January 21, 2005
Oren B. Azar
Associate General Counsel and Secretary
100 East Wisconsin Avenue
Suite 2780
Milwaukee, Wisconsin 53202
Re: Joy Global Inc.
Registration Statement on Form S-3
Filed December 23, 2004
File No. 333-121569
Dear Mr. Azar:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form S-3
Where You Can Find More Information - Page iii
1. Please update the financial statements when required by Rule 3-
12
of Regulation S-X.
Fee Table
2. Note (4) to the fee table indicates that you are registering an
indeterminate number or amount of additional securities issuable
upon
conversion of, in exchange for, or upon exercise of convertible or
exchangeable securities as may be offered pursuant to the
registration statement. Please note that at the time of issuance
of
those additional securities, you must specifically allocate from
the
remaining dollar amount of securities that may be issued under
this
registration statement the maximum number or amount of additional
securities that you believe you may issue upon exercise or
conversion
of the convertible or exchangeable securities, based on a good-
faith
estimate. If the actual number of additional securities to be
issued
turns out to be greater than that estimate, you must file another
prospectus supplement to allocate those additional securities or,
if
the remaining aggregate dollar amount of securities that may be
issued under this registration statement is at that time
insufficient
to permit such allocation, file a new registration statement to
register the additional securities. Please revise Note (4) to the
fee table accordingly.
Risk Factors - Page 1
3. Please note that Form S-3 does not allow for incorporation by
reference of risk factors prior to effectiveness. Please include
risk factors in your document. We may have further comments.
Description of Purchase Contracts - Page 15
Description of Units - Page 16
4. We note that purchase contracts and/or units may be composed of
third-party debt securities. Please supplementally explain how
the
distribution of those third-party debt securities will be effected
in
compliance with the registration requirements of the Securities
Act.
5. We note that you have registered an offering of purchase
contracts
and units, the specific terms of which are intended to be
described
in a prospectus supplement. Where the offered securities involve
the
issuance of a novel or complex security, including, for example,
any
income deposit, enhanced income, enhanced yield or similar
securities, we may have comments on the disclosure in the
prospectus
supplement. In addition, the issuance of any novel or complex
securities may represent a fundamental change to the information
contained in the registration statement and/or a material change
to
the plan of distribution such that a post-effective amendment
would
be required. If you determine to conduct an offering of any
purchase
contracts and/or units, you should file a post-effective amendment
or
submit supplementally the prospectus supplement in advance of the
offering.
Plan of Distribution - Page 18
6. We note the prospectus refers to the remarketing of securities.
Please note that, depending upon the level of involvement by the
issuer or its affiliates in the remarketing, any offers or sales
pursuant to the remarketing may require registration under the
Securities Act of 1933. If you would prefer that the staff
express
its views on this issue at the present time, please supplementally
provide information about the procedures that will be used and the
participants in the remarketing, including the role of the company
or
its affiliates, if any.
Exhibits - Page 25
7. We note your intention to file a number of exhibits, including
your legal opinion, by amendment. Because we may have comments on
these exhibits, please file the exhibits allowing adequate time
for
their review prior to effectiveness.
8. Please provide an updated accountants` consent with any
amendment
to the filing.
Signatures - Pages 30 - 42
9. Please explain why the registration statement was not dated,
and
why it does not appear to have been signed by the registrant or
co-
registrants, or by a majority of directors of the registrant and
co-
registrants. Please ensure that the next amendment is signed and
that any power of attorney is included with the amendment.
Form 10-K for fiscal year ended October 30, 2004
10. We note you have incorporated by reference the information
required in Part III of the Form 10-K to your definitive proxy
statement on Schedule 14A. Please note that you must file the
proxy
statement containing that Part III information (or file an
amendment
to your Form 10-K to include that information) prior to
acceleration
of the effective date of the Form S-3.
Business
11. In future filings, please revise to indicate the percentage of
your revenue derived from any product, class of product, or
service(s) provided that materially contributed to your business
over
the last three years. See Item 101(c)(1)(i) of Regulation S-K.
In
this regard, we note your November 3, 2004 presentation at the
Goldman Sachs Global Capital Goods Conference which indicates that
continuous miners, longwall shearers, and electric shovels are
"significant product lines." Furthermore, we note from the
presentation that aftermarket services constituted at least 70% of
your total revenues since fiscal 2001.
12. In future filings, please provide a more complete description
of
the development of your business during the year. For example,
did
you introduce, enhance or discontinue products? Did you acquire
or
sell any product lines? Why? In what other ways did your business
change materially during the year?
