Joy Global 10-Q 2007 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDEDJanuary 26, 2007

OR

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD fromto.

Commission File number 1-9299

    JOY GLOBAL INC. (Exact Name of Registrant as Specified in Its Charter)

Delaware	39-1566457
(State of Incorporation)	(I.R.S. Employer
	Identification No.)

100 East Wisconsin Ave, Suite 2780

Milwaukee, Wisconsin 53202

(Address of principal executive offices)

(Zip Code)

(414) 319-8500

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b -2 of the Exchange Act. LARGE ACCELERATED FILER x ACCELERATED FILER o NON-ACCELERATED FILER o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at February 21, 2007
Common Stock, $1 par value	109,420,242 shares

JOY GLOBAL INC.

FORM 10-Q -- INDEX

January 26, 2007

PART I. – FINANCIAL INFORMATION		PAGE No.
Item 1 – Financial Statements (unaudited):
	Condensed Consolidated Statement of Income – Three Months
	Ended January 26, 2007 and January 28, 2006	3
	Condensed Consolidated Balance Sheet – January 26, 2007
	and October 28, 2006	4
	Condensed Consolidated Statement of Cash Flows – Three Months
	Ended January 26, 2007 and January 28, 2006	5
	Notes to Condensed Consolidated Financial Statements	6 – 20
Item 2 – Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	21 – 26
Item 3 – Quantitative and Qualitative Disclosures About Market Risk		27
Item 4 – Controls and Procedures		27
PART II. – OTHER INFORMATION
Item 1 – Legal Proceedings		28
Item 1A – Risk Factors		28
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3 – Defaults Upon Senior Securities		28
Item 4 – Submission of Matters to a Vote of Security Holders		28
Item 5 – Other Information		28 – 30
Item 6 –Exhibits		30
Signatures		31

-2-

PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements

JOY GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

(In thousands except per share amounts)

			Three Months Ended
			January 26,		January 28,
			2007		2006
Net sales		$	560,466	$	553,341
Costs and expenses:
	Cost of sales		385,599		387,599
	Product development, selling and administrative expenses		81,850		76,320
	Other income		(965)		(984)
Operating income			93,982		90,406
Interest income			2,668		1,765
Interest expense			(7,110)		(567)
Reorganization items			(150)		(125)
Income before income taxes			89,390		91,479
Provision for income taxes			(29,725)		(33,300)
Income before cumulative effect of changes in
	accounting principle		59,665		58,179
Cumulative effect of changes in accounting principle			-		1,565
Net income		$	59,665	$	59,744
Basic earnings per share:
	Income before cumulative effect of accounting changes	$	0.52		0.48
	Cumulative effect of accounting changes		-		0.01
	Net income	$	0.52	$	0.49
Diluted earnings per share:
	Income before cumulative effect of accounting changes	$	0.51	$	0.47
	Cumulative effect of accounting changes		-		0.01
	Net income	$	0.51	$	0.48
Dividends per share		$	0.15	$	0.1125
Weighted average shares outstanding:
	Basic		114,679		122,354
	Diluted		116,049		124,060

See accompanying notes to consolidated financial statements

-3-

JOY GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands)

				January 26,		October 28,
				2007		2006
				(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	70,099	$	101,254
	Accounts receivable, net			434,293		431,430
	Inventories			685,617		639,934
	Other current assets			60,043		55,257
		Total current assets		1,250,052		1,227,875
Property, plant and equipment, net				211,304		205,011
Intangible assets, net				73,476		76,154
Deferred income taxes				316,995		335,690
Prepaid benefit cost				66,337		69,388
Other assets				50,576		39,887
		Total assets	$	1,968,740	$	1,954,005
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Short-term notes payable, including current portion
		of long-term obligations	$	4,068	$	5,166
	Trade accounts payable			161,604		200,121
	Employee compensation and benefits			43,988		77,415
	Advance payments and progress billings			194,708		186,581
	Accrued warranties			40,988		38,929
	Other accrued liabilities			85,622		91,769
		Total current liabilities		530,978		599,981
	Long-term obligations			479,080		98,145
	Accrued pension costs			264,719		264,093
	Other			72,995		72,157
		Total liabilities		1,347,772		1,034,376
Shareholders' equity				620,968		919,629
		Total liabilities and shareholders' equity	$	1,968,740	$	1,954,005

See accompanying notes to consolidated financial statements

-4-

JOY GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(In thousands)

			Three Months Ended
			January 26,		January 28,
			2007		2006
Cash flows from operating activities:
Net income		$	59,665	$	59,744
Non-cash items:
	Cumulative effect of accounting change		-		(1,565)
	Depreciation and amortization		12,214		9,566
	Amortization of financing fees and discounts		148		75
	Decrease in deferred income taxes, net of change in valuation allowance		(80)		(1,028)
	Excess income tax benefit from exercise of stock options		(1,521)		(10,938)
	Change in long-term accrued pension costs		5,655		5,606
	Other, net		1,772		3,848
Changes in working capital items:
	Decrease in accounts receivable, net		3,194		12,565
	Increase in inventories		(38,800)		(3,046)
	Increase in other current assets		(2,423)		(423)
	Decrease in trade accounts payable		(43,050)		(27,212)
	Decrease in employee compensation and benefits		(34,044)		(25,635)
	Increase (decrease) in advance payments and progress billings		6,229		(15,099)
	Increase in other accrued liabilities		12,057		12,696
Net cash provided (used) by operating activities			(18,984)		19,154
Cash flows from investing activities:
	Acquisition of business, net of cash acquired		(8,551)		-
	Property, plant and equipment acquired		(12,142)		(12,256)
	Proceeds from the sale of business		-		500
	Other, net		(52)		1,459
Net cash used by investing activities			(20,745)		(10,297)
Cash flows from financing activities:
	Exercise of stock options		3,572		7,626
	Excess income tax benefit from exercise of stock options		1,521		10,938
	Dividends paid		(17,313)		(13,709)
	Purchase of treasury stock		(359,704)		(9,996)
	Issuance of senior notes		394,874		-
	Financing fees		(976)		-
	Payments on long-term obligations, net		(14,093)		(155)
	Decrease in short-term notes payable		(1,486)		-
Net cash provided (used) by financing activities			6,395		(5,296)
Effect of exchange rate changes on cash and cash equivalents			2,179		2,893
Increase (Decrease) in Cash and Cash Equivalents			(31,155)		6,454
Cash and Cash Equivalents at Beginning of Period			101,254		143,917
Cash and Cash Equivalents at End of Period		$	70,099	$	150,371

See accompanying notes to consolidated financial statements

-5-

JOY GLOBAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 26, 2007

(Unaudited)

1. Description of Business

Joy Global Inc. is the world's leading manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. Our equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands and other minerals. We operate in two business segments: underground mining machinery (Joy Mining Machinery or “Joy”) and surface mining equipment (P&H Mining Equipment or “P&H”). Joy is a major manufacturer of underground mining equipment for the extraction of coal and other bedded minerals and offers comprehensive service locations near major mining regions worldwide. P&H is a major producer of surface mining equipment for the extraction of ores and minerals and provides extensive operational support for many types of equipment used in surface mining.

