Item 1. Business
SEGMENTS OF BUSINESS
Harnischfeger Industries, Inc. ("Harnischfeger Industries" or the "Company") is a holding company for subsidiaries involved in the worldwide manufacture and distribution of surface mining equipment (P&H Mining Equipment); underground mining equipment (Joy Mining Machinery); pulp and papermaking machinery (Beloit Corporation); and material handling equipment (P&H Material Handling). In early fiscal 1996, the Company completed the acquisition of Dobson Park Industries plc ("Dobson"), an industrial engineering group with interests in underground mining equipment, industrial electronic control systems, toys and plastics. Dobson's principal subsidiary, Longwall International, is engaged in the manufacture, sale and service of mining equipment for the international underground coal mining industry and has been integrated into the Company's Mining Equipment Segment. In March 1996, the Company completed the purchase of the assets of the pulp machinery division of Ingersoll-Rand Company.
Harnischfeger Industries is the direct successor to a business begun over 100 years ago which, at October 31, 1996, through its subsidiaries, manufactures and markets products classified into three industry segments: Pulp and Papermaking Machinery, Mining Equipment, and Material Handling.
The following discussion and the portions of the Company's 1996 Annual Report to Shareholders incorporated herein by reference contain forward looking statements. Terms such as "anticipate", "believe", "estimate", "expect", "indicate", "may be", "objective", "plan", "predict", and "will be" are intended to identify such statements. Forward-looking statements are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from those predicted. See "Cautionary Factors" at the end of this Item 1.
MINING EQUIPMENT
P&H Mining Equipment is the world's largest producer of electric mining shovels and is a significant producer of electric and diesel-electric crawler and walking draglines, hydraulic mining excavators, blasthole drills, and dredge and dragline bucket products. Electric mining shovels range in capacity from 18 to 80 cubic yards, crawler draglines from 10 to 20 cubic yards and hydraulic mining excavators from 12 to 27 cubic yards. Capacities for walking draglines range from 20 to 150 cubic yards. Blasthole drill models have drilling diameters ranging from 9 to 22 inches and bit load capacities from 70,000 to 150,000 pounds.
The products of P&H Mining Equipment are used in mines, quarries and earth-moving operations in the digging and loading of such minerals and other ores as coal, copper, gold, iron ore, lead, zinc, bauxite, uranium, phosphate, stone and clay.
P&H Mining Equipment has a relationship in the mining shovel business with Kobe Steel, Ltd. ("Kobe") pursuant to which P&H Mining Equipment licenses Kobe to manufacture certain electric mining shovels and related replacement parts in Japan. Harnischfeger Corporation has the exclusive right to market Kobe-manufactured mining shovels and parts outside Japan (except in the case of certain government sales). In addition, Harnischfeger Corporation is party to an agreement with a corporate unit of the People's Republic of China, licensing the manufacture and sale of two models of electric mining shovels and related components. This relationship provides P&H Mining Equipment with an opportunity to sell component parts for shovels built in China.
On November 29, 1994, pursuant to an exchange of common stock, the Company completed its acquisition of Joy Technologies Inc. ("Joy" or "Joy Mining Machinery"), a world leader in underground mining equipment. Joy manufactures and services mining equipment for the underground extraction of coal and other bedded materials and has facilities in Australia, South Africa, the United Kingdom and the United States, as well as sales offices in Poland and the People's Republic of China. Joy Mining Machinery designs, manufactures and distributes continuous miners; entry drivers and sump shearers; longwall shearers; roof supports; armored face conveyors; shuttle cars; and continuous haulage systems for use in underground mining. Joy products are not sold into the general construction industry, and demand for them is not tied to cycles in that industry. Joy also maintains an extensive network of service and spare parts distribution centers to rebuild and service equipment and sell spare parts in support of its installed base. This network includes seven service centers in the United States and five outside of the United States, all of which are strategically located in major underground mining regions. The financial position and results of operations of Harnischfeger Industries and Joy were combined retroactively in fiscal 1995.
In early fiscal 1996, the Company completed the acquisition of Dobson Park Industries plc for a purchase price of approximately $330 million including acquisition costs plus the assumption of net debt of approximately $40 million.
Dobson, headquartered in the United Kingdom, was an industrial engineering group with interests in underground mining equipment, industrial electronic control systems, toys and plastics. Longwall International ("Longwall"), one of the main subsidiaries of Dobson, was engaged in the manufacture, sale and service of underground mining equipment for the international coal mining industry. Its products include electronically controlled roof support systems, armored face conveyors, pumps and belt conveyor components and systems. The Company is fully integrating Longwall's operations into Joy, thus enabling Joy to offer integrated underground longwall mining systems to the worldwide mining industry. The industrial electronic and toys/plastics businesses are held for sale. Several of the businesses were sold during 1996. The remaining businesses are expected to be sold within the next year.
Financial information with respect to the acquisition of Dobson is presented in Note 2 to the Financial Statements of the 1996 Annual Report to Shareholders incorporated herein by reference.
PULP AND PAPERMAKING MACHINERY
The Pulp and Papermaking Machinery Division is comprised of the Company's 80% interest in Beloit Corporation ("Beloit"). Mitsubishi Heavy Industries, Ltd. ("Mitsubishi") is the owner of the other 20% interest in Beloit. The Company and Mitsubishi have entered into certain agreements that provide Mitsubishi with the right to designate one of Beloit's five directors. These agreements also place certain restrictions on the transfer of Beloit stock. In the event of a change in control of the Company, Mitsubishi has the right to sell its 20% interest back to the Company for the greater of $60 million or the book value of its equity interest.
Beloit is a leader in the design and manufacture of pulp and papermaking machinery and related products used in the pulp and paper industries. Beloit operates on a global basis with major manufacturing facilities in ten countries and sales and service offices located throughout the world. In addition, licensing arrangements exist with several major foreign companies.
Beloit's activities are divided into the following categories: complete installations involving the design, manufacture and installation of integrated pulp and papermaking machinery; major rebuilds and servicing of existing systems; and the sale of ancillary equipment and replacement parts. This machinery is custom designed to meet the specific needs of each customer. On March 27, 1996, the Company purchased the assets of the pulp machinery division of Ingersoll-Rand Company ("IMPCO"), which significantly strengthens Beloit's pulping equipment offerings.
Beloit is known for the quality and dependability of its products and is a leader in product innovation and development. Beloit has made a continuous commitment to research and development activities and has been granted numerous patents on its designs. Beloit systems and equipment are used by a substantial number of paper producers, both domestic and foreign.
A major factor in Beloit's success in the pulp and papermaking machinery industry has been its international manufacturing operations. Beloit's overseas facilities have been used to support both domestic and foreign sales and have provided Beloit with the flexibility to shift its manufacturing to more favorable locations as appropriate. Beloit's manufacturing facilities are supported by a domestic and international marketing network staffed by experienced sales engineers.
Beloit Corporation spent nine months developing a total strategic redesign of its business. A $43.0 million pre-tax restructuring charge was recorded in the fourth quarter to accomplish asset and employment reductions necessary to implement the strategy. The restructuring and refocus will be an all-out effort to improve operating efficiencies and profit margins, expand Beloit Mill Services offerings for aftermarket support, and satisfy the vigorous growth in demand for pulp and papermaking machinery in the Pacific Rim.
Formerly, the Pulp and Papermaking Machinery Division also included the Company's 20% interest in Measurex Corporation ("Measurex"). In fiscal 1995, Measurex repurchased its stock which had been held by the Company resulting in a pre-tax gain of $29.7 million. Measurex continues to have cooperative agreements with Beloit.
P&H MATERIAL HANDLING
P&H Material Handling produces lines of through-the-air material handling equipment designed for a variety of users and container handling cranes for use in ports in addition to providing aftermarket support and distribution and service.
Engineered overhead cranes are comprised of several product lines: engineered cranes, standard cranes, portal cranes, ship-to-shore cranes, and crane components. Cranes are designed for installation in a wide range of industrial settings. Each crane is engineered to the customer's specifications, using standard components wherever possible. Engineered cranes are marketed for moderate to severe duty cycle applications in capacities from 3 to 800 tons.
Standard overhead cranes are available in capacities from 5 to 100 tons. Stacker cranes, ranging in capacities from 2 to 50 tons, are particularly suitable for factory automation projects. Portal cranes range in lifting capacities from 5 to 100 tons and are used outdoors for woodyard, scrap, and container handling.
P&H Material Handling has two groups specializing in aftermarket support and distribution and service. The P&H Aftermarket Group consists of Product Support, which markets replacement products and repair parts and Phoenix(TM), which handles pre-owned and remanufactured cranes and parts plus provides engineering services for the revitalization of crane and runway systems.P&H Distribution and Service provides installation, erection and repair and maintenance services under the ProCare trademark.
DISCONTINUED SEGMENTS
Environmental
The Company completed the sale of Joy Environmental Technologies ("JET") in the first quarter of 1996. JET was a unit of Joy which supplied air pollution and ash handling equipment for electric utilities and other industrial operations.
Systems
Syscon Corporation ("Syscon"), the remaining unit in the Company's Systems Group, was sold in February 1995 to Logicon, Inc. Syscon was engaged principally in providing systems development, systems integration and systems services to the U. S. Government, government agencies and commercial enterprises.
INTERNATIONAL OPERATIONS
In 1996, 1995 and 1994, Beloit's foreign sales amounted to 53%, 41% and 30%, respectively, of Beloit's consolidated net sales.
Foreign sales of the Mining Equipment segment generated approximately 58% of the segment's consolidated net sales in 1996, 44% in 1995 and 48% in 1994.
Foreign sales of the P&H Material Handling segment's consolidated net sales amounted to 39% in 1996 and 48% in 1995. Sales in 1994 were principally in the United States.
Beloit has granted licensing agreements to serve certain foreign markets to companies located in Australia, Japan and Spain. Beloit maintains sales and service offices throughout the world.
Harnischfeger Industries' international operations are subject to certain risks not generally applicable to its domestic businesses, including currency fluctuations, changes in tariff restrictions, restrictive regulations of foreign governments (including price and exchange controls), and other governmental actions. Harnischfeger Industries has entered into various foreign currency exchange contracts with major international financial institutions designed to minimize its exposure to exchange rate fluctuations on foreign currency transactions.
GENERAL
Seasonality
No significant portion of Harnischfeger Industries' business is subject to or influenced by seasonal factors; however, the Company's business is influenced by the cyclical nature of the paper, mining and capital goods industries.
Distribution
P&H Mining and Joy Mining Machinery sales are made mostly through sales at the segments' headquarters and sales offices located around the world. Joy's worldwide sales forces have marketing responsibility for new machine sales, as well as for parts, components and rebuild services provided to customers. A segment of the sales force in the United States is dedicated to operating a fleet of trucks which visit customer sites on a regular basis in order to deliver components and parts.
Sales of Beloit products are principally made directly to end users. Beloit maintains a worldwide marketing group to coordinate and support worldwide facilities in marketing strategies, technical sales support and participation in major projects including interface with engineering firms and financial institutions. Beloit offers systems and turnkey alternatives to assist in related business development throughout the world. Agents are used in certain foreign countries to augment Beloit's sales force stationed in the segment's manufacturing facilities and in sales offices worldwide.
In the United States, overhead cranes and certain electrical products are principally marketed directly from the segments' headquarters and regional sales offices. Electric wire rope and chain hoists and crane modernizations are sold through dealers and distributors, assisted and coordinated by corporate and regional office personnel. P&H Material Handling has a dealer network of regional distributorships (referred to as Material Handling Centers).
The manufacture and sale of repair and replacement parts and the servicing of equipment are important aspects of each of the Company's businesses.
Competition
Harnischfeger Industries conducts its domestic and foreign operations under highly competitive market conditions, requiring that its products and services be competitive in price, quality, service and delivery.
