Joy Global Inc.
JOY GLOBAL INC (Form: 10-Q, Received: 06/03/2016 15:29:16)
Table of Contents




 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________ 
FORM 10-Q
____________________________________________ 
(MARK ONE)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED April 29, 2016
OR  
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD from                      to                      
Commission File number 001-09299
____________________________________________  
JOY GLOBAL INC.
(Exact Name of Registrant as Specified in Its Charter)
 ____________________________________________
Delaware
39-1566457
(State of Incorporation)
(I.R.S. Employer Identification No.)
100 East Wisconsin Ave, Suite 2780
Milwaukee, Wisconsin 53202
(Address of Principal Executive Offices) (Zip Code)
(414) 319-8500
(Registrant’s Telephone Number, Including Area Code)
____________________________________________ 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
LARGE ACCELERATED FILER
ý
 
ACCELERATED FILER
¨
 
 
 
 
 
NON-ACCELERATED FILER
¨
 
SMALLER REPORTING COMPANY
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ý
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
 
Class
 
May 27, 2016
Common Stock, $1 par value
 
98,137,336
 
 
 
 
 



Table of Contents




JOY GLOBAL INC.
FORM 10-Q INDEX
April 29, 2016
 
PAGE NO.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





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Forward-Looking Statements
This document contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives, pending acquisitions or divestitures, 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 general economic and industry conditions in the markets in which we operate, risks associated with conducting business in foreign countries, risks arising from regulations affecting the global mining industry, risks associated with acquisitions and the other risks discussed in Item 1A, Risk Factors , of our Annual Report on Form 10-K for our fiscal year ended October 30, 2015 and in other filings that we make with the U.S. Securities and Exchange Commission (the "SEC"). 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 any forward-looking statement. 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.



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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 

Quarter Ended
 
Six Months Ended

April 29,
2016
 
May 1,
2015
 
April 29,
2016
 
May 1,
2015
Net sales
$
601,985

 
$
810,523

 
$
1,128,285

 
$
1,514,396

Cost of sales
458,479

 
576,226

 
896,735

 
1,093,796

Product development, selling and administrative expenses
116,643

 
131,142

 
227,056

 
261,535

Restructuring expenses
33,394

 
11,110

 
60,053

 
11,775

Other income
(2,206
)
 
(900
)
 
(6,147
)
 
(4,113
)
Operating (loss) income
(4,325
)
 
92,945

 
(49,412
)
 
151,403

Interest income
858

 
2,980

 
1,665

 
5,920

Interest expense
(12,437
)
 
(16,252
)
 
(25,360
)
 
(32,149
)
(Loss) income before income taxes
(15,904
)
 
79,673

 
(73,107
)
 
125,174

(Benefit) provision for income taxes
(599
)
 
23,715

 
(17,581
)
 
38,691

Net (loss) income from continuing operations
(15,305
)
 
55,958

 
(55,526
)
 
86,483

Income from discontinued operations, net of income taxes
5,466

 

 
5,466

 

Net (loss) income
$
(9,839
)
 
$
55,958

 
$
(50,060
)
 
$
86,483

 
 
 
 
 
 
 
 
Basic (loss) earnings per share:
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.16
)
 
$
0.57

 
$
(0.57
)
 
$
0.89

Income from discontinued operations
0.06

 

 
0.06

 

Net (loss) income
$
(0.10
)
 
$
0.57

 
$
(0.51
)
 
$
0.89

 
 
 
 
 
 
 
 
Diluted (loss) earnings per share:
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.16
)
 
$
0.57

 
$
(0.57
)
 
$
0.88

Income from discontinued operations
0.06

 

 
0.06

 

Net (loss) income
$
(0.10
)
 
$
0.57

 
$
(0.51
)
 
$
0.88

 
 
 
 
 
 
 
 
Dividends per share
$
0.01

 
$
0.20

 
$
0.02

 
$
0.40

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
97,921

 
97,416

 
97,886

 
97,482

Diluted
97,921

 
97,972

 
97,886

 
98,055

See Notes to Condensed Consolidated Financial Statements.

3

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JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
 
 
Quarter Ended
 
April 29,
2016
 
May 1,
2015
Net (loss) income
$
(9,839
)
 
$
55,958

Other comprehensive income (loss):
 
 
 
Change in unrecognized prior service costs on pension and other postretirement obligations, net of (benefits) taxes of ($197) and $16
(181
)
 
34

Derivative instrument fair market value adjustment, net of tax benefits of $219 and $47
(509
)
 
(89
)
Foreign currency translation adjustment on long-term intercompany foreign loans
2,838

 
7,147

Other foreign currency translation adjustment
35,616

 
1,009

Total other comprehensive income, net of taxes
37,764

 
8,101

Comprehensive income
$
27,925

 
$
64,059

 
 
 
 
 
Six Months Ended
 
April 29,
2016
 
May 1,
2015
Net (loss) income
$
(50,060
)
 
$
86,483

Other comprehensive income (loss):
 
 
 
Change in unrecognized prior service costs on pension and other postretirement obligations, net of (benefits) taxes of ($93) and $32
(135
)
 
69

Derivative instrument fair market value adjustment, net of (benefits) taxes of ($365) and $1,473
(855
)
 
3,599

Foreign currency translation adjustment on long-term intercompany foreign loans
6,217

 
(3,746
)
Other foreign currency translation adjustment
174

 
(108,820
)
Total other comprehensive income (loss), net of taxes
5,401

 
(108,898
)
Comprehensive loss
$
(44,659
)
 
$
(22,415
)

See Notes to Condensed Consolidated Financial Statements.