13. Where you discuss the cyclicality of your business,
particularly
where cyclicality is driven by commodity prices, please expand
future
filings to indicate the portion of your business derived from
sales
to specific mining industries (such as coal mining, copper mining,
etc.).
14. We note your disclosure in your management`s discussion and
analysis section regarding "Alliance Partners" and your
attribution
of a portion of your increase in sales of new surface mining
equipment in fiscal 2004 to sales of equipment manufactured by
your
partners. Supplementally, with a view toward disclosure, identify
the partners with whom you have "Alliance Partner" relationships.
Supplementally and in future filings, describe the nature of the
partnerships and the material terms of your arrangements with
these
partners.
Surface Mining Equipment
15. We note your references to "life cycle management" contracts
and
programs. Supplementally and in future filings, please explain
the
term "life cycle management," describe the programs you offer, and
describe the material terms of life cycle contracts. Also explain
how life cycle contracts "reduce customer operating risk and
guarantee productivity levels."
Raw Materials
16. We note your reliance on single source suppliers for "certain
components and raw material." Please revise future filings to
discuss
your ability to replace these suppliers. Also revise to include
an
estimate of the portion of your business dependent on the
components
and material that you purchase from a single source.
Patents and Licenses
17. In future filings, please indicate the duration of patents
held.
Also, please expand your discussion of the importance of patents
and
licenses to your business by quantifying the portion of your
business
that depends on the "significant" patents and licenses in "certain
product areas."
Research and Development
18. We note your disclosure of your research and development costs
did not include "application engineering." Supplementally clarify
this term and explain why these costs were excluded from the
disclosed figures.
Environmental, Health and Safety Matters
19. In future filings, please revise this section to describe the
costs of complying with environmental regulations, where material,
as
required by Item 101(c)(1)(xii) of Regulation S-K.
International Operations
20. Your discussion of the risks involved in international
operations
is generic and could apply to any company with international
operations. This disclosure should be revised in future filings
to
describe how each of the bullet point factors may impact your
operations specifically. For instance, please indicate which
countries in particular have experienced economic downturns that
impacted your business during the fiscal year.
Management`s Discussion and Analysis
Results of Operations
21. When you cite more than one factor in explaining a change in a
financial statement item, the amounts of the individual items
cited,
including offsetting factors, should be quantified unless not
practical. We see various discussions throughout MD&A where the
amounts of factors cited appear reasonable quantifiable. Please
expand and apply this general guidance throughout MD&A.
2004 Compared with 2003
22. We note your disclosure that "activity levels" in emerging
markets, including China, continued the "high level of activity"
seen
in 2003. Please supplementally explain what you mean by "activity
levels." Are you referring to an increase in orders for new
equipment or some other measure of activity?
Provision for Income Taxes
23. Please expand to make more detailed and specific disclosure
about
why the increase in deferred tax valuation reserves was necessary
and
quantify the amount. Make disclosure about the underlying factors
leading to your "concerns about realizability." There should also
be
transparent disclosure about why the effective tax rate increased
from 33.6% to 41.5% between 2003 and 2004. Please expand.
Restructuring and Other Special Charges
24. When you engage in exit activities SAB Topic 5-P specifies
certain disclosures about cost savings expected and actually
derived
from the actions. For guidance on the required disclosures refer
to
the Question under "Disclosures," specifically the next to last
paragraph to the interpretive response. Please expand.
Quantitative and Qualitative Disclosures about Market Risk
25. The quantitative disclosures about foreign exchange risks do
not
appear to fully conform to the requirements of Item 305(a) to
Regulation S-K. For instance, it appears that you intend to make
disclosure under the tabular option. If so, then it appears that
you
should expand to more fully conform to the requirements of that
alternative, including the related instructions to paragraph
305(a)(1)(i). As provided by Item 305(a)(3) you should also
provide
summary comparative disclosures for the prior year. Expand or
explain to us how your disclosures meet the requirements of the
Item.
Controls and Procedures
26. Provide a full supplemental description of the material
weakness
identified by your auditor. Provide us with supplemental copies of
any correspondence from your auditors regarding this matter. Tell
us
about (and quantify) any adjustments recorded as a result of this
weakness. We see that you plan to alter controls in 2005. With
respect to the 2004 financial statements and the provision for
income
taxes presented therein, tell us what you did, to assure yourself
that the auditors` concerns were appropriately addressed.
27. As a related matter, we see that you recorded a significant
increase to the tax valuation at one of your international
businesses
in the fourth quarter of fiscal 2004. Is this adjustment related
to
the material weakness? Did it arise at the operations subject to
the
material weakness identified by your auditor? Please fully
explain
the facts and circumstances leading to the adjustment. Also tell
us
why the effect of this adjustment is appropriately a fourth
quarter
item. Support that the timing of the adjustment is appropriate.
