Joy Global 10Q 2007 Q2 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 ENDED April 27, 2007

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

Commission File number 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 May 23, 2007
Common Stock, $1 par value		108,615,493 shares

JOY GLOBAL INC.

FORM 10-Q -- INDEX

April 27, 2007

PART I. – FINANCIAL INFORMATION		PAGE No.

Item 1 – Financial Statements (unaudited):
	Condensed Consolidated Statement of Income –
	Three and Six Months Ended April 27, 2007 and April 29, 2006	3

	Condensed Consolidated Balance Sheet – April 27, 2007
	and October 28, 2006	4

	Condensed Consolidated Statement of Cash Flows –
	Six Months Ended April 27, 2007 and April 29, 2006	5

	Notes to Condensed Consolidated Financial Statements	6 – 23

Item 2 – Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	24 – 32

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		32

Item 4 – Controls and Procedures		33

PART II. – OTHER INFORMATION

Item 1 – Legal Proceedings		34

Item 1A – Risk Factors		34

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		34

Item 3 – Defaults Upon Senior Securities		34

Item 4 – Submission of Matters to a Vote of Security Holders		34

Item 5 – Other Information		35

Item 6 –Exhibits		38

Signatures		39

-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				Six Months Ended
				April 27,		April 29,		April 27,		April 29,
				2007		2006		2007		2006

Net sales			$	629,162	$	560,348	$	1,189,628	$	1,113,689
Costs and expenses:
	Cost of sales			419,990		375,758		805,589		763,357
	Product development, selling and
		administrative expenses		89,013		78,075		170,863		154,395
	Other income			(1,418)		(3,977)		(2,383)		(4,961)

Operating income				121,577		110,492		215,559		200,898
Interest income				1,176		1,886		3,844		3,651
Interest expense				(9,219)		(578)		(16,329)		(1,145)
Reorganization items				(130)		5,077		(280)		4,952

Income before income taxes				113,404		116,877		202,794		208,356
Provision for income taxes				(35,825)		(34,000)		(65,550)		(67,300)
Income before cumulative effect of
	changes in accounting principle			77,579		82,877		137,244		141,056
Cumulative effect of changes in
	accounting principle			-		-		-		1,565

Net income			$	77,579	$	82,877	$	137,244	$	142,621

Basic earnings per share:
	Income before cumulative effect
		of accounting changes	$	0.71	$	0.67	$	1.22	$	1.15
	Cumulative effect of accounting changes			-		-		-		0.01
	Net income		$	0.71	$	0.67	$	1.22	$	1.16

Diluted earnings per share:
	Income before cumulative effect
		of accounting changes	$	0.70	$	0.66	$	1.21	$	1.13
	Cumulative effect of accounting changes			-		-		-		0.01
	Net income		$	0.70	$	0.66	$	1.21	$	1.14

Dividends per share			$	0.15	$	0.113	$	0.30	$	0.225

Weighted average shares outstanding:
	Basic			109,420		123,710		112,049		123,032
	Diluted			110,719		125,426		113,384		124,743

See accompanying notes to consolidated financial statements

-3-

JOY GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands)

				April 27,		October 28,
				2007		2006
				(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	91,644	$	101,254
	Accounts receivable, net			442,372		431,430
	Inventories			740,603		639,934
	Other current assets			66,157		55,257
		Total current assets		1,340,776		1,227,875

Property, plant and equipment, net				214,422		205,011
Intangible assets, net				70,888		76,154
Deferred income taxes				296,480		335,690
Prepaid benefit cost				60,790		69,388
Other assets				50,578		39,887
		Total assets	$	2,033,934	$	1,954,005


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Short-term notes payable, including current portion
		of long-term obligations	$	2,056	$	5,166
	Trade accounts payable			183,870		200,121
	Employee compensation and benefits			49,532		77,415
	Advance payments and progress billings			197,983		186,581
	Accrued warranties			41,076		38,929
	Other accrued liabilities			85,459		91,769
		Total current liabilities		559,976		599,981

	Long-term obligations			521,061		98,145
	Accrued pension costs			265,266		264,093
	Other			73,208		72,157

		Total liabilities		1,419,511		1,034,376

Shareholders' equity				614,423		919,629

		Total liabilities and shareholders' equity	$	2,033,934	$	1,954,005

See accompanying notes to consolidated financial statements

-4-

JOY GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(In thousands)

			Six Months Ended
			April 27,		April 29,
			2007		2006
Cash flows from operating activities:
Net income		$	137,244	$	142,621
Non-cash items:
	Cumulative effect of accounting change		-		(1,565)
	Depreciation and amortization		24,229		19,088
	Increase in deferred income taxes, net of change in valuation allowance		99		11,839
	Excess income tax benefit from exercise of stock options		(3,466)		(19,935)
	Change in long-term accrued pension costs		11,773		11,645
	Other, net		(2,853)		(4,256)
Changes in working capital items:
	Increase in accounts receivable, net		(2,209)		(8,046)
	Increase in inventories		(87,339)		(56,673)
	(Increase) decrease in other current assets		(4,336)		2,772
	Decrease in trade accounts payable		(22,030)		(6,451)
	Decrease in employee compensation and benefits		(29,162)		(22,310)
	Increase (decrease) in advance payments and progress billings		5,676		(24,530)
	Increase in other accrued liabilities		32,539		32,419

Net cash provided by operating activities			60,165		76,618

Cash flows from investing activities:
	Acquisition of business, net of cash acquired		(10,601)		-
	Property, plant and equipment acquired		(23,805)		(24,568)
	Proceeds from the sale of property, plant and equipment		187		6,296
	Other, net		30		812

Net cash used by investing activities			(34,189)		(17,460)

Cash flows from financing activities:
	Exercise of stock options		7,394		13,366
	Excess income tax benefit from exercise of stock options		3,466		19,935
	Dividends paid		(33,680)		(27,550)
	Purchase of treasury stock		(434,413)		(37,106)
	Issuance of senior notes		394,874		-
	Financing fees		(976)		-
	Borrowings on long-term obligations, net		27,800		146
	Decrease in short-term notes payable		(3,564)		-

Net cash used by financing activities			(39,099)		(31,209)

Effect of exchange rate changes on cash and cash equivalents			3,513		3,372

(Decrease) Increase in Cash and Cash Equivalents			(9,610)		31,321
Cash and Cash Equivalents at Beginning of Period			101,254		143,917

Cash and Cash Equivalents at End of Period		$	91,644	$	175,238

See accompanying notes to consolidated financial statements

-5-

JOY GLOBAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 27, 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”) 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 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 April 27, 2007, we were in compliance with all financial covenants in the Credit Agreement.