The pulp and paper capital machinery market is globally competitive; Beloit's two major paper machinery competitors are foreign-owned companies. The principal competitors are Valmet Paper Machinery, Inc., with controlling interest held by Valmet Corporation, Finland, and Voith Sulzer Papiertechnik GMBH, with headquarters in Germany. The principal competitors in pulp machinery are Sunds Difibrator, Ahlstrom, and Kvaerner, Black-Clawson and Andritz. In the aftermarket area, Beloit competes with various small suppliers.
P&H Mining Equipment's principal competitors in electric mining shovels are Bucyrus International, Inc. and Marion, a division of Global Industrial Technologies. Harnischfeger Industries believes P&H Mining Equipment is the leading participant in this market. Its principal competitors in the hydraulic mining excavator market are Demag, Hitachi, Caterpillar and Orenstein & Koppel. In draglines, the main competitors are Bucyrus International, Inc. and Marion. The Division's main competitors in drills are Ingersoll-Rand, Driltech and Bucyrus International, Inc.
In the underground coal mining industry, Joy competes primarily on the basis of the quality and reliability of its products and its ability to provide timely, extensive and cost-effective repair and rebuild services and delivery of spare parts. Joy's primary competitors in the continuous mining machinery industry are EIMCO, Voest Alpine(a Tampella Tamrock Company), Simmons-Rand Company(a subsidiary of Long-Airdox Company) and Jeffrey. In the longwall shearer new equipment market, Joy competes primarily with Anderson Longwall (a subsidiary of Long-Airdox Company), Eickhoff Corporation, and Mitsui Miike Machinery Company, Ltd. In the continuous haulage market, Joy competes with Long-Airdox, Fairchild International and Jeffrey. In roof supports and armored face conveyors, Joy primarily competes with DBT, Long-Airdox Company and several regional suppliers. In the sale of spare parts for Joy's equipment, Joy competes with various small suppliers.
The principal worldwide competitors for the P&H Material Handling Division are Demag and Konecranes International KCI. Harnischfeger Industries believes that P&H Material Handling is one of the largest worldwide participants in this market. When considering any specific geographic market, the competitors would normally be split into overhead cranes, dockside cranes, hoists, and service. There are significant numbers of competitors in each of the geographic markets and segments of those markets.
Customers
During 1996, there were no sales or services made to an individual customer amounting to 10% or more of consolidated sales.
Backlog
Backlog by business segment for the Company's continuing operations (in thousands of dollars) as of the end of fiscal years 1996 and 1995 was as follows:
Supply of Materials and Purchased Components
P&H Mining Equipment Division and P&H Material Handling manufacture machines and heat-treated gears, pinions, shafts, structural fabrications, electrical motors, generators and other electrical parts. They purchase raw and semi-processed steel, castings, forgings, copper and other materials for these parts and components from approximately 400 suppliers. In addition, component parts, such as engines, bearings, controls, hydraulic components, and a wide variety of mechanical and electrical items are purchased from approximately 1,500 suppliers. Purchases of materials and components are made on a competitive basis with no single source being dominant.
Joy purchases electric motors, gears, hydraulic parts, electronic components, forgings, steel, clutches and other components and raw materials from outside suppliers. Although Joy purchases certain components and raw materials from a single supplier, alternative sources of supply are available for all such quantities. Joy believes that it has adequate sources of supplies of component parts and raw materials for its manufacturing requirements.
The Pulp and Papermaking Machinery Division purchases raw materials used in its products which include plates, sheets, shapes, carbon and alloy steel, stainless steel, brass and bronze, nickel alloy, and aluminum. Purchases of semi-processed and component parts include castings, valves, filters, pumps, dryers, electrical equipment, and various vacuum, drying, hydraulic, combustion, material-handling and temperature control systems. Beloit has approximately 5,300 suppliers, of which approximately 1,600 are most commonly used. No single source is dominant.
Patents and Licenses
Patents are important in the papermaking industry. All major papermaking machinery manufacturers use patents extensively to protect the technology base that results from research and development. Beloit has been granted numerous patents on its designs and more are pending. Most are registered in all of the major countries into which Beloit and its licensees sell.
Joy and P&H Mining Equipment and their respective subsidiaries own numerous patents and trademarks and have patent licenses from others relating to their respective products and manufacturing methods. Also, patent licenses are granted to others throughout the world and royalties are received under most of these licenses. While they do not consider any particular patent or license or group of patents or licenses to be essential to their respective business as a whole, they consider their patents and licenses significant to the conduct of its business in certain product areas.
P&H Material Handling has numerous trademarks and domestic and foreign patents, patent applications and patent licensing agreements. P&H Material Handling does not consider these businesses materially dependent upon any patent or patent license agreement.
Research and Development
Harnischfeger Industries maintains a strong commitment to research and development with engineering staffs that are engaged in full-time research and development of new products, and improvement of existing products. Beloit maintains research and development facilities in Rockton, Illinois; Pittsfield, Massachusetts; Bolton, United Kingdom; Clarks Summit, Pennsylvania; Portland, Oregon; and Waukesha, Wisconsin. Harnischfeger Corporation maintains research and development facilities in Milwaukee, Wisconsin. Joy pursues technological development through the engineering of new products, systems and applications; the improvement and enhancement of licensed technology; and synergistic acquisitions of technology. Research and development expenses were $34.5 million in 1996, $30.3 million in 1995 and $28.9 million in 1994.
Environmental and Health and Safety Matters
The activities of the Company are regulated by federal, state and local statutes, regulations and ordinances relating to both environmental protection and worker health and safety. These laws govern current operations, require remediation of environmental impacts associated with past or current operations, and under certain circumstances provide for civil and criminal penalties and fines, as well as injunctive and remedial relief. The Company's foreign operations are subject to similar requirements as established by their respective countries.
The Company has expended substantial managerial and financial resources in developing and implementing actions for continued compliance with these requirements. The Company believes that it has substantially satisfied these diverse requirements. However, because these requirements are complex and, in many areas, rapidly evolving, there can be no guarantee against the possibility of sizeable additional costs for compliance in the future. These same requirements must also be met by the Company's competitors and, therefore, the costs for present and future compliance with these laws should not create a competitive disadvantage. Further, these laws have not had, and are not presently expected to have, a material adverse effect on the Company.
The Company's operations or facilities have been and may become the subject of formal or informal enforcement actions or proceedings for alleged noncompliance with either environmental or worker health and safety laws or regulations. Such matters have typically been resolved through direct negotiations with the regulatory agency and have typically resulted in corrective actions or abatement programs. However, in some cases, fines or other penalties have been paid. Historically, neither such commitments nor such penalties have been material.
Employees
As of October 31, 1996, Harnischfeger Industries employed approximately 17,200, of which approximately 9,600 were employed in the United States. Approximately 3,700 of the U. S. employees are represented by local unions under collective bargaining agreements with expiration dates from March 22, 1997 to April 1, 2001. Harnischfeger Industries believes that it maintains generally good relationships with its employees.
Financial Information about Industry Segments
The financial information on industry segments is presented in Note 15 to the Financial Statements incorporated herein by reference.
Cautionary Factors ------------------
This report and other documents or oral statements which have been and will be prepared or made in the future contain or may contain forward-looking statements by or on behalf of the Company. Such statements are based upon management's expectations at the time they are made. In addition to the assumptions and other factors referred to specifically in connection with such statements, the following factors, among others, could cause actual results to differ materially from those contemplated.
The Company's principal businesses involve designing, manufacturing, marketing and servicing large, complex machines for the mining, papermaking and capital goods industries. Long periods of time are necessary to plan, design and build these machines. With respect to new machines and equipment, there are risks of customer acceptances and start-up or performance problems. Large amounts of capital are required to be devoted by the Company's customers to purchase these machines and to finance the mines, paper mills, steel mills and other facilities that use these machines. The Company's success in obtaining and managing a relatively small number of sales opportunities can have a material effect on the Company's financial performance. In addition, many projects are located in undeveloped or developing economies where business conditions are less predictable. In recent years, more than 50% of the Company's total sales occurred outside the United States.
Other factors that could cause actual results to differ materially from those contemplated include:
- Factors affecting purchases of new equipment, rebuilds, parts and services such as: production capacity, stockpiles and production and consumption rates of coal, copper, iron, gold, fiber, paper/paperboard, recycled paper, steel and other commodities; the cash flows of customers; the cost and availability of financing to customers and the ability of customers to obtain regulatory approval for investments in mining, papermaking, steel making, automotive manufacturing and other heavy industrial projects; the ages, efficiencies and utilization rates of existing equipment; the development of new technologies; the availability of used or alternative equipment; consolidations among customers; work stoppages at customers or providers of transportation; and the timing, severity and duration of customer buying cycles, particularly in the paper and mining businesses.
- Factors affecting the Company's ability to capture available sales opportunities, including: customers' perceptions of the quality and value of the Company's products as compared to competitors' products; the existence of patents protecting or restricting the Company's ability to offer features requested by customers; whether the Company has successful reference installations to show customers, especially for papermaking and mining equipment; customers perceptions of the health and stability of the Company as compared to its competitors; the availability of manufacturing capacity at the Company's factories; and whether the Company can offer the complete package of products and services sought by its customers.
- Factors affecting the Company's ability to successfully manage sales it obtains, such as: the accuracy of the Company's cost and time estimates for major projects; the Company's success in completing projects on time and within budget; the Company's success in recruiting and retaining managers and key employees; wage stability and cooperative labor relations; plant capacity and utilization; and whether acquisitions are assimilated and divestitures completed without notable surprises or unexpected difficulties.
- Factors affecting the Company's general business, such as: unforeseen patent, tax, product, environmental, employee health or benefit or contractual liabilities; nonrecurring restructuring charges; changes in accounting or tax rules or regulations; and reassessments of asset valuations such as inventories.
- Factors affecting general business levels, such as: political turmoil and economic growth in major markets such as the United States, Canada, Europe, The Far East, South Africa, Australia and Chile; environmental and trade regulations; and the stability and ease of exchange of currencies.
Item 2.
Item 2. Properties
As of October 31, 1996, the following principal properties were owned, except as indicated. All of these plants are generally suitable for operations.
Harnischfeger Industries owns a 94,000 square foot office building in St. Francis, Wisconsin, which is used as its worldwide corporate headquarters.
The mining equipment segment operates warehouses in Casper and Green River, Wyoming; Hibbing, Minnesota; Charleston and Pineville, West Virginia; Milwaukee, Wisconsin; Phoenix, Arizona; Elco, Nevada; Birmingham, Alabama; Carlsbad, New Mexico; Norton, Virginia; Lovely and Henderson, Kentucky; Hinton, Sparwood, Cornwall and Vancouver, Canada; Bayswater, Mt. Thorley, Gracemere, Rockhampton, Emerald, Kurri Kurri, Litigow and Mackay, Australia; Belo Horizonte, Brazil; Weiterstadt, Germany; Johannesburg, Wadeville and Hendrina, South Africa; Stobswood and Bestwood, United Kingdom and Puerto Ordaz, Venezuela. The warehouses in Casper, Hibbing, Milwaukee, Mt. Thorley, Belo Horizonte and Johannesburg are owned; the others are leased. In addition, the segment leases sales offices throughout the United States and in principal locations in other countries.
The Pulp and Papermaking Machinery business has warehouse space at the above facilities and in addition maintains leased facilities in Memphis, Tennessee; Swiecie, Poland; and Montreal, Canada. Sales offices are also maintained at various locations throughout the world.
The material handling division has leased facilities for its company owned Material Handling Centers in San Leandro, California; Reno, Nevada; Dallas and Houston, Texas; New Orleans, Louisiana; Chicago, Illinois; Detroit and Grand Rapids, Michigan; Pittsburgh, Pennsylvania; Cleveland, Ohio; Denver, Colorado; Waukesha, Wisconsin; Lynwood, Washington; Phoenix, Arizona; and Richmond, Calgary and Saskatoon, Canada. In addition, the division leases sales offices throughout the United States and in principal locations in other countries. It also has approximately 18 leased locations for service operations in the United Kingdom, Mexico and South Africa.
Information relating to lease commitments is presented in Note 11 to the Financial Statements incorporated herein by reference.