28. Expand to make more specific disclosure about the nature and
extent of the weakness identified by your auditor. Make complete
disclosure about the aspects of the underlying controls and
procedures deemed insufficient by your auditors. Also make
specific
disclosure about what you did to ensure that the auditors concerns
were appropriately addressed in these financial statements. We
may
have further comment on disclosure once we see the responses to
immediately preceding comments.
29. In light of the fact that a material weakness existed with
respect to the valuation allowance against deferred net tax
assets,
disclose in reasonable detail the basis for officers` conclusions
that the company`s disclosure controls and procedures were
nonetheless effective as of the end of the period covered by the
report.
30. Please disclose how, if at all, the discovery of the
identified
material weakness in the company`s internal controls impacted the
effectiveness determinations that the company`s CEO and CFO made
with
respect to the company`s disclosure controls and procedures in
prior
periods.
31. We note your disclosure that your management, including your
Chief Executive Officer and Chief Financial Officer, concluded
that
the Company`s disclosure controls and procedures are "effective in
recording, processing, summarizing and reporting, on a timely
basis,
information required to be disclosed...." Revise to clarify, if
true,
that your officers concluded that your disclosure controls and
procedures are also effective to ensure that information required
to
be disclosed in the reports that you file or submit under the
Exchange Act is accumulated and communicated to your management,
including your chief executive officer and chief financial
officer,
to allow timely decisions regarding required disclosure. See
Exchange
Act Rule 13a-15(e).
32. We note your disclosure that you plan to take certain steps to
improve your internal controls "starting in fiscal 2005." Please
revise to address when you expect all improvements and corrective
actions will be implemented completely, and what actions the
company
is taking in the interim to mitigate the weaknesses in the
controls.
Financial Statements and Supplementary Data
33. Please expand to explain the effect of any unusual or
infrequently occurring items presented in each quarter as well as
the
aggregate effect and nature of any year-end or other adjustments
that
are material to the results of that quarter. See Item 302 (a)(3)
of
Regulation S-K for guidance. We see, for instance, disclosure
about
a material fourth quarter adjustment in a press release dated
December 16, 2004.
Consolidated Statement of Income
34. We see that you provide both products and services. Tell us
why
you should not disaggregate product and services revenues and
costs.
Describe you consideration of Rules 5-03(b)(1) and (2) to
Regulation
S-X. Tell us how you differentiated product and services revenues
for purposes of responding to this comment.
Consolidated Statement of Cash Flows
35. We see the significant difference between cash received upon
exercise of stock options and the increase to shareholders` equity
attributed to exercise of options in fiscal 2004. Supplementally
reconcile the two amounts. Expand to clarify or show us that your
disclosures comply with the requirements of paragraph 32 to FAS
95.
Note 2. Significant Accounting Policies
Inventories
36. Tell us the amounts of inventory impairment charges in each of
the three most recent fiscal year-ends. Describe the facts and
circumstances leading to any significant charges, including
discussion of the disposition of the related inventory. Also tell
us
more about how you identify and measure impaired inventory. Show
us
that your method is SAB Topic 5-BB compliant.
37. As a related matter, MD&A should include disclosure of the
amounts of any significant inventory impairment charges, including
disclosure about the facts and circumstances leading to the
charges
and the disposition of the underlying inventory.
Comprehensive Income (Loss)
38. Please expand to disclose the amount of income taxes netted
against the components of accumulated comprehensive income. You
should also disclose the amounts of income taxes netted against
the
changes in the components for each year. Refer to FAS 130.
Revenue Recognition
39. For product revenues not recognized on a percentage of
completion
basis, supplementally describe the nature and extent of post
shipment
obligations (installation, training, etc...) and any customer
acceptance protocols. To the extent these obligations and
protocols
vary based on product, customer or other factors, please be
specific.
Tell us how these matters are considered in your revenue
practices.
40. Tell us more about the nature of the arrangements accounted
for
on the percentage of completion method. For those circumstances,
describe the factors you consider in determining that use of
percentage of completion accounting is appropriate and show us
that
your use of that method is appropriate under the scope of SOP 81-
1.
Please be detailed and specific.
41. Supplementally provide us a more detailed description of the
life
cycle management business. Describe the typical terms and
conditions
of the arrangements and provide us more detail about how you
estimate
revenues and costs under these arrangements. Tell us how
revisions
to these estimates are accounted for, including how you identify
and
account for contract losses. Show us that your accounting for
this
revenue stream is appropriate.