2. Basis of Presentation

The Condensed Consolidated Financial Statements presented in this quarterly report on Form 10-Q are unaudited and have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission.

In our opinion, all adjustments necessary for the fair presentation on a going concern basis of the results of operations, cash flows and financial position for all periods presented have been made. All adjustments made are of a normal recurring nature.

These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 28, 2006. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of the financial statements in conformity with GAAP for interim financial information requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts could differ from the estimates.

3. Borrowings and Credit Facilities

On November 10, 2006, we amended our $400.0 million unsecured revolving credit facility (“Credit Agreement”) to extend the facility through November 10, 2011 and also amend certain financial covenants, including the elimination of covenants that had the effect of restricting stock repurchases and limiting capital expenditures. Outstanding borrowings bear interest equal to LIBOR plus the applicable margin (.5% to 1.25%) or the Base Rate (defined as the higher of the Prime Rate or the Federal Funds Effective Rate plus 0.50%) at our option. We pay a commitment fee ranging from 0.125% to 0.25% on the unused portion of the revolving credit facility based on our credit rating. The Credit Agreement requires the maintenance of certain financial covenants including leverage and interest coverage. On January 26, 2007, we were in compliance with all financial covenants in the Credit Agreement.

-6-

At January 26, 2007, there were $83.0 million outstanding direct borrowings under the Credit Agreement. Outstanding letters of credit issued under the Credit Agreement, which count toward the $400 million credit limit, totaled $130.2 million. At January 26, 2007, there was $186.8 million available for borrowings under the Credit Agreement.

In November 2006, we issued $250.0 million of 6% Senior Notes due 2016 and $150.0 million of 6.625% Senior Notes due 2036 with interest on the notes being paid semi-annually in arrears on May 15 and November 15 of each year, starting on May 15, 2007. The notes are guaranteed by each of our current and future significant domestic subsidiaries. Proceeds from these offerings were used for the repayment of outstanding revolver balances, additional share repurchases and general corporate purposes.

4. Shareholders’ Equity

On November 14, 2006, our Board of Directors declared a cash dividend of $0.15 per outstanding share of common stock. The dividend was paid on December 19, 2006 to all stockholders of record at the close of business on December 5, 2006.

Under our share repurchase program, management is authorized to repurchase up to $1.0 billion in shares in the open market or through privately negotiated transactions until December 31, 2008. Through January 26, 2007, we have repurchased approximately $655.2 million of common stock, representing 14,252,178 shares, under the program including approximately $359.7 million of common stock, representing 8,105,426 shares, during the three months ended January 26, 2007.

Separate Statements of Shareholders’ Equity are not required to be presented for interim periods. However,

comprehensive income consisted of the following:

			Three Months Ended
			January 26,		January 28,
In thousands			2007		2006
Net income		$	59,665	$	59,744
Comprehensive income:
	Minimum pension liability adjustment		-		3,376
	Translation adjustments		10,013		7,159
	Derivative fair value adjustments		1,368		1,858
Total comprehensive income		$	71,046	$	72,137

5. Stock Based Compensation

Effective October 30, 2005, we adopted Statement of Financial Accounting Standards (“SFAS”) 123(R), Share Based Payments (“SFAS 123(R)”) using the modified prospective transition method. Prior to the adoption of SFAS 123(R), we accounted for share-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). The total stock-based compensation expense we recognized for the three months ended January 26, 2007 and January 28, 2006 was approximately $2.3 million for both periods.

-7-

Stock Options

A summary of stock option activity under all plans is as follows:

			Weighted-Average
	Number of		Exercise Price
	Options		per Share
Outstanding at October 28, 2006	2,549,476	$	18.10
Options granted	638,000		41.76
Options exercised	(248,156)		18.56
Options forfeited or cancelled	(6,418)		20.39
Outstanding at January 26, 2007	2,932,902	$	23.20

Restricted Stock Units

A summary of restricted stock unit activity under all plans is as follows:

			Weighted-Average
	Number of		Grant Date
	Units		Fair Value
Outstanding at October 28, 2006	362,882	$	15.05
Units granted	79,400		41.85
Units earned from dividends	1,353		49.16
Units settled	(30,320)		11.82
Units deferred	(4,146)		11.82
Outstanding at January 26, 2007	409,169	$	20.63

Performance Shares

A summary of performance share activity under all plans is as follows:

			Weighted-
			Average		Aggregate
	Number of		Grant Date		Intrinsic
	Shares		Fair Value		Value
Outstanding at October 28, 2006	421,120	$	21.87
Shares granted	61,900		42.02
Shares distributed	(71,471)		11.78	$	3,347
Shares deferred	(109,150)		11.78	$	5,111
Shares not yet vested at January 26, 2007	302,399	$	20.13

-8-

6. Basic and Diluted Net Income Per Share

Basic net income per share is computed based on the weighted-average number of shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares during each period, plus dilutive potential shares considered outstanding during the period in accordance with SFAS No. 128, “Earnings per Share.”

The following table sets forth the computation of basic and diluted earnings per share:

			Three Months Ended
			January 26,		January 28,
In thousands except per share data			2007		2006
Numerator:
	Income before cumulative effect	$	59,665	$	58,179
	Cumulative effect of accounting change, net of income taxes		-		1,565
	Net income	$	59,665	$	59,744
Denominator:
	Denominator for basic net income per share -
	Weighted average shares		114,679		122,354
	Effect of dilutive securities:
	Stock options, restricted stock and
	performance shares		1,370		1,706
	Denominator for diluted net income per share -
	Adjusted weighted average shares and
	assumed conversions		116,049		124,060
Basic earnings per share
	Income before cumulative effect of accounting changes	$	0.52	$	0.48
	Cumulative effect of accounting changes		-		0.01
	Net income	$	0.52	$	0.49
Diluted earnings per share
	Income before cumulative effect of accounting changes	$	0.51	$	0.47
	Cumulative effect of accounting changes		-		0.01
	Net income	$	0.51	$	0.48

-9-

7. Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually. Intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

