty Four, Pennsylvania
 
118,000

 
(4)
 

 
Warehouse, distribution
Franklin, Pennsylvania
 
830,900

 
  
 
58

 
Manufacturing, administration, engineering, assembly

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Underground Locations
Homer City, Pennsylvania
 
91,124

 
  
 
10

 
Manufacturing, warehouse, administration, repairs, rebuilds, assembly
Meadowlands, Pennsylvania
 
117,900

 
  
 
12

 
Warehouse, administration, repairs, distributions, sales
Reno, Pennsylvania
 
121,400

 
  
 
22

 
Manufacturing
Winfield, Alabama
 
250,000

 
 
 
33

 
Manufacturing, administration, sales, engineering
Winfield, Alabama
 
960

 
(1)
 

 
Distribution
Mount Vernon, Illinois
 
6,407

 
(3)
 

 
Sales
Mount Vernon, Illinois
 
1,700

 
(1)
 

 
Services
Lebanon, Kentucky
 
88,250

 
  
 
12

 
Manufacturing, repairs, rebuilds, assembly
Salyersville, Kentucky
 
125,842

 
  
 
14

 
Manufacturing
Billings, Montana
 
30,000

 
(3)
 

 
Manufacturing, warehouse, administration, repairs, rebuilds, distribution, sales, services, assembly
Brook Park, Ohio
 
85,000

 
 
 
4

 
Manufacturing
Solon, Ohio
 
101,200

 
  
 
11

 
Manufacturing
Wellington, Utah
 
76,250

 
  
 
60

 
Warehouse, administration, repairs, rebuilds, sales, assembly
Bluefield, Virginia
 
102,160

 
  
 
15

 
Manufacturing, repairs, rebuilds, assembly
Duffield, Virginia
 
101,310

 
  
 
11

 
Repairs, rebuilds, sales
Australia
 
 
 
 
 
 
 
 
Minto
 
23,024

 
  
 
4

 
Manufacturing
Moss Vale
 
97,392

 
  
 
33

 
Manufacturing, repairs, rebuilds, engineering
Moss Vale
 
38,750

 
(1)
 
13

 
Warehouse, administration
Moss Vale
 
11,302

 
(1)
 

 
Warehouse
Mudgee
 
2,046

 
(2)
 

 
Administration, sales
Parkhurst
 
76,639

 
  
 
19

 
Repairs, rebuilds
Somersby
 
49,655

 
  
 
3

 
Manufacturing, administration, repairs, engineering
Wollongong
 
14,334

 
(4)
 

 
Administration, engineering
Canada
 
 
 
 
 
 
 
 
Lively
 
46,666

 
 
 
10

 
Manufacturing, warehouse, administration, repairs, rebuilds, distribution, engineering, services, assembly
Lively
 
54,456

 
 
 
6

 
Manufacturing, warehouse, administration, repairs, rebuilds, distribution, sales, engineering, services, assembly
Thompson
 
35,000

 
(2)
 

 
Warehouse, repairs, distribution, sales
China
 
 
 
 
 
 
 
 
Baotou
 
104,162

 
(5)
 
6

 
Repairs, rebuilds, engineering, services
Beijing
 
21,586

 
(3)
 

 
Administration, sales
Huainan
 
349,255

 
  
 
50

 
Manufacturing, warehouse, administration, sales, engineering, services, assembly
Jiamusi
 
1,222,228

 
  
 
28

 
Manufacturing, warehouse, administration, repairs, distribution, sales, services, assembly
Jixi
 
929,945

 
  
 
18

 
Manufacturing, warehouse, administration
Qingdao
 
117,692

 
  
 
1

 
Manufacturing, warehouse, administration, services, assembly
Tianjin
 
370,187

 
 
 
9

 
Manufacturing, warehouse, distribution
Tianjin
 
205,645

 
(9)
 
8

 
Manufacturing
Wuxi
 
185,421

 
  
 
10

 
Manufacturing
England
 
 
 
 
 
 
 
 

18

Table of Contents

Underground Locations
Sunderland
 
100,850

 
(8)
 
5

 
Manufacturing, administration, sales, engineering
Wigan
 
60,000

 
(2)
 
3

 
Administration, engineering
Worcester
 
178,000

 
  
 
14

 
Manufacturing, warehouse, administration, repairs, engineering
India
 
 
 
 
 
 
 
 
Nagpur
 
8,053

 
(1)
 

 
Administration, repairs, rebuilds, distribution, sales, services
Poland
 
 
 
 
 
 
 
 
Tychy
 
66,206

 
  
 
9

 
Manufacturing, warehouse, administration, repairs, rebuilds, distribution, sales, engineering, services, assembly
Russia
 
 
 
 
 
 
 
 
Novokuznetsk
 
15,750

 
(2)
 
3

 
Manufacturing, warehouse, repairs, rebuilds
South Africa
 
 
 
 
 
 
 
 
Pretoria
 
2,778

 
(3)
 
1

 
Administration
Rustenburg
 
538

 
(3)
 
1

 
Administration, sales
Wadeville
 
333,393

 
  
 
29

 
Manufacturing, warehouse, administration, repairs, rebuilds, distribution, sales, engineering, services, assembly
Witbank
 
39,708

 
  
 
1

 
Warehouse, administration, distribution, sales, services



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Table of Contents

Surface Locations
Location
 
Floor Space
(Sq. Ft.)
 
 
 
Land Area
(Acres)
 
Principal Operations
United States
 
 
 
 
 
 
 
 
Milwaukee, Wisconsin
 
684,000

 
  
 
46

 
Manufacturing, warehouse, administration, distribution, sales, engineering, assembly
Milwaukee, Wisconsin
 
180,000

 
  
 
13

 
Manufacturing, administration, sales, assembly
Milwaukee, Wisconsin
 
91,207

 
(2)
 
8

 
Manufacturing, sales and assembly
Mesa, Arizona
 
73,000

 
  
 
5

 
Warehouse, administration, repairs, rebuilds
Fort Meade, Florida
 
24,086

 
(7)
 
5

 
Warehouse, administration, repairs, rebuilds, sales, services
Virginia, Minnesota
 
82,000

 
 
 
20

 
Warehouse, administration, repairs, rebuilds, distribution, sales, services, assembly
Elko, Nevada
 
30,000

 
  
 
5

 
Repairs and rebuilds
Elko, Nevada
 
28,000

 
(4)
 
4

 
Repairs and services
Portland, Oregon
 
26,586

 
 
 
6

 
Warehouse, administration, repairs, rebuilds, distribution, sales, services, assembly
Kilgore, Texas
 
12,400

 
  
 
4

 
Administration, sales, services
Longview, Texas
 
1,409,000

 
  
 
2,105

 
Manufacturing, warehouse, administration, repairs, distribution, sales, engineering, services, assembly
Evansville, Wyoming
 
25,000

 
  
 
6

 
Rebuilds
Gillette, Wyoming
 
60,000

 
  
 
6

 
Manufacturing, warehouse, administration, repairs, rebuilds, sales, services, assembly
Gillette, Wyoming
 
16,000

 
  
 
3

 
Administration, services
Australia
 
 
 
 
 
 
 
 
Bassendean
 
72,500

 
  
 
5

 
Warehouse, administration, sales, services, assembly
Hemmant
 
23,724

 
  
 
2

 
Warehouse, administration, repairs
Mackay
 
36,425

 
  