4

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JOY GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
April 29,
2016
 
October 30,
2015
 
(unaudited)
 
(audited)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
160,878

 
$
102,885

Accounts receivable, net
670,376

 
812,073

Inventories
939,863

 
1,007,925

Other current assets
123,033

 
145,559

Assets held for sale
31,025

 

Total current assets
1,925,175

 
2,068,442

Property, plant and equipment, net
716,355

 
792,032

Other assets:
 
 
 
Other intangible assets, net
236,105

 
255,710

Goodwill
350,875

 
354,621

Deferred income taxes
153,008

 
118,913

Other non-current assets
126,582

 
122,728

Total other assets
866,570

 
851,972

Total assets
$
3,508,100

 
$
3,712,446

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term borrowings, including current portion of long-term obligations
$
23,353

 
$
26,321

Trade accounts payable
240,900

 
275,789

Employee compensation and benefits
83,723

 
90,335

Advance payments and progress billings
225,167

 
229,470

Accrued warranties
46,981

 
52,146

Other accrued liabilities
206,804

 
225,277

Current liabilities of discontinued operations

 
11,582

Total current liabilities
826,928

 
910,920

Long-term obligations
983,488

 
1,060,643

Other liabilities:
 
 
 
Liabilities for postretirement benefits
18,659

 
19,540

Accrued pension costs
167,999

 
175,699

Other non-current liabilities
131,259

 
125,635

Total other liabilities
317,917

 
320,874

Shareholders’ equity
1,379,767

 
1,420,009

Total liabilities and shareholders’ equity
$
3,508,100

 
$
3,712,446

See Notes to Condensed Consolidated Financial Statements.

5

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JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Six Months Ended
 
April 29,
2016
 
May 1,
2015
Operating Activities:
 
 
 
Net (loss) income
$
(50,060
)
 
$
86,483

Income from discontinued operations
(5,466
)
 

Adjustments to continuing operations:
 
 
 
Depreciation and amortization
77,393

 
66,176

Impairment charges
17,146

 

Changes in deferred income taxes
(1,876
)
 
17,593

Contributions to defined benefit employee pension and postretirement plans
(9,420
)
 
(12,254
)
Defined benefit employee pension and postretirement plan expense (income)
1,659

 
(12,510
)
Share-based compensation expense
11,240

 
15,965

Changes in long-term receivables
(9,172
)
 
10,882

Other adjustments to continuing operations, net
20,120

 
2,270

Changes in working capital items attributed to continuing operations:
 
 
 
Accounts receivable, net
144,892

 
105,010

Inventories
54,995

 
(139,419
)
Other current assets
2,114

 
(17,603
)
Trade accounts payable
(34,316
)
 
(36,574
)
Employee compensation and benefits
(3,605
)
 
(47,831
)
Advance payments and progress billings
(5,559
)
 
57,926

Accrued warranties
(4,338
)
 
(7,313
)
Other accrued liabilities
(52,976
)
 
(36,040
)
Net cash provided by operating activities
152,771

 
52,761

Investing Activities:
 
 
 
Property, plant and equipment acquired
(21,094
)
 
(39,795
)
Proceeds from sale of property, plant and equipment
10,587

 
3,958

Other investing activities, net
3

 
373

Net cash used by investing activities
(10,504
)
 
(35,464
)
Financing Activities:
 
 
 
Common stock issued

 
2,560

Dividends paid
(1,977
)
 
(38,964
)
Repayments of term loan
(18,750
)
 

Payments on credit agreement
(58,600
)
 

Repayments of short term debt
(3,165
)
 

Financing fees
(1,011
)
 

Treasury stock purchased

 
(50,000
)
Other financing activities, net

 
865

Net cash used by financing activities
(83,503
)
 
(85,539
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(771
)
 
(9,858
)
Increase (Decrease) in Cash and Cash Equivalents
57,993

 
(78,100
)
Cash and Cash Equivalents at Beginning of Period
102,885

 
270,191

Cash and Cash Equivalents at End of Period
$
160,878

 
$
192,091


See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents




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

1.
Description of Business
Joy Global Inc. (the "Company," "we" and "us") is a leading manufacturer and servicer of high productivity mining equipment for the extraction of metals and minerals. 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 and haulage of coal and other bedded minerals. We are also a major producer of surface mining equipment for the extraction and haulage of copper, coal and other minerals and ores. We offer comprehensive direct service, which includes our smart service offerings, near major mining regions worldwide and provide extensive operational support for many types of equipment used in mining. Our principal manufacturing facilities are located in the United States, including facilities in Alabama, Texas and Wisconsin, and internationally, including facilities in Australia, Canada, China, France, South Africa and the United Kingdom.

2.
Basis of Presentation
The Condensed Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited and are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to SEC rules and regulations. In our opinion, all adjustments necessary for the fair presentation on a going concern basis of the results of operations, cash flows and financial position for all periods presented have been made. All such adjustments made are of a normal recurring nature. The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate realization of assets and settlement of liabilities in the future could differ from those estimates.
These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 30, 2015 . The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Further, results for all periods presented reflect the voluntary change in our method of accounting for actuarial gains and losses and the calculation of our expected return on plan assets for all of our pension and other post-retirement benefit plans as discussed further in our Form 10-K for the year ended October 30, 2015.

3.
Acquisitions
Acquisition of Montabert S.A.S.
On June 1, 2015 , we completed the acquisition of 100% of the equity of Montabert S.A.S. ("Montabert") for approximately $ 121.5 million dollars, gross of cash acquired of $ 7.1 million dollars. Montabert specializes in the design, production and distribution of high quality hydraulic rock breakers, pneumatic equipment, drilling attachments, drifters and related parts and tools. This acquisition expands our product and service capabilities for hard rock mining, tunneling and rock excavation, further diversifying our commodity and end market exposures. Montabert's results of operations have been included as part of the Underground segment from the date of the acquisition forward.
In connection with the acquisition, we recorded goodwill of approximately $ 55.5 million and intangible assets of approximately $ 35.1 million . The intangible assets are primarily comprised of customer relationships, trade names and patents, which are being amortized over their respective estimated useful lives. Other assets acquired consist of working capital related items and property, plant and equipment, with values that are not individually significant.

4.
Inventories
Consolidated inventories consist of the following:
 

7





In thousands
April 29,
2016
 
October 30,
2015
Finished goods
754,555

 
$
814,306

Work in process
134,729

 
135,310

Raw materials
50,579

 
58,309

Total inventories
$
939,863

 
$
1,007,925

Finished goods include finished components and parts in addition to any finished equipment.