-6-

At April 27, 2007, there were $125.0 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 $120.7 million. At April 27, 2007, there was $154.3 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 and additional share repurchases.

4.	Shareholders’ Equity

On February 22, 2007, our Board of Directors declared a cash dividend of $0.15 per outstanding share of common stock. The dividend was paid on March 19, 2007 to all stockholders of record at the close of business on March 5, 2007.

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. During the three months ended April 27, 2007, we repurchased approximately $74.7 million of common stock, representing 1,608,734 shares. During the six months ended April 27, 2007, we have repurchased approximately $434.4 million of common stock, representing 9,714,160 shares. As of April 27, 2007, 15,860,912 of shares were held as treasury shares.

Comprehensive income consisted of the following:

			Three Months Ended				Six Months Ended
			April 27,		April 29,		April 27,		April 29,
In thousands			2007		2006		2007		2006

Net income		$	77,579	$	82,877	$	137,244	$	142,621
Other comprehensive income (loss):
	Minimum pension liability adjustment		-		-		-		3,376
	Translation adjustments		7,732		2,064		17,745		9,223
	Derivative fair value adjustments		(1,010)		2,881		358		4,739
Total other comprehensive income			6,722		4,945		18,103		17,338
Total comprehensive income		$	84,301	$	87,822	$	155,347	$	159,959

-7-

5.	Stock Based Compensation

We account for stock based compensation in accordance with Statement of Financial Accounting Standards (“SFAS”) 123(R), Share Based Payments (“SFAS 123(R)”). The total stock based compensation expense recognized for the six months ended April 27, 2007 and April 29, 2006 was approximately $5.3 million and $4.2 million, respectively. The total stock-based compensation expense we recognized for the three months ended April 27, 2007 and April 29, 2006 was approximately $3.0 million and $1.9 million, respectively.

During the three months ended April 27, 2007, there were 395,825 of deferred performance shares issued.

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	644,500		41.80
Options exercised	(450,037)		16.56
Options forfeited or cancelled	(169,618)		25.89

Outstanding at April 27, 2007	2,574,321	$	23.79

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.”

Options outstanding used to compute earnings per share excluded 86,500 and 85,250 shares of common stock for the three months and six months ended April 27, 2007, respectively, as their inclusion would have been anti-dilutive. No options outstanding were excluded from the calculation of the weighted average diluted common stock used to compute earnings per share for the three months and six months ended April 29, 2006, respectively.

-8-

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

			Three Months Ended				Six Months Ended
			April 27,		April 29,		April 27,		April 29,
In thousands except per share data			2007		2006		2007		2006
Numerator:
	Income before cumulative effect
	of changes in accounting principle	$	77,579	$	82,877	$	137,244	$	141,056
	Cumulative effect of changes in accounting
	principle, net of income taxes		-		-		-		1,565
	Net income	$	77,579	$	82,877	$	137,244	$	142,621

Denominator:
	Denominator for basic net income per share -
	Weighted average shares		109,420		123,710		112,049		123,032
	Effect of dilutive securities:
	Stock options, restricted stock units and
	performance shares		1,299		1,716		1,335		1,711
	Denominator for diluted net income per share -
	Adjusted weighted average shares and
	assumed conversions		110,719		125,426		113,384		124,743

Basic earnings per share
	Income before cumulative effect of
	changes in accounting principle	$	0.71	$	0.67	$	1.22	$	1.15
	Cumulative effect		-		-		-		0.01
	Net Income	$	0.71	$	0.67	$	1.22	$	1.16

Diluted earnings per share
	Income before cumulative effect of
	changes in accounting principle	$	0.70	$	0.66	$	1.21	$	1.13
	Cumulative effect		-		-		-		0.01
	Net Income	$	0.70	$	0.66	$	1.21	$	1.14

-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.”

				April 27, 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	$	(363)	$	2,900	$	(121)
	Customer Relationships	20 years		31,000		(1,513)		31,000		(505)
	Backlog	1 year		5,990		(4,528)		5,990		(1,498)
	Non-Compete Agreements	5 years		5,300		(795)		5,300		(265)
	Patents	17 years		10,543		(4,560)		10,500		(4,079)
	Unpatented Technology	35 years		1,147		(123)		1,147		(105)
	Subtotal	16 years		56,880		(11,882)		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			$	82,770	$	(11,882)	$	82,727	$	(6,573)

Amortization expense was $2.6 million and $0.4 million for the three months ended April 27, 2007 and April 29, 2006, respectively and $5.3 million and $0.2 million for the six months ended April 27, 2007 and April 29, 2006, respectively. Estimated 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 $2.5 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 $8.5 million. We are still in the process of finalizing third-party valuations

-10-

of certain intangible assets; accordingly, allocation of the purchase price is subject to modification in the future.

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.

On April 19, 2004, Joy South Africa declared a dividend to our wholly owned subsidiary in the United Kingdom in the amount of approximately $46.0 million. As part of the transaction and in accordance with the South African Tax Act (“Act”), Joy South Africa was not required to pay tax on the transaction. In August 2004 the South African Revenue Service (“SARS”) stated that it disagreed with the Joy South Africa interpretation of the Act and would attempt to collect this tax. In September 2005, we received a notice of assessment from SARS, which as of April 2007 was approximately $7.4 million, including interest and penalties. We have not made payment or recorded a liability as it relates to the assessment, as management believes the exemption utilized during the dividend transaction was valid in accordance with the Act. We also believe further information will become available as a result of a similar case which is pending trial. We will continue to defend our position on the matter.