				January 26, 2007				October 28, 2006
		Weighted
		Average		Gross				Gross
		Amortization		Carrying		Accumulated		Carrying		Accumulated
In thousands		Period		Amount		Amortization		Amount		Amortization
Finite lived other intangible assets:
	Engineering Drawings	6 years	$	2,900	$	(242)	$	2,900	$	(121)
	Customer Relationships	20 years		31,000		(1,009)		31,000		(505)
	Backlog	1 year		5,990		(2,995)		5,990		(1,498)
	Non-Compete Agreements	5 years		5,300		(530)		5,300		(265)
	Patents	17 years		10,511		(4,373)		10,500		(4,079)
	Unpatented Technology	35 years		1,147		(113)		1,147		(105)
	Subtotal	16.0 years		56,848		(9,262)		56,837		(6,573)
Indefinite lived other intangible assets:
	Trademarks			21,500		-		21,500		-
	Pension			4,390		-		4,390		-
	Subtotal			25,890		-		25,890		-
Total other intangible assets			$	82,738	$	(9,262)	$	82,727	$	(6,573)

Amortization expense was $2.7 million and $0.2 million for the three months ended January 26, 2007 and January 28, 2006, respectively. Estimated future annual amortization expense is as follows:

In thousands
For the fiscal year ending:
	2007	$	8,656
	2008		4,001
	2009		3,840
	2010		3,803
	2011		3,480

Goodwill of $3.7 million was recorded in Fiscal 2006 as part of the Stamler acquisition and recorded as part of the underground mining machinery segment. An additional $2.7 million of goodwill was recorded in Fiscal 2007 primarily related to the finalization of the opening balance sheet.

In December 2006, we acquired the assets of Donnelly Pty. Ltd., a small motor rebuild operation in Australia for a total cost of approximately $8.6 million. We are still in the process of finalizing third-party valuations of certain intangible assets; accordingly, allocation of the purchase price is subject to modification in the future.

-10-

8. Contingent Liabilities

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

From time to time we and our subsidiaries become involved in proceedings relating to environmental matters. We believe that the resolution of such environmental matters will not have a materially adverse effect on our consolidated financial position, results of operations or liquidity.

At January 26, 2007, we were contingently liable to banks, financial institutions and others for approximately $163.8 million for outstanding letters of credit, bank guarantees and surety bonds securing performance of sales contracts and other guarantees in the ordinary course of business. At January 26, 2007, there were $16.1 million of outstanding letters of credit or other guarantees issued by non-U.S. banks for non-U.S. subsidiaries.

We have entered into various forward foreign exchange contracts with major international financial institutions for the purpose of hedging our risk of loss associated with changes in foreign exchange rates. These contracts involve off-balance-sheet market and credit risk. As of January 27, 2006, the nominal or face value of forward foreign exchange contracts to which we are a party, in absolute U.S. dollar equivalent terms, was $221.6 million.

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

We are exposed to credit-related losses in the event of non-performance by counterparties to our forward exchange contracts, but we do not expect any counterparties to fail to meet their obligations. A contract is generally subject to credit risk only when it has a positive fair value and the maximum exposure is the amount of the positive fair value.

9. Inventories

Consolidated inventories consisted of the following:

		January 26,		October 28,
In thousands		2007		2006
Finished goods	$	387,674	$	358,785
Work in process and purchased parts		228,091		207,660
Raw materials		69,852		73,489
	$	685,617	$	639,934

-11-

10. Warranties

We provide a warranty reserve for the estimated costs that may be incurred under product warranties to remedy deficiencies of quality or performance in our products. These product warranties extend over either a specified period of time, units of production or machine hours depending upon the product subject to the warranty. We accrue a provision for estimated future warranty costs based upon the historical relationship of warranty costs to sales. We periodically review the adequacy of the accrual for product warranties and adjust the warranty percentage and accrued warranty reserve for actual experience as appropriate.

The following table reconciles the changes in the Company's product warranty reserve:

			Three Months Ended
			January 26,		January 28,
In thousands			2007		2006
Balance, beginning of period		$	38,929	$	34,183
	Accrual for warranty expensed during
	the period		5,941		5,598
	Settlements made during the period		(4,599)		(2,175)
	Change in liability for pre-existing warranties
	during the period, including expirations		95		(114)
	Effect of foreign currency translation		622		205
Balance, end of period		$	40,988	$	37,697

11. Reorganization Items

Reorganization items include income, expense and loss that were realized or incurred as a result of our reorganization under Chapter 11 of the Bankruptcy Code. We emerged from Chapter 11 of the Bankruptcy Code on July 12, 2001. For the three months ended January 26, 2007 and January 28, 2006, the $0.2 million and $0.1 million, respectively, of reorganization items represented post emergence professional fees.

12. Pension and Postretirement

The components of net periodic benefit costs recognized are as follows:

			Pension Benefits				Postretirement Benefits
			Three Months Ended				Three Months Ended
			January 26,		January 28,		January 26,		January 28,
In thousands			2007		2006		2007		2006
Service cost		$	5,773	$	5,249	$	129	$	48
Interest cost			20,014		18,593		853		753
Expected return on assets			(21,781)		(20,511)		-		-
Amortization of:
	Prior service cost		126		111		(49)		-
	Actuarial (gain) loss		5,689		5,272		111		196
Net periodic benefit cost		$	9,821	$	8,714	$	1,044	$	997

-12-

13. Segment Information

At January 26, 2007, we had two reportable segments: Underground Mining Machinery and Surface Mining Equipment. Operating income (loss) of the segments does not include interest income (expense) or provision for income taxes. There are no significant intersegment sales. There has not been a material change in segment total assets from October 28, 2006.

		Net		Operating
In thousands		Sales		Income (Loss)
2007 First Quarter
Underground Mining Machinery	$	327,121	$	58,126
Surface Mining Equipment		233,345		43,022
Total operations		560,466		101,148
Corporate		-		(7,166)
Consolidated Total	$	560,466	$	93,982
2006 First Quarter
Underground Mining Machinery	$	341,395	$	64,041
Surface Mining Equipment		211,946		34,355
Total operations		553,341		98,396
Corporate		-		(7,990)
Consolidated Total	$	553,341	$	90,406

14. Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132R (“SFAS 158”). SFAS 158 requires companies to recognize the funded status of pension and other postretirement benefit plans on sponsoring employers’ balance sheets and to recognize changes in the funded status in the year the changes occur. SFAS 158 is effective for us at the end of Fiscal 2007. The effect on our financial statements is dependent upon the discount rate at our Fiscal 2007 measurement date (October 26, 2007) and actual returns on our pension plan assets during the year. We expect the statement to result in a reduction of our shareowners’ equity. It is unlikely that SFAS 158 will affect our loan covenant compliance.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and retirement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 will be effective for us beginning in Fiscal 2008. We are evaluating the interpretation to determine the effect on our financial statements and related disclosures.