5.
Held for Sale Assets
As of April 29, 2016 , our steel mill business and certain assets associated with one of our electrical facilities met the held for sale criteria. We are disposing of these non-core assets in our Surface segment in response to adverse market conditions. The disposal groups have been recognized at the lower of cost or fair value less costs to sell. No gain or loss was recognized in the quarter ended April 29, 2016 , in part as a result of a prior impairment recognized for the steel mill disposal group.
The value of the assets consist of the following:
In thousands
April 29,
2016
Inventories
3,642

Property, plant and equipment, net
20,702

Other intangible assets, net
2,336

Goodwill
4,345

Total Assets Held for Sale
$
31,025

We have recorded these assets as current in the Assets held for sale line of the Condensed Consolidated Balance Sheet, as we expect these assets to be sold within the next year.

6.
Goodwill and Other Intangible Assets
Finite-lived intangible assets are amortized to reflect the pattern of economic benefits consumed, which is principally the straight-line method. Intangible assets that are subject to amortization are evaluated for potential impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. No impairment was identified related to our finite-lived intangible assets as of either April 29, 2016 or May 1, 2015 .
Indefinite-lived intangible assets 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. Due to the Company's decision to idle certain facilities in China and the continued market challenges in that region, we conducted an assessment of our indefinite-lived trademarks as of April 29, 2016 using the relief-from-royalty methodology, which evaluates the estimated licensing cost of an intangible asset as an alternative to ownership. This valuation concluded that the carrying value of the Company's indefinite-lived trademarks exceeded the estimated licensing cost. As a result, the Company recorded a $6.6 million non-cash, pre-tax impairment charge to its Underground segment in the second quarter of fiscal 2016 . Assumptions critical to the process include forecasted information and discount rates. This fair value determination is categorized as Level 3 in the fair value hierarchy. See Note 17, Fair Value Measurements , for the definition of Level 3 inputs. This charge is recorded in the Consolidated Statement of Operations under the heading Restructuring expenses .
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, 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. The most recent goodwill impairment test was performed as of January 29, 2016, as our total shareholders’ equity exceeded our market capitalization based on our stock price of $9.97 per share at that point in time, and therefore indicated the possibility of an impairment to goodwill. This interim goodwill impairment test focused on our Surface reporting unit, as all Underground goodwill was fully impaired in the fourth quarter of fiscal 2015 . After completing our step one analysis, we concluded that the estimated fair value of our Surface reporting unit exceeded its carrying value by 15% . We determined that there were no indicators of impairment for the quarter ended April 29, 2016 that would warrant an additional interim impairment test at that point in time. Although we have concluded that there is no impairment on the goodwill of $350.9 million associated with our Surface reporting unit as of April 29, 2016 , we will continue to closely monitor this in the future considering the volatility and uncertainty in the global commodity markets that our surface mining equipment services. Should there be further market declines, particularly in Latin American copper or North American coal and iron ore, which are the most

8





significant markets serviced by our Surface reporting unit, or if our market capitalization falls below our total shareholders' equity in future periods, there would be an increased risk that we would be required to recognize impairment to the Surface reporting unit's goodwill.

7.
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.
The following table reconciles the changes in the product warranty reserve:
 
Quarter Ended
 
Six Months Ended
In thousands
April 29,
2016
 
May 1,
2015
 
April 29,
2016
 
May 1,
2015
Balance, beginning of period
50,518

 
$
58,528

 
$
52,146

 
$
67,272

Accrual for warranty expensed during the period
5,071

 
12,673

 
11,965

 
18,853

Settlements made during the period
(9,270
)
 
(15,012
)
 
(16,262
)
 
(26,387
)
Effect of foreign currency translation
662

 
2,005

 
(868
)
 
(1,544
)
Balance, end of period
$
46,981

 
$
58,194

 
$
46,981

 
$
58,194


8.
Borrowings and Credit Facilities
On July 29, 2014, we entered into a revolving credit agreement that matures on July 29, 2019 (the "Credit Agreement"). On December 14, 2015, we entered into an amendment to our Credit Agreement that increased the maximum consolidated leverage ratio for the period beginning in the second quarter of fiscal 2016 through the first quarter of fiscal 2018. The amendment increased the permitted ratio from 3.0 x to 3.5 x for the second quarter of fiscal 2016 and will further increase the permitted ratio to 4.25 x in the third quarter of fiscal 2016 and to 4.5 x in the fourth quarter of fiscal 2016. The ratio will begin to decline on a quarterly basis beginning in the third quarter of fiscal 2017 and return to 3.0 x in the second quarter of fiscal 2018. The amendment also reduced the aggregate amount of revolving commitments of the lenders from $ 1.0 billion to $ 850.0 million and added a letter of credit sublimit of $ 500.0 million . In addition, we also agreed to limit priority debt (secured indebtedness and the unsecured indebtedness of our foreign subsidiaries) to 10% of consolidated net worth and to limit cash dividends to $ 25.0 million per year in the aggregate. We may continue to 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. 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 if the consolidated leverage ratio exceeds the maximum amount set forth therein. As of April 29, 2016 , we were in compliance with all financial covenants of the Credit Agreement.
As of April 29, 2016 , there were no direct borrowings under the Credit Agreement. Total interest expense recognized for direct borrowings under the Credit Agreement for the quarters ended April 29, 2016 and May 1, 2015 was $0.1 million and $0.2 million , respectively. For the six months ended April 29, 2016 and May 1, 2015 , total interest expense recognized for direct borrowings under the Credit Agreement was $0.5 million and $0.4 million , respectively. Outstanding standby letters of credit issued under the Credit Agreement, which count toward the $850.0 million credit limit, totaled $112.1 million . As of April 29, 2016 , there was $737.9 million available for borrowings under the Credit Agreement.
On July 29, 2014, we also entered into a term loan agreement that matures July 29, 2019 and provides for a commitment of up to $375.0 million . The Term Loan replaced our prior term loan, dated as of June 16, 2011. The Prior Term Loan had been