During the fourth quarter of Fiscal 2006, Joy Mining completed the manufacturing of a powered roof support system for a customer in China. In accordance with company policy, revenue was recognized under the percentage of completion method. During the last half of Fiscal 2006, the customer experienced a series of explosions at their mine, which in turn shut down the mine and delayed the delivery of the system and corresponding payments. We are currently working with our customer on a timeline in which they will be able to remit payment. We believe we will receive payment in full on the system mainly due to the close proximity of the mine to a coal fueled power plant, but if collectability is determined to not be assured and alternative sales are not viable, the maximum amount of the loss could be approximately $19.0 million.

At April 27, 2007, we were contingently liable to banks, financial institutions and others for approximately $149.0 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. Included in the amount were $10.8 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 April 27, 2007, the nominal or face value of forward foreign exchange contracts to which we are a party, in absolute U.S. dollar equivalent terms, was $198.5 million.

-11-

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.

We are currently negotiating retirement income matters in accordance with the memorandum of understanding within the 2004 contract agreement with the United Steelworkers of America (“Steelworkers”) at P&H Mining Equipment’s manufacturing facility in Milwaukee, Wisconsin. While we have passed the contractual deadline of May 1, 2007, both management and the Steelworkers are currently engaged in mediation to find a mutually agreeable solution. Although management is optimistic that this matter can be resolved without adverse impact on the business, we have contingency plans covering a variety of outcomes.

9.	Inventories

Consolidated inventories consisted of the following:

		April 27,		October 28,
In thousands		2007		2006
Finished goods	$	453,530	$	358,785
Work in process and purchased parts		221,063		207,660
Raw materials		66,010		73,489
	$	740,603	$	639,934

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.

-12-

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

			Three Months Ended				Six Months Ended
			April 27,		April 29,		April 27,		April 29,
In thousands			2007		2006		2007		2006
Balance, beginning of period		$	40,988	$	37,697	$	38,929	$	34,183
	Accrual for warranty expensed during
	the period		8,656		5,786		14,597		11,384
	Settlements made during the period		(8,839)		(4,909)		(13,438)		(7,084)
	Change in liability for pre-existing warranties
	during the period, including expirations		112		(171)		207		(285)
	Effect of foreign currency translation		159		319		781		524
Balance, end of period		$	41,076	$	38,722	$	41,076	$	38,722

11.

Pension and Postretirement

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

			Pension Benefits				Postretirement Benefits
			Three Months Ended				Three Months Ended
			April 27,		April 29,		April 27,		April 29,
In thousands			2007		2006		2007		2006

Service cost		$	5,773	$	5,249	$	220	$	48
Interest cost			20,014		18,593		798		753
Expected return on assets			(21,781)		(20,511)		(63)		-
Amortization of:
	Prior service cost		126		111		(25)		-
	Actuarial loss		5,689		5,272		111		196
Net periodic benefit cost		$	9,821	$	8,714	$	1,041	$	997

			Pension Benefits				Postretirement Benefits
			Six Months Ended				Six Months Ended
			April 27,		April 29,		April 27,		April 29,
In thousands			2007		2006		2007		2006

Service cost		$	11,546	$	10,498	$	439	$	97
Interest cost			40,029		37,186		1,596		1,505
Expected return on assets			(43,563)		(41,023)		(126)		-
Amortization of:
	Prior service cost		251		222		(50)		-
	Actuarial loss		11,379		10,544		223		391
Net periodic benefit cost		$	19,642	$	17,427	$	2,082	$	1,993

-13-

12.

Segment Information

At April 27, 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.

		Second Quarter				Six Months
In thousands		Fiscal 2007		Fiscal 2006		Fiscal 2007		Fiscal 2006

Net Sales
Underground Mining Machinery	$	363,179	$	335,188	$	690,300	$	676,583
Surface Mining Equipment		265,983		225,160		499,328		437,106
Consolidated Total	$	629,162	$	560,348	$	1,189,628	$	1,113,689

Operating Income
Underground Mining Machinery	$	81,685	$	77,693	$	139,811	$	141,734
Surface Mining Equipment		47,491		39,503		90,513		73,858
Total operations		129,176		117,196		230,324		215,592
Corporate		(7,599)		(6,704)		(14,765)		(14,694)
Consolidated Total		121,577		110,492		215,559		200,898
Interest income		1,176		1,886		3,844		3,651
Interest expense		(9,219)		(578)		(16,329)		(1,145)
Reorganization items		(130)		5,077		(280)		4,952
Income before income taxes	$	113,404	$	116,877	$	202,794	$	208,356

13.

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 shareholders’ 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

-14-

beginning in Fiscal 2008. We are evaluating the interpretation to determine the effect on our financial statements and related disclosures.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 becomes effective for us beginning in Fiscal 2009. We do not believe the adoption of SFAS 159 will have a significant effect on our financial statements or related disclosures.

14.

Subsidiary Guarantors

The following tables present condensed consolidated financial information as of and for the three months and six months ended April 27, 2007 and April 29, 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.

-15-

Condensed Consolidated

Statement of Income

Three Months Ended April 27, 2007

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated

Net sales		$	-	$	433,872	$	344,814	$	(149,524)	$	629,162

Cost of sales			-		301,711		239,102		(120,823)		419,990

Product development, selling
	and administrative expenses		7,503		45,962		35,548		-		89,013
Other (income) expense			-		5,932		(7,350)		-		(1,418)
Operating income (loss)			(7,503)		80,267		77,514		(28,701)		121,577

Intercompany items			(3,095)		(7,539)		(8,149)		18,783		-
Interest income (expense) - net			(8,915)		90		782		-		(8,043)
Reorganization items			(130)		-		-		-		(130)

Income (loss) before income taxes
	and equity		(19,643)		72,818		70,147		(9,918)		113,404

(Provision) benefit for income taxes			9,869		(30,257)		(15,437)		-		(35,825)
Equity in income (loss) of subsidiaries			87,353		40,453		9,909		(137,715)		-