 
3

 
Warehouse, administration, repairs, sales, services
Murarrie
 
15,000

 
(5)
 
1

 
Administration, sales
Rutherford
 
15,640

 
(2)
 
4

 
Warehouse, administration, repairs
Rutherford
 
150,000

 
 
 
11

 
Warehouse, administration, repairs, rebuilds, sales, services, assembly
Brazil
 
 
 
 
 
 
 
 
Belo Horizonte
 
40,365

 
(15)
 
1

 
Warehouse, administration, repairs, distributions, sales, engineering, services, assembly
Canada
 
 
 
 
 
 
 
 
Calgary
 
31,499

 
(6)
 
1

 
Manufacturing, administration
Edmonton
 
37,810

 
(2)
 
6

 
Warehouse, rebuilds
Fort McMurray
 
44,200

 
(14)
 
5

 
Warehouse, rebuilds
Sparwood
 
67,923

 
(4)
 
2

 
Services
Chile
 
 
 
 
 
 
 
 
Antofagasta
 
303,844

 
  
 
7

 
Repairs, rebuilds, engineering, services, assembly
Antofagasta
 
161,459

 
(1)
 
4

 
Warehouse, distribution
China
 
 
 
 
 
 
 
 
Tianjin
 
127,880

 
(9)
 
3

 
Manufacturing, warehouse, administration, distribution, engineering, assembly
India
 
 
 
 
 
 
 
 
Kolkata
 
10,176

 
(2)
 

 
Administration, sales, services
Mexico
 
 
 
 
 
 
 
 
Tlaquepaque, Jalisco
 
5,823

 
(3)
 

 
Administration, sales
Cananea, Sonora
 
15,000

 
(5)
 

 
Warehouse, administration, repairs, sales, services

(1)
Under a month-to-month lease

20

Table of Contents

(2)
Under a lease expiring in 2015
(3)
Under a lease expiring in 2016
(4)
Under a lease expiring in 2017
(5)
Under a lease expiring in 2018
(6)
Under a lease expiring in 2019
(7)
Under a lease expiring in 2020
(8)
Under a lease expiring in 2021
(9)
Under a lease expiring in 2022
(10)
Under a lease expiring in 2023
(11)
Under a lease expiring in 2024
(12)
Under a lease expiring in 2025
(13)
Under a lease expiring in 2026
(14)
Under a lease expiring in 2027

Item 3. Legal Proceedings
We and our subsidiaries are involved in various unresolved legal matters that arise in the ordinary course of operations, the most prevalent of which relate to product liability (including approximately 3,250 asbestos and silica related cases), employment and commercial matters. We and our subsidiaries also become involved from time to time in proceedings relating to environmental matters and litigation arising outside the ordinary course of business.

SEC Investigation . In the fourth quarter of 2014, we received a notice from the SEC’s Division of Enforcement that it was conducting an investigation into certain matters involving our acquisition of IMM in 2012 and related accounting matters. The notice was accompanied by a subpoena directing us to produce a variety of documents. We have provided documents responsive to the subpoena and are cooperating with the SEC in its investigation. While it is not possible to predict the timing or outcome of the SEC inquiry, we currently believe that this matter will not have a material adverse effect on our consolidated results of operation, financial position or liquidity.

Delaware Chancery Litigation . On November 12, 2014, Ironworkers Local No. 25 Pension Fund (“Plaintiff”) brought suit in the Court of Chancery of the State of Delaware (Case No. 10341) against the Company, members of its Board of Directors, and Bank of America Corporation (“Bank of America”), in its capacity as Administrative Agent under the Credit Agreement. Plaintiff alleges that the Company’s directors breached their fiduciary duties by unjustifiably permitting the Credit Agreement to contain what plaintiff calls a “Dead Hand Proxy Put” change of control provision, which would provide for the acceleration of amounts outstanding under the Credit Agreement in the event that a majority of the board of directors is replaced in a proxy contest.   In addition to the Credit Agreement, this provision has been present in the Company’s credit facilities since 2005. Plaintiff claims that this provision has a coercive effect on stockholder voting for change on the board of directors, and entrenches the Company’s incumbent directors.  The complaint alleges that Bank of America aided and abetted the defendant directors in their alleged breach of fiduciary duties.  The complaint does not seek monetary damages from the Company, but instead seeks a declaratory judgment that the Company’s directors breached their fiduciary duties, that Bank of America aided and abetted this breach, and that the challenged change of control provision is invalid, unenforceable, and severable; a permanent injunction against enforcement of the challenged provision by Bank of America; and attorneys’ fees and other costs.

Item 4. Mine Safety Disclosures
Not applicable.

Executive Officers of the Registrant
The following table shows certain information for each of our executive officers, including their position within the corporation and their 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.

21

Table of Contents

Name
 
Age
 
Current Office and Principal Occupation
 
Years as
Officer
Edward L. Doheny II
 
52
 
President and Chief Executive Officer and a director of Joy Global Inc. since 2013. From 2006 to 2013 he served as Executive Vice President of Joy Global Inc. and President and Chief Operating Officer of Joy Global Underground Mining LLC.
 
8
Randal W. Baker
 
51
 
Executive Vice President and Chief Operating Officer since 2013. He previously served as Executive Vice President of Joy Global Inc. and President and Chief Operating Officer of Joy Global Surface Mining Inc. from 2009 to 2013.
 
5
James M. Sullivan
 
54
 
Executive Vice President and Chief Financial Officer since 2012. He previously served as Chief Financial Officer of Solutia, Inc. from 2004 to 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.
 
2
Sean D. Major
 
50
 
Executive Vice President, General Counsel and Secretary since 2007.
 
8
Johannes S. Maritz
 
55
 
Executive Vice President, Human Resources since 2012. From 2007 to 2012 he served as Vice President, Human Resources for Joy Global Underground Mining LLC.
 
2

22

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 of $1.00 per share, began trading on the New York Stock Exchange on December 6, 2011 under the symbol “JOY.” The table below sets forth the high and low sales price and dividend payments for our common stock during the periods indicated. As of December 11, 2014 , there were approximately 81,120 shareholders of record.
 
Price per Share
 
Dividends
Per Share
 
High
 
Low
 
Fiscal 2014
 
 
 
 
 
Fourth Quarter
$
64.61

 
$
48.91

 
$
0.20

Third Quarter
$
65.36

 
$
56.81

 
$
0.20

Second Quarter
$
62.49

 
$
51.17

 
$
0.175

First Quarter
$
59.35

 
$
52.12

 
$
0.175

Fiscal 2013
 
 
 
 
 
Fourth Quarter
$
58.96

 
$
48.07

 
$
0.175

Third Quarter
$
61.75

 
$
47.83

 
$
0.175

Second Quarter
$
68.21

 
$
52.10

 
$
0.175

First Quarter
$
69.19

 
$
53.83

 
$
0.175


During the fourth quarter of fiscal 2014 , we made the following purchases of our common stock:
Period
 
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of Shares Purchased Under the Publicly Announced Program*
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program*
(in millions)
August 2, 2014 - August 29, 2014
 
1,100,000

 
$
61.04

 
1,100,000

 
$
524.4

August 30, 2014 - September 26, 2014
 
123,713

 
$
63.46

 
123,713

 
$
516.6

September 27, 2014 - October 31, 2014
 

 
$

 

 
$
516.6

* In August 2013, our Board of Directors authorized the Company to repurchase up to $1.0 billion in shares of common stock until August 2016. Under the program, the Company may repurchase shares in the open market in accordance with applicable SEC rules and regulations.