9





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 that we entered into the Term Loan. We utilized the $375.0 million commitment under the Term Loan to repay the balance outstanding under the Prior Term Loan. On December 14, 2015, the Term Loan was amended to be consistent with the revolving Credit Agreement with respect to the maximum leverage ratio, restrictions on priority debt and dividends, and other restricted payments. The Term Loan requires quarterly principal payments beginning in fiscal 2016, of which $4.7 million and $9.4 million were paid during the quarter and six months ended April 29, 2016 , respectively. Additionally, in the second quarter we prepaid $9.4 million of the payments due in the third and fourth quarter of fiscal 2016. The Term Loan 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 April 29, 2016 , 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") 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 Senior Notes for an aggregate principal amount of $ 150.0 million at 6.625% due 2036 (the "2036 Notes"). Interest on the 2036 Notes is paid semi-annually in arrears on May 15 and November 15 of each year, and the 2036 Notes are guaranteed by each of our current and future material domestic subsidiaries, as well as certain current immaterial domestic subsidiaries. The 2036 Notes were originally issued in a private placement under an exemption from registration provided by the Securities Act. In the second quarter of fiscal 2007, the 2036 Notes were exchanged for substantially identical 2036 Notes in an exchange that was registered under the Securities Act. At our option, we may redeem some or all of the 2036 Notes at a redemption price of the greater of 100% of the principal amount of the 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 0.375% .
Our borrowings also include amounts related to transfers of certain receivables under factoring arrangements with recourse related to our French operations.
Direct borrowings and capital lease obligations consist of the following:
In thousands
April 29,
2016
 
October 30,
2015
Domestic:
 
 
 
Term Loan due 2019
356,250

 
375,000

5.125% Senior Notes due 2021
497,397

 
497,195

6.625% Senior Notes due 2036
148,569

 
148,553

Credit Agreement

 
58,600

Foreign:
 
 
 
Capital leases
83

 
159

Factoring arrangement
4,542

 
7,457

Total obligations
1,006,841

 
1,086,964

Less: Amounts due within one year
(23,353
)
 
(26,321
)
Long-term obligations
$
983,488

 
$
1,060,643

     

9.
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) and its components are presented in the Condensed Consolidated Statements of Comprehensive Income (Loss). Changes in accumulated other comprehensive income (loss), net of taxes, consist of the following:

10





 
Quarter ended April 29, 2016
 
Quarter ended May 1, 2015
 
Change in Unrecognized Prior Service Costs on Pension and Other Postretirement Obligations
 
Derivative Instrument Fair Market Value Adjustment
 
Foreign Currency Translation Adjustment
 
Total
 
Change in Unrecognized Prior Service Costs on Pension and Other Postretirement Obligations
 
Derivative Instrument Fair Market Value Adjustment
 
Foreign Currency Translation Adjustment
 
Total
Beginning balance
$
(1,236
)
 
$
9,948

 
$
(188,147
)
 
$
(179,435
)
 
$
(1,451
)
 
$
8,424

 
$
(130,252
)
 
$
(123,279
)
Other comprehensive income (loss) before reclassifications, net of taxes

 
(1,955
)
 
38,454

 
36,499

 

 
(407
)
 
8,156

 
7,749

Amounts reclassified from accumulated other comprehensive (loss) income, net of taxes
(181
)
 
1,446

 

 
1,265

 
34

 
318

 

 
352

Total other comprehensive (loss) income, net of taxes
(181
)
 
(509
)
 
38,454

 
37,764

 
34

 
(89
)
 
8,156

 
8,101

Ending balance
$
(1,417
)
 
$
9,439

 
$
(149,693
)
 
$
(141,671
)
 
$
(1,417
)
 
$
8,335

 
$
(122,096
)
 
$
(115,178
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended April 29, 2016
 
Six months ended May 1, 2015
 
Change in Unrecognized Prior Service Costs on Pension and Other Postretirement Obligations
 
Derivative Instrument Fair Market Value Adjustment
 
Foreign Currency Translation Adjustment
 
Total
 
Change in Unrecognized Prior Service Costs on Pension and Other Postretirement Obligations
 
Derivative Instrument Fair Market Value Adjustment
 
Foreign Currency Translation Adjustment
 
Total
Beginning balance
$
(1,282
)
 
$
10,294

 
$
(156,084
)
 
$
(147,072
)
 
$
(1,486
)
 
$
4,736

 
$
(9,530
)
 
$
(6,280
)
Other comprehensive income (loss) before reclassifications, net of taxes

 
(2,745
)
 
6,391

 
3,646

 

 
2,213

 
(112,566
)
 
(110,353
)
Amounts reclassified from accumulated other comprehensive (loss) income, net of taxes
(135
)
 
1,890

 

 
1,755

 
69

 
1,386

 

 
1,455

Total other comprehensive (loss) income, net of taxes
(135
)
 
(855
)
 
6,391

 
5,401

 
69

 
3,599

 
(112,566
)
 
(108,898
)
Ending balance
$
(1,417
)
 
$
9,439

 
$
(149,693
)
 
$
(141,671
)
 
$
(1,417
)
 
$
8,335

 
$
(122,096
)
 
$
(115,178
)
Details of the reclassifications from accumulated other comprehensive (loss) income are disclosed below:

11





 
 
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)
 
 
 
 
Quarter Ended
 
Six Months Ended
 
Affected Line Items in the Statements of Operations
 
 
April 29,
2016
 
May 1,
2015
 
April 29,
2016
 
May 1,
2015
 
Change in unrecognized prior service costs on pension and other postretirement obligations:
 
 
 
 
 
 
 
 
 
 
Amortization of prior service cost
 
$
60

 
$
50

 
$
110

 
$
101

 
Cost of sales/Product development, selling and administrative expense*
Curtailment gain
 
(438
)
 

 
(338
)
 

 
Cost of sales/administrative expense
Deferred tax
 
197

 
(16
)
 
93

 
(32
)
 
Provision for income taxes
Amounts reclassified from accumulated other comprehensive (loss) income, net of taxes
 
$
(181
)
 
$
34

 
$
(135
)
 
$
69

 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instrument fair market value adjustment:
 
 
 
 
 
 
 
 
 
 
Foreign exchange cash flow hedges
 
$
2,072

 
$
455

 
$
2,703

 
$
1,964

 
Net sales/Cost of sales**
Deferred tax
 
(626
)
 
(137
)
 
(813
)
 
(578
)
 
Provision for income taxes
Amounts reclassified from accumulated other comprehensive income, net of taxes
 
$
1,446

 
$
318

 
$
1,890

 
$
1,386

 
 
 
 
 
 
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
1,265

 
$
352

 
$
1,755

 
$
1,455

 
 

* Amounts are included in the computation of net periodic benefits costs as either cost of sales or product development, selling and administrative expense as appropriate. Refer to Note 13, Retiree Benefits, for additional information.