-13-

15. Subsidiary Guarantors

The following tables present condensed consolidated financial information as of and for the three months ended January 26, 2007 and January 28, 2006 for; (a) the Company; (b) on a combined basis, the guarantors of the Credit Agreement and Senior Notes issued in November 2006, which include Joy Technologies Inc. and P&H Mining Equipment Inc. (“Subsidiary Guarantors”); and (c) on a combined basis, the non-guarantors, which include all of our foreign subsidiaries and a number of small domestic subsidiaries (“Non-Guarantor Subsidiaries”). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are unconditionally, jointly, and severally liable under the guarantees, and we believe such separate statements or disclosures would not be useful to investors.

-14-

Condensed Consolidated

Statement of Income

Three Months Ended January 26, 2007

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated
Net sales		$	-	$	363,696	$	335,340	$	(138,570)	$	560,466
Cost of sales			-		253,340		246,411		(114,152)		385,599
Product development, selling
	and administrative expenses		7,110		41,662		33,078		-		81,850
Other income			-		8,472		(9,437)		-		(965)
Operating income (loss)			(7,110)		60,222		65,288		(24,418)		93,982
Intercompany items			(250)		(8,101)		(12,753)		21,104		-
Interest income (expense) - net			(5,081)		209		430		-		(4,442)
Reorganization items			(150)		-		-		-		(150)
Income (loss) before income taxes
	and equity		(12,591)		52,330		52,965		(3,314)		89,390
(Provision) benefit for income taxes			4,643		(24,185)		(10,183)		-		(29,725)
Equity in income (loss) of subsidiaries			67,613		35,081		4,087		(106,781)		-
Net Income		$	59,665	$	63,226	$	46,869	$	(110,095)	$	59,665

-15-

Condensed Consolidated

Statement of Income

Three Months Ended January 28, 2006

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated
Net sales		$	-	$	327,418	$	363,551	$	(137,628)	$	553,341
Cost of sales			-		231,388		272,083		(115,872)		387,599
Product development, selling
	and administrative expenses		7,720		40,537		28,063		-		76,320
Other income			-		7,373		(8,357)		-		(984)
Operating income (loss)			(7,720)		48,120		71,762		(21,756)		90,406
Intercompany items			(952)		(8,962)		(11,389)		21,303		-
Interest income (expense) - net			21		146		1,031		-		1,198
Reorganization items			(125)		-		-		-		(125)
Income (loss) before income taxes
	and equity		(8,776)		39,304		61,404		(453)		91,479
(Provision) benefit for income taxes			932		(23,206)		(11,026)		-		(33,300)
Equity in income (loss) of subsidiaries			66,023		46,445		12,043		(124,511)		-
Income before cumulative effect of changes
	in accounting principle		58,179		62,543		62,421		(124,964)		58,179
Cumulative effect of changes in accounting
	principle		1,565		-		-		-		1,565
Net Income		$	59,744	$	62,543	$	62,421	$	(124,964)	$	59,744

-16-

Condensed Consolidated

Balance Sheet

January 26, 2007

				Parent		Subsidiary		Non-Guarantor
				Company		Guarantors		Subsidiaries		Eliminations		Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	(3,149)	$	2,959	$	70,289	$	-	$	70,099
	Accounts receivable-net			-		230,876		234,453		(31,036)		434,293
	Inventories			-		402,147		320,414		(36,944)		685,617
	Other current assets			33,364		9,587		17,092		-		60,043
		Total current assets		30,215		645,569		642,248		(67,980)		1,250,052
Property, plant and equipment-net				217		135,731		75,356		-		211,304
Intangible assets-net				4,390		67,593		1,493		-		73,476
Investment in affiliates				1,598,046		731,854		168,122		(2,498,022)		-
Intercompany accounts-net				(562,075)		40,571		543,136		(21,632)		-
Deferred income taxes				316,995		-		-		-		316,995
Prepaid benefit costs				7,300		-		59,037		-		66,337
Other assets				2,148		27,065		21,363		-		50,576
		Total assets	$	1,397,236	$	1,648,383	$	1,510,755	$	(2,587,634)	$	1,968,740
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Short-term notes payable, including current portion
	of long-term obligations		$	-	$	12	$	4,056	$	-	$	4,068
	Trade accounts payable			978		82,720		77,906		-		161,604
	Employee compensation and benefits			4,361		21,559		18,068		-		43,988
	Advance payments and progress billings			-		98,888		105,589		(9,769)		194,708
	Accrued warranties			-		22,461		18,527		-		40,988
	Other accrued liabilities			(6,965)		50,318		54,929		(12,660)		85,622
		Total current liabilities		(1,626)		275,958		279,075		(22,429)		530,978
Long-term obligations				477,990		165		925		-		479,080
Other non-current liabilities				299,904		12,088		29,530		(3,808)		337,714
Shareholders' equity				620,968		1,360,172		1,201,225		(2,561,397)		620,968
		Total liabilities and shareholders' equity	$	1,397,236	$	1,648,383	$	1,510,755	$	(2,587,634)	$	1,968,740

-17-

Condensed Consolidated

Balance Sheet

October 28, 2006

				Parent		Subsidiary		Non-Guarantor
				Company		Guarantors		Subsidiaries		Eliminations		Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	(1,270)	$	24,970	$	77,554	$	-	$	101,254
	Accounts receivable-net			-		196,129		257,275		(21,974)		431,430
	Inventories			-		375,128		309,159		(44,353)		639,934
	Other current assets			32,273		7,046		15,938		-		55,257
		Total current assets		31,003		603,273		659,926		(66,327)		1,227,875
Property, plant and equipment-net				235		134,004		70,772		-		205,011
Intangible assets-net				4,390		74,059		(2,295)		-		76,154
Investment in affiliates				1,523,484		672,059		160,845		(2,356,388)		-
Intercompany accounts-net				(592,439)		98,255		509,836		(15,652)		-
Deferred income taxes				335,690		-		-		-		335,690
Prepaid benefit costs				12,724		-		56,664		-		69,388
Other assets				1,252		20,650		17,985		-		39,887
		Total assets	$	1,316,339	$	1,602,300	$	1,473,733	$	(2,438,367)	$	1,954,005
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Short-term notes payable, including current portion
	of long-term obligations		$	-	$	11	$	5,155	$	-	$	5,166
	Trade accounts payable			3,399		103,929		92,793		-		200,121
	Employee compensation and benefits			6,813		45,919		24,683		-		77,415
	Advance payments and progress billings			-		96,219		97,238		(6,876)		186,581
	Accrued warranties			-		20,057		18,872		-		38,929
	Other accrued liabilities			(10,022)		60,075		66,774		(25,058)		91,769
		Total current liabilities		190		326,210		305,515		(31,934)		599,981
Long-term obligations				97,048		161		936		-		98,145
Other non-current liabilities				299,472		12,113		24,665		-		336,250
Shareholders' equity				919,629		1,263,816		1,142,617		(2,406,433)		919,629
		Total liabilities and shareholders' equity	$	1,316,339	$	1,602,300	$	1,473,733	$	(2,438,367)	$	1,954,005