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Table of Contents


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 30, 2009 in our common stock, the S&P 500 Composite Stock Index and the DJUSHR.
 
10/30/2009
 
10/29/2010
 
10/28/2011
 
10/26/2012
 
10/25/2013
 
10/31/2014
Joy Global Inc.
$
100.00

 
$
142.54

 
$
184.70

 
$
125.97

 
$
120.39

 
$
110.50

S&P 500
100.00

 
116.52

 
125.94

 
145.09

 
184.52

 
216.39

DJUSHR
100.00

 
151.92

 
164.22

 
163.75

 
189.91

 
223.43


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
 

24


In thousands, except per share amounts
Year Ended October 31, 2014
 
Year Ended October 25, 2013 (1)
 
Year Ended October 26, 2012 (2)
 
Year Ended October 28, 2011 (3)
 
Year Ended October 29, 2010
Net sales
$
3,778,310

 
$
5,012,697

 
$
5,660,889

 
$
4,403,906

 
$
3,524,334

Operating income
517,140

 
821,661

 
1,172,559

 
920,179

 
697,103

Income from continuing operations attributable to Joy Global Inc.
$
331,037

 
$
533,938

 
$
767,081

 
$
631,002

 
$
461,499

Loss from discontinued operations

 
(225
)
 
(5,060
)
 
(21,346
)
 

Net income attributable to Joy Global Inc.
$
331,037

 
$
533,713

 
$
762,021

 
$
609,656

 
$
461,499

Basic earnings per share:
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
3.31

 
$
5.03

 
$
7.25

 
$
6.01

 
$
4.47

Loss from discontinued operations

 

 
(0.05
)
 
(0.20
)
 

Net income
$
3.31

 
$
5.03

 
$
7.20

 
$
5.81

 
$
4.47

Diluted earnings per share:
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
3.28

 
$
4.99

 
$
7.18

 
$
5.92

 
$
4.40

Loss from discontinued operations

 

 
(0.05
)
 
(0.20
)
 

Net income
$
3.28

 
$
4.99

 
$
7.13

 
$
5.72

 
$
4.40

Dividends per share
$
0.75

 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

Working capital excluding cash held in escrow and discontinued operations
$
1,454,953

 
$
1,473,538

 
$
1,388,407

 
$
1,000,475

 
$
1,338,603

Total assets
$
5,596,986

 
$
5,789,582

 
$
6,142,503

 
$
5,426,354

 
$
3,271,013

Total long-term obligations
$
1,269,646

 
$
1,307,376

 
$
1,357,092

 
$
1,388,167

 
$
396,668


(1) – In fiscal 2013, we incurred a $155.2 million intangible impairment charge.
(2) – In December 2011, we acquired IMM, a leading designer and manufacturer of underground coal mining equipment in China.
(3) – 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.

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.
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 fiscal 2014 , 2013 and 2012 . For a more complete understanding of this discussion, please read the Notes to Consolidated Financial Statements included in this report.

Overview
We are 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 parts and perform services for both underground and surface mining, as well as 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 and Surface. 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 coal and other minerals and ores and 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 Alabama, Pennsylvania, Texas and Wisconsin, and internationally, including facilities in Australia, Canada, China, South Africa and the United Kingdom.
Acquisition of Mining Technologies International Inc.
On May 30, 2014, we closed on the purchase of certain assets of Mining Technologies International Inc. ("MTI") for $44.4 million. MTI is a Canadian manufacturer of underground hard rock mining equipment serving the North American markets and

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a world leading supplier of raise bore drilling consumables. We have acquired substantially all of the assets associated with MTI's hard rock drilling, loaders, dump trucks, shaft sinking and raise bore product lines. MTI's results of operations have been included as part of the Underground segment from the acquisition date forward.
Acquisition of International Mining Machinery
On December 29, 2011, we acquired a controlling interest in IMM, a leading designer and manufacturer of underground coal mining equipment in China. In fiscal 2012, we acquired the remaining shares of IMM through a tender offer and subsequent compulsory acquisition of the untendered shares.
Prior to obtaining control on December 29, 2011, we accounted for our investment in IMM 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 Consolidated Statement of Income under the heading Other income for the year ended October 26, 2012. The results of operations for IMM have been included in the accompanying financial statements from December 29, 2011 forward as part of the Underground segment. Prior to obtaining control, our share of income from IMM was reported in the Consolidated Statements of Income under the heading Other income and included in Corporate.
Operating Results
Net sales in fiscal 2014 were $3.8 billion , compared to $5.0 billion in fiscal 2013 . The decrease in net sales of $1.2 billion , or 25% , in the current year reflected a decrease in original equipment sales of $1.1 billion , or 47% , and a decrease in service sales of $167.1 million , or 6% . Original equipment sales decreased in all regions. The decline in original equipment sales was led by North America and Australia, which decreased by $362.8 million and $259.6 million, respectively. Service sales decreased in China, Australia and Eurasia by $100.4 million, $88.5 million and $12.8 million, respectively, with increases in all other regions. Compared to the prior year, net sales in fiscal 2014 included a $94.8 million unfavorable effect of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.
Operating income in fiscal 2014 was $517.1 million , or 13.7% of net sales, compared to $821.7 million , or 16.4% of net sales, in fiscal 2013 . The decrease in operating income of $304.5 million , or 37% , in the current year was due to margins on lower sales volumes of $421.8 million, a less favorable product mix of $31.4 million, lower manufacturing cost absorption of $41.8 million, a decrease in other income of $21.3 million due to a $15.0 million claim settlement and a $13.5 million acquisition settlement in fiscal 2013, and higher period costs (defined as any costs of sales other than those costs associated with selling inventory at standard costs) of $17.1 million, which includes a $7.8 million non-cash pension curtailment charge resulting from actions taken during fiscal 2014 to freeze certain of our U.S. bargaining units' defined benefit plans at the end of the calendar year. These items were partially offset by the non-cash impairment charge of certain acquired trademarks in fiscal 2013 of $155.2 million and reduced product development, selling and administrative expenses of $73.7 million, which include a $6.9 million decrease in restructuring costs. Compared to the prior year, operating income in fiscal 2014 included a $17.4 million unfavorable effect of foreign currency translation.
Income from continuing operations in fiscal 2014 was $331.0 million , or $3.28 per diluted share, compared to $533.9 million , or $4.99 per diluted share, in fiscal 2013 .
Bookings in fiscal 2014 were $3.6 billion , compared to $3.9 billion in fiscal 2013 . The decrease in bookings of $310.9 million , or 8% , in the current year reflected a decrease in original equipment bookings of $358.0 million , or 26% , and an increase in service orders of $47.1 million , or 2% . Original equipment bookings decreased in all regions except Latin America. The decrease in original equipment orders was led by Australia and North America, which decreased by $180.3 million and $86.7 million, respectively. Service bookings increased in all regions except Australia and Eurasia. The increase in service orders was led by Latin America and North America, which increased by $62.8 million and $36.8 million, respectively. Compared to the prior year, bookings in fiscal 2014 included a $114.6 million unfavorable effect of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.
Market Outlook
During 2014, most major commodity markets served by the company remained in surplus as a slower than expected supply response was met by weakening global demand. These conditions resulted in a depressed pricing environment for most of the year that continued to influence the capital spending plans of our customers. Mining industry capital expenditures declined in 2014 for the second consecutive year, with further declines expected in 2015 as companies seek to optimize their mining portfolios to operate in a lower commodity price environment.