** Amounts are included in either net sales or cost of sales as appropriate. Refer to Note 14, Derivatives, for additional information.

10.
Shareholders' Equity
In August 2013, our Board of Directors authorized the repurchase of up to $1.0 billion in shares of our common stock until August 2016. Under the program, we may repurchase shares in the open market in accordance with applicable SEC rules and regulations. During the quarter and six months ended April 29, 2016 , we did not repurchase any shares of common stock. During the quarter ended May 1, 2015 , we did not repurchase any shares of common stock. During the six months ended May 1, 2015 , we repurchased 954,580 shares of common stock for approximately $50.0 million . Since the program's inception, we have repurchased 9,771,605 shares of common stock under the program for approximately $533.4 million , leaving $466.6 million available under the program.

11.
Share-Based Compensation
Total share-based compensation expense recognized for the quarters ended April 29, 2016 and May 1, 2015 is $ 6.9 million and $ 8.4 million , respectively. Total share-based compensation expense recognized for the six months ended April 29, 2016 and May 1, 2015 is $11.2 million and $16.0 million , respectively. The total share-based compensation expense is reflected in our Condensed Consolidated Statements of Cash Flows in operating activities as an add back to net income .
The corresponding deferred tax assets recognized related to the share-based compensation are $1.9 million and $ 2.2 million for the quarters ended April 29, 2016 and May 1, 2015 , respectively. The corresponding deferred tax asset recognized related to the share-based compensation expense are $3.2 million and $4.1 million for the six months ended April 29, 2016 and May 1, 2015 , respectively.

12.
Restructuring Charges
During fiscal 2015, in response to the adverse market conditions, management implemented further cost reduction initiatives, which we refer to as the Restructuring Program. Expected and actual costs related to the Restructuring Program have continued into 2016 as more activities have been planned and initiated. These costs include entering into severance and termination agreements

12





and full or partial closures and idling of certain facilities in order to better align the Company's overall cost structure with anticipated levels of future demand. We currently expect to complete the Restructuring Program by the end of fiscal 2017.
Restructuring charges incurred to date related to the Restructuring Program have consisted primarily of employee severance and termination costs, asset impairment charges and accelerated depreciation. Other costs consist primarily of equipment and inventory relocation costs, as well as inventory write-downs and some environmental and legal expenses. The following tables summarize restructuring costs by line item:
In thousands
Quarter ended April 29, 2016
 
Quarter ended May 1, 2015
 
Restructuring Expenses
 
Cost of Sales
 
Total
 
Restructuring Expenses
 
Cost of Sales
 
Total
Employee severance and termination costs
$
9,912

 
$

 
$
9,912

 
$
11,110

 
$

 
$
11,110

Asset impairment charges
17,145

 

 
17,145

 

 

 

Accelerated depreciation
5,089

 

 
5,089

 

 

 

Other costs
1,248

 
1,306

 
2,554

 

 

 

Total restructuring and related charges
$
33,394

 
$
1,306

 
$
34,700

 
$
11,110

 
$

 
$
11,110

In thousands
Six months ended April 29, 2016
 
Six months ended May 1, 2015
 
Restructuring Expenses
 
Cost of Sales
 
Total
 
Restructuring Expenses
 
Cost of Sales
 
Total
Employee severance and termination costs
$
31,065

 
$

 
$
31,065

 
$
11,775

 
$

 
$
11,775

Asset impairment charges
17,145

 

 
17,145

 

 

 

Accelerated depreciation
9,868

 

 
9,868

 

 

 

Other costs
1,975

 
1,306

 
3,281

 

 

 

Total restructuring and related charges
$
60,053

 
$
1,306

 
$
61,359

 
$
11,775

 
$

 
$
11,775

The following tables summarize the amounts incurred for the period by segment:
In thousands
Quarter ended April 29, 2016
 
Underground
 
Surface
 
Corporate
 
Total
Employee severance and termination costs*
$
8,828

 
$
1,084

 
$

 
$
9,912

Asset impairment charges
17,145

 

 

 
17,145

Accelerated depreciation
5,089

 

 

 
5,089

Other costs
2,554

 

 

 
2,554

Total restructuring and related charges
$
33,616

 
$
1,084

 
$

 
$
34,700

In thousands
Quarter ended May 1, 2015
 
Underground
 
Surface
 
Corporate
 
Total
Employee severance and termination costs
$
4,970

 
$
5,888

 
$
252

 
$
11,110

Total restructuring and related charges
$
4,970

 
$
5,888

 
$
252

 
$
11,110

In thousands
Six months ended April 29, 2016
 
Underground
 
Surface
 
Corporate
 
Total
Employee severance and termination costs*
$
29,022

 
$
1,648

 
$
395

 
$
31,065

Asset impairment charges
17,145

 

 

 
17,145

Accelerated depreciation
9,868

 

 

 
9,868

Other costs
3,281

 

 