Net Income		$	77,579	$	83,014	$	64,619	$	(147,633)	$	77,579

-16-

Condensed Consolidated

Statement of Income

Three Months Ended April 29, 2006

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated

Net sales		$	-	$	364,674	$	306,374	$	(110,700)	$	560,348

Cost of sales			-		250,181		218,686		(93,109)		375,758

Product development, selling
	and administrative expenses		6,680		42,232		29,163		-		78,075
Other income					6,506		(10,483)		-		(3,977)
Operating income (loss)			(6,680)		65,755		69,008		(17,591)		110,492

Intercompany items			4,656		(10,475)		(8,289)		14,108		-
Interest income (expense) - net			149		175		984		-		1,308
Reorganization items			5,077		-		-		-		5,077

Income (loss) before income taxes
	and equity		3,202		55,455		61,703		(3,483)		116,877

(Provision) benefit for income taxes			4,354		(27,825)		(10,529)		-		(34,000)
Equity in income (loss) of subsidiaries			75,321		43,843		9,446		(128,610)		-

Income before cumulative effect of changes
	in accounting principle		82,877		71,473		60,620		(132,093)		82,877

Cumulative effect of changes in accounting
	principle		-		-		-		-		-

Net Income		$	82,877	$	71,473	$	60,620	$	(132,093)	$	82,877

-17-

Condensed Consolidated

Statement of Income

Six Months Ended April 27, 2007

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated

Net sales		$	-	$	797,568	$	680,154	$	(288,094)	$	1,189,628

Cost of sales			-		555,051		485,513		(234,975)		805,589

Product development, selling
	and administrative expenses		14,613		87,624		68,626		-		170,863
Other income			-		14,404		(16,787)		-		(2,383)
Operating income (loss)			(14,613)		140,489		142,802		(53,119)		215,559

Intercompany items			(3,345)		(15,640)		(20,902)		39,887		-
Interest income (expense) - net			(13,996)		299		1,212		-		(12,485)
Reorganization items			(280)		-		-		-		(280)

Income (loss) before income taxes
	and equity		(32,234)		125,148		123,112		(13,232)		202,794

(Provision) benefit for income taxes			14,512		(54,442)		(25,620)		-		(65,550)
Equity in income (loss) of subsidiaries			154,966		75,534		13,996		(244,496)		-

Net Income		$	137,244	$	146,240	$	111,488	$	(257,728)	$	137,244

-18-

Condensed Consolidated

Statement of Income

Six Months Ended April 29, 2006

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated

Net sales		$	-	$	692,092	$	669,925	$	(248,328)	$	1,113,689

Cost of sales			-		481,569		490,769		(208,981)		763,357

Product development, selling
	and administrative expenses		14,400		82,769		57,226		-		154,395
Other income			-		13,879		(18,840)		-		(4,961)
Operating income (loss)			(14,400)		113,875		140,770		(39,347)		200,898

Intercompany items			3,704		(19,437)		(19,678)		35,411		-
Interest income (expense) - net			170		321		2,015		-		2,506
Reorganization items			4,952		-		-		-		4,952

Income (loss) before income taxes
	and equity		(5,574)		94,759		123,107		(3,936)		208,356

(Provision) benefit for income taxes			5,286		(51,031)		(21,555)		-		(67,300)
Equity in income (loss) of subsidiaries			141,344		90,288		21,489		(253,121)		-

Income before cumulative effect of changes
	in accounting principle		141,056		134,016		123,041		(257,057)		141,056

Cumulative effect of changes in accounting
	principle		1,565		-		-		-		1,565

Net Income		$	142,621	$	134,016	$	123,041	$	(257,057)	$	142,621

-19-

Condensed Consolidated

Balance Sheet

April 27, 2007

(In thousands)

				Parent		Subsidiary		Non-Guarantor
				Company		Guarantors		Subsidiaries		Eliminations		Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	16,871	$	8,082	$	66,691	$	-	$	91,644
	Accounts receivable-net			-		216,407		258,394		(32,429)		442,372
	Inventories			-		400,684		381,105		(41,186)		740,603
	Other current assets			31,920		18,368		21,494		(5,625)		66,157
		Total current assets		48,791		643,541		727,684		(79,240)		1,340,776

Property, plant and equipment-net				199		134,639		79,584		-		214,422
Intangible assets-net				4,390		65,241		1,257		-		70,888
Investment in affiliates				1,692,168		758,812		182,179		(2,633,159)		-
Intercompany accounts-net				(612,430)		97,468		544,208		(29,246)		-
Deferred income taxes				296,480		-		-		-		296,480
Prepaid benefit costs				1,174		-		59,616		-		60,790
Other assets				2,057		27,829		20,692		-		50,578

		Total assets	$	1,432,829	$	1,727,530	$	1,615,220	$	(2,741,645)	$	2,033,934

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Short-term notes payable, including current portion
	of long-term obligations		$	48	$	11	$	1,997	$	-	$	2,056
	Trade accounts payable			794		97,212		86,733		(869)		183,870
	Employee compensation and benefits			3,662		26,462		19,408		-		49,532
	Advance payments and progress billings			-		93,992		117,168		(13,177)		197,983
	Accrued warranties			-		22,069		19,007		-		41,076
	Other accrued liabilities			(6,273)		40,857		62,052		(11,177)		85,459
		Total current liabilities		(1,769)		280,603		306,365		(25,223)		559,976

Long-term obligations				520,010		155		896		-		521,061

Other non-current liabilities				300,165		12,138		26,171		-		338,474

Shareholders' equity				614,423		1,434,634		1,281,788		(2,716,422)		614,423

		Total liabilities and shareholders' equity	$	1,432,829	$	1,727,530	$	1,615,220	$	(2,741,645)	$	2,033,934

-20-

Condensed Consolidated

Balance Sheet

October 28, 2006

(In thousands)

				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

-21-

Condensed Consolidated

Statement of Cash Flows

Six Months Ended April 27, 2007

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated

Net cash provided (used) by operating activities		$	53,587	$	(359)	$	7,123	$	(186)	$	60,165