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Table of Contents

Since peaking during July, global economic growth has slowed in recent months as geographic and geopolitical issues have weighed on the overall global economy. Manufacturing conditions in the Eurozone slowed throughout the year weighing on economic growth, which reached 16-month lows in November. Along with this, consumer confidence in Europe has eroded and suggests the need for further policy measures to avoid a renewed contraction in economic activity. Chinese growth remains muted as the ongoing transition to a more consumer driven economy has slowed manufacturing growth. While growth in China is expected to occur in calendar 2014, conditions constraining growth persist, including a cooling of the housing market, high levels of debt and a weak export market.
After one of the coldest winters on record in 2013, U.S. coal markets were poised to see a rebound in production during 2014. However, a cooler-than-normal summer, record domestic natural gas production, and reduced export opportunities reduced the U.S. coal production outlook. Production during 2014 is now expected to be flat, while coal consumption in the electric power sector should increase. Coal inventories across the country remain below 10-year averages and could provide a catalyst for increased production should demand pick up. Looking into 2015, U.S. coal markets will remain constrained as expected gas production growth and depressed seaborne prices weigh on U.S. coal production, which will likely be flat with 2014.
After falling during 2014, seaborne thermal coal markets are expected to remain under pressure as new supply outpaces demand in 2015. The ramp-up of mine projects started during the 2011 to 2013 cycle is expected to reach a peak in 2015, before the market begins to rebalance in 2016 and beyond. Thermal coal prices are expected to pressure the seaborne market.
Seaborne thermal coal markets continue to be influenced by domestic Chinese policies including import restrictions, usage bans, and production curtailments. Domestic Chinese production is down year-to-date. A significant number of mines in China have been closed since 2013 due to safety reasons and production inefficiencies, and further consolidation is expected to continue in 2015. The domestic Chinese market is expected to recover slowly as excess capacity is absorbed and the effects of governmental policies continue to materialize in 2015.
Similar conditions are expected in the metallurgical coal market where prices now sit at 5-year lows. While a significant amount of curtailments have been announced year-to-date, the impact of these cuts won’t be felt until 2015. Oversupplied conditions are expected to elicit further supply curtailments in 2015 before a recovery in prices begins. Further straining the market is the decelerating growth rate in global steel production. 2014 is likely to finish with global steel production increasing, before slowing its growth rate in 2015.
The slowdown in steel production has also impacted the global iron ore market. The seaborne iron ore market is facing a significant amount of new supply coming online in 2015 and 2016. Combined with the possibility of slowing demand, iron ore prices are expected to remain range bound with movements primarily driven by the reaction of marginal supply in China and elsewhere.
Despite copper prices falling since the beginning of the year, further investment remains attractive for the majority of copper producers. Through the first nine months of the year, the global copper market has seen a deficit with a full-year deficit expected as well. New supply growth in 2015 is expected to move the market to a surplus for the next two years. Post-2016, the copper market is expected to return to a deficit as economic growth drives demand and investment in new capacity growth slows.
While global economic growth is expected to improve modestly in 2015, the rate of growth has been reduced in recent months which could exacerbate the supply rationalization process facing most major commodity markets. Multi-year low commodity prices will continue to impact customer capital expenditure decisions and drive demand for only those products and services that improve mine productivity and reduce operating cost. While a number of mines have closed over the last year, there remain many high-cost uneconomic mines that will face pressure in 2015 as the industry continues to consolidate and optimize the global portfolio of mines.
Company Outlook
While commodity prices remain depressed with limited upside expected in 2015, we continue to focus on those things that we can control. Our focus remains on creating growth with new products and providing world class direct service and support to our customers. While service bookings contracted slightly year over year during the fourth quarter, we were encouraged with the sequential stability in the fourth quarter as compared to the third quarter and the increase in service bookings during 2014 compared to 2013.
Despite challenging market conditions and an environment where capital expenditure decisions are being highly scrutinized, we will continue to make the necessary investments that are required to provide world-class service to our customers. During 2014, we opened a new service center in Australia that is capable of handling both surface and underground machinery. Improving our service infrastructure near our customers' mines is important as we seek to increase the share of service work on our fleet of

27

Table of Contents

equipment in the field and drive our branded consumable product offerings. With our service business representing nearly 70 percent of our revenue in 2014, developing our global network of service centers will remain a priority in 2015 beginning with our Peru and Russia locations, which is set to open in fiscal 2015.
Given the market landscape for 2015, we remain committed to controlling costs and optimizing our global manufacturing footprint. The deployment of our JBS ("Joy Business System") operational excellence programs will continue in 2015 as we seek continuous improvement of all functions, service centers and manufacturing operations to better position our business for future growth.
In addition, we will look to create growth by bringing new products, applications and systems to the market that improve our customers’ mine performance. In 2014, we booked our first high productivity low seam longwall system which is set to begin production in early 2015. Strategic investments made over the last several years have resulted in new products and systems that are enabling significant cost savings for our customers; the fully automated low seam longwall, a new heavy continuous miner linked with our exclusive flexible conveyor train for applications in potash and salt, and our new hybrid wheel loader for underground hard rock applications. These are just some examples where we will continue to focus our new product development activities and spending that will help us create growth in a down market.
With respect to the MTI acquisition, we are encouraged by prospect activity and our ability to generate top line growth in 2015 through our global sales and service network. We will continue to drive our strategy to expand our product offering in underground hard rock mining through organic technology development and acquired growth, and believe that this strategy will deliver strong returns to shareholders over the long term.
In 2015, we will also continue to implement our domestic China strategy of delivering customized full-systems solutions to our customers, and believe this is the right strategy for a market that is rapidly consolidating and broadly seeking to move sustainably lower on the global cost curve. We are seeing success in moving certain customers from lower technology products to higher technology, more integrated customized mining solutions. We remain committed to this strategy, and will continue to invest in our local China product and systems capability to provide a full range of mining solutions for our customers inside and outside of China.
While 2015 will again present challenges as oversupplied commodity market dynamics play out, we are focused on optimizing our business and working with our customers to deliver innovative products and system solutions that make their mining operations safer, more efficient and more profitable.

Results of Operations
Fiscal 2014 Compared With Fiscal 2013
Net Sales
The following table sets forth fiscal 2014 and 2013 net sales included in our Consolidated Statements of Income:
In thousands
2014
 
2013
 
 $ Change
 
% Change
Net Sales
 
 
 
 
 
 
 
Underground
$
2,078,894

 
$
2,691,039

 
$
(612,145
)
 
(23
)%
Surface
1,843,104

 
2,494,678

 
(651,574
)
 
(26
)%
Eliminations
(143,688
)
 
(173,020
)
 
29,332

 
 
Total
$
3,778,310

 
$
5,012,697

 
$
(1,234,387
)
 