 
3,281

Total restructuring and related charges
$
59,316

 
$
1,648

 
$
395

 
$
61,359


13





In thousands
Six months ended May 1, 2015
 
Underground
 
Surface
 
Corporate
 
Total
Employee severance and termination costs
$
5,416

 
$
6,107

 
$
252

 
$
11,775

Total restructuring and related charges
$
5,416

 
$
6,107

 
$
252

 
$
11,775

* The amount incurred during the quarter and six months ended April 29, 2016 includes $0.2 million of income and $9.4 million of expense for contractual termination benefits under the Joy Global qualified pension plan as part of continued restructuring activities in our Underground division. As noted below, amounts accrued for contractual termination benefits are included in our retiree benefit liabilities.
The impairment charges above relate to both property, plant and equipment and indefinite-lived trademarks. As of April 29, 2016 , we assessed the long-lived assets of an asset group in China for impairment as a result of our decision to idle certain facilities in China due to the continued market challenges in that region. As such, it was determined that the cash flows associated with this asset group would be insufficient to support their carrying value. A valuation was performed over property, plant and equipment using the market approach for real property. Personal property was valued primarily using the cost approach. As a result of this analysis, we recorded non-cash impairment charges of $10.6 million in the quarter ended April 29, 2016 for our Underground segment related to such property, plant, and equipment.
As discussed in Note 6, "Goodwill and Other Intangible Assets ," we also assessed our indefinite-lived trademarks using the relief-from-royalty methodology as of April 29, 2016 due to our decision to idle certain facilities in China and the continued market challenges in that region. As a result, a non-cash, pre-tax impairment charge of $6.6 million was recorded in the quarter ended April 29, 2016 by our Underground segment
The following table summarizes the cumulative amounts incurred from inception to date by segment:
In thousands
April 29, 2016
 
Underground
 
Surface
 
Corporate
 
Total
Employee severance and termination costs
$
45,362

 
$
14,099

 
$
2,980

 
$
62,441

Asset impairment charges
17,145

 

 

 
17,145

Accelerated depreciation
11,947

 

 

 
11,947

Other costs
5,360

 

 

 
5,360

Total restructuring and related charges
$
79,814

 
$
14,099

 
$
2,980

 
$
96,893

The following table summarizes the total expected costs from inception of the Restructuring Program through fiscal 2017 by segment:
In thousands
April 29, 2016
 
Underground
 
Surface
 
Corporate
 
Total
Employee severance and termination costs
$
53,000

 
$
18,000

 
$
3,000

 
$
74,000

Asset impairment charges
17,000

 

 

 
17,000

Accelerated depreciation
15,000

 
11,000

 

 
26,000

Other costs
15,000

 
1,000

 

 
16,000

Total restructuring and related charges
$
100,000

 
$
30,000

 
$
3,000

 
$
133,000

Amounts impacting the Company's reserves for restructuring charges for its Restructuring Program relate to employee severance and termination costs as follows:

14





 
Quarter Ended
In thousands
April 29, 2016
 
May 1, 2015
 
Employee Severance and Termination Costs
 
Other Costs
 
Total
 
Employee Severance and Termination Costs
 
Other Costs
 
Total
Beginning accrual
$
11,191

 
$

 
$
11,191

 
$
470

 
$

 
$
470

Costs incurred
10,186

 
1,068

 
11,254

 
11,110

 

 
11,110

Costs paid/settled
(5,796
)
 
(930
)
 
(6,726
)
 
(2,287
)
 

 
(2,287
)
Other adjustments
(371
)
 

 
(371
)
 

 

 

Effect of foreign currency translation
69

 

 
69

 
35

 

 
35

Ending accrual
$
15,279

 
$
138

 
$
15,417

 
$
9,328

 
$

 
$
9,328

 
Six Months Ended
In thousands
April 29, 2016
 
May 1, 2015
 
Employee Severance and Termination Costs
 
Other Costs
 
Total
 
Employee Severance and Termination Costs
 
Other Costs
 
Total
Beginning accrual
$
13,613

 
$

 
$
13,613

 
$

 
$

 
$

Costs incurred
21,657

 
1,795

 
23,452

 
11,775

 

 
11,775

Costs paid/settled
(17,099
)
 
(1,657
)
 
(18,756
)
 
(2,565
)
 

 
(2,565
)
Other adjustments
(2,915
)
 

 
(2,915
)
 

 

 

Effect of foreign currency translation
23

 

 
23

 
118

 

 
118

Ending accrual
$
15,279

 
$
138

 
$
15,417

 
$
9,328

 
$

 
$
9,328

Included in other adjustments for the six months ended April 29, 2016 is $ 2.6 million of contractual termination benefits recognized in fiscal 2015 under the Joy Global qualified pension plan for benefits to be provided to certain employees as part of restructuring activities in our Underground division. Those amounts are recorded in our retiree benefit liabilities and are therefore excluded from the restructuring accrual roll-forward above.
For the Restructuring Program, total restructuring charges are currently anticipated to be approximately $ 133 million through fiscal 2017, with total expected cash costs related to the Restructuring Program estimated to be approximately $ 87 million .

13.
Retiree Benefits
The components of the net periodic benefit (income) cost associated with our pension and other postretirement plans are as follows:
 
Pension Benefits
 
Postretirement Benefits
 
Quarter Ended
 
Quarter Ended
In thousands
April 29,
2016
 
May 1,
2015
 
April 29,
2016
 
May 1,
2015
Service cost
$
1,227

 
$
977

 
$
122

 
$
156

Interest cost
18,745

 
19,688

 
256

 
281

Expected return on assets
(23,831
)
 
(27,311
)
 
(147
)
 
(156
)
Amortization of prior service cost
17

 
17

 
43

 
33

Curtailment gain

 

 
(762
)
 

Mark to market adjustment on curtailed plan

 

 
(36
)
 

Contractual termination benefits
(192
)
 

 

 

Net periodic benefit (income) cost
$
(4,034
)
 
$
(6,629
)
 
$
(524
)
 
$
314


15





 
 
 
 
 
 
 
 
 
Pension Benefits
 
Postretirement Benefits
 
Six Months Ended
 
Six Months Ended
In thousands
April 29,
2016
 
May 1,
2015
 
April 29,
2016
 
May 1,
2015
Service cost
$
2,453

 
$
1,953

 
$
313

 
$
409

Interest cost
37,481

 
39,346

 
561

 
581

Expected return on assets
(47,675
)
 