-18-

Condensed Consolidated

Statement of Cash Flows

Three Months Ended January 26, 2007

(In Thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated
Net cash provided (used) by operating activities		$	(9,770)	$	(13,754)	$	4,540	$	-	$	(18,984)
Investing Activities:
	Acquisition of business, net of cash received		-		(97)		(8,454)		-		(8,551)
	Property, plant and equipment acquired		-		(8,400)		(3,742)		-		(12,142)
	Other - net		(83)		235		(204)		-		(52)
	Net cash used by investing activities		(83)		(8,262)		(12,400)		-		(20,745)
Financing Activities:
	Exercise of stock options		3,572		-		-		-		3,572
	Excess income tax benefit from exercise of stock options		1,521		-		-		-		1,521
	Dividends paid		(17,313)		-		-		-		(17,313)
	Purchase of treasury stock		(359,704)		-		-		-		(359,704)
	Issuance of senior notes		394,874		-		-		-		394,874
	Financing fees		(976)		-		-		-		(976)
	Borrowings (payments) on long-term obligations, net		(14,000)		5		(98)		-		(14,093)
	Increase (decrease) in short-term notes payable, net		-		-		(1,486)		-		(1,486)
	Net cash (used) provided by financing activities		7,974		5		(1,584)		-		6,395
Effect of Exchange Rate Changes on Cash and
	Cash Equivalents		-		-		2,179		-		2,179
Increase (Decrease) in Cash and Cash Equivalents			(1,879)		(22,011)		(7,265)		-		(31,155)
Cash and Cash Equivalents at Beginning of Period			(1,270)		24,970		77,554		-		101,254
Cash and Cash Equivalents at End of Period		$	(3,149)	$	2,959	$	70,289	$	-	$	70,099

-19-

Condensed Consolidated

Statement of Cash Flows

Three Months Ended January 28, 2006

(In Thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated
Net cash provided (used) by operating activities		$	12,860	$	(2,864)	$	9,158	$	-	$	19,154
Investing Activities:
	Acquisition of business, net of cash received		-		-		-		-		-
	Property, plant and equipment acquired		(94)		(7,745)		(4,417)		-		(12,256)
	Proceeds from the sale of business		-		500		-		-		500
	Other - net		59		1,134		266		-		1,459
	Net cash used by investing activities		(35)		(6,111)		(4,151)		-		(10,297)
Financing Activities:
	Exercise of stock options		7,626		-		-		-		7,626
	Excess income tax benefit from exercise of stock options		10,938		-		-		-		10,938
	Dividends paid		(13,709)		-		-		-		(13,709)
	Borrowings (payments) on long-term obligations, net		-		4		(159)		-		(155)
	Purchase of treasury stock		(9,996)		-		-		-		(9,996)
	Net cash (used) provided by financing activities		(5,141)		4		(159)		-		(5,296)
Effect of Exchange Rate Changes on Cash and
	Cash Equivalents		-		-		2,893		-		2,893
Increase (Decrease) in Cash and Cash Equivalents			7,684		(8,971)		7,741		-		6,454
Cash and Cash Equivalents at Beginning of Period			52,427		5,694		85,796		-		143,917
Cash and Cash Equivalents at End of Period		$	60,111	$	(3,277)	$	93,537	$	-	$	150,371

-20-

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Forward-looking statements are subject to risks, uncertainties and assumptions which could cause actual results to differ materially from those projected, including those described in Item 5 - Other Information – Forward-Looking Statements and Cautionary Factors in Part II of this report.

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes to the Condensed Consolidated Financial Statements in Part I of this report. Dollar amounts are in thousands, except share and per share data and as indicated.

Overview

Joy Global Inc., a worldwide leader in high-productivity mining solutions, manufactures and markets original equipment and aftermarket parts and services for both the underground and aboveground mining industries through two business segments, underground mining machinery and surface mining equipment. Our principal manufacturing facilities are located in the United States, including facilities in Pennsylvania and Wisconsin, and in the United Kingdom, South Africa, Chile, Australia and China.

Operating results during the first quarter of Fiscal 2007 represent the continued growth of international commodity markets combined with softness in U.S. coal markets. Net sales for the first quarter of Fiscal 2007 totaled $560 million compared with $553 million in the first quarter of Fiscal 2006. During the prior year, timing of certain original equipment shipments combined with early project completions added to the strong quarter. The strong prior year first quarter combined with the impact from a weak U.S. coal market, offset by incremental sales in the first quarter Fiscal 2007 related to the Stamler acquisition contributed to the modest overall net sales growth. Operating income totaled $94 million in the first quarter Fiscal 2007 compared to $90 million in the prior year first quarter. Net income was unchanged at $60 million in both the first quarter Fiscal 2007 and Fiscal 2006. The growth in operating income was offset by increased interest expense related to our Senior Note offering during the first quarter Fiscal 2007.

The long-term outlook for the commodities mined by our customers remains very positive. Commodity prices for copper, iron ore and international coal are well above production costs. In addition, future demand for these commodities is expected to outpace supply, particularly driven by increasing demand from China and other developing countries. As a result, customers producing these commodities continue to discuss additional expansion projects and equipment needs with us. The development of the oil sands of Canada continues, leading to discussions for additional shovel orders into this area. Overall, orders for mining shovels were strong again in the first quarter and in excess of our expanded production capacity. Lead times for mining shovels are currently longer than desired. We are working closely with major customers to ensure that their future shovel needs will be met. Finally, the development of coal mining in China continues at a very strong pace. In response to the growing needs of the Chinese mining companies, we are focused on increasing organizational capabilities rapidly, while expanding both original equipment and aftermarket infrastructure. Our aggressive investment timetable in China is to ensure its leadership position as this major mining market grows in significance.