(25
)%
Underground net sales in fiscal 2014 were $2.1 billion , compared to $2.7 billion in fiscal 2013 . The decrease in Underground net sales of $612.1 million , or 23% , in the current year reflected a decrease in original equipment sales of $534.2 million , or 42% , and a decrease in service sales of $77.9 million , or 6% . Original equipment sales decreased in all regions except Eurasia. The decline in original equipment sales was led by North America and Australia, which decreased by $184.0 million and $170.4 million, respectively. Service sales decreased in all regions except North America and Africa. The decline in service sales was led by China and Australia, which decreased by $92.2 million and $53.6 million, respectively. Compared to the prior year, Underground net sales in fiscal 2014 included a $64.3 million unfavorable effect of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.
Surface net sales in fiscal 2014 were $1.8 billion compared to $2.5 billion in fiscal 2013 . The decrease in Surface net sales of $651.6 million , or 26% , in the current year reflected a decrease in original equipment sales of $559.0 million , or 53% , and a

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decrease in service sales of $92.6 million , or 6% . Original equipment sales decreased in all regions. The decline in original equipment sales was led by North America and Latin America, which decreased by $189.2 million and $163.0 million, respectively. Service sales decreased in all regions except Latin America. The decline in service sales was led by North America and Australia, which decreased by $51.6 million and $32.8 million, respectively. Compared to the prior year, Surface net sales in fiscal 2014 included a $30.5 million unfavorable effect of foreign currency translation, due primarily to the decline in the value of the Australian dollar relative to the U.S. dollar.
Operating Income
The following table sets forth fiscal 2014 and 2013 operating income included in our Consolidated Statements of Income:
 
2014
 
2013
In thousands
Operating Income (Loss)
 
 % of Net Sales
 
Operating Income (Loss)
 
% of Net Sales
Operating Income (Loss)
 
 
 
 
 
 
 
Underground
$
273,930

 
13.2
%
 
$
367,233

 
13.6
%
Surface
334,826

 
18.2
%
 
525,314

 
21.1
%
Corporate Expenses
(48,085
)
 
 
 
(25,652
)
 
 
Eliminations
(43,531
)
 
 
 
(45,234
)
 
 
Total
$
517,140

 
13.7
%
 
$
821,661

 
16.4
%
Underground operating income in fiscal 2014 was $273.9 million , or 13.2% of net sales, compared to $367.2 million , or 13.6% of net sales, in fiscal 2013 . The decrease in Underground operating income of $93.3 million , or 25% , was due to margins on lower sales volumes of $212.1 million, a less favorable product mix of $8.4 million, lower manufacturing cost absorption of $49.9 million, a decrease in other income of $0.2 million, and higher period costs of $3.5 million, which includes a $7.8 million non-cash pension curtailment charge resulting from actions taken during the year to freeze certain of our U.S. bargaining units' defined benefit plans at the end of the calendar year. These items were partially offset by reduced product development, selling and administrative expenses of $50.6 million and the prior year non-cash impairment charge of certain acquired trademarks of $130.2 million. Compared to the prior year, Underground operating income in fiscal 2014 included a $16.9 million unfavorable effect of foreign currency translation.
Surface operating income in fiscal 2014 was $334.8 million , or 18.2% of net sales, compared to $525.3 million , or 21.1% of net sales, in fiscal 2013 . The decrease in Surface operating income of $190.5 million , or 36% , was due to margins on lower sales volumes of $216.0 million, a less favorable product mix of $18.3 million and higher period costs of $13.6 million. These items were partially offset by higher manufacturing cost absorption of $8.0 million, an increase in other income of $7.0 million, the prior year non-cash impairment charge of certain acquired trademarks of $25.0 million and reduced product development, selling and administrative expenses of $17.4 million, which includes a $5.5 million decrease in restructuring costs. Compared to the prior year, Surface operating income in fiscal 2014 included a $0.5 million unfavorable effect of foreign currency translation.
Corporate expense in fiscal 2014 was $48.1 million , compared to $25.7 million in fiscal 2013 . The increase in corporate expense of $22.4 million , or 87% , was due to a decrease in other income of $28.0 million, which in fiscal 2013 included a claim settlement and an acquisition settlement of $15.0 million and $13.5 million, respectively. These items were partially offset by reduced administrative expenses of $5.6 million primarily due to lower incentive-based compensation expense.
Product Development, Selling and Administrative Expense
Product development, selling and administrative expense in fiscal 2014 was $606.3 million , or 16.0% of net sales, compared to $680.0 million , or 13.6% of net sales, in fiscal 2013 . The decrease in product development, selling and administrative expense of $73.7 million , or 11% , was primarily driven by lower sales volumes, lower incentive-based compensation expense, reduced restructuring activities and savings from the Company's cost reduction programs.
In the fourth quarter of fiscal 2013, a non-cash impairment charge of $155.2 million was recorded in conjunction with our review of our brand portfolio and our development of a strategy to increase the visibility of our core brands in furtherance of our One Joy Global initiative. As a result, $130.2 million of impairment was recorded by our Underground segment and $25.0 million of impairment was recorded within our Surface segment.
Net Interest Expense
Net interest expense in fiscal 2014 was $55.3 million , compared to $57.5 million in fiscal 2013 . The decrease in net interest expense of $2.2 million , or 4% , was primarily due to a lower balance on our Term Loan, savings from our debt refinancing that occurred in the third quarter of fiscal 2014 and interest income on higher balances of interest bearing assets.

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Provision for Income Taxes
The provision for income taxes in fiscal 2014 was $130.8 million , compared to $230.2 million in fiscal 2013 . The effective income tax rate was 28.3% in fiscal 2014 , compared to 30.1% in fiscal 2013 . Net discrete tax benefits of $21.4 million were recorded in fiscal 2014 compared to $5.2 million in the prior year. The effective tax rate excluding discrete adjustments was 32.9% in fiscal 2014 , compared to 30.8% in fiscal 2013 . The increase in the normalized effective tax rate during the year was primarily attributable to the geographic mix of earnings and increased net operating losses of certain foreign subsidiaries without a currently recognizable tax benefit. The discrete tax benefits in fiscal 2014 were primarily attributable to favorable income tax audit settlements and release of certain reserves for which the statute of limitations had expired.
Bookings
Bookings represent new customer orders for original equipment and services, exclusive of long-term maintenance and repair arrangements and life cycle management arrangements awarded to us during the reporting period. Customer orders represent arrangements to purchase specific original equipment or services. We record bookings when firm orders are received and add the bookings to our backlog. Bookings for fiscal 2014 and 2013 are as follows:
In thousands
2014
 
2013
 
$ Change
 
% Change
Bookings
 
 
 
 
 
 
 
Underground
$
1,836,610

 
$
2,301,059

 
$
(464,449
)
 
(20
)%
Surface
1,917,994

 
1,779,827

 
138,167

 
8
 %
Eliminations
(140,590
)
 
(156,019
)
 
15,429

 
 
Total Bookings
$
3,614,014

 
$
3,924,867

 
$
(310,853
)
 