Item 3.
Item 3. Legal Proceedings
The Company is party to litigation matters and claims, which are normal in the course of its operations. Also, as a normal part of their operations, the Company's subsidiaries undertake certain contractual obligations, warranties and guarantees in connection with the sale of products or services. In the case of Beloit Corporation, certain claims are currently pending in connection with its contractual undertakings. While the outcome of such litigation and claims cannot be predicted with certainty and favorable or unfavorable judgements or resolutions may affect income on a quarter-to-quarter basis, management believes that such matters will not have a materially adverse effect on the Company's consolidated financial position or annual results of operations.
The Company is also involved in a number of proceedings and potential proceedings relating to environmental matters. Although it is difficult to estimate the potential exposure to the Company related to these environmental matters, the Company believes that these matters will not have a materially adverse effect on its consolidated financial position or results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1996.
Executive Officers of the Registrant
The following table sets forth, through the date of filing this 10-K report, the executive officers of Harnischfeger Industries, their ages, their offices with Harnischfeger Industries and the period during which they have held such offices.
Mr. Lundgren joined the Company in September 1991. Prior to joining the Company, Mr. Lundgren was a partner with the law firm of Michael, Best & Friedrich.
The business address of each such person is 3600 South Lake Drive, St. Francis, Wisconsin 53235-3716. All officers listed above are citizens of the United States of America. Officers are elected annually but may be removed at any time at the discretion of the Board of Directors. There are no family relationships between the foregoing officers.
PART II
The information required by Items 6 through 8 is incorporated herein by reference from the 1996 Annual Report to Shareholders.
PART III
All information required by Items 10 through 13 of Part III, with the exception of information on the Executive Officers which appears in Part I of this report, is incorporated by reference from the Company's Proxy Statement for its 1997 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year.
PART IV
The information required by item 14 is incorporated by reference herein from the 1996 Annual Report to Shareholders.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report: (1) Financial Statements* Consolidated Statement of Income for the years ended October 31, 1996, 1995 and 1994 Consolidated Balance Sheet at October 31, 1996 and Consolidated Statement of Cash Flow for the years ended October 31, 1996, 1995 and 1994 Consolidated Statement of Shareholders' Equity for the years ended October 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements Report of Independent Accountants
* Incorporated by reference from the 1996 Annual Report to Shareholders
(2) Financial Statement Schedule Report of Independent Accountants on Financial Statement Schedule............................... For the Years Ended October 31, 1996, 1995 and 1994: II. Valuation and Qualifying Accounts...............
All other schedules are omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto.
Financial statements of 50% or less-owned companies have been omitted because the proportionate share of their profit before income taxes and total assets are less than 20% of the respective consolidated amounts and investments in such companies are less than 20% of consolidated total assets.
- ------------------------------------------- * Represents a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
NONE
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Harnischfeger Industries, Inc.
Our audits of the consolidated financial statements referred to in our report dated November 21, 1996 appearing in the 1996 Annual Report to Shareholders of Harnischfeger Industries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP Milwaukee, Wisconsin November 21, 1996 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Francis, Wisconsin, on the 28th day of January 1997.
HARNISCHFEGER INDUSTRIES, INC. (Registrant)
/s/FRANCIS M. CORBY, JR. Francis M. Corby, Jr. Executive Vice President for Finance and Administration
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on January 28, 1997.
Item 5
Item 5
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
THE ANNUAL MEETING
The annual meeting of the shareholders of Harnischfeger Industries, Inc. will be held at Milwaukee's Wyndham Hotel, 139 E. Kilbourn Ave., on Tuesday, April 15, 1997 at 10:00 a.m.
ANNUAL REPORT ON FORM 10-K
Copies of the annual report on Form 10-K, filed with the Securities and Exchange Commission, will be available to shareholders after February 15, 1997 without charge on request to:
Shareholder Services Harnischfeger Industries, Inc. P.O. Box 554 Milwaukee, WI 53201-0554 Telephone: (414)486-6480
TRANSFER AGENT AND REGISTRAR
Bank of Boston c/o Boston EquiServe Mail Stop 45-02-64 P.O. Box 644 Boston, MA 02102-0644 Telephone:(617)575-3400
MARKET AND OWNERSHIP OF COMMON STOCK
The principal market for the Company's Common Stock is the New York Stock Exchange, where its trading symbol is HPH. As of October 31, 1996, the approximate number of holders of record of the Company's Common Stock was 2,000. In addition, there were an estimated 10,000 beneficial owners of shares held of record by brokers and fiduciaries.
CORPORATE HEADQUARTERS
3600 South Lake Drive St. Francis, WI 53235-3716
MAILING ADDRESS
P.O. Box 554 Milwaukee, WI 53201-0554
SHAREHOLDER SERVICES
Annual Report Requests and General Information: (414)486-6626
FINANCIAL INFORMATION
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EXHIBIT 11
Management's Discussion and Analysis of Financial Statements
Overview
Fiscal 1996 was a year of global growth and financial achievement. The Company reported strong financial results, showing income from continuing operations of $114.2 million, or $2.42 per share, on consolidated net sales of $2,863.9 million. Included in income from continuing operations was a restructuring charge totaling $43.0 million ($21.8 million after tax and minority interest, or $0.46 per share). This compares with income from continuing operations of $92.1 million, or $1.99 per share, in 1995 on sales of $2,152.1 million. In addition, bookings increased 33% in 1996 while backlog at October 31, 1996 was up 39%.
All three of the Company's core business segments continued to experience strong order and sales activity. Leading the way in 1996 was the Mining Equipment segment, which includes P&H Mining Equipment and Joy Mining Machinery ("Joy"). The segment reported net sales of $1,405.9 million, up 49% over 1995 levels, reflecting continued expansion, the acquisition of Dobson Park Industries plc ("Dobson") and growth in the worldwide mining market. Operating income improved from $122.1 million in 1995 to $183.1 million in 1996.
The Pulp and Paper Machinery segment also reported strong results with net sales of $1,134.8 million, up 17% from 1995. The increase is due to continued strength in the market for papermaking machines and the acquisition of the Pulp Machinery Division of Ingersoll-Rand Company ("IMPCO").
Sales for the Material Handling segment increased 35% to $323.2 million in 1996 from $239.9 million in 1995. Operating income increased from $22.9 million in 1995 to $33.1 million in 1996. These strong results are due primarily to improved results in existing product lines and continued global expansion.
In 1996, the strategy of focusing on the five characteristics required of a core business - a global marketplace, leadership positions in the industries served, strong aftermarket sales potential, technological superiority and the ability to earn positive Economic Value Added ("EVA") - continued to steer the actions of the Company.
Acquisitions once again were a prominent feature of this strategy. In early 1996, the Company completed the Dobson acquisition. Dobson, a manufacturer of roof supports and face conveyors, is complementary with the fiscal 1995 purchase of Joy, a producer of underground mining equipment, and has significantly strengthened the Mining Equipment segment. On March 27, 1996, the Company's Beloit Corporation subsidiary purchased the assets of IMPCO. This acquisition strengthens pulping equipment product lines and enables Beloit to grow through existing global distribution channels.
Fiscal 1996 marked the fourth year that the Company was guided by the EVA philosophy and the third year that EVA has been fully implemented for purposes of management incentive compensation. EVA, which measures operating results after taxes in excess of the after-tax cost of capital, has helped to maintain and sometimes reduce the capital base at a time of increasing profits and sales. Each of the Company's segments posted positive EVA achievement in 1996.
The discussion in Management's Discussion and Analysis contains forward-looking statements. When used in this document, terms such as "anticipate", "believe", "estimate", "expect", "indicate", "may be", "objective", "plan", "predict", and "will be" are intended to identify such statements. Forward-looking statements are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from those projected. (See Cautionary Factors below)
Acquisitions and Divestitures Fiscal 1996 was a year of continued global expansion for the Company. Key acquisitions in each segment enhanced the Company's presence in the worldwide market.
In early fiscal 1996, the Company completed the acquisition of Dobson which firmly establishes the Company as a world leader in both surface and underground mining equipment. The transaction was completed for a purchase price of $330 million, including acquisition costs, plus the assumption of net debt of approximately $40.0 million. The acquisition was accounted for as a purchase transaction with the purchase price allocated to specific assets acquired and liabilities assumed. Resultant goodwill is being amortized over 40 years.
Dobson, headquartered in the United Kingdom, was an industrial engineering group with interests in mining equipment, industrial electronic control systems, toys and plastics. Longwall International ("Longwall"), the main subsidiary of Dobson, was engaged in the manufacture, sale and service of mining equipment for the international coal mining industry. Its principal products included electronically controlled roof support systems and armored face conveyors. The acquisition of Dobson enables Joy to offer integrated, underground longwall mining systems to the worldwide mining industry.
As a part of the Dobson acquisition, several non-mining businesses were designated as businesses for sale. The original value of the businesses was set at $100.0 million. At October 31, 1996, three businesses remain unsold with a total assigned value of $26.2 million. It is expected that these remaining businesses will be sold within the next year. Profit/losses of these businesses generated during the period have been excluded from operating results.
On March 27, 1996, the Company's Beloit Corporation subsidiary purchased the assets of IMPCO for $119.2 million, including acquisition costs. The acquisition was accounted for as a purchase transaction with the purchase price allocated to specific assets acquired and liabilities assumed. Resultant goodwill is being amortized over 40 years. With this acquisition, Beloit now offers a full line of pulping machinery and systems.
On November 29, 1994, the Company completed the acquisition of Joy Technologies Inc. ("JTI") through a stock-for-stock merger following approval of the merger by shareholders of each company. Under the terms of the acquisition, accounted for as a pooling of interests, the Company exchanged 17,720,750 shares of Company common stock for all of JTI's 31,353,000 outstanding shares, at an exchange ratio of .5652 of a share of the Company's common stock for each of JTI's common shares.
Effective November 1, 1994, the fiscal year for JTI was conformed to the Company's fiscal year. All periods presented have been retroactively restated. Amounts related to JTI in fiscal 1994 have been retroactively adjusted to reflect the adoption of Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", through the immediate recognition of the obligation to conform with the Company's adoption. In addition, JTI's operating results for the period February 26, 1994 to November 1, 1994, a net loss of $(4.6) million on sales of $293.3 million, have been reflected as an adjustment to the combined Company's retained earnings on November 1, 1994.
Transaction costs incurred to complete the JTI merger of $17.5 million ($11.4 million after tax, or $0.24 per share) were charged to income and consisted primarily of investment banker, attorney and accountant fees, severance and related benefits, and printing, mailing and registration expenses.
In September, 1994, the Material Handling segment completed the acquisition of Morris Mechanical Handling Limited in the United Kingdom for a purchase price of $24.9 million. The acquisition was accounted for as a purchase with resultant goodwill being amortized over 40 years.
In addition, during fiscal years 1994 through 1996, the Company made several smaller acquisitions in each of the three business segments. All acquisitions were accounted for as purchase transactions. Resultant goodwill is being amortized over a 30- or 40-year period.
On April 12, 1995, the Company announced its decision to divest of Joy Environmental Technologies ("JET"), a unit of JTI that supplies air pollution and ash handling equipment for electric utilities and other industrial operations. Accordingly, the operating results of JET were segregated and reflected in the Consolidated Statement of Income as a discontinued operation. In December, 1995, the Company completed the sale of JET to Babcock and Wilcox, an operating unit of McDermott International, for $11.7 million. The loss on the sale, net of applicable taxes, was recorded in fiscal 1995.
In fiscal 1994, the Company announced its decision to divest of Syscon Corporation ("Syscon"), the remaining unit in the Company's Systems Group. The assets and liabilities and operating results of Syscon were segregated in the consolidated financial statements and were reflected as net assets and results of discontinued operations in the Consolidated Balance Sheet and Consolidated Statement of Income, respectively. On February 16, 1995, the Company completed the sale of Syscon to Logicon, Inc. for a cash price of $45.0 million. In connection with this sale, the Company recorded a loss on sale of discontinued operations of $(21.9) million, or $(0.48) per share, net of applicable income taxes, in the first quarter of 1995.