The exception to the strong commodity markets is the current softness in U.S. coal, where conditions have continued to soften since we reported our fourth quarter results. Limited production cutbacks have been announced. A number of domestic coal mining companies have also stated that they will be restricting their capital spending until normal conditions return. As the softness being experienced is largely weather-related, it is generally believed that the return of normal weather conditions will be a prerequisite to more favorable mining conditions. The overall winter weather of the past few weeks has been encouraging. However, we believe a return to more positive conditions in U.S. coal will require not only a normal heating season this

-21-

winter, but a normal summer cooling season as well. Predicting these events is impossible, and therefore the temporary softness in U.S. coal is assumed to continue throughout the company’s guidance period. What remains however, is the favorable long-term supply and demand situation for coal in the U.S. Electricity demand will continue to increase in future years in the U.S., and an increasing percentage of total electricity is expected to be generated from coal. The growing energy needs, both domestically and globally, will require strong contributions from all energy sources. In addition, new coal technologies will create additional demand for coal in the United States as an energy source that is secure, cost-effective, and environmentally compliant.

Results of Operations

Net Sales

The following table sets forth the combined net sales included in our Condensed Consolidated Statement of Income:

			Three Months Ended
			January 26,		January 28,		$	%
In thousands			2007		2006		Change	Change
Net Sales
	Underground Mining Machinery	$	327,121	$	341,395	$	(14,274)	(4.2%)
	Surface Mining Equipment		233,345		211,946		21,399	10.1%
	Total	$	560,466	$	553,341	$	7,125	1.3%

The decrease in net sales for underground mining machinery in the first quarter was the result of a $41.8 million decrease in original equipment shipments, partially offset by a $27.5 million increase in the sale of aftermarket products. Decreased original equipment sales were reported in the United States and the emerging markets served out of the United Kingdom offset by incremental sales related to the Stamler line of business which was purchased during the fourth quarter of Fiscal 2006. In the United States, a $20.8 million decrease in original equipment sales was due to a roof support system sale in the first quarter of Fiscal 2006 not duplicated in the first quarter of Fiscal 2007, partially offset by increased shipments of continuous miners. In the emerging markets served out of the United Kingdom, a $27.0 million decrease in original equipment sales was due to a roof support system sale in the first quarter of Fiscal 2006 not duplicated in the first quarter of Fiscal 2007 and decreased sales of armored face conveyors. Aftermarket sales increased by greater than 15% in Australia, South Africa and the emerging markets served out of the United Kingdom.

The increase in net sales for surface mining equipment in the first quarter was the result of a $11.8 million increase in original equipment and a $9.6 million increase in aftermarket parts and service. The market for original equipment continues to remain strong globally. During the quarter, original equipment sales were particularly strong in China, Chile and the United States due to the continued strength in the demand for coal and copper. Aftermarket sales increased in the United States and Brazil by over 15% and also increased in Chile. These were partially offset by a decrease in Australia primarily due to timing. All other markets were generally flat versus the prior year.

-22-

Operating Income

The following table sets forth the operating income (loss) included in our Condensed Consolidated Statement of Income:

			Three Months Ended
			January 26, 2007			January 28, 2006
			Operating	%		Operating	%
In thousands			Income (loss)	of Net Sales		Income (loss)	of Net Sales
Operating income (loss):
	Underground Mining Machinery	$	58,126	17.8%	$	64,041	18.8%
	Surface Mining Equipment		43,022	18.4%		34,355	16.2%
	Corporate Expense		(7,166)			(7,990)
	Total	$	93,982	16.8%	$	90,406	16.3%

Operating income as a percentage of net sales for Underground Mining Machinery decreased from 18.8% in the first quarter of 2006 to 17.8% in the first quarter of 2007. The decrease in operating profit as a percentage of sales is primarily driven by increased product development selling and administrative expenses as a percentage of sales of 3.2% offset by a more favorable sales mix of original equipment and aftermarket products of 2.2%.

Operating income as a percentage of net sales for Surface Mining Equipment increased from 16.2% in the first quarter of 2006 to 18.4% in the first quarter of 2007. The increase in operating profit as a percentage of sales is primarily driven by a more favorable sales mix of original equipment and aftermarket products of 0.6% and decreased product development selling and administrative expenses as a percentage of sales of 1.6%.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense totaled $81.9 million, or 15% of sales, in the first quarter of Fiscal 2007, as compared to $76.3 million, or 14% of sales, in the first quarter of Fiscal 2006. Increased product development, selling and administrative expense was attributable to general inflation, strategic operational initiatives, including safety and training initiatives, $2.7 million related to the Stamler acquisition and $3.8 million of higher selling expenses related to increased business activity and the development of emerging markets. The increase was offset by approximately $3.0 million decrease in performance based compensation expense.

Provision for Income Taxes

Income tax expense for the first quarter of Fiscal 2007 decreased to $29.7 million as compared to $33.3 million in the first quarter of Fiscal 2006. These income tax provisions represented effective income tax rates for the first quarters of Fiscal 2007 and 2006 of 33% and 36%, respectively. The main drivers of the variance in tax rates were the decreased global profitability and mix of earnings year over year.

A review of income tax valuation reserves was performed as part of the analysis of the first quarter of Fiscal 2007 income tax provision and no discreet adjustments were warranted.

-23-

Cash taxes paid for the first quarter of Fiscal 2007 were $15.3 million compared to $9.0 million in the first quarter of Fiscal 2006. This increase in cash taxes paid was primarily due to increased foreign taxes year over year caused by increases in profitability and decreased benefits from net operating loss carryforwards.

Bookings and Backlog

Bookings for the first quarter of Fiscal 2007 were approximately $565 million compared to bookings of $598 million in the first quarter of Fiscal 2006. Orders in the first quarter of Fiscal 2007 for original equipment decreased 16% primarily due to the softness in the U.S. underground coal market while aftermarket parts and service orders increased 2% quarter over quarter. The surface mining businesses had an increase in new orders of $34 million compared to a year ago, while underground mining new orders decreased by $67 million compared to the prior year’s first quarter.

Due to the continued strength of the surface mining business and despite the softness in the U.S underground coal market, backlog as of January 26, 2007 remained essentially unchanged from the $1.3 billion at the end of Fiscal 2006.

Liquidity and Capital Resources

We currently use working capital and cash flow production as two financial measurements to judge the performance of our operations and our ability to meet our financial obligations.