(8
)%
Underground bookings in fiscal 2014 were $1.8 billion , compared to $2.3 billion in fiscal 2013 . The decrease in Underground bookings of $464.4 million , or 20% , in the current year reflected a decrease in original equipment bookings of $455.1 million , or 45% , and a decrease in service orders of $9.4 million , or 1% . Original equipment bookings decreased in all regions except Eurasia. The decline in original equipment orders was primarily in Australia and North America, which decreased by $208.0 million and $147.6 million, respectively. Service bookings decreased in all regions except North America and China. The decline in service bookings was led by Australia and Africa, which decreased by $35.8 million and $5.8 million, respectively. Compared to prior year, Underground bookings in fiscal 2014 included a $79.2 million unfavorable impact of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.
Surface bookings for fiscal 2014 were $1.9 billion , compared to $1.8 billion in fiscal 2013 . The increase in Surface bookings of $138.2 million , or 8% , in the current year reflected an increase in original equipment bookings of $79.4 million , or 18% , and an increase in service orders of $58.8 million , or 4% . Original equipment bookings increased in all regions except Eurasia and Africa. The increase in original equipment orders was led by North America and Latin America, which increased by $60.7 million and $59.3 million, respectively. Service bookings increased in Latin America, North America and Africa by $62.8 million, $20.2 million and $7.6 million, respectively, with decreases in all other regions. Compared to prior year, Surface bookings in fiscal 2014 included a $35.4 million unfavorable impact of foreign currency translation, due primarily to the decline in the value of the Australian dollar relative to the U.S. dollar.
Fiscal 2013 Compared With Fiscal 2012
Net Sales
The following table sets forth fiscal 2013 and 2012 net sales included in our Consolidated Statements of Income:
In thousands
2013
 
2012
 
$ Change
 
% Change
Net Sales
 
 
 
 
 
 
 
Underground
$
2,691,039

 
$
3,107,488

 
$
(416,449
)
 
(13
)%
Surface
2,494,678

 
2,737,488

 
(242,810
)
 
(9
)%
Eliminations
(173,020
)
 
(184,087
)
 
11,067

 
 
Total
$
5,012,697

 
$
5,660,889

 
$
(648,192
)
 
(11
)%
Underground net sales in fiscal 2013 were $2.7 billion , compared to $3.1 billion in fiscal 2012 . The decrease in Underground net sales of $416.4 million , or 13% , reflected a decrease in original equipment sales of $245.5 million , or 16% , and a decrease in service sales of $170.9 million , or 11% . The decrease in sales was due to declining order rates driven by weak market conditions. Original equipment sales were stronger in Africa by $36.8 million, offset by declines in all other regions. Service sales declined

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in all regions except Australia, which increased by $6.2 million. Compared to the prior year, net sales in fiscal 2013 included a $71.4 million unfavorable effect of foreign currency translation.
Surface net sales in fiscal 2013 were $2.5 billion , compared to $2.7 billion in fiscal 2012 . The decrease in Surface net sales of $242.8 million , or 9% , reflected a decrease in original equipment of $212.5 million , or 17% , and a decrease in service sales of $30.3 million , or 2% . The decrease in sales was due to declining order rates driven by weak market conditions. Original equipment sales increases in Latin America and Africa of $31.0 million and $44.2 million, respectively, were more than offset by declines in all other regions. Service growth in Latin America and Eurasia of $29.3 million and $11.6 million, respectively, was more than offset by lower service sales in all other regions. Compared to the prior year, net sales in fiscal 2013 included a $16.6 million unfavorable effect of foreign currency translation.
Operating Income
The following table sets forth fiscal 2013 and 2012 operating income included in our Consolidated Statements of Income:
 
2013
 
2012
In thousands
Operating Income (Loss)
 
 % of Net Sales
 
Operating Income (Loss)
 
% of Net Sales
Operating Income (Loss)
 
 
 
 
 
 
 
Underground
$
367,233

 
13.6
%
 
$
671,797

 
21.6
%
Surface
525,314

 
21.1
%
 
592,687

 
21.7
%
Corporate Expense
(25,652
)
 
 
 
(51,079
)
 
 
Eliminations
(45,234
)
 
 
 
(40,846
)
 
 
Total
$
821,661

 
16.4
%
 
$
1,172,559

 
20.7
%
Underground operating income in fiscal 2013 was $367.2 million , or 13.6% of net sales, compared to $671.8 million , or 21.6% of net sales, in fiscal 2012 . The decrease in Underground operating income of $304.6 million , or 45% , was due to margins on lower sales volumes of $173.9 million, a less favorable product mix of $31.5 million, lower manufacturing cost absorption of $15.3 million, lower other income of $3.5 million and a non-cash impairment of certain acquired trademarks of $130.2 million. These items were partially offset by lower period costs of $30.5 million, which included a $31.2 million decrease in excess purchase accounting costs and a $2.1 million decrease in costs from the prior year pension curtailment, and lower product development, selling and administrative expenses of $19.3 million, which included an increase in restructuring costs of $13.3 million. Compared to the prior year, Underground operating income in fiscal 2013 included a $19.4 million unfavorable effect of foreign currency translation.
Surface operating income in fiscal 2013 was $525.3 million , or 21.1% of net sales, compared to $592.7 million , or 21.7% of net sales, in fiscal 2012 . The decrease in Surface operating income of $67.4 million , or 11% , was due to margins on lower sales volumes of $92.3 million, lower manufacturing cost absorption of $23.9 million, lower other income of $3.4 million and a non-cash impairment of certain acquired trademarks of $25.0 million . These items were partially offset by a more favorable product mix of $11.1 million, lower period costs of $45.8 million, which includes a decrease in excess purchase accounting costs of $13.7 million and a decrease in costs from the prior year pension curtailment of $10.4 million, and lower product development, selling and administrative expenses of $20.4 million, which includes an increase in restructuring costs of $6.8 million. Compared to the prior year, Surface operating income in fiscal 2013 included a $2.0 million unfavorable effect of foreign currency translation.
Corporate expense in fiscal 2013 was $25.7 million , compared to $51.1 million in fiscal 2012 . The decrease in corporate expense of $25.4 million , or 50% , in the current year was primarily due to a decrease in acquisition costs of $15.4 million, a successful claim settlement in the fourth quarter of $15.0 million and a successful acquisition settlement in the fourth quarter of $13.5 million associated with IMM. These items were partially offset by the prior year gain of $19.4 million on the re-measurement of our interest in IMM upon obtaining a controlling interest
Product Development, Selling and Administrative Expense
Product development, selling and administrative expense in fiscal 2013 was $680.0 million , or 13.6% of net sales, compared to $736.8 million , or 13.0% of net sales, in fiscal 2012 . The decrease in product development, selling and administrative expense of $56.8 million , or 8% , was primarily driven by lower sales volumes, lower incentive-based compensation expense, decreased pension and bad debt expenses, decreased amortization of intangibles, lower acquisition costs, reduced headcount and other cost reduction actions, as well as recoveries related to longwall deliveries and development activity. These items were partially offset by increased restructuring charges.

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In addition, in the fourth quarter of fiscal 2013, we reviewed our brand portfolio and developed a strategy to increase the visibility of our core brands in furtherance of our One Joy Global initiative. During this review, we determined that the indefinite life assumption was no longer appropriate for most of our previously acquired trademarks. As a result, a non-cash impairment charge of $155.2 million was recorded in the fourth quarter of fiscal 2013, of which $130.2 million was recorded by our Underground segment and $25.0 million was recorded by our Surface segment. 
Net Interest Expense
Net interest expense in fiscal 2013 was $57.5 million , compared to $67.4 million in fiscal 2012 . The decrease in net interest expense of $9.9 million , or 15% , was primarily due to higher borrowings in the prior year and generally lower fiscal 2013 short-term rates. In February 2012, we drew a term loan of $250.0 million in conjunction with the IMM tender offer. This loan was repaid in October 2012.
Provision for Income Taxes
The provision for income taxes in fiscal 2013 was $230.2 million , compared to $337.9 million in fiscal 2012 . The effective income tax rate from continuing operations was 30.1% in fiscal 2013 , compared to 30.6% in fiscal 2012 . Net discrete tax benefits of $5.2 million were recorded for fiscal 2013 , compared to net discrete tax benefits of $7.6 million in fiscal 2012 . The effective tax rate excluding discrete adjustments was 30.8% in fiscal 2013 , compared to 31.3% in fiscal 2012 . The decrease in the effective tax rate during the year was primarily attributable to the geographic mix of earnings.
Bookings
Bookings for fiscal 2013 and fiscal 2012 are as follows:
In thousands
2013
 