Results of Operations - Consolidated
Sales: Worldwide sales in fiscal 1996 amounted to $2,863.9 million representing an increase of 33% over 1995 sales of $2,152.1 million. All three segments reported strong increases, led by a 49% increase in the Mining Equipment segment. The Pulp and Paper Machinery segment sales increased 17% over the prior year and Material Handling segment sales increased 35% over the prior year.
Sales for fiscal 1995 of $2,152.1 million were 39% greater than 1994 sales of $1,551.7 million, led by a strong increase in the Pulp and Paper Machinery segment of 36%. Sales for the Mining Equipment segment rose 29%. The Material Handling segment reported an increase of 119% due mainly to the full-year impact of the Morris Mechanical Handling Limited acquisition.
Costs and Expenses: Costs of sales increased 30% to $2,166.8 million in 1996 from $1,671.9 million in 1995. Strong increases in sales volume during the period were the primary reason for the increase. Product development, selling and administrative expenses as a percent of sales were 15.1% in 1996 and 15.4% in 1995. This level of expenses reflects continued efforts by the Company to control costs. Cost of sales for 1995 increased 40% to $1,671.9 million from $1,195.9 million in 1994. This increase is consistent with the 39% increase in sales for the same period. Product development, selling and administrative expenses as a percent of sales decreased to 15.4% from 18.0% in 1994.
Operating Results from Continuing Operations: The Company reported income from continuing operations of $114.2 million in 1996 ($136.0 million, or $2.88 per share before the non-recurring restructuring charge), as compared to income from continuing operations of $92.1 million in 1995 and $36.6 million in 1994. The primary factor contributing to the increase in 1996 was a $62.6 million increase in operating income offset by an increase in interest expense resulting from acquisition debt and higher taxes due to higher pre-tax results.
1996 Restructuring Actions In the fourth quarter of fiscal 1996, the Company's Beloit Corporation subsidiary recorded a restructuring charge of $43.0 million ($21.8 million after tax and minority interest, or $0.46 per share). The focus of the restructuring is to improve financial returns and increase customer satisfaction while significantly reducing costs and cycle times. It is expected that the restructuring actions will be substantially completed by the end of fiscal 1997.
Details regarding specific restructuring actions are as follows:
The cash and noncash elements of the restructuring charge approximate $27.7 million and $15.3 million, respectively. It is expected that restructuring actions will be funded through cash flows from continuing operations.
Additional details are discussed in the (Operating Results by Business Segment) section which follows and in the Notes to Consolidated Financial Statements (Note 3 - Restructuring Charge).
Income Taxes The Company's effective tax rate from continuing operations was 35.0% in 1996 (compared to a 35.0% federal statutory rate), 35.0% in 1995, and 26.5% in 1994. The effective tax rate in 1994 differed from the federal statutory rate of 35.0% due primarily to differences in foreign and U.S. tax rates, general business credits and lower state taxes due to net operating losses for state income tax purposes.
A more detailed discussion of income taxes can be found in the Notes to Consolidated Financial Statements (Note 6 - Income Taxes).
Adoption of New Accounting Standards During the first quarter of fiscal 1994, the Company adopted SFAS No. 109, "Accounting for Income Taxes", by restating prior years' financial statements, retroactive to 1989. The impact of adopting this standard was to reduce previously reported shareholders' equity by $15.0 million at November 1, 1991.
During the first quarter of fiscal 1994, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" through the immediate recognition of the obligation. Under SFAS 106, the costs of retiree health care and life insurance benefits are accrued over relevant employee service periods. Previously, these costs were charged to expense as claims were paid. The cumulative effect of the accounting change required by this standard was a one-time, pre-tax charge of $136.3 million ($81.7 million, or $1.87 per share after taxes and minority interest). The discount rate used to determine the liability was 8.2%.
In 1993, the Board of Directors of the Company approved a general approach that would culminate in the elimination of all Company contributions towards postretirement health care benefits. Increases in costs paid by the Company were capped for certain plans beginning in 1994 extending through 1998 and Company contributions will be eliminated on January 1, 1999 for most employee groups, excluding Joy. For Joy, based upon existing plan terms, future eligible retirees will participate in a premium cost-sharing arrangement which is based on age as of March 1, 1993 and position at the time of retirement. Active Joy employees under age 45 as of March 1, 1993 and new hires after April 1, 1993 will be required to pay 100% of the applicable premium.
The initial one-time, pre-tax charge reflected all plan terms and amendments in place on November 1, 1993. Negative plan amendments made subsequent to November 1, 1993 are being amortized from the date of amendment to January 1, 1999. Postretirement benefit expense recognized for 1996 and 1995 was reduced by $10.8 million and $9.4 million, respectively, for amortization of negative plan amendments.
The Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits" in the first quarter of fiscal 1995. The impact of adoption of SFAS 112 on the Company's results of operations and financial position was not material.
In 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation". The standard calls for recording stock-based compensation at fair value instead of the currently used intrinsic value method. The change is not required to be reported in the financial statements but the pro-forma effect of the standard must be included in the footnotes to the financial statements.
The Company is not required to adopt the standard until fiscal 1997. The current plan is to adopt the standard by disclosing the pro-forma effects of the change to the fair value method in the footnotes to the financial statements.
Bookings and Backlog Backlog at October 31, 1996, 1995 and 1994 by business segment was as follows:
Bookings were $3,000.8 million in 1996, $2,252.3 million in 1995 and $1,636.9 million in 1994. A discussion of changes in bookings by segment is presented in the "Operating Results by Business Segment" section which follows.
Liquidity and Capital Resources The Company's capital structure at October 31, 1996 and 1995 was as follows:
The Company's debt to capitalization ratio increased to 48.0% at October 31, 1996 from 42.6% at October 31, 1995. The increase was caused by an increase in long-term debt to finance acquisitions, offset by an increase in equity from strong operating results.
Cash flow from operating activities was $80.4 million in 1996 compared to $125.3 million in 1995 and $117.3 million in 1994. The decrease in cash flow between periods was caused primarily by a net increase in working capital items, exclusive of acquisitions, offset by higher net income.
Net working capital of $333.1 million at October 31, 1996 decreased $157.0 million or 32% from October 31, 1995 levels of $490.1 million. The change was primarily due to cash used for acquisitions and the restructuring reserves.
Net working capital increased to $490.1 million in 1995 from $431.3 million in 1994, due mainly to higher cash, accounts receivable and inventories, which were offset by increases in accounts payable, employee compensation accruals and advance payments.
Cash applied to investing activities in 1996 was $424.0 million, primarily caused by the acquisitions of Dobson and IMPCO, offset by the sale of businesses. Cash provided by investing activities in 1995, primarily generated from the sale of the Company's investment in Measurex Corporation, was $44.1 million.
Net capital expenditures for property, plant and equipment in 1996 were $66.6 million compared with $61.8 million in 1995. Depreciation and amortization was $89.3 million and $70.5 million in 1996 and 1995, respectively.
Cash provided by financing activities in 1996 of $140.4 million was primarily from the issuance of debt related to the Dobson acquisition offset by a decrease in short-term notes payable. The $102.6 million use of cash in 1995 was primarily for the redemption of JTI's bank facility term loan and partial redemption of JTI's 10 1/4 % Senior Notes (see below).
The Company completed the acquisition of Dobson in early 1996 for a purchase price of approximately $330.0 million, including acquisition costs. The transaction was funded via a short-term bridge financing facility arranged specifically for this acquisition, issuance of commercial paper, other short-term facilities and available cash. The short-term facilities were replaced with $150.0 million, 7 1/4 % debentures issued on December 19, 1995, at 99.153%.
The Company's Beloit Corporation subsidiary purchased the assets of IMPCO on March 27, 1996 for a purchase price of $119.2 million, including acquisition costs. The acquisition of IMPCO was funded via short-term bridge loans and the Revolving Credit Facility.
The acquisition of JTI, completed on November 29, 1994, altered the Company's capital structure. At the time the transaction was completed, JTI's outstanding long-term borrowings totaled approximately $318.0 million. Of this amount, an $84.1 million bank facility, which was subject to a change in control provision, was immediately retired by the Company from available cash. Other debt included $200.0 million of 10 1/4 % Senior Notes due 2003 ("Senior Notes") and approximately $34.0 million of Industrial Revenue Bonds and other debt.
The indenture for the Senior Notes provides that, upon a "Change in Control" as defined therein, each holder of the Senior Notes shall have the right to require the repurchase of the Senior Notes at a cash purchase price equal to 101% of the principal amount thereof plus accrued but unpaid interest, if any, to the date of purchase. The acquisition of JTI constituted a "Change in Control" under the indenture. On December 29, 1994, JTI offered to purchase for cash any and all of its outstanding Senior Notes. This offer expired on February 10, 1995 with $0.3 million being redeemed under the offer. Prior to this tender offer, the Company had purchased $11.4 million of outstanding 10 1/4 % Senior Notes in unsolicited open market transactions. As a result of the bank facility and Senior Note redemptions, the Company recorded an extraordinary loss on debt retirement, net of applicable income taxes, of $(3.5) million, or $(0.08) per share, consisting primarily of unamortized financing costs and redemption premiums. The Company may, at its option, redeem the Senior Notes in whole or in part at any time on or after September 1, 1998 at 105.125% of their principal amount, plus accrued interest, declining to 100% of their principal amount, plus accrued interest, on or after September 1, 2000.
In connection with the JTI acquisition, the Company exchanged 17,720,750 common shares to consummate the transaction, after which 47,666,301 common shares were outstanding. In addition, the Company increased its authorized common stock from 50,000,000 to 100,000,000 shares.
The Company completed the sale of 2,000,000 shares of treasury stock in September, 1994 for $46.8 million in a private transaction. The sale was executed in connection with the Company's merger with JTI to satisfy requirements under the pooling of interests accounting rules relating to treasury stock purchases.
The Company maintains the ability to expand its borrowings in several ways, including the following:
(1.) A shelf registration with the Securities and Exchange Commission for the sale of up to $200.0 million of debt securities. To date, no securities have been issued under this registration.
(2.) A Revolving Credit Facility Agreement expiring November, 2000 between the Company and certain domestic and foreign financial institutions that allows for borrowings of up to $240.0 million at rates expressed in relation to the LIBOR and other rates. Direct borrowings and commercial paper are both considered a utilization of the facility. At October 31, 1996, utilization of the facility amounted to $40.0 million and $17.2 million for direct borrowings and commercial paper, respectively.
(3.) Short-term bank credit lines of foreign subsidiaries of approximately $167.5 million of which approximately $25.1 million was outstanding at October 31, 1996.
The Company believes its available cash, cash flow provided by operating activities and committed credit lines provide adequate liquidity on both a short- and long-term basis.
The Company has no significant capital commitments as of October 31, 1996. Any future commitments are expected to be funded through cash flow from operations and, if necessary, from available lines of credit.
It is the Company's policy not to participate in high-yield financings, highly leveraged transactions, or other "derivative" instruments. Hedging of specific foreign exchange transaction exposures does occur in certain circumstances.
The Company intends to continue to expand its businesses, both internally and through acquisitions. Acquisitions are evaluated in light of the five characteristics required of a core business. It is expected that new acquisitions would be financed primarily by internally-generated funds or additional borrowings.
The Company's restructuring actions announced in the fourth quarter of fiscal 1996 are expected to be financed internally through cash flows from continuing operations.
Operating Results by Business Segment
Mining Equipment
The Mining Equipment segment reported net sales of $1,405.9 million in 1996, a 49% increase from 1995 sales of $941.8 million. The sales increase is due to the acquisition of Longwall and to increases in both original equipment and aftermarket activity for both surface and underground mining operations. Operating income was $183.1 million or 13.0% of sales, compared to operating income of $122.1 million or 13.0% of sales in 1995. The increase in operating income is primarily due to increased sales. Foreign sales of the Mining Equipment segment amounted to 58% of total sales in 1996, 44% in 1995 and 48% in 1994.