The following table summarizes the major components of our working capital as of the quarters ended January 26, 2007 and January 28, 2006, respectively:

		January 26,		January 28,
In millions		2007		2006
Cash and cash equivalents	$	70.1	$	150.4
Accounts receivable		434.3		341.2
Inventories		685.6		555.6
Other current assets		60.0		49.7
Short-term debt		(4.1)		(0.9)
Accounts payable		(161.6)		(134.1)
Employee compensation and benefits		(44.0)		(50.2)
Advance payments and progress billings		(194.7)		(173.0)
Accrued warranties		(41.0)		(37.7)
Other current liabilities		(85.6)		(97.9)
Working Capital	$	719.0	$	603.1

We continue to require working capital investment to maintain our position as the world’s leading manufacturer and servicer of high productivity mining equipment. The primary drivers relate to funding for purchases of production and replacement parts inventories. Efforts continue to align inventory levels with customer demand and current production schedules.

Going forward, we anticipate that capital spending will be accelerated during Fiscal 2007 and 2008 and could reach 3.5% to 4.0% of sales primarily due to a number of programs to increase our manufacturing capacity and in order to continue the expansion of our aftermarket service capabilities.

-24-

Expansion efforts of both the surface and underground mining operations continued during the quarter. The investment of $16.6 million in equipment in our Milwaukee surface mining facility was completed in the first quarter of Fiscal 2007 and will provide capacity of over 24 shovels annually. The underground mining operation continues the previously announced expansion efforts in lower cost environments, including Poland and China. The 70,000 square feet combined service center and manufacturing facility in Poland is on target for completion in late Fiscal 2007. The Baotou expansion, which will provide expanded repair and rebuild capacity, is still set for completion in March 2007. The Tianjin facility was completed in the quarter and is currently providing original equipment components. Our board of directors has recently approved significant expansion in component machining capabilities for P&H Mining. The final development and implementation of this expansion is included in the expanded capital spending forecast, and could increase planned spending over the next two years by $50 million.

During the first quarter of Fiscal 2007, cash used by operating activities was $19.0 million compared to cash provided by operating activities of $19.2 million during the first quarter of Fiscal 2006. The decrease in cash generated by operating activities primarily related to the increase in inventory due to the development of emerging markets and increased business activity. The decrease in cash generated by operating activities is also attributed to decreased accounts payable due to timing and decreased employee compensation and benefit liabilities related to performance compensation.

During the first quarter of Fiscal 2007 cash used by investing activities was $20.7 million compared to cash used by investing activities of $10.3 million during the first quarter of Fiscal 2006. The increase was primarily due to the $8.6 million acquisition of a repair and rebuild facility in Australia during the first quarter of Fiscal 2007. The acquisition will provide complementary service to existing electric motor repair and rebuild facilities and create an original equipment repair shop network in Eastern Australia.

During the first quarter Fiscal 2007 cash provided by financing activities was $6.4 million compared to cash used by financing activities of $5.3 million in the first quarter Fiscal 2006. The primary drivers of this change were the issuance of senior notes in the quarter partially offset by the increased purchase of treasury stock.

In November 2006, we issued $250.0 million of 6% Senior Notes due 2016 and $150.0 million of 6.625% Senior Notes due 2036 with interest on the notes being paid semi-annually in arrears on May 15 and November 15 of each year, starting on May 15, 2007. The notes are guaranteed by each of our current and future significant domestic subsidiaries. Proceeds from these offerings were used for the repayment of outstanding revolver balances, additional share repurchases and general corporate purposes.

Under our share repurchase program, management is authorized to repurchase up to $1.0 billion in shares in the open market or through privately negotiated transactions until December 31, 2008. We have repurchased approximately $655.2 million of common stock, representing 14,252,178 shares, under the program including approximately $359.7 million of common stock, representing 8,105,426 shares, during the quarter ended January 26, 2007.

On November 14, 2006, our Board of Directors declared a cash dividend of $0.15 per outstanding share of common stock. The dividend was paid on December 19, 2006 to all stockholders of record at the close of business on December 5, 2006. This represented a 33% increase from the previous quarterly rate of $0.1125 per share.

Financial Condition

As of the end of the first quarter Fiscal 2007, we had $70.1 million in cash and cash equivalents and $186.8 million available for borrowings under the Credit Agreement. Our primary cash requirements include working capital, capital expenditures, dividends and share repurchases. We will also continue to evaluate potential

-25-

acquisitions. Target acquisitions would include “bolt-on” businesses which would be mining related product line additions or service extensions or “third leg” businesses that would provide a strong branded, highly engineered product with the platform for our life-cycle management strategy and provide a solid base for growth potential. Based upon our current level of operations, we believe that cash flows from operations, together with available borrowings under the Credit Agreement, will be adequate to meet our anticipated future cash requirements.

Off-Balance Sheet Arrangements

We lease various assets under operating leases. No significant changes to lease commitments have occurred since our fiscal year ended October 28, 2006. We have no other off-balance sheet arrangements, other than noted in Note 8 to the Condensed Consolidated Financial Statements.

Critical Accounting Estimates, Assumptions and Policies

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

We believe our accounting policies for revenue recognition, inventories, intangible assets, accrued warranties, pension and postretirement benefits and costs, and income taxes are the ones that most frequently require us to make estimates and judgments, and therefore are critical to the understanding of our results of operations. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended October 28, 2006 for a discussion of these policies. There were no material changes to these policies during the first quarter of Fiscal 2007.

Effective October 30, 2005, we adopted SFAS 123(R) using the modified prospective transition method. Prior to the adoption of SFAS 123(R), we accounted for share based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The fair value of certain share based payments is estimated at grant date using the Black Scholes valuation model.

As a result of adopting SFAS 123(R), we recorded a cumulative effect of a change in accounting principle related to the performance share award program. The cumulative effect of a change in accounting principle added $1.6 million (net of taxes of $0.8 million), or $.01 a share, to net income for the three months ended January 28, 2006. Under APB 25, we recorded share based payment expense related to performance share awards and restricted stock units. For performance share awards, we recorded compensation expense for changes in the market value of the underlying common stock. For restricted stock unit awards, we recorded compensation expense based on the grant date market value of the underlying common stock.

The total stock-based compensation expense was $2.3 million for both the three months ended January 26, 2007 and January 28, 2006, respectively. We estimate that our share based compensation expense for Fiscal 2007 will be $11.1 million and is dependent on the share based payment programs awarded thus far in Fiscal 2007, the assumptions used in calculating the fair value of the awards using the Black Scholes model and the actual amount of forfeitures as compared to expected forfeitures upon issuance.

-26-

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As more fully described in our Annual Report on Form 10-K for the year ended October 28, 2006, we are exposed to various types of market risks, primarily foreign currency risks. We monitor our risks in this area on a continuous basis and generally enter into forward foreign currency contracts to minimize these exposures for periods of less than one year. We do not engage in speculation in our derivative strategies. Gains and losses from foreign currency contract activities are offset by changes in the underlying costs of the transactions being hedged.