2012
 
$ Change
 
% Change
Bookings
 
 
 
 
 
 
 
Underground
$
2,301,059

 
$
2,780,799

 
$
(479,740
)
 
(17
)%
Surface
1,779,827

 
2,474,003

 
(694,176
)
 
(28
)%
Eliminations
(156,019
)
 
(183,463
)
 
27,444

 
 
Total Bookings
$
3,924,867

 
$
5,071,339

 
$
(1,146,472
)
 
(23
)%
Underground bookings in fiscal 2013 were $2.3 billion , compared to $2.8 billion in fiscal 2012 . The decrease in Underground bookings of $479.7 million , or 17% , reflected a decrease in original equipment bookings of $210.2 million , or 17% , and a decrease in service orders of $269.5 million , or 17% . The decrease in bookings was driven by weak market conditions. Original equipment bookings decreased in all regions except Eurasia, which increased by $20.4 million, and service orders decreased in all regions. Compared to prior year, Underground bookings in fiscal 2013 included a $123.8 million unfavorable impact of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.
Surface bookings in fiscal 2013 were $1.8 billion , compared to $2.5 billion in fiscal 2012 . The decrease in Surface bookings of $694.2 million , or 28% , reflected a decrease in original equipment bookings of $582.6 million , or 57% , and a decrease in service orders of $111.6 million , or 8% . The decrease in bookings was driven by weak market conditions. Original equipment and service orders decreased in all regions except Eurasia, for which original equipment bookings increased by $62.4 million and service orders increased by $12.7 million. Compared to prior year, Surface bookings in fiscal 2013 included a $38.4 million unfavorable impact of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.

Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is based on 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, inventory, goodwill and intangible assets, warranty, pension and postretirement benefits and costs, 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 services when the following criteria are satisfied: persuasive evidence of a sales arrangement exists, product delivery and transfer of title and risk and rewards has occurred or services have been rendered, the price is fixed and determinable and collectability is reasonably assured. We recognize revenue on long-term contracts, such as contracts to manufacture 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 93% of our sales in fiscal 2014 were recorded at the time of shipment of the product or delivery of the service, with the remaining 7% of sales recorded using percentage-of-completion accounting.
We have life cycle management arrangements with customers to supply parts and service for terms of 1 to 17 years . These arrangements are established based on the conditions in which the equipment will be operating, the time horizon that the arrangements 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 arrangement terms. Accounting for these arrangements requires us to make various estimates, including estimates of the relevant machine’s long-term maintenance requirements. Under these arrangements, 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 arrangements 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 considered multiple element arrangements. These agreements primarily consist of the sale of multiple pieces of equipment or equipment with subsequent installation services. These agreements are assessed for the purpose of identifying deliverables and determining whether the delivered item has value to the customer on a standalone basis and whether delivery or performance of the undelivered item is considered probable and substantially in our control. If those criteria are met, revenue is allocated to each identified unit of accounting based on our estimate of the relative selling prices of the deliverables and is recognized as the revenue recognition criteria are met for each element. The relative selling price is estimated by using recent sales transactions for similar items or from competitor prices for similar items. The difference between the total of the separate selling prices and the total contract consideration is allocated pro-rata across each of the units of accounting included in the arrangement.
Revenue recognition involves judgments, including assessments of expected returns, the likelihood of nonpayment and estimates of expected costs and profits on long-term contracts. In determining when to recognize revenue, we analyze various factors, including the specifics of the transaction, historical experience, creditworthiness of the customer and current market and economic conditions. 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, except for inventories in those jurisdictions for which another method is required by law. Cost includes direct materials, direct labor and manufacturing overhead. 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 and finished goods. 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 engineering drawings, customer relationships, patents, unpatented technology and trademarks. Indefinite-lived intangible assets are composed of certain trademarks and are not amortized but are evaluated for impairment annually or more frequently if events or changes occur that suggest an impairment in carrying value, such as a significant adverse change in the business climate. Indefinite-lived intangible assets are evaluated for impairment by comparing each assets' fair value to its book value. We first determine qualitatively whether it is more likely than not that an indefinite-lived asset is impaired. If we conclude that it is more likely than not that an indefinite-lived asset is impaired, then we determine the fair value by using 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 in fiscal 2014 .

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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 in fiscal 2014 .
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 is 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 generally 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 it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then 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 a non-cash 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 as of the first day of the fourth quarter of fiscal 2014 and no impairment was identified.
Accrued Warranties
We provide for the estimated costs that may be incurred under product warranties to remedy deficiencies of quality or performance of our products. Warranty costs are accrued at the time revenue is recognized. 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.
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 discount rates, expected returns on plan assets, mortality rates and rates of compensation increases, as 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 approximates 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 returns 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.
Mortality rates: Mortality rates are based on the IRS prescribed annuitant and non-annuitant mortality for 2014 under the Pension Protection Act of 2006.
Rates of compensation increases: The rates of compensation increases reflect 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. Specifically, the net loss (gain) in excess of 10% of the projected benefit obligation or the market related value of assets is amortized on a straight line basis over the average expected remaining service period (or over the lifetime for frozen plans) of active participants (or all participants for frozen plans) expected

34

Table of Contents

to benefit under the plan. 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. We have considered the new mortality tables (RP-2014) and the mortality improvement scale (MP-2014) that were recently released by the Society of Actuaries in the current year assumptions. We will continue to assess the mortality tables and improvement scale changes in fiscal 2015.
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 the expected return on net assets would have the following effects on pension expense and the projected benefit obligation as of and for the fiscal year ended October 31, 2014 :
 
0.25% Increase
 
0.25% Decrease
In thousands
Discount rate
 
Expected return on net assets
 
Discount rate
 
Expected return on net assets
U.S. Pension Plans:
 
 
 
 
 
 
 
Net pension expense (benefit)
$
502

 
$
(2,572
)
 
$
1,248

 
$
2,572

Projected (decrease) increase in benefit obligation
(32,728
)
 

 
33,682

 

Non U.S. Pension Plans:
 
 
 
 
 
 
 
Net pension (benefit) expense
(1,043
)
 
(1,613
)
 
570

 
1,613

Projected (decrease) increase in benefit obligation
(26,778
)
 

 
27,808

 

Other Postretirement Benefit Plans:
 
 
 
 
 
 
 
Net pension (benefit) expense
(10
)
 
(19
)
 
8

 
19

Projected (decrease) increase in benefit obligation
(517
)
 

 
528

 

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 intangible assets 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 31, 2014 , there were $63.3 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 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 the 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 October 31, 2014 and October 25, 2013 , respectively.