(54,589
)
 
(294
)
 
(311
)
Amortization of prior service cost
34

 
35

 
76

 
66

Curtailment gain

 

 
(662
)
 

Mark to market adjustment on curtailed plan

 

 
(36
)
 

Contractual termination benefits
9,408

 

 

 

Net periodic benefit cost (income)
$
1,701

 
$
(13,255
)
 
$
(42
)
 
$
745

For the six months ended April 29, 2016 , we contributed $9.4 million to our defined benefit employee pension and other postretirement benefit plans, and we expect contributions to be approximately $15.0 million for the full fiscal year.
During the quarter ended January 29, 2016, we recognized $9.6 million of estimated contractual termination benefits under the Joy Global qualified pension plan for benefits to be provided to certain employees as part of restructuring activities in our Underground division. These contractual termination benefits were trued-up to $9.4 million during the quarter ended April 29, 2016 upon finalization of the associated valuation.

14.
Derivatives
We are exposed to certain foreign currency risks in the normal course of our global business operations. We enter into derivative contracts that are foreign currency forward contracts to hedge the risks of certain identified and anticipated transactions in currencies other than the functional currency of the respective operating unit. The types of risks hedged are those arising from the variability of future earnings and cash flows caused by fluctuations in foreign currency exchange rates. These contracts are for forecasted transactions and committed receivables and payables denominated in foreign currencies and are not entered into for speculative purposes. Consequently, any market-related losses on the forward contract would be offset by changes in the value of the hedged item, and, as a result, we are generally not exposed to net market risk associated with these instruments.
Each derivative is classified as either a cash flow hedge, a fair value hedge or an undesignated instrument. All derivatives are recorded at fair value on the Condensed Consolidated Balance Sheets under the heading Other current assets or under the heading Other accrued liabilities, as appropriate. Cash flows from fair value and cash flow hedges are classified within the same category as the item being hedged on the Condensed Consolidated Statements of Cash Flows. Cash flows from undesignated derivative instruments are included in operating activities on the Condensed Consolidated Statements of Cash Flows.
The total notional amount of our derivatives as of April 29, 2016 is $ 707.9 million .
For derivative contracts that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative contract is recorded as a component of other comprehensive income, net of tax. This amount is reclassified into the statement of operations on the line associated with the underlying transaction for the periods in which the hedged transaction affects earnings. The amounts recorded in accumulated other comprehensive income for existing cash flow hedges are generally expected to be reclassified into earnings within one year, and all of the existing hedges will be reclassified into earnings by November 2017 . Ineffectiveness related to these derivative contracts was not material to the Consolidated Statements of Operations for the quarters and six months ended April 29, 2016 and May 1, 2015 .
For derivative contracts that are designated and qualify as a fair value hedge, the gain or loss is recorded in the Condensed Consolidated Statements of Operations under the heading Cost of sales . For the quarters ended April 29, 2016 and May 1, 2015 , we recorded a loss of $4.7 million and a gain of $0.2 million , respectively, related to fair value hedges, which were offset by foreign exchange fluctuations of the underlying hedged item. For the six months ended April 29, 2016 and May 1, 2015 , we recorded loss es of $6.3 million and $0.6 million , respectively, related to fair value hedges, which were offset by foreign exchange fluctuations of the underlying hedged item.
For derivative contracts entered into in order to hedge revaluation of net balance sheet exposures in non-functional currency that are not designated as a fair value hedge or a cash flow hedge, the gain or loss is recorded in the Condensed Consolidated Statements of Operations under the heading Cost of sales . For the quarters ended April 29, 2016 and May 1, 2015 , we recorded a loss of $6.9 million and a gain of $1.2 million , respectively, related to undesignated hedges, which were offset by foreign exchange fluctuations. For the six months ended April 29, 2016 and May 1, 2015 , we recorded a loss of $2.3 million and a gain of $8.0 million , respectively, related to undesignated hedges, which were offset by foreign exchange fluctuations.

16





The following table summarizes the effect of cash flow hedges on the Condensed Consolidated Financial Statements:
In thousands
 
Effective Portion
 
 
Amount of (Loss) Gain Recognized in Other Comprehensive Income
 
(Loss) Gain Reclassified from Accumulated Other Comprehensive Income into Earnings
Derivative Hedging Relationship
 
 
Location
 
Amount
Foreign currency forward contracts
 
 
 
 
 
 
Quarter ended April 29, 2016
 
$
(2,799
)
 
Cost of sales
 
$
(2,100
)
 
 
 
 
Sales
 
28

Six months ended April 29, 2016
 
$
(3,923
)
 
Cost of sales
 
$
(2,585
)
 
 
 
 
Sales
 
(118
)
Quarter ended May 1, 2015
 
$
(595
)
 
Cost of sales
 
$
(455
)
 
 
 
 
Sales
 

Six months ended May 1, 2015
 
$
3,104

 
Cost of sales
 
$
(1,964
)
 
 
 