Investing Activities:
	Acquisition of business, net of cash received		-		(2,147)		(8,454)		-		(10,601)
	Property, plant and equipment acquired		-		(15,040)		(8,951)		186		(23,805)
	Proceeds from the sale of property, plant and equipment		-		12		175		-		187
	Other - net		(111)		652		(511)		-		30
	Net cash (used) provided by investing activities		(111)		(16,523)		(17,741)		186		(34,189)

Financing Activities:
	Exercise of stock options		7,394		-		-		-		7,394
	Excess income tax benefit from exercise of stock options		3,466		-		-		-		3,466
	Dividends paid		(33,680)		-		-		-		(33,680)
	Purchase of treasury stock		(434,413)		-		-		-		(434,413)
	Issuance of senior notes		394,874		-		-		-		394,874
	Financing fees		(976)		-		-		-		(976)
	Borrowings (payments) on long-term obligations, net		28,000		(6)		(194)		-		27,800
	Increase (decrease) in short-term notes payable, net		-		-		(3,564)		-		(3,564)
	Net cash used by financing activities		(35,335)		(6)		(3,758)		-		(39,099)

Effect of Exchange Rate Changes on Cash and
	Cash Equivalents		-		-		3,513		-		3,513
Increase (Decrease) in Cash and Cash Equivalents			18,141		(16,888)		(10,863)		-		(9,610)
Cash and Cash Equivalents at Beginning of Period			(1,270)		24,970		77,554		-		101,254
Cash and Cash Equivalents at End of Period		$	16,871	$	8,082	$	66,691	$	-	$	91,644

-22-

Condensed Consolidated

Statement of Cash Flows

Six Months Ended April 29, 2006

(In thousands)

			Parent		Subsidiary		Non-Guarantor
			Company		Guarantors		Subsidiaries		Eliminations		Consolidated

Net cash provided by operating activities		$	62,427	$	7,882	$	6,309	$	-	$	76,618

Investing Activities:
	Acquisition of business, net of cash received		-		-		-		-		-
	Property, plant and equipment acquired		(94)		(15,557)		(8,917)		-		(24,568)
	Proceeds from the sale of property, plant and equipment		-		847		5,449		-		6,296
	Other - net		(181)		860		133		-		812
	Net cash used by investing activities		(275)		(13,850)		(3,335)		-		(17,460)

Financing Activities:
	Exercise of stock options		13,366		-		-		-		13,366
	Excess income tax benefit from exercise of stock options		19,935		-		-		-		19,935
	Dividends paid		(27,550)		-		-		-		(27,550)
	Borrowings (payments) on long-term obligations, net		-		(5)		151		-		146
	Purchase of treasury stock		(37,106)		-		-		-		(37,106)
	Net cash (used) provided by financing activities		(31,355)		(5)		151		-		(31,209)

Effect of Exchange Rate Changes on Cash and
	Cash Equivalents		-		-		3,372		-		3,372
Increase (Decrease) in Cash and Cash Equivalents			30,797		(5,973)		6,497		-		31,321
Cash and Cash Equivalents at Beginning of Period			52,427		5,694		85,796		-		143,917
Cash and Cash Equivalents at End of Period		$	83,224	$	(279)	$	92,293	$	-	$	175,238

-23-

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 second quarter of Fiscal 2007 and six month period then ended represent the continued strength of international commodity markets offset with softness in underground U.S. coal markets. Net sales for the second quarter of Fiscal 2007 totaled $629 million compared with $560 million in the second quarter of Fiscal 2006 while net sales for the Fiscal 2007 six months totaled $1.2 billion compared with $1.1 billion in the Fiscal 2006 six months. The acquisition of Stamler during the fourth quarter of Fiscal 2006 added $30.1 and $59.0 million of sales in the quarter and six months, respectively, while consistent growth in aftermarket parts and service globally contributed to the remainder of the increase. Operating income totaled $122 million in the second quarter Fiscal 2007 compared to $110 million in the prior year second quarter and $216 million in the Fiscal 2007 six months compared to $201 million in the prior year six month period. The increase in operating income was due to increased gross profit margins primarily related to a higher mix of aftermarket revenues offset by incremental expenses associated with the Stamler acquisition. Net income was down from $82.9 million in the second quarter Fiscal 2006 to $77.6 million in Fiscal 2007 and down from $142.6 million in the Fiscal 2006 six months compared to $137.2 million in the Fiscal 2007 six months. Both the quarter and six month period decreases in net income were primarily impacted by increased interest expense related to our Senior Note offering during the first quarter Fiscal 2007.

The demand for commodities mined by our customers continues to remain strong. Commodity prices for copper and iron ore are well above production costs with demand expected to outpace supply on the sustained economic growth in China and other developing countries. As the strong commodity cycle develops, our customers that mine these resources continue strategic expansion projects, which results in many short and long-term opportunities for both original equipment and aftermarket needs. The oil sands of Canada continue to be a significant long-term growth opportunity for surface mining with the expected market demand to be 6 to 8 shovels a year through 2015. Coal markets outside of the U.S. have shown strength in the quarter. The recent tightening of the seaborne thermal coal market has begun to show strength primarily due to China’s change in status from a net exporter to net importer of thermal coal. As China needs additional energy requirements to keep pace with current and future strong economic growth, high productivity mining equipment will become more prevalent in existing and new mines.

The softening of the U.S. underground coal market has continued in the second quarter of Fiscal 2007. Certain positive signs, such as higher electrical power demand in 2007 as compared to 2006 and slowly increasing spot coal pricing in eastern production areas, have signaled that conditions are improving. Despite these indicators, more positive U.S. coal conditions will not become apparent until spot prices increase to a level which supports the development of new mines and the reopening of currently idled mines. The timing of these

-24-

events is impossible to determine and new orders of original equipment specifically related to underground mining will continue to be adversely effected by such uncertainty. The long-term outlook for U.S. coal remains positive with electricity demand continuing to strengthen over the foreseeable future. Coal continues to be one of the most cost effective energy sources and as new coal technologies are developed, additional demand will be created as environmental concerns subside.