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In thousands
October 31, 2014
 
October 25, 2013
Accounts receivable, net
$
1,059,709

 
$
1,083,663

Inventories
1,108,308

 
1,139,744

Trade accounts payable
(395,945
)
 
(388,119
)
Advance payments and progress billings
(285,939
)
 
(399,768
)
Trade Working Capital
$
1,486,133

 
$
1,435,520

Other current assets
180,151

 
193,328

Short-term notes payable, including current portion of long-term obligations
(11,739
)
 
(58,669
)
Employee compensation and benefits
(136,911
)
 
(130,555
)
Accrued warranties
(67,272
)
 
(85,732
)
Other accrued liabilities
(265,600
)
 
(286,063
)
Working Capital Excluding Cash and Cash Equivalents
$
1,184,762

 
$
1,067,829

Cash and cash equivalents
270,191

 
405,709

Working Capital
$
1,454,953

 
$
1,473,538

We currently use trade working capital and cash flow from continuing 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 direct 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 the continuous improvement of our 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 fiscal 2014 was $363.4 million , compared to $638.5 million provided by continuing operations in fiscal 2013 . The decrease in cash provided by continuing operations was primarily due to lower earnings and cash used from changes in trade working capital levels, offset by reduced contributions to the defined benefit employee pension plan.
Cash used by investing activities for fiscal 2014 was $125.5 million , compared to $150.0 million used by investing activities in fiscal 2013 . The decrease in cash used by investing activities was primarily due to a decline in capital expenditures, partially offset by the current year acquisition of MTI.
Cash used by financing activities for fiscal 2014 was $367.3 million , compared to $336.5 million used by financing activities in fiscal 2013 . The increase in cash used by financing activities was primarily due to an increase in treasury share repurchases, partially offset by a decrease in required repayments made on the Term Loan due to the change in the repayment schedule associated with the debt refinancing that occurred in the third quarter of fiscal 2014.
During the first two quarters of fiscal 2014 we paid cash dividends of $0.175 per outstanding share of common stock each quarter and during the last two quarters of fiscal 2014 we paid cash dividends of $0.20 per outstanding share of common stock each quarter, resulting in $74.9 million in dividends paid during the fiscal year. In addition, on November 18, 2014 , our Board of Directors declared a cash dividend of $0.20 per outstanding share of common stock. This dividend will be paid on December 18, 2014 to all shareholders of record at the close of business on December 4, 2014 .
In fiscal 2015 , we expect capital spending to be between $100.0 million and $125.0 million . Capital projects will be focused on continuing investments in our global service infrastructure and operational excellence initiatives.
Retiree Benefits
We sponsor pension plans in the U.S. and in other countries. The significance of the funding requirements of these plans is largely dependent on the 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. During fiscal 2014 , we contributed $7.1 million to our defined benefit employee pension plans, and we do not expect contributions to exceed $50.0 million in fiscal 2015 . As of October 31, 2014 , we have a net unfunded pension and other postretirement liability of $169.7 million .
During the current year, we substantially completed negotiations with certain of our U.S. bargaining units to freeze their respective defined benefit plans at the end of the calendar year. These actions resulted in a $7.8 million non-cash pension curtailment charge during fiscal 2014.

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Credit Facilities and Senior Notes
On July 29, 2014, we entered into the Credit Agreement, which is a $1.0 billion unsecured revolving credit facility that matures on July 29, 2019. 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 $1.0 billion revolving credit agreement dated as of October 12, 2012 that was scheduled to expire on November 12, 2017. Under the terms of the Credit Agreement, we pay a commitment fee ranging from 0.09% to 0.30% 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 bear interest for a period from the applicable borrowing date until a date one week 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 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,” or (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 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 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. The Credit Agreement also restricts payment of dividends or other returns of capital to shareholders when the consolidated leverage ratio exceeds a stated level amount. As of October 31, 2014 , we were in compliance with all financial covenants of the Credit Agreement and had no restrictions under the Credit Agreement on the payment of dividends or returns of capital.
As of October 31, 2014 , there were no direct borrowings under the Credit Agreement. Outstanding standby letters of credit issued under the Credit Agreement, which count toward the $1.0 billion credit limit, totaled $191.9 million . As of October 31, 2014 , there was $808.1 million available for borrowings under the Credit Agreement.
On July 29, 2014, we entered into a term loan agreement which matures July 29, 2019 and provides for a commitment of up to $375.0 million (as amended, the "Term Loan"). The Term Loan amended our prior term loan, dated as of June 16, 2011 (the "Prior Term Loan"). The Prior Term Loan had been scheduled to mature on July 16, 2016 and provided an initial commitment of $500.0 million , which had been drawn in full in conjunction with our fiscal 2011 acquisition of LeTourneau Technologies Inc., and had been amortized to $375.0 million at the date of amendment. We utilized the $375.0 million commitment under the Term Loan to repay the balance outstanding under the Prior Term Loan. The Term Loan requires quarterly principal payments beginning in fiscal 2016 and contains terms and conditions that are the same as 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. As of October 31, 2014 , 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. 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.
Stock Repurchase Program
In August 2013, our Board of Directors authorized the Company to repurchase up to $1.0 billion in shares of our common stock until August 2016. Under the program, the Company may repurchase shares in the open market in accordance with applicable SEC rules and regulations. During the year ended October 31, 2014 , we purchased 4,712,025 shares of common stock for approximately $269.3 million . During the year ended October 25, 2013 , we purchased 4,105,000 shares of common stock for

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approximately $214.1 million . Since its inception, the Company has repurchased 8,817,025 shares of common stock under the program for approximately $483.4 million , leaving $516.6 million available under the program.
Advance Payments and Progress Billings
As part of the negotiation process associated with original equipment orders, contracts generally require advance payments and progress billings from our customers to support the procurement of inventory and other resources. As of October 31, 2014 , advance payments and progress billings were $285.9 million . As orders are shipped or costs are incurred, the advance payments and progress billings are recognized as revenue in the consolidated financial statements.
Financial Condition
We believe our liquidity and capital resources are adequate to meet our projected needs. We had $270.2 million in cash and cash equivalents as of October 31, 2014 , of which $196.5 million is held by foreign entities, and $808.1 million is available for borrowings under the Credit Agreement. We expect to meet our U.S. funding needs without repatriating undistributed profits that are indefinitely reinvested outside the U.S., which would result in the incurrence of additional U.S. corporate income taxes on such undistributed profits. Requirements for working capital, dividends, pension contributions, capital expenditures, acquisitions, stock repurchases and principal and interest payments on our Term Loan and senior notes will be adequately funded by cash on hand and continuing operations, supplemented by short and long term borrowings, as required.
Off-Balance Sheet Arrangements
We lease various assets under operating leases. The aggregate payments under operating leases as of October 31, 2014 are disclosed in the table in the Disclosures about Contractual Obligations and Commercial Commitments section below. No significant changes to lease commitments have occurred during fiscal 2014 . We have no other off-balance sheet arrangements.
Disclosures about Contractual Obligations and Commercial Commitments
The following table sets forth our contractual obligations and commercial commitments as of October 31, 2014 :
In thousands
Total
 
Less Than
1 Year
 
1 - 3
Years
 
3 - 5
Years
 
More Than
5 Years
Long Term Debt*
$
1,715,469

 
$
50,563

 
$
399,875

 
$
389,875

 
$
875,156

Purchase Obligations
45,329

 
40,635

 
4,645

 
49

 

Capital Leases*
287

 
180

 
107

 

 

Operating Leases
100,808

 
33,443

 
36,991

 
19,487

 
10,887

Other Long Term Obligations**
57,965

 
44,411

 
3,877

 
3,413

 
6,264

 
$
1,919,858

 
$
169,232

 
$
445,495

 
$
412,824

 
$
892,307

*
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 , 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

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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,