Item 4.Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board of Directors.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective (1) in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and (2) to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There have not been any changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

-27-

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

No change.

Item 1A.Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended October 28, 2006.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) We made the following purchases of our common stock, par value $1.00 per share, during the period covered by this report:

					Maximum Approximate
					Dollar Value of Shares
			Total Number of Shares		that May Yet Be
			Purchased as Part of		Purchased Under the
	Total Number of	Average Price	Publicly Announced		Plans or Programs
Period	Shares Purchased	Paid per Share	Plans or Programs		(in millions)*
October 29, 2006 to	1,676,816	40.96	1,676,816	$	636.8
November 28, 2006
November 29, 2006 to	3,199,000	44.21	3,199,000	$	494.4
December 28, 2006
December 29, 2006 to	3,229,210	46.32	3,229,210	$	344.8
January 26, 2007

*All purchases were made under our stock repurchase plan announced on May 31, 2005, which originally authorized the repurchase of $300 million in common stock. On September 12, 2006, the stock repurchase plan was increased to a level of $1 billion and extended until the end of calendar 2008.

Item 3.Defaults upon Senior Securities

Not applicable.

Item 4.Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.Other Information

-28-

Forward-Looking Statements and Cautionary Factors

This document contains forward-looking statements. When used in this document, terms such as “anticipate,” “believe,” “estimate,” “expect,” “indicate,” “may be,” “objective,” “plan,” “predict,” “will be,” and the like are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Actual results may differ for a variety of reasons, many of which are beyond our control. Forward-looking statements are based upon our expectations at the time they are made. Although we believe that our expectations are reasonable, we can give no assurance that our expectations will prove to be correct. Important factors that could cause actual results to differ materially from such expectations (“Cautionary Statements”) are described generally below and disclosed elsewhere in this document. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Our principal businesses involve designing, manufacturing, marketing and servicing large, complex machines. Significant periods of time are necessary to design and build these machines. Large amounts of capital must be devoted by our customers to purchase these machines and to finance the mines that use them. Our success in obtaining and managing a relatively small number of sales opportunities, including our success in securing payment for such sales and meeting the requirements of warranties and guarantees associated with such sales, can affect our financial performance. In addition, many mines are located in undeveloped or developing economies where business conditions are less predictable. Factors that could cause actual results to differ materially include:

Factors affecting our customers’ purchases of new equipment, rebuilds, parts and services such as: production capacity, stockpile levels and production and consumption rates of coal, copper, iron ore, gold, oil sands and other ores and minerals; the cash flows and capital expenditures of our customers; the cost and availability of financing to our customers and their ability to obtain regulatory approval for investments in mining projects; consolidations among customers; changes in environmental regulations; work stoppages at customers or providers of transportation; and the timing, severity and duration of customer buying cycles, particularly for original equipment.

Factors affecting our ability to capture available sales opportunities, including: our customers’ perceptions of the quality and value of our products and services as compared to our competitors’ products and services; our ability to commit to delivery schedules requested or required by our customers; whether we have successful reference installations to display to customers; customers’ perceptions of our financial health and stability as compared to our competitors; our ability to assist customers with competitive financing programs; the availability of steel, castings, forgings, bearings and other materials; and the availability of manufacturing capacity at our factories.

Factors affecting general business levels, such as: political and economic turmoil in major markets such as the United States, Australia, Brazil, Canada, Chile, China, Russia and South Africa; environmental and trade regulations; commodity prices; and the stability and ease of exchange of currencies.

Factors affecting our ability to successfully manage and complete sales we obtain, such as: the successful transition to a new enterprise software system at our surface mining equipment business; the timely renegotiation of expiring collective bargaining agreements with our unionized workers; the accuracy of our cost and time estimates for major projects and long-term maintenance and repair contracts; the adequacy of our systems to manage major projects and our success in completing projects on time and within budget; our success in recruiting, hiring and retaining managers and skilled employees in the areas where we operate; wage stability and cooperative labor relations; plant capacity and utilization; and whether acquisitions are assimilated and divestitures completed without notable surprises or unexpected difficulties.

-29-

Factors affecting our general business or financial position, such as: unforeseen patent, tax, product (including asbestos-related and silicosis liability), environmental, employee health and benefits, or contractual liabilities; changes in pension and post-retirement benefit costs; nonrecurring restructuring and other special charges; changes in accounting or tax rules or regulations; reassessments of asset valuations for such assets as receivables, inventories, fixed assets, intangible assets and deferred tax assets; and leverage and debt service.

Item 6.Exhibits

4.1	Registration Rights Agreement, dated as of November 10, 2006, among Joy Global Inc., the Guarantors, and Banc of America Securities LLC, Lehman Brothers Inc. and UBS Securities LLC, as representatives of the several initial purchasers (incorporated by reference to Exhibit 4.2 to current report of Joy Global Inc. on Form 8-K dated November 16, 2006, File No. 01-9299).
4.2	Indenture, dated as of November 10, 2006, among Joy Global Inc. and Wells Fargo Bank, N.A. as trustee (incorporated by reference to Exhibit 4.3 to current report of Joy Global Inc. on Form 8-K dated November 16, 2006, File No. 01-9299).
4.3	Supplemental Indenture, dated as of November 10, 2006, entered into by and among Joy Global Inc. and Wells Fargo Bank, N.A., as trustee (incorporated by reference to Exhibit 4.4 to current report of Joy Global Inc. on Form 8-K dated November 16, 2006, File No. 01-9299).
4.4	Form of 6.000% Senior Notes due 2016 and 6.625% Senior Notes due 2036 (incorporated by reference to Exhibit 4.5 to current report of Joy Global Inc. on Form 8-K dated November 16, 2006, File No. 01-9299).
4.5	First Amendment to Credit Agreement dated as of November 10, 2006 and entered into among Joy Global Inc., as Borrower, the lenders listed therein, as Lenders, and Bank of America, N.A. as Administrative Agent (incorporated by reference to Exhibit 4.1 to current report of Joy Global Inc. on Form 8-K dated November 16, 2006, File No. 01-9299).
31.1	Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certifications
31.2	Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications

-30-

SIGNATURES

Pursuant to the requirements 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.

	JOY GLOBAL INC
	(Registrant)
	/s/ Donald C. Roof
Date March 1, 2007	Donald C. Roof
	Executive Vice President,
	Chief Financial Officer
	and Treasurer
	/s/ Michael S. Olsen
Date March 1, 2007	Michael S. Olsen
	Vice President and
	Chief Accounting Officer

-31-