Results of Operations

Three Months Ended April 27, 2007 to Three Months Ended April 29, 2006.

Net Sales

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

			Three Months Ended
			April 27,		April 29,		$	%
In thousands			2007		2006		Change	Change

Net Sales
	Underground Mining Machinery	$	363,179	$	335,188	$	27,991	8.4%
	Surface Mining Equipment		265,983		225,160		40,823	18.1%
	Total	$	629,162	$	560,348	$	68,814	12.3%

The increase in net sales for Underground Mining Machinery in the second quarter was the result of a $2.0 million increase in original equipment shipments and a $26.0 million increase in the sale of aftermarket products and service. Decreased original equipment sales were reported in 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 emerging markets served out of the United Kingdom, the decrease in original equipment sales was due to a roof support system and flexible conveyor train sale in the second quarter of Fiscal 2006 not duplicated in the second quarter of Fiscal 2007. Aftermarket sales increases were primarily due to emerging markets served out of the United Kingdom on continued demand for coal mining activity internationally.

The increase in net sales for Surface Mining Equipment in the second quarter was the result of a $5.7 million increase in original equipment and a $35.1 million increase in aftermarket products and service. Growth remained consistent in the market for original equipment and aftermarket sales globally. During the quarter, original equipment and aftermarket sales were particularly strong in the United States due to the continued strength in the demand for coal and copper. Aftermarket sales also increased in Chile by over 15% and almost doubled in emerging markets served out of the United Kingdom. Aftermarket growth was partially offset by decreases in South Africa, Canada and Australia primarily due to timing.

-25-

Operating Income

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

			Three Months Ended
			April 27, 2007			April 29, 2006
			Operating	%		Operating	%
In thousands			Income (loss)	of Net Sales		Income (loss)	of Net Sales


	Underground Mining Machinery	$	81,685	22.5%	$	77,693	23.2%
	Surface Mining Equipment		47,491	17.9%		39,503	17.5%
	Corporate Expense		(7,599)			(6,704)
	Total	$	121,577	19.3%	$	110,492	19.7%

Operating income as a percentage of net sales for Underground Mining Machinery decreased from 23.2% in the second quarter of 2006 to 22.5% in the second quarter of 2007. The decrease in operating profit as a percentage of sales was primarily driven by increased product development selling and administrative expenses as a percentage of sales of 1.2% and a less favorable sales mix of original equipment and aftermarket sales of 0.5% offset by decreased period costs as a percentage of sales of 1.0% due to more stable material costs, decreased overtime premiums and decreased performance-based incentive compensation.

Operating income as a percentage of net sales for Surface Mining Equipment increased from 17.5% in the second quarter of 2006 to 17.9% in the second quarter of 2007. The increase in operating profit as a percentage of sales was driven by a more favorable sales mix of original equipment and aftermarket products of 0.2% and decreased product development selling and administrative expenses as a percentage of sales of 1.1% offset by 0.9% decrease in other income primarily related to decreased asset sales.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense totaled $89.0 million, or 14% of sales, in the second quarter of Fiscal 2007, as compared to $78.1 million, or 14% of sales, in the second quarter of Fiscal 2006. Increased product development, selling and administrative expense was attributable to general inflation, $2.3 million related to the Stamler acquisition and $4.2 million of higher selling expenses related to increased business activity and the development of emerging markets.

Interest Expense

Interest expense increased to $9.2 million in the second quarter of Fiscal 2007 as compared to $0.6 million for Fiscal 2006. The $8.6 million increase was principally due to the November 2006 issuance of $250.0 million of 6% Senior Notes due 2016 and $150.0 million of 6.625% Senior Notes due 2036 and increased borrowings on our Credit Agreement, all of which were primarily used to finance our common stock repurchase program.

Reorganization Items

Reorganization items include income and expense that were realized or incurred as a result of our reorganization under Chapter 11 of the Bankruptcy Code. Reorganization related items moved to $0.1 million of expense during the second quarter of Fiscal 2007 from $5.1 million of income during the second quarter of

-26-

Fiscal 2006 with the Fiscal 2006 results being positively effected by reorganization income related to cash receipts from a fully reserved note receivable of $5.2 million.

Provision for Income Taxes

Income tax expense for the second quarter of Fiscal 2007 increased to $35.8 million as compared to $34.0 million in the second quarter of Fiscal 2006. These income tax provisions represented effective income tax rates for the second quarters of Fiscal 2007 and 2006 of 31.6% and 29.1%, respectively.

A review of income tax valuation reserves was performed as part of the analysis of the second quarter Fiscal 2007 and 2006 income tax provisions, respectively. No discreet adjustments were recorded relating to Fiscal 2007 while a discreet tax benefit of $6.3 million was recorded in Fiscal 2006 relating to certain valuation reserves applicable to our Australian Group. On a recurring basis, the main drivers of the variance in tax rates when compared to the statutory rate of 35% were the geographic mix of earnings and the corresponding differences in local statutory tax rates offset by U.S. State income taxes.

Cash taxes paid for the second quarter of Fiscal 2007 were $13.3 million compared to $10.3 million in the second quarter of Fiscal 2006. This increase in cash taxes paid was primarily due to increased Non-U.S. profitability year over year and the global timing requirements with respect to the payment of current and prior year tax liabilities.

Six Months Ended April 27, 2007 to Six Months Ended April 29, 2006.