Net sales and operating income amounted to $729.5 million and $82.5 million, respectively, in 1994.
Bookings amounted to $1,406.4 million in 1996 and $972.4 million in 1995, an increase of 45%. The increase was due primarily to the acquisition of Longwall and strong markets in both surface and underground mining equipment. Strong bookings levels are expected to continue in fiscal 1997 in both surface and underground mining products.
Pulp and Paper Machinery
The Pulp and Paper Machinery segment reported sales of $1,134.8 million and operating income before restructuring charge of $91.5 million for 1996. Sales volume in 1996 was 17% higher than the prior year's level of $970.4 million, reflecting acquisitions and continued strength in the worldwide pulp and paper industry's spending for original equipment and aftermarket services. Foreign sales for this segment amounted to 53% of total sales in 1996, 41% in 1995 and 30% in 1994. Operating income before the restructuring charge in 1996 was 8.1% of sales compared to 5.8% in 1995. Both sales and operating income are expected to improve in 1997 as the upturn continues and the effects of the restructuring take effect.
Net sales and operating income amounted to $970.4 million and $56.1 million, respectively, in 1995. Net sales were 36% higher than in 1994 reflecting the cyclical upturn in the worldwide pulp and paper industry. Operating income as a percent of sales increased to 5.8% in 1995 from 4.5% in 1994.
In the fourth quarter of fiscal 1996, the Pulp and Paper Machinery segment recorded a restructuring charge of $43.0 million. The focus of the restructuring is to better serve its customers, strengthen market position, enable the segment to increase EVA and improve profitability levels. The charge is primarily comprised of costs related to severance, machinery and equipment dispositions, closure of certain facilities and sale of businesses. Substantially all of the cash portion of the restructuring charge is expected to be funded in fiscal 1997.
Bookings activity improved in 1996 to $1,269.5 million from $1,016.3 million in 1995. The 25% increase reflects improved bookings in both pulp and paper machinery and aftermarket services and products, as well as continued acquisitions in overseas markets. Bookings in 1997 are expected to exceed new orders secured in 1996. The Pulp and Paper Machinery segment continues to maintain its leadership in papermaking machinery and allied products and services for the pulp and paper industries.
Material Handling
The Material Handling segment reported net sales of $323.2 million in 1996, an increase of 35% from 1995 levels of $239.9 million. Operating income increased to $33.1 million compared to $22.9 million in 1995, an increase of 45%. Increases are primarily due to improved results from existing businesses. Foreign sales amounted to 39% of total sales in 1996 compared to 48% in 1995; sales were principally in the U.S. for 1994.
Net sales of the Material Handling segment increased to $239.9 million in 1995 from $109.4 million in 1994. Operating income increased from $12.1 million in 1994 to $22.9 million in 1995. The increase in both sales and profitability is primarily due to the acquisition of Morris Mechanical Handling Limited as well as improved results from original equipment sales and aftermarket services from existing businesses.
Bookings amounted to $324.9 million in 1996, a 23% increase from $263.6 million in 1995. The increase in bookings in 1996 reflects the segment's leadership in the domestic equipment market and continued growth of its aftermarket business.
Discontinued Operations
Net sales and loss from discontinued operations in 1995 were $101.5 million and $(31.2) million, respectively, as compared to $263.3 million and $(4.0) million, respectively, in 1994. The decrease in sales activity from 1994 is due to the sale of Syscon Corporation to Logicon, Inc. on February 16, 1995, and lower comparative sales of JET.
Cautionary Factors This report and other documents or oral statements which have been and will be prepared or made in the future contain or may contain forward-looking statements by or on behalf of the Company. Such statements are based upon management's expectations at the time they are made. In addition to the assumptions and other factors referred to specifically in connection with such statements, the following factors, among others, could cause actual results to differ materially from those contemplated.
The Company's principal businesses involve designing, manufacturing, marketing and servicing large, complex machines for the mining, papermaking and capital goods industries. Long periods of time are necessary to plan, design and build these machines. With respect to new machines and equipment, there are risks of customer acceptance and start-up or performance problems. Large amounts of capital are required to be devoted by the Company's customers to purchase these machines and to finance the mines, paper mills, steel mills and other facilities that use these machines. The Company's success in obtaining and managing a relatively small number of sales opportunities, including warranties and guarantees associated therewith, can affect the Company's financial performance. In addition, many projects are located in undeveloped or developing economies where business conditions are less predictable. In recent years, more than 50% of the Company's total sales occurred outside the United States.
Other factors that could cause actual results to differ materially from those contemplated include:
- - Factors affecting purchases of new equipment, rebuilds, parts and services such as: production capacity, stockpiles and production and consumption rates of coal, copper, iron, gold, fiber, paper/paperboard, recycled paper, steel and other commodities; the cash flows of customers; the cost and availability of financing to customers and the ability of customers to obtain regulatory approval for investments in mining, papermaking, steel making, automotive manufacturing and other heavy industrial projects; the ages, efficiencies and utilization rates of existing equipment; the development of new technologies; the availability of used or alternative equipment; consolidations among customers; work stoppages at customers or providers of transportation; and the timing, severity and duration of customer buying cycles, particularly in the paper and mining businesses.
- - Factors affecting the Company's ability to capture available sales opportunities, including: customers' perceptions of the quality and value of the Company's products as compared to competitors' products; the existence of patents protecting or restricting the Company's ability to offer features requested by customers; whether the Company has successful reference installations to show customers, especially for papermaking and mining equipment; customers' perceptions of the health and stability of the Company as compared to its competitors; the Company's ability to offer competitive seller financing programs; the availability of manufacturing capacity at the Company's factories; and whether the Company can offer the complete package of products and services sought by its customers.
- - Factors affecting the Company's ability to successfully manage sales it obtains, such as: the accuracy of the Company's cost and time estimates for major projects; the Company's success in completing projects on time and within budget; the Company's success in recruiting and retaining managers and key employees; wage stability and cooperative labor relations; plant capacity and utilization; and whether acquisitions are assimilated and divestitures completed without notable surprises or unexpected difficulties.
- - Factors affecting the Company's general business, such as: unforeseen patent, tax, product, environmental, employee health or benefit or contractual liabilities; nonrecurring restructuring charges; changes in accounting or tax rules or regulations; and reassessments of asset valuations such as inventories.
- - Factors affecting general business levels, such as: political turmoil and economic growth in major markets such as the United States, Canada, Europe, the Far East, South Africa, Australia and Chile; environmental and trade regulations; and the stability and ease of exchange of currencies.
Consolidated Statement of Income
Consolidated Statement of Income
Consolidated Statement of Income
Notes to Consolidated Financial Statements
(Dollar amounts in thousands unless indicated) Note 1 Significant Accounting Policies
Basis of Presentation - The consolidated financial statements and related notes give retroactive effect to the merger on November 29, 1994 with Joy Technologies Inc. ("JTI") for all periods presented, accounted for as a pooling of interests. The Consolidated Statements of Income and of Cash Flow for each of the three years ended October 31, 1996 include the results of JTI for the years ended October 31, 1996, October 31, 1995 and February 25, 1994, respectively. The Consolidated Statement of Income has also been restated to reflect the Company's divestiture of the Systems Group in 1995 and Joy Environmental Technologies ("JET") accounted for as discontinued operations. See Note 16 - Discontinued Operations. The term "Company" as used in these consolidated financial statements refers to Harnischfeger Industries, Inc. and its subsidiaries.
Principles of Consolidation - The consolidated financial statements include the accounts of all majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions, in certain circumstances, that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Ultimate realization of assets and settlement of liabilities in the future could differ from those estimates.
Inventories - Inventories are stated at the lower of cost or market value. Cost is determined by the last-in, first-out (LIFO) method for substantially all domestic inventories and by the first-in, first-out (FIFO) method for the inventories of foreign subsidiaries.
Revenue Recognition - Revenue on long-term contracts is generally recorded using the percentage-of-completion method for financial reporting purposes. Such contracts include contracts for papermaking machinery, certain mining equipment and custom-engineered cranes. Losses, if any, are recognized in full as soon as identified. Sales of other products and services are recorded as products are shipped or services are rendered.
Property, Plant and Equipment - Property, plant and equipment is stated at historical cost. Expenditures for major renewals and improvements are capitalized, while maintenance and repairs which do not significantly improve the related asset or extend its useful life are charged to expense as incurred.
For financial reporting purposes, plant and equipment is depreciated primarily by the straight-line method over the estimated useful lives of the assets. Depreciation claimed for income tax purposes is computed by accelerated methods.
Cash Equivalents - The Company considers all highly liquid debt instruments with a maturity of three months or less at the date of purchase to be cash equivalents.
Foreign Exchange Contracts - Any gain or loss on forward contracts designated as hedges of commitments is deferred and included in the measurement of the related foreign currency transaction, except that permanent losses are recognized immediately.
Foreign Currency Translation - The majority of the assets and liabilities of the Company's international operations are translated at year-end exchange rates; income and expenses are translated at average exchange rates prevailing during the year.
For operations whose functional currency is the local currency, translation adjustments are accumulated in a separate section of shareholders' equity. Transaction gains and losses, as well as translation adjustments relating to operations whose functional currency is the U.S. dollar, are reflected in income. Pre-tax foreign exchange (losses) gains included in operating income were $(1,150), $1,901 and $(1,619) in 1996, 1995 and 1994, respectively.
Goodwill and Intangible Assets - Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of acquired companies and is amortized on a straight-line basis over periods ranging from 30 to 40 years. The Company assesses the carrying value of goodwill at each balance sheet date. Consistent with Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", such assessments include, as appropriate, a comparison of (a) the estimated future nondiscounted cash flows anticipated to be generated during the remaining amortization period of the goodwill to (b) the net carrying value of goodwill. The Company recognizes diminution in value of goodwill, if any, on a current basis. Other intangible assets are amortized over the shorter of their legal or economic useful lives ranging from 5 to 20 years. Accumulated amortization was $93,383 and $98,200 at October 31, 1996 and 1995, respectively.
Income Taxes - In 1994, the Company adopted SFAS No. 109, "Accounting for Income Taxes", retroactive to November 1, 1988. Under SFAS 109, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, and for tax basis carryforwards. A valuation allowance is provided for deferred tax assets where it is considered more likely than not that the Company will not realize the benefit of such assets. The consolidated financial statements for each year presented take into account the effects of SFAS 109. (See Note 6 - Income Taxes.)
Research and Development Expenses - Research and development costs are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products amounted to $34,471, $30,348, and $28,879 in 1996, 1995 and 1994, respectively. Certain capital expenditures used in research activities, such as the construction of a pilot paper machine used in research and for customer tests, are capitalized and depreciated over their expected useful lives.
Earnings Per Share - Earnings per share are based upon the weighted average number of common shares outstanding during the year. The number of shares used in the computation were 47,196,388 in 1996, 46,218,144 in 1995, and 43,716,464 in 1994. Common stock equivalents were not significant in any of the years presented. Shares in the Stock Employee Compensation Trust ("SECT") are not considered outstanding for purposes of computing earnings per share.
Note 2 Acquisitions
In early fiscal 1996, the Company completed the acquisition of Dobson Park Industries plc ("Dobson") for a purchase price of approximately $330,000, including acquisition costs, plus the assumption of net debt of approximately $40,000. The acquisition was accounted for as a purchase transaction with the purchase price allocated to the fair value of specific assets acquired and liabilities assumed. Resultant goodwill is being amortized over 40 years.
Dobson, headquartered in the United Kingdom, was an industrial engineering group with interests in underground mining equipment, industrial electronic control systems, toys and plastics. Longwall International ("Longwall"), one of the main subsidiaries of Dobson, was engaged in the manufacture, sale and service of underground mining equipment for the international coal mining industry. Longwall's products included electronically controlled roof support systems and armored face conveyors.