 
Sales
 

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

15.
Income Taxes
In accordance with FASB Accounting Standards Codification 740, Income Taxes , each interim period is considered integral to the annual period and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period. If, however, the entity is unable to reliably estimate its annual effective tax rate due to the Company’s inability to forecast income by jurisdiction or as a result of rate volatility caused by minor changes in income when projecting near break-even earnings, then the actual effective tax rate for the year-to-date period may be the best annual effective tax rate estimate. For the quarter and six months ended April 29, 2016 , the Company determined that the estimated annual effective rate method would not provide a reliable estimate due to the volatility of income tax (benefit) expense to modest changes in forecasted annual pre-tax results. Therefore, the Company recorded a tax benefit for the quarter and six months ended April 29, 2016 based on the actual effective rate (i.e. the “cut-off” method). The effective tax rate for the quarter and six months ended May 1, 2015 was calculated based on an estimated annual effective tax rate in addition to discrete items.
For the quarter ended April 29, 2016 , the Company recorded a benefit for income taxes from continuing operations of $0.6 million that resulted in an effective tax rate of 3.8% . A net discrete tax benefit of $6.1 million was recorded in the second quarter of fiscal 2016 primarily related to the revision of prior year fourth quarter valuation allowance calculations on our domestic China business' deferred tax assets. For the quarter ended May 1, 2015 , the Company recorded a provision for income taxes from continuing operations of $23.7 million that resulted in an effective tax rate of 29.8% . A net discrete tax expense of $1.2 million was recorded in the second quarter of fiscal 2015 .
For the six months ended April 29, 2016 , the Company recorded a benefit for income taxes from continuing operations of $17.6 million that resulted in an effective tax rate of 24.0% . A net discrete tax benefit of $7.0 million was recorded in the six months ended April 29, 2016 , primarily related to the revision of prior year fourth quarter valuation allowance calculations on our domestic China business' deferred tax assets. For the six months ended May 1, 2015 , the Company recorded a provision for income taxes from continuing operations of $38.7 million that resulted in an effective tax rate of 30.9% . A net discrete tax expense of $1.6 million was recorded in the six months ended May 1, 2015 .

16.
(Loss) Earnings Per Share
Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of shares outstanding during each period. Diluted (loss) earnings per share is computed similar to basic (loss) earnings per share, except that the weighted average number of shares outstanding is increased to include additional shares from the assumed exercise of stock options, performance shares and restricted stock units, if dilutive.
The following table sets forth the computation of basic and diluted (loss) earnings per share:

17





 
Quarter Ended
 
Six Months Ended
In thousands, except per share amounts
April 29,
2016
 
May 1,
2015
 
April 29,
2016
 
May 1,
2015
Numerator:
 
 
 
 
 
 
 
Net (loss) income from continuing operations
$
(15,305
)
 
$
55,958

 
$
(55,526
)
 
$
86,483

Income from discontinued operations, net of income taxes
5,466

 

 
5,466

 

Net (loss) income
$
(9,839
)
 
$
55,958

 
$
(50,060
)
 
$
86,483

Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding
97,921

 
97,416

 
97,886

 
97,482

Dilutive effect of stock options, performance shares and restricted stock units

 
556

 

 
573

Weighted average shares outstanding assuming dilution
97,921

 
97,972

 
97,886

 
98,055

 
 
 
 
 
 
 
 
Basic (loss) earnings per share:
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.16
)
 
$
0.57

 
$
(0.57
)
 
$
0.89

Income from discontinued operations
0.06

 

 
0.06

 

Net (loss) income
$
(0.10
)
 
$
0.57

 
$
(0.51
)
 
$
0.89

 
 
 
 
 
 
 
 
Diluted (loss) earnings per share:
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.16
)
 
$
0.57

 
$
(0.57
)
 
$
0.88

Income from discontinued operations
0.06

 

 
0.06

 

Net (loss) income
$
(0.10
)
 
$
0.57

 
$
(0.51
)
 
$
0.88

In the quarter and six months ended April 29, 2016 , the computation of weighted average shares outstanding assuming dilution does not include the effect of stock options, performance shares and restricted stock units because a net loss existed from continuing operations and thus the result would have been antidilutive. Weighted average shares outstanding used for diluted earnings per share from both continuing operations and discontinued operations therefore excludes 4.5 million and 4.9 million shares for these antidilutive items as of the quarter and six months ended April 29, 2016 , respectively.
Options to purchase a weighted average of 2.7 million shares were excluded from the calculation of diluted earnings per share for continuing operations for the quarter ended May 1, 2015 , as the effect would have been antidilutive. Options to purchase a weighted average of 2.5 million shares were excluded from the calculation of diluted earnings per share for continuing operations for the six months ended May 1, 2015 , as the effect would have been antidilutive.

17.
Fair Value Measurements
GAAP establishes a three level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:
Level 1: Quoted prices in active markets for identical instruments;
Level 2: Inputs, other than quoted prices in active markets, that are observable for the instrument either directly or indirectly or quoted prices for similar instruments in active markets; and
Level 3: Unobservable inputs for the instrument where there is little or no market data, which requires the reporting entity to develop its own assumptions.
GAAP requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The following tables present the fair value hierarchy for those assets and liabilities measured at fair value and disclose the fair value of long-term obligations recorded at cost as of April 29, 2016 and October 30, 2015 . As of April 29, 2016 and October 30, 2015 , we did not have any Level 3 assets or liabilities.


18





Fair Value Measurements as of April 29, 2016
 
 
 
 
 
 
 
In thousands
Carrying
Value
 
Total Fair
Value
 
Level 1
 
Level 2
Current Assets
 
 
 
 
 
 
 
Cash equivalents
$
5,493

 
$
5,493

 
$
5,493

 
$

Other Current Assets
 
 
 
 
 
 
 
Derivatives
$
9,488

 
$
9,488

 
$

 
$
9,488

Other Accrued Liabilities
 
 
 
 
 
 
 
Derivatives
$
20,383

 
$
20,383

 
$

 
$
20,383

Long-term Obligations Including Amounts due within One Year
 
 
 
 
 
 
 
Term Loan due 2019
$
356,250

 
$
351,618

 
$

 
$
351,618

5.125% Senior Notes due 2021
$
497,397

 
$
450,000

 
$

 
$
450,000

6.625% Senior Notes due 2036
$
148,569

 
$
123,375

 
$

 
$
123,375


Fair Value Measurements as of October 30, 2015
 
 
 
 
 
 
 
In thousands
Carrying
Value
 
Total Fair
Value
 
Level 1
 
Level 2
Current Assets
 
 
 
 
 
 
 
Cash equivalents
$
9,831

 
$
9,831

 
$
9,831

 
$

Other Current Assets
 
 
 
 
 
 
 
Derivatives
$
20,267

 
$
20,267

 
$

 
$
20,267

Other Accrued Liabilities
 
 
 
 
 
 
 
Derivatives
$
10,577

 
$
10,577

 
$

 
$
10,577

Long-term Obligations Including Amounts due within One Year
 
 
 
 
 
 
 
Term Loan due 2019
$
375,000

 
$