Net Sales

			Six Months Ended
			April 27,		April 29,		$	%
In thousands			2007		2006		Change	Change

Net Sales
	Underground Mining Machinery	$	690,300	$	676,583	$	13,717	2.0%
	Surface Mining Equipment		499,328		437,106		62,222	14.2%
	Total	$	1,189,628	$	1,113,689	$	75,939	6.8%

The increase in net sales for Underground Mining Machinery in the Fiscal 2007 six months compared with the Fiscal 2006 six months was the result of a $53.5 million increase in aftermarket products and service partially offset by decreased shipments of original equipment of $39.8 million. Decreased original equipment sales were reported in the United States and emerging markets served out of the United Kingdom offset by incremental sales of $28.7 million related to the Stamler line of business, which was purchased during the fourth quarter of Fiscal 2006. In the United States, the decrease in original equipment sales was the result of a roof support system sale in the Fiscal 2006 six months not duplicated in the Fiscal 2007 six months and a decrease in shuttle car sales over the same period. In the emerging markets served out of the United Kingdom, the decrease in original equipment sales was due to the sale of a roof support system and armored face conveyor in the Fiscal 2006 six months not duplicated in the Fiscal 2007 six months. Aftermarket sales increases were reported across all underground markets but primarily in the emerging markets served out of the United Kingdom due to the continued strength of coal mining activity internationally. Incremental aftermarket sales were also contributed by the Stamler line of business.

The increase in net sales of Surface Mining Equipment for the Fiscal 2007 six months compared to the Fiscal 2006 six months was due to a $17.4 million increase in original equipment and a $44.8 million increase in aftermarket products and service. Increases in original equipment sales in the United States, China, and Canada were primarily from sales of electric mining shovels and continues to reflect the ongoing growth of activity

-27-

levels for both the replacement of existing equipment and the addition of new mining capacity for copper, coal, iron ore, oil sands and gold. Aftermarket sales growth was particularly strong in the United States from the continued strength in copper and surface mined coal. Aftermarket sales increased by 60% in the emerging markets served out of the United Kingdom and by 10% in Chile due to continued strength in copper. Aftermarket growth was partially offset by decreases in Canada, Australia and South Africa primarily due to timing.

Operating Income

			Six Months Ended
			April 27, 2007			April 29, 2006
			Operating	%		Operating	%
In thousands			Income (loss)	of Net Sales		Income (loss)	of Net Sales


	Underground Mining Machinery	$	139,811	20.3%	$	141,734	20.9%
	Surface Mining Equipment		90,513	18.1%		73,858	16.9%
	Corporate Expense		(14,765)			(14,694)
	Total	$	215,559	18.1%	$	200,898	18.0%

Operating income as a percentage of net sales for Underground Mining Machinery decreased from 20.9% in the Fiscal 2006 six months to 20.3% in the Fiscal 2007 six months. The decrease in operating profit as a percentage of sales was primarily driven by increased product development selling and administrative expenses as a percentage of sales of 2.1% offset by a more favorable sales mix of original equipment and aftermarket sales of 0.8% and decreased period costs as a percentage of sales of 0.9% due to more stable material costs, decreased overtime premiums and decreased performance-based incentive compensation.

Operating income as a percentage of net sales for Surface Mining Equipment increased from 16.9% in the Fiscal 2006 six months to 18.1% in the Fiscal 2007 six months. 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 1.1% and decreased product development selling and administrative expenses as a percentage of sales of 1.5% offset by increased period costs as a percentage of sales primarily related to the timing of increased warranty expense and decreased other income related to the sale of assets in the Fiscal 2006 six months.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense totaled $170.9 million, or 14% of sales, in the Fiscal 2007 six months, as compared to $154.4 million, or 14% of sales, in the Fiscal 2006 six months. While a consistent percentage of total sales, the 11% increase in product development, selling and administrative expense was primarily attributable to general inflation, $4.4 million related to the Stamler acquisition and $7.9 million of higher selling expenses related to increased business activity and the development of emerging markets.

Interest Expense

Interest expense increased to $16.3 million in the Fiscal 2007 six months as compared to $1.1 million for the Fiscal 2006 six months. The $15.2 million increase was principally due to the November 2006 issuance of $250.0 million of 6% Senior Notes due 2016 and $150.0 million of 6.625% Senior Notes due 2036 and increased borrowings on our Credit Agreement, all of which were primarily used to finance our common stock repurchase program.

-28-

Reorganization Items

Reorganization related items moved to $0.3 million of expense during the Fiscal 2007 six months from $5.0 million of income during the Fiscal 2006 six months with the Fiscal 2006 results being positively affected by reorganization income related to cash receipts from a fully reserved note receivable of $5.2 million.

Provision for Income Taxes

Income tax expense for the Fiscal 2007 six months decreased to $65.5 million as compared to $67.3 million for the Fiscal 2006 six months. On a consolidated basis, these income tax provisions represented effective income tax rates for the Fiscal 2007 six months and Fiscal 2006 six months of 32.3% for both periods.

A review of income tax valuation reserves was performed as part of the analysis of the Fiscal 2007 and 2006 six months income tax provisions, respectively. No discreet adjustments were recorded relating to Fiscal 2007 while a discreet tax benefit of $6.3 million was recorded in Fiscal 2006 relating to certain valuation reserves applicable to our Australian Group. On a recurring basis, the main drivers of the variance in tax rates when compared to the Statutory rate of 35% were the geographic mix of earnings and the corresponding differences in local statutory tax rates offset by U.S. State income taxes.

Cash taxes paid for the Fiscal 2007 six months were $28.6 million compared to $19.3 million paid for the Fiscal 2006 six months. This increase in cash taxes paid was primarily due to increased Non-U.S. profitability year over year and the global timing requirements with respect to the payment of current and prior year tax liabilities.

Bookings and Backlog

The bookings trend remained strong for original equipment and aftermarket products and services. During the Fiscal 2007 second quarter and six months, we received $728 million and $1.3 billion, respectively, of new orders compared to new order bookings of $548 million and $1.1 billion for the Fiscal 2006 second quarter and six months, respectively. Aftermarket products and services orders continued to trend upward for the quarter and six month periods ended April 27, 2007 by 8% and 5%, respectively as compared to the prior year. The measured growth of aftermarket parts and services is largely representative of the demands on the ever increasing installed base of original equipment offset by the continued weakness in the United States coal market. Original equipment orders were up 87% and 26% for the quarter and six month period over the prior year mainly due to the continued strength of all markets served by the surface mining business and international markets served by our underground mining business offset by the effects of the downturn in the United States coal market on our underground mining business.