42. Supplementally describe the services revenue stream in more
detail. Supplementally describe the factors you consider in
concluding that services have in fact been completed for revenue
recognition purposes. To the extent the evidence you consider
varies
based on the nature of the service or other factors, please be
specific in supporting your accounting.
43. Supplementally clarify the timing of completed contract
revenue.
Describe the circumstances when you apply that accounting and show
us
that such accounting is appropriate in those circumstances.
44. Disclosures in the "Business Section" about products and
services
offered in both of the segments suggest that you enter into
customer
agreements that may be multiple element arrangements as defined in
EITF 00-21. Tell us whether you in fact have multiple element
arrangements under the scope of the Abstract and, as relevant,
show
us that your accounting is appropriate under that guidance.
Describe
in detail how you identify, value and account for individual
elements. If you believe that you do not have multiple element
arrangements, explain supplementally and in detail. Specifically
address the scope and requirements of the Abstract in supporting
your
position.
45. We see that you manufacture heavy equipment. Tell us how
shipping and handling revenues and costs are presented in the
income
statement. If the related amounts are not classified pursuant to
EITF 00-10, explain why you should not make the disclosures
required
by the Abstract.
46. We see that you also distribute products manufactured by
others.
With respect to these arrangements, supplementally describe your
consideration of EITF 99-19. To the extent that the significant
terms and conditions of the underlying arrangements vary, please
be
specific.
Accounting for Stock Options
47. How can $5.9 million, $5.3 million and $21.1 million be
weighted-
averages? Are these amounts the total fair value of options
granted
in the years presented?
Note 14. Reorganization Items
48. Tell us more about the nature and origin of these items.
Explain
why these amounts are appropriately classified as "reorganization
items."
Note 17. Commitments, Contingencies and Off-Balance-Sheet Risks
49. We see that you provide summary disclosure about unresolved
product liability and environmental matters, including asbestos
exposure. As set forth in SAB Topic 5-Y, if it is reasonably
possible that material loss may arise from resolution of these
contingencies, additional disclosure may be required under the
SAB.
Supplementally provide us more detail about your underlying
exposures
to product liability and environmental contingencies. Demonstrate
to
us that your disclosures about product liability and environmental
contingencies are sufficient under the SAB. If necessary to comply
with the requirements of that guidance, please appropriately
revise.
Note 21. Segment Information
50. Pursuant to paragraph 38a to FAS 131 you should identify any
foreign country from where you derive a material amount of
revenues
and disclose the related amount of that revenue. Tell us how your
disclosure is consistent with that requirement or expand as
necessary.
51. As a related matter, you should also make the long-lived asset
disclosure specified by paragraph 38b to FAS 131. Pursuant to the
FASB publication "Segment Information: Guidance on Applying
Statement
131" that disclosure should include only tangible assets.
Signatures
52. The annual report does not appear to be signed. Please amend
your filing or alternatively supplementally provide us with the
version of the signature page submitted for filing that
demonstrates
Mr. Hanson signed the report on behalf of the registrant and that
the
directors executed the power of attorney.
Exhibits 32.1 and 32.2
53. It does not appear that the certifications filed as Exhibits
32.1
and 32.2 were signed. Please amend your filing in its entirety to
provide the required certifications, or alternatively
supplementally
provide us with the version of the exhibits submitted for filing
that
demonstrates the officers signed the certifications.
Form 8-K dated December 16, 2004
54. We see that the earnings release includes non-GAAP disclosure
of
EBITDA. Under Item 10(e) to Regulation S-K, when you furnish non-
GAAP information in a Form 8-K the filing must include statements
about why you believe the non-GAAP measure provides useful
information to investors about your financial condition and
results
of operations. You must also make disclosure about any other
material
purposes for which you use the information. Those disclosures
should
be specific to your business and may not be generic or cookie-
cutter.
Your statement that the disclosure is "a useful indicator of our
operating results" is generic and insufficient under the
requirement.
Either delete the EBITDA disclosure from future earnings releases
or
expand future earnings releases to more fully comply with the
disclosure requirement. Show us how you intend to apply this
comment.
Refer to Item 10(e)(1)(i) to Regulation S-K and the Instructions
to
Item 2.02 to Form 8-K.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Traci Hornfeck at (202) 824-5565 or Gary
Todd
at (202) 942-2862 if you have questions regarding comments on the
financial statements and related matters. Please contact Mary Beth
Breslin at (202) 942-2914 or me at (202) 942-7924 with any other
questions.
Sincerely,
David Ritenour
Special Counsel
cc (via fax): Keith S. Crow, Esq.
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Joy Global Inc.
January 21, 2005
Page 12