The Company is fully integrating Longwall's operations into Joy Mining Machinery ("Joy"), thus enabling Joy to offer integrated underground longwall mining systems to the worldwide mining industry. As a result of this integration, the Company has established purchase accounting reserves to provide for the estimated costs of this effort. The reserves related primarily to the closure of selected manufacturing and service facilities, severance and relocation costs approximate $71,000. As of October 31, 1996, approximately $13,600 of the reserves had been used.
The following unaudited pro-forma results of operations give effect to the acquisition of Dobson as if it had occurred on November 1, 1994:
The unaudited pro-forma information is not necessarily indicative of either results of operations that would have occurred had the purchase been made on November 1, 1994, or of future results of operations of the combined companies.
The industrial electronic and toys/plastics businesses are held for sale and are separately classified as such in the Consolidated Balance Sheet. These businesses were originally valued at $100,000. Several of the businesseshave been sold during 1996, aggregating net proceeds of $73,848. The remaining balance represents the net realizable value including the expected cash flow from such businesses. These businesses are expected to be sold within the next year.
On March 27, 1996, the Company and its Beloit Corporation subsidiary purchased the assets of the Pulp Machinery Division of Ingersoll-Rand Company ("IMPCO") for $119,230, including acquisition costs. The acquisition was accounted for as a purchase transaction with the purchase price allocated to the fair value of specific assets acquired and liabilities assumed. Resultant goodwill is being amortized over 40 years.
On November 29, 1994, the Company completed the acquisition of JTI upon the approval of the shareholders of each company. Under the terms of the acquisition, accounted for as a pooling of interests, the Companyexchanged 17,720,750 common shares for all of JTI's 31,353,000 outstanding shares, at an exchange ratio of .5652 of a share of the Company's common stock for each of JTI's common shares.
The fiscal year of JTI has been conformed to the Company's fiscal year effective November 1, 1994, and all periods presented have been retroactively restated (See Note 1 - Significant Accounting Policies - Basis of Presentation). JTI's operating results for the period from February 26, 1994 (the end of JTI's fiscal year before the acquisition) to November 1, 1994, a net loss of $(4,575) on net sales of $293,290, have been reflected as an adjustment to the combined Company's retained earnings on November 1, 1994.
Transaction costs incurred to complete the JTI merger of $17,459 ($11,384 after tax, or $0.24 per share) were charged to income and consisted primarily of investment banker, attorney and accountant fees, severance and related benefits, and printing, mailing and registration expenses.
In September, 1994, the Company completed the acquisition of all of the outstanding shares of MMH (Holdings) Limited, a holding company for Morris Mechanical Handling Limited ("Morris") and related companies for $24,890. The acquisition was accounted for as a purchase transaction. The purchase price was allocated to the fair value of specific net assets acquired and liabilities assumed. Resultant goodwill is being amortized over 40 years.
In addition, during fiscal years 1994 through 1996, the Company made several smaller acquisitions in each of the three business segments. All acquisitions were accounted for as purchase transactions. Resultant goodwill is being amortized over a 30- or 40-year period.
Note 3 Restructuring Charge
In the fourth quarter of fiscal 1996, the Company's Beloit Corporation subsidiary recorded a restructuring charge. The focus of the restructuring is to better serve its customers and strengthen its market position in the worldwide pulp and paper industry. The restructuring is consistent with the Company's policy to generate positive Economic Value Added ("EVA"). The restructuring initiative involves organizing engineering and manufacturing operations into Centers of Excellence and expanding the aftermarket capabilities of the subsidiary. The total estimated cost of the restructuring activities reduced pre-tax income by $43,000 ($21,830 after tax and minority interest, or $0.46 per share). Included in the charge are costs related to severance for approximately 500 employees worldwide, the disposition of machinery and equipment, closure of certain facilities and the sale of businesses. Details of the restructuring charge are listed below.
The cash and noncash elements of the restructuring charge approximated $27,700 and $15,300, respectively. Cash outflows to date are approximately $1,900. It is expected that the restructuring actions will be substantially completed by the end of fiscal 1997.
Note 4 Accounts Receivable
The amount of accounts receivable due beyond one year is not significant.
Note 5 Inventories
Inventories at October 31 consisted of the following:
Inventories valued using the LIFO method represented approximately 56% and 80% of consolidated inventories at October 31, 1996 and 1995, respectively.
Note 6 Income Taxes
The components of income for the Company's domestic and foreign operations for the years ended October 31 were as follows:
The consolidated provision (credit) for income taxes included in the Consolidated Statement of Income for the years ended October 31 consisted of the following:
Income tax provision (credit) is included in the Consolidated Statement of Income as follows:
The difference between the federal statutory tax rate and the effective tax rate on continuing operations for the years ended October 31 are as follows:
Temporary differences and carryforwards which gave rise to the net deferred tax asset (liability) at October 31 are as follows:
This net asset (liability) is included in the Consolidated Balance Sheet in the following captions:
At October 31, 1996, the Company had general business tax credits of $7,665 expiring in 2009-2011, and alternative minimum tax credit carryforwards of $6,914 which do not expire. In addition, tax loss carryforwards consisted of foreign carryforwards of $30,339 with various expiration dates, capital loss carryforwards of $22,933 with various expiration dates, and domestic carryforwards of $18,300 with various states and expiration dates. The carryforwards will be available for the reduction of future income tax liabilities; a valuation allowance has been recorded against certain of these carryforwards for which utilization is uncertain.
U.S. income taxes, net of foreign taxes paid or payable, have been provided on the undistributed profits of foreign subsidiaries, except in those instances where such profits are expected to be permanently reinvested. Such unremitted earnings of subsidiaries which have been or are intended to be permanently reinvested were $196,100 at October 31, 1996. If, for some reason not presently contemplated, such profits were to be remitted or otherwise become subject to U.S. income tax, the Company expects to incur tax at substantially less than the U.S. income tax rate as a result of foreign tax credits that would be available.
Income taxes paid were $30,205, $31,686 and $16,979 for 1996, 1995 and 1994, respectively.
Note 7 Long-Term Obligations, Bank Credit Facilities and Interest Expense
Long-term obligations at October 31 consisted of the following:
The 10 1/4% Senior Notes have a maturity date of September 1, 2003. The Company may, at its option, redeem the Senior Notes in whole or in part at any time on or after September 1, 1998 at 105.125% of their principal amount, plus accrued interest, declining to 100% of their principal amount, plus accrued interest, on or after September 1, 2000.
In addition, upon a change of control, JTI is required to make an offer to purchase the Senior Notes then outstanding at a purchase price equal to 101% of the principal amount thereof plus accrued interest.
On December 29, 1994, JTI issued an offer to purchase for cash at 101% any and all of its outstanding 10 1/4% Senior Notes. This offer expired on February 10, 1995 with $270 being redeemed under the offer. Prior to this tender offer, the Company had purchased $11,350 of outstanding 10 1/4% Senior Notes in unsolicited open market transactions. In 1995, as a result of the 10 1/4% Senior Note redemptions and repayment of remaining borrowings under JTI's Bank Facility, the Company recorded an extraordinary loss on debt retirement, net of applicable income taxes, of $3,481, or $0.08 per share, consisting primarily of unamortized financing costs and redemption premiums.
During fiscal 1994, the Company recorded an extraordinary after-tax charge of $4,827 associated with the prepayment of JTI's outstanding Tranche A term loans existing under the Bank Facility and all of JTI's 12.3% Junior Subordinated Notes.
The Company has $150,000 of unsecured debentures outstanding with interest rates ranging from 8.7% to 8.9% due at maturity in 2022.
The 7 1/4% Debentures were issued on December 19, 1995 at 99.153%. The debentures mature on December 15, 2025, are not redeemable prior to maturity and are not subject to any sinking fund requirements.
The Senior Notes, Series A through D, are privately placed and unsecured. The Series D Notes provide for eleven equal annual repayments beginning in 1996; Series A through C Notes are due at maturity in 1999, 1999 and 2001, respectively.
The terms of certain of the debt instruments place limits on the amount of additional long-term debt the Company may issue and require maintenance of a minimum consolidated net worth, as defined. Additional funded debt may be incurred if immediately thereafter consolidated funded debt does not exceed 50% of consolidated total tangible assets, as defined.
In November, 1993, the Company entered into a four-year Revolving Credit Facility Agreement between the Company and certain domestic and foreign financial institutions that allowed for borrowings of up to $150,000 at rates expressed in relation to LIBOR and other rates. In November, 1994, the facility was increased to $240,000 and expires in November, 2000. A facility fee is payable on the Revolving Credit Facility.
At October 31, 1996, direct outstanding borrowings under the Facility were $40,000 and commercial paper borrowings, considered a utilization of the Facility, were $17,167.
In 1996, the Company filed a shelf registration with the Securities and Exchange Commission for the sale of up to $200,000 of debt securities. To date, no securities covered by the registration have been offered for sale.
Installments payable to holders of the outstanding long-term obligations of the Company are due as follows:
1997 $ 4,372 1998 3,801 1999 38,709 2000 11,881 2001 68,136
At October 31, 1996, short-term bank credit lines of foreign subsidiaries were approximately $167,503. The outstanding borrowings were $25,094 with a weighted average interest rate of 12.0%. There were no compensating balance requirements under these lines of credit. Net interest expense consisted of the following:
Interest paid was $65,161, $52,615 and $45,547 in 1996, 1995 and 1994, respectively.
Note 8 Pensions and Other Employee Benefits
The Company and its subsidiaries have a number of defined benefit, defined contribution and government mandated pension plans covering substantially all employees. Benefits from these plans are based on factors which include various combinations of years of service, fixed monetary amounts per year of service, employee compensation during the last years of employment and the recipient's social security benefit. The Company's funding policy with respect to its qualified plans is to contribute annually not less than the minimum required by applicable law and regulation nor more than the amount which can be deducted for income tax purposes. The Company also has a nonqualified senior executive supplemental pension plan, funded by Company stock held in a trust, which is based on credited years of service and compensation during the last years of employment.
Certain foreign plans, which supplement or are coordinated with government plans, many of which require funding through mandatory government retirement or insurance company plans, have pension funds or balance sheet accruals which approximate the actuarially computed value of accumulated plan benefits as of October 31, 1996 and 1995.
The Company recorded an additional minimum pension liability and intangible asset of $5,600 and $9,698 in 1996 and 1995, respectively, to recognize the unfunded accumulated benefit obligation of certain domestic plans.
Pension expense for all plans of the Company was $19,132 in 1996, $17,344 in 1995 and $18,521 in 1994. Net periodic pension costs for U.S. plans and plans of subsidiaries outside the United States for which SFAS 87, "Employers' Accounting for Pensions," has been adopted included the following components:
The discount rate used for U.S. plans was 8.0% in 1996 and 1995 and 7.9%-8.0% in 1994, and for non-U.S. plans ranged from 8.0%-14.0%. The assumed rate of increase in future compensation of U.S. salaried employees was 5.0% in 1996 and 1995 and ranged from 4.5-5.0% in 1994, and for non-U.S. salaried employees ranged from 5.0%-11.0%. Benefits under the hourly employee plans are generally not based on wages. The expected long-term rate of return on assets for U.S. plans was 10.0% and for non-U.S. plans ranged from 8.5%-15.0%. The assumptions for non-U.S. plans were developed on a basis consistent with that for U.S. plans, adjusted to reflect prevailing economic conditions and interest rate environments.
The following table sets forth the plans' funded status at October 31, 1996 and 1995:
Pension plan assets consist primarily of trust funds with diversified portfolios of primarily equity and fixed income investments.
The Company has a qualified profit sharing plan which covers substantially all domestic employees except employees covered by collective bargaining agreements and employees of subsidiaries with separate defined contribution plans. Contributions to the plan are based on the Company's EVA performance. Profit sharing expense was $10,783 in 1996, $6,321 in 1995 and $3,300 in 1994.
In the first quarter of fiscal 1995, the Company implemented SFAS No. 112, "Employers' Accounting for Postemployment Benefits". The impact upon adoption of SFAS 112 on the Company's results of operations and financial position was not material.