Due to the continued strength of the surface mining business and despite the softness in the U.S underground coal market, backlog increased from $1.3 billion at the end of Fiscal 2006 to $1.4 billion at the end of the Fiscal 2007 second quarter.

-29-

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 April 27, 2007 and October 28, 2006, respectively:

		April 27,		October 28,
In millions		2007		2006
Cash and cash equivalents	$	91.6	$	101.3
Accounts receivable		442.4		431.4
Inventories		740.6		639.9
Other current assets		66.2		55.3
Short-term debt		(2.0)		(5.2)
Accounts payable		(183.9)		(200.1)
Employee compensation and benefits		(49.5)		(77.4)
Advance payments and progress billings		(198.0)		(186.6)
Accrued warranties		(41.1)		(38.9)
Other current liabilities		(85.5)		(91.8)

Working Capital	$	780.8	$	627.9

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. As part of our continuous improvement of purchasing and manufacturing processes, we continue to strive for alignment of inventory levels with customer demand and current production schedules.

We anticipate that capital spending could reach 3.5% to 4.0% of sales in Fiscal 2007 and 2008 primarily due to a number of programs to increase our manufacturing capacity and in order to continue the expansion of our aftermarket service capabilities.

Expansion efforts of both the surface and underground mining operations continued during the second quarter of Fiscal 2007. Efforts commenced on the expansion in component machining capabilities for P&H Mining at our Tianjin, China campus, with start-up being projected as mid-2008. The underground mining operation continued 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 was completed during the second quarter and is currently providing expanded repair and rebuild capability in the region. The Joy Tianjin facility was completed in the first quarter of Fiscal 2007 and is currently providing pan lines for armored face conveyors.

During the Fiscal 2007 six months, cash provided by operating activities was $60.2 million compared to cash provided by operating activities of $76.6 million during the Fiscal 2006 six months. The decrease in cash generated by operating activities primarily related to increased working capital requirements associated with higher business activity levels.

During the Fiscal 2007 six months cash used by investing activities was $34.2 million compared to cash used by investing activities of $17.5 million during the Fiscal 2006 six months. The increase was primarily due to the $8.5 million acquisition of a repair and rebuild facility in Australia during the first quarter of Fiscal 2007.

-30-

The acquisition has provided complementary service to existing electric motor repair and rebuild facilities and created an original equipment repair shop network in Eastern Australia. The increase was also impacted by proceeds of $4.9 million from the sale of facilities in the United States and Australia during the Fiscal 2006 six months.

During the Fiscal 2007 six months cash used by financing activities was $39.1 million compared to cash used by financing activities of $31.2 million in the Fiscal 2006 six months. The primary drivers of the change were the decreased excess income tax benefits from the exercise of stock options and increased borrowings on long term obligations and the issuance of senior notes in the first quarter of Fiscal 2007 offset by the increased purchase of common stock.

Financial Condition

As of the end of the second quarter Fiscal 2007, we had $91.6 million in cash and cash equivalents and $154.3 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 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

-31-

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 second 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 six months ended April 29, 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 recognized for the six months ended April 27, 2007 and April 29, 2006 was approximately $5.3 million and $4.2 million, respectively. The total stock-based compensation expense we recognized for the three months ended April 27, 2007 and April 29, 2006 was approximately $3.0 million and $1.9 million, 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.

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.

-32-

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.

-33-

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)*

January 27, 2007 to	602,900	$	47.45	602,900	$	316,151,730
February 26, 2007

February 27, 2007 to	1,005,834	$	45.84	1,005,834	$	270,048,544
March 26, 2007

March 27, 2007 to	-			-	$	270,048,544
April 27, 2006

*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

At the annual meeting held on February 22, 2007 there were three proposals voted on by shareholders.

-34-

Proposal # 1

Each of our directors standing for election was re-elected to a term ending at the annual meeting in 2008. The votes cast are listed below:

					Broker
	For	Against	Withheld	Abstained	Non-Votes

Steven L. Gerard	99,517,464	-	1,812,822	-	-

John Nils Hanson	98,029,645	-	3,300,641	-	-

Ken C. Johnsen	100,010,108	-	1,320,178	-	-

Gale E. Klappa	100,313,634	-	1,016,652	-	-

Richard B. Loynd	90,821,710	-	10,508,576	-	-

P. Eric Siegert	97,393,228	-	3,937,058	-	-

Michael W. Sutherlin	100,900,727	-	429,559	-	-

James H. Tate	87,656,587	-	13,673,699	-	-

Proposal #2

Shareholders were asked to approve the Joy Global Inc. 2007 Stock Incentive Plan. The proposal was passed and the votes cast are listed below:

			Broker
For	Against	Abstained	Non-Votes

54,247,561	34,691,254	167,095	12,224,376

Proposal #3

Shareholders were asked to approve an amendment to the corporation’s Restated Certificate of Incorporation increasing its authorized common stock from 150,000,000 to 500,000,000 shares. The proposal was not passed and the votes cast are listed below:


For	Against	Abstained

38,741,537	61,023,138	1,592,608

Item 5. Other Information

Not applicable

-35-

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 negotiation of collective bargaining agreements and pension issues 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.

-36-

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; adverse tax rulings; collectibility of accounts receivable; and leverage and debt service.

-37-

Item 6. Exhibits

10.1	Joy Global Inc. 2007 Stock Incentive Plan
10.2	Form of Restricted Stock Unit Award Agreement entered into between the registrant and each of its non-employee directors in connection with restricted stock unit awards granted under the Joy Global Inc. 2007 Stock Incentive Plan
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

-38-

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/ James H. Woodward, Jr.

Date May 31, 2007			James H. Woodward, Jr.
			Executive Vice President,
			Chief Financial Officer
			and Treasurer




			/s/ Michael S. Olsen

Date May 31, 2007			Michael S. Olsen
			Vice President and
			Chief Accounting Officer

-39-

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Joy Global Inactive 10-Q2007 Q2 Quarterly report

Content analysis