Note 9 Postretirement Benefits Other Than Pensions
The Company generally provides certain health care and life insurance benefits under various plans for U.S. employees who retire after attaining early retirement eligibility, subject to the plan amendments discussed below.
During the first quarter of fiscal 1994, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", through the immediate recognition of the obligation. Under SFAS 106, the costs of retiree health care and life insurance benefits are accrued over relevant employee service periods. Previously, these costs were charged to expense as claims were paid. The cumulative effect of the accounting change required by this standard was a one-time, pre-tax charge of $136,291 ($81,696 or $1.87 per share after taxes and minority interest). The weighted average discount rate used in determining the postretirement benefit obligation at October 31, 1996 and October 31, 1995 was 8%.
The following table sets forth the plans' funded status and amounts recognized in the Company's Consolidated Balance Sheet as of October 31:
For measurement purposes, an annual rate of increase in the per capita cost of covered health care benefits in the range of 6.4% to 10% for non-Medicare eligible participants was assumed for 1996 (a range of 5.5% to 8.75% was used for Medicare eligible participants); these rates were assumed to decrease gradually to 5.0% for all participants by 2001 and remain at that level thereafter. The health care cost trend rate assumption has an effect on the amounts reported. A one percentage point increase in the assumed health care cost trend rates each year would increase the accumulated postretirement benefit obligation as of October 31, 1996 by $3,300 and the aggregate service cost and interest cost components of the net periodic postretirement benefit cost for the year by $300. Postretirement life insurance benefits have a minimal effect on the total benefit obligation.
In 1993, the Board of Directors of the Company approved a general approach that would culminate in the elimination of all Company contributions towards postretirement health care benefits. Increases in costs paid by the Company were capped for certain plans beginning in 1994 extending through 1998 and Company contributions will be eliminated on January 1, 1999 for most employee groups, excluding Joy. For Joy, based upon existing plan terms, future eligible retirees will participate in a premium cost-sharing arrangement which is based upon age as of March 1, 1993 and position at the time of retirement. Active employees under age 45 as of March 1, 1993 and any new hires after April 1, 1993 will be required to pay 100% of the applicable premium.
The initial one-time, pre-tax charge reflected all plan terms and amendments in place on November 1, 1993. Negative plan amendments made subsequent to November 1, 1993 are being amortized from the date of amendment to January 1, 1999.
Net periodic postretirement benefit cost includes the following components:
Note 10 Shareholders' Equity and Stock Options
The Company's authorized Common Stock amounts to 100,000,000 shares. A Preferred Stock Purchase Right is attached to each share of Common Stock which entitles a shareholder to exercise certain rights in the event a person or group acquires or seeks to acquire 20% or more of the outstanding Common Stock of the Company.
At the April 9, 1996 annual meeting, shareholders approved a new Stock Incentive Plan. This plan provides the granting, up to April 9, 2006, of qualified and non-qualified options, stock appreciation rights, restricted stock and performance units to key employees for not more than 2,000,000 shares of Common Stock. Non-qualified options covering 490,900 shares were granted under this plan in fiscal year 1996.
The Company's 1988 Incentive Stock Plan provides for the granting of qualified and non-qualified options, stock appreciation rights and restricted stock to key employees for not more than 3,600,000 shares of Common Stock. In fiscal 1996, non-qualified options and restricted stock covering 4,000 and 347,857 shares, respectively, were granted under this plan. The restricted stock was issued in connection with the cancellation of the employment contracts of certain senior executive officers. Such shares are subject to restrictions and forfeiture under certain circumstances. Following shareholder approval of the Stock Incentive Plan, the 1988 Incentive Stock Plan terminated for the granting of future awards.
Since the inception of the 1978 and 1988 Incentive Stock Plans and the 1996 Stock Incentive Plan, options for the purchase of 4,130,405 shares have been granted at prices ranging from $6.75 to $37.88 per share. At October 31, 1996, 1,498,334 of the options were outstanding, 1,600,003 had been exercised and 1,032,068 had expired. Generally, the options become exercisable in cumulative installments of one-fourth of the shares in each year beginning six months from the date of the grant. In addition, 7,250 restricted shares were issued in 1996 under a restricted stock award program established in 1990 under the 1988 Incentive Stock Plan. The shares became unrestricted in 1996.
Certain information regarding stock options is as follows:
In September, 1994, the Company sold 2,000,000 shares of Common Stock in a private transaction. This sale satisfied the requirements under the pooling of interests accounting rules to replace shares repurchased during the two years prior to the announcement of the Company's merger with JTI. The shares were sold from treasury stock.
Following a "Dutch auction" self-tender offer in May, 1993, the Company purchased for cash 2,500,000 shares of Common Stock, or approximately 9% of shares of Common Stock outstanding at that time, at $19 5/8 per share, in conjunction with the establishment of the Harnischfeger Industries, Inc. Stock Employee Compensation Trust ("SECT"). Concurrent with the purchase, the Company sold 2,547,771 shares of Common Stock held in treasury to the SECT, amounting to $50,000 at $19 5/8 per share. The purchase of the treasury shares reduced shareholders' equity. The sale of the treasury shares to the SECT had no impact on such equity. Shares in the SECT are being used to fund future employee benefit obligations under plans that currently require shares of Company Common Stock.
Shares owned by the SECT are accounted for as treasury stock until issued to existing benefit plans; they are reflected as a reduction to shareholders' equity. Shares owned by the SECT are valued at the closing market price each period, with corresponding changes in the SECT balance reflected in capital in excess of par value. Shares in the SECT are not considered outstanding for computing earnings per share.
Note 11 Operating Leases
The Company leases certain plant, office and warehouse space as well as machinery, vehicles, data processing and other equipment.
Certain of the leases have renewal options at reduced rates and provisions requiring the Company to pay maintenance, property taxes and insurance.
Generally, all rental payments are fixed. The Company's assets and obligations under capital lease arrangements are not significant.
Total rental expense under operating leases, excluding maintenance, taxes and insurance, was $27,887, $20,822 and $20,327 in 1996, 1995 and 1994, respectively.
At October 31, 1996, the future payments for all operating leases with remaining lease terms in excess of one year, and excluding maintenance, taxes and insurance, were as follows:
1997 $20,231 1998 14,709 1999 4,955 2000 2,156 2001 1,133 2002 and thereafter 2,599
Note 12 Commitments, Contingencies and Off-Balance-Sheet Risks
At October 31, 1996, the Company was contingently liable to banks, financial institutions and others for approximately $271,000 for outstanding letters of credit securing performance of sales contracts and other guarantees in the ordinary course of business, excluding the H-K Systems, Inc. back-up bond guarantee facility. The Company may also guarantee performance of its equipment at levels specified in sales contracts without the requirement of a letter of credit.
The Company is party to litigation matters and claims which are normal in the course of its operations. Also, as a normal part of their operations, the Company's subsidiaries undertake certain contractual obligations, warranties and guarantees in connection with the sale of products or services. In the case of Beloit Corporation, certain claims are currently pending in connection with its contractual undertakings. While the outcome of such litigation and claims cannot be predicted with certainty and favorable or unfavorable judgements or resolutions may affect income on a quarter-to-quarter basis, management believes that such matters will not have a materially adverse effect on the Company's consolidated financial position or annual results of operations.
The Company is also involved in a number of proceedings and potential proceedings relating to environmental matters. Although it is difficult to estimate the potential exposure to the Company related to these environmental matters, the Company believes that these matters will not have a materially adverse effect upon its consolidated financial position or annual results of operations.
The Company has entered into various foreign currency exchange contracts with major international financial institutions designed to minimize its exposure to exchange rate fluctuations on foreign currency transactions. These contracts are used to hedge known cash receipts and disbursements in the ordinary course of business. At October 31, 1996, the outstanding net U.S. dollar face amounts of contracts to cover sales and purchase activity totaled approximately $201,000. In addition, at October 31, 1996, the Company had outstanding foreign exchange contracts totaling $15,072 to cover interest and borrowing obligations. The difference between contract and estimated fair values at October 31, 1996 was not significant. It is the Company's policy not to participate in high-yield financings, highly leveraged transactions or other "derivative" instruments.
On October 29, 1993, the Company completed the sale of H-K Systems, Inc. to that unit's senior management and some equity partners. The Company agreed to make available a back-up bonding guarantee facility for certain bid, performance and other contract bonds issued by H-K Systems, Inc. Outstanding contract bonds under the guarantee arrangement totaled approximately $47,800 at October 31, 1996. No new bonds can be issued during 1997.
In 1994, a Federal court jury in Madison, Wisconsin returned a verdict finding that Valmet Corporation of Finland infringed a Beloit patent on the Bel-Champ(TM) paper machine drying technology. In connection with this suit, the jury awarded Beloit $7,875 in damages. The verdict has been appealed by Valmet. The award has not been recorded in the Company's financial statements.
Note 13 Disclosure About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Cash Equivalents: The carrying value approximates fair value because of the short maturity of those instruments.
Long-Term Obligations: The fair value of the Company's long-term obligations has been based on prevailing market quotations and by discounting cash flows using current market yields quoted on similar issues.
The estimated fair values of the Company's financial instruments at October 31, 1996 and 1995 are as follows:
Note 14 Transactions With Affiliated Companies Mitsubishi Heavy Industries, Ltd. ("Mitsubishi") owns a 20% interest in Beloit Corporation. In connection with this ownership interest, Mitsubishi entered into certain agreements that provide it with the right to designate one of Beloit's five directors. The agreements also place certain restrictions on the transfer of Beloit stock. In the event of change in control of the Company, Mitsubishi has the right to sell its 20% interest back to the Company for the greater of $60,000 or the book value of its equity interest.
Transactions with Mitsubishi for the years ending October 31, were as follows:
The Company believes that its transactions with Mitsubishi were competitive with alternate sources of supply for each party involved.
As of October 31, 1994, the Company's total investment in Measurex Corporation, including related expenses, equity income and net of dividends received, amounted to $66,347, representing a 20% interest. In fiscal 1995, Measurex repurchased its stock which had been purchased by the Company resulting in a pre-tax gain of $29,657.
Measurex continues to have cooperative agreements with Beloit.
Note 15 Segment Information
The Company designs, manufactures, markets and services products structured into three industry segments.
The "Mining Equipment Segment" consists of P&H Mining Equipment (Harnischfeger Corporation) and Joy Mining Machinery. P&H Mining Equipment designs, manufactures and markets electric mining shovels, electric and diesel-electric draglines, buckets, hydraulic mining excavators, large rotary blasthole drilling equipment and related replacement parts for the surface mining and quarrying industries. Joy Mining Machinery designs, manufactures and distributes continuous miners, longwall shearers, roof supports, face conveyors, shuttle cars and flexible conveyor train continuous haulage systems for use in the underground extraction of coal and other minerals. In addition, Joy engineers, manufactures and markets worldwide a highwall mining system for the extraction of coal from exposed surface seams in the walls of surface coal mines, trenches and mountainside benches. It also rebuilds and services installed equipment and sells spare parts for the equipment it manufactures.
The "Pulp and Paper Machinery Segment" (Beloit Corporation) designs, manufactures, services and markets papermaking machinery and allied equipment for the pulp and paper industries.
The "Material Handling Segment" (Harnischfeger Corporation) designs, manufactures, services and markets overhead cranes, electric wire rope and chain hoists, engineered products, container cranes and crane modernizations and electrical products for use worldwide in a variety of industries and applications.
Intersegment sales are not significant. Common operating plants have been allocated to the respective segments.
Corporate assets include principally cash, cash equivalents, and administration facilities.
Exports of U.S.-produced products were approximately $321,000, $263,000 and $190,000 in 1996, 1995 and 1994, respectively.
Note 16 Discontinued Operations
In 1994, the Company announced its decision to divest of Syscon Corporation, the remaining unit in the Systems Group. Accordingly, the assets and liabilities and operating results of Syscon were segregated in the consolidated financial statements and were reflected as net assets and results of discontinued operations in the Consolidated Balance Sheet and Consolidated Statement of Income, respectively. In February, 1995, the Company completed the sale of Syscon to Logicon, Inc. for a cash price of $45,000. In connection with this sale, the Company recorded a loss of $(21,948) or $(0.48) per share, net of applicable income taxes, in the first quarter of 1995.
In April, 1995, the Company announced its decision to divest of Joy Environmental Technologies ("JET"), a unit of JTI which supplies air pollution and ash handling equipment for electric utilities and other industrial operations. Accordingly, the operating results of JET were segregated and reflected in the Consolidated Statement of Income as a discontinued operation.
In December, 1995, the Company completed the sale of substantially all of the assets of JET to Babcock and Wilcox, an operating unit of McDermott International, for $11,651. The loss on sale, net of applicable income taxes, was recorded in fiscal 1995.
As a result, the Consolidated Statement of Income reflects a loss from the discontinued operations of $(9,287) or $(0.19) per share for fiscal 1995. Prior comparative periods have also been restated to reflect JET as a discontinued operation.
Operating results of discontinued operations as of October 31, were as follows:
Note 17 Unaudited Quarterly Financial Data and Stock Prices
Unaudited Quarterly Financial Data and Stock Prices
Unaudited Quarterly Financial Data and Stock Prices
Report of Independent Accountants
To the Directors and Shareholders of Harnischfeger Industries, Inc.
In our opinion, based upon our audits and the report of other auditors, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Harnischfeger Industries, Inc. and its subsidiaries (the "Company") at October 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of Joy Technologies Inc., which statements reflect total revenues of $572.7 million and $583.3 million for the years ended February 25, 1994. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Joy Technologies, Inc. as of February 25, 1994, is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for the opinion expressed above.
As discussed in Note 9, in the first quarter of fiscal 1994, the Company changed its method of accounting for postretirement benefits other than pensions.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin November 21, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Joy Technologies Inc.:
We have audited the accompanying consolidated balance sheets of Joy Technologies Inc. (a Delaware corporation) and subsidiaries as of February 25, 1994, and February 26, 1993, and the related consolidated statements of income, accumulated deficit and cash flows for each of the three years in the period ended February 25, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Joy Technologies Inc. and subsidiaries as of February 25, 1994, and February 26, 1993, and the results of their operations and their cash flows for each of the three years in the period ended February 25, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits other than pensions.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania, March 25, 1994
(1) Reflects declared and cumulative preferred stock dividends for the senior and junior preferred stock of JTI (2) Includes amounts classified as current portion of long-term obligations (3) Total debt to total debt, minority interest and shareholders' equity (4) As of end of year, excluding SECT shares
(1) Reflects declared and cumulative preferred stock dividends for the senior and junior preferred stock of JTI (2) Includes amounts classified as current portion of long-term obligations (3) Total debt to total debt, minority interest and shareholders' equity (4) As of end of year, excluding SECT shares
(1) Reflects declared and cumulative preferred stock dividends for the senior and junior preferred stock of JTI (2) Includes amounts classified as current portion of long-term obligations (3) Total debt to total debt, minority interest and shareholders' equity (4) As of end of year, excluding SECT shares
EXHIBIT 21
HARNISCHFEGER INDUSTRIES, INC.
SUBSIDIARIES
October 31, 1996
Harnischfeger Industries, Inc. is publicly held and has no parent. The following subsidiaries are wholly-owned except as noted below: "Certain subsidiaries, which if considered in the aggregate as a single subsidiary would not constitute a significant subsidiary, are omitted from this list."
Description (1)
Justification ------------- Beloit Corporation (2) . . . . . . . . . . . . . . . . . . . Delaware Beloit Canada Ltd./Ltee (3). . . . . . . . . . . . . . . . .Canada Joy Technologies Canada Inc.(4) . . . . . . . . . . . . . . . . . . . .Canada Harnischfeger Corporation of Canada, Ltd.(5). . . . . . . . . . . . Canada Beloit Industrial Ltda. (6). . . . . . . . . . . . . . . . .Brazil Beloit International Pty. Ltd.. . . . . . . . . . . . . . . . . . . .Australia Beloit Pulping Group, Inc. . . . . . . . . . . . . . . . . . . . . . Delaware Beloit Poland S.A. (7) . . . . . . . . . . . . . . . . . . Poland BWRC, Inc. . . . . . . . . . . . . . . . . . . . . . . . .Delaware Beloit Asia Pacific Pte.Ltd. . . . . . . . . . . . . . Singapore Beloit Italia S.p.A. (8).. . . . . . . . . . . . . . . . . Italy Beloit Lenox GmbH. . . . . . . . . . . . . . . . . . . . Germany Beloit Walmsley Limited. . . . . . . . . . . . . .United Kingdom J&L Fiber Services, Inc. . . . . . . . . . . . . . . . Wisconsin IMPCO Voest Alpine Pulping Technologies GmbH. . . . . . . . . . . . .Germany Optical Alignment Systems and Inspection Services, Inc.New Hampshire Sandusky International, Inc.(9). . . . . . . . . . . . . . .Ohio Harnischfeger Corporation (doing business under the names of "P&H Mining Equipment" and "P&H Material Handling") . . . . . . . . Delaware Birmingham Crane & Hoist, Inc. . . . . . . . . . . . . . . Alabama Blooma Engineering Pte. Limited (10) . . . . . . . . . . Singapore Harnischfeger of Australia Pty. Ltd. (11). . . . . . . . Australia Harnischfeger do Brasil Comercio e Industria Limitada. . . .Brazil Harnischfeger Distribution & Service, LLC . . . . . . . . . . . . . .Wisconsin Harnischfeger de Chile Limitada(12). . . . . . . . . . . . . Chile Harnischfeger Corporation of Canada, Ltd.. . . . . . . . . .Canada Harnischfeger GmbH (13). . . . . . . . . . . . . . . . . . Germany Harnischfeger (South Africa) (Proprietary) Limited . .South Africa Harnischfeger Venezuela, S.A.. . . . . . . . . . . . . . Venezuela HCHC, Inc. . . . . . . . . . . . . . . . . . . . . . . . .Delaware Harnischfeger Contract Services, Inc.. . . . . . . . . .Delaware Harnischfeger Holdings Limited . . . . . . . . . .United Kingdom MMH (Holdings) Limited. . . . . . . . . . . . . . . . . . . United Kingdom Harnischfeger Mexico Holdings S.A. de C.V. (14). . . . . . .Mexico P&H Mining Equipment Peru S.A.(15) . . . . . . . . . . . . . . . . . . . Peru SPH Crane and Hoist, Inc.. . . . . . . . . . . . . . . . .Delaware Joy Technologies Inc.(doing business under the name "Joy Mining Machinery") . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware Joy Manufacturing Company (Africa)(Pty)Ltd.. . . . . .South Africa Joy Manufacturing Company Pty. Limited . . . . . . . . . Australia Joy Mining Machinery Limited . . . . . . . . . . . .United Kingdom Joy MM Holdings (U.K.) Ltd. . . . . . . . . . . . . . . . . United Kingdom Joy Manufacturing Company (U.K.)Limited . . .United Kingdom
(1) Where the name of a subsidiary is indented, it is wholly-owned by its immediate parent listed at the margin above it, unless otherwise indicated.
(2) Harnischfeger Industries, Inc. owns 80% of the voting securities of Beloit Corporation.
(3) Beloit Corporation owns 70% of the voting securities of Beloit Canada Ltd./Ltee. Harnischfeger Corporation, Joy Technologies Inc., and Joy Technologies Canada Inc. each own 10% of the voting securities.
(4) Beloit Canada Ltd./Ltee owns 90% and Joy Technologies Inc. owns 10% of the voting securities of Joy Technologies Canada Inc.
(5) Joy Technologies Canada Inc. owns 90% and Harnischfeger Corporation owns 10% of the voting securities of Harnischfeger Corporation of Canada Limited.
(6) Beloit Corporation owns 45% of the voting quotas and 100% of the non-voting quotas of Beloit Industrial Ltda. This gives Beloit Corporation an 82.1% ownership of Beloit Industrial Ltda.
(7) Harnischfeger Corporation owns 99.6% of the voting securities of Beloit Poland S.A.
(8) BWRC, Inc. owns 99.98% of the voting securities of Beloit Italia S.p.A.
(9) BWRC, Inc. owns 50% of the voting securities of Sandusky International, Inc.
(10) Harnischfeger Corporation owns 85% of the voting securities of Blooma Engineering Pte.
(11) Harnischfeger Corporation owns 75% of the voting securities of Harnischfeger of Australia Pay. Ltd.
(12) HCHC, Inc. owns 90% and Harnischfeger Corporation owns 10% of the voting securities of Harnischfeger de Chile Limitada. (13) Harnischfeger Corporation owns 75% and Harnischfeger Australia Pty. Ltd. owns 25% of the voting securities of Harnischfeger GmbH. (14) HCHC, Inc. owns 90% and Harnischfeger Corporation owns 10% of the voting securities of Harnischfeger Mexico Holdings S.A. de C.V. (15) HCHC, Inc. owns 90% and Harnischfeger Corporation owns 10% of the voting securities of P&H Mining Equipment Peru S.A
Exhibit 23 (a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 and in the Registration Statements on Form S-8 listed below of Harnischfeger Industries, Inc. of our report dated November 21, 1996 which appears in this Current Report on Form 8-K.
1. Registration Statement on Form S-8 (Registration No. 33-42833) 2. Registration Statement on Form S-8 (Registration No. 33-23985) 3. Registration Statement on Form S-8 (Registration No. 33-46738) 4. Registration Statement on Form S-8 (Registration No. 33-46739) 5. Registration Statement on Form S-8 (Registration No. 33-46740) 6. Registration Statement on Form S-8 (Registration No. 33-57209) 7. Registration Statement on Form S-3 (Registration No. 33-57979) 8. Registration Statement on Form S-8 (Registration No. 33-58087) 9. Registration Statement on Form S-8 (Registration No. 333-01703) 10. Registration Statement on Form S-8 (Registration No. 333-01705) 11. Registration Statement on Form S-3 (Registration No. 333-02401) 12. Registration Statement on Form S-8 (Registration No. 333-10327) 13. Registration Statement on Form S-8 (Registration No. 333-10329)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin January 28, 1997
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by reference in Harnischfeger Industries, Inc.'s Form 10-K of our report dated March 25, 1994, included in Harnischfeger Industries, Inc. Registration Statement File No. 1-9299.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania, January 28, 1997
EXHIBIT 24
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, her attorney, with full power to act for her and in her name, place and stead, to sign her name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and seal this ninth day of December, 1996. ________________ (SEAL) Donna M. Alvarado
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
_______________ (SEAL) John D. Correnti
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints John N. Hanson and Francis M. Corby, Jr., and each or either of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
____________________ (SEAL) Jeffery T. Grade
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
______________ (SEAL) Harry L. Davis
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
____________________ (SEAL) Robert M. Gerrity
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
____________________ (SEAL) Jean-Pierre Labruyere
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
____________________
(SEAL) Ralph C. Joynes
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
________________________ (SEAL) Herbert V. Kohler, Jr.
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
____________________ (SEAL) Robert F. Schnoes
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
_____________ (SEAL) Donald Taylor
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade and Francis M. Corby, Jr., and each or either of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
______________ (SEAL) John N. Hanson
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
_______________ (SEAL) Robert B. Hoffman
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade and John N. Hanson, and each or either of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
____________________ (SEAL) Francis M. Corby, Jr.
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a Delaware corporation (hereinafter referred to as the "Corporation"), will file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, a Form 10-K Annual Report for the fiscal year ended October 31, 1996; and,
WHEREAS, the undersigned is a Director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints Jeffery T. Grade, John N. Hanson and Francis M. Corby, Jr., and each or any of them, his attorney, with full power to act for him and in his name, place and stead, to sign his name in the aforesaid capacity to such Form 10-K Annual Report, hereby ratifying and confirming all that said attorney may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this ninth day of December, 1996.
_________________ (SEAL) Larry D. Brady