10-Q Draft for 1st Qtr. 2000: 09/12/01 9:12 AM Page 2
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 July 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD From _________ to __________
Commission File number 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 checkmark 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 [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS.
Indicate by checkmark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [ X ] No [ ]
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 September 10, 2001
- -------------------------------------------- ---------------------------------
Common Stock, $1 par value 39,743,681 shares
- 2 -
JOY GLOBAL INC.
FORM 10-Q -- INDEX
July 31, 2001
PART I. - FINANCIAL INFORMATION Page No.
--------
Item 1 - Financial Statements:
Consolidated Statement of Operations - One month ended
July 31, 2001 (Successor Company), Two months ended
June 23, 2001, three months ended July 31, 2000, Eight
months ended June 23, 2001 and nine months ended
July 31, 2000 (Predecessor Company) 3 - 4
Consolidated Balance Sheet - July 31, 2001 (Successor Company),
and October 31, 2000 (Predecessor Company) 5
Consolidated Statement of Cash Flow - One month ended
July 31, 2001 (Successor Company), Eight months ended
June 23, 2001 and nine months ended July 31, 2000
(Predecessor Company) 6
Notes to Consolidated Financial Statements 7 - 18
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 19 - 24
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 24
PART II. - OTHER INFORMATION
Item 1 - Legal Proceedings 25
Item 2 - Changes in Securities 25
Item 3 - Defaults Upon Senior Securities 25
Item 4 - Submission of Matters to a Vote of Security Holders 25
Item 5 - Other Information 25 - 27
Item 6 - Exhibits and Reports on Form 8-K 27
Signatures 28
See accompanying notes to consolidated financial statements
-6-
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
JOY GLOBAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
Successor
Company Predecessor Company
---------------- -----------------------------------
One Month Two Months Three Months
Ended Ended Ended
July 31, 2001 June 23, 2001 July 31, 2000
---------------- ---------------- ----------------
Revenues
Net sales $ 104,947 $ 185,197 $ 261,652
Other income 108 300 1,429
---------------- ---------------- ----------------
105,055 185,497 263,081
Cost of sales 88,532 138,478 200,798
Product development, selling
and administrative expenses 16,780 34,678 51,231
Restructuring (credit) charge - (16) (1,041)
---------------- ---------------- ----------------
Operating income (loss) (257) 12,357 12,093
Interest expense - net (2,044) (20,223) (4,791)
---------------- ---------------- ----------------
Income (loss) before reorganization items
and fresh start accounting adjustments (2,301) (7,866) 7,302
Reorganization items - (6,228) (21,945)
Fresh start accounting adjustments - 45,057 -
---------------- ---------------- ----------------
Income (loss) before income taxes and
minority interest (2,301) 30,963 (14,643)
(Provision) benefit for income taxes (1,000) 32,755 (3,000)
Minority interest (476) (375) (241)
---------------- ---------------- ----------------
Income (loss) from continuing operations,
before extraordinary item and
discontinued operations (3,777) 63,343 (17,884)
Extraordinary item - gain on debt discharge - 1,124,083 -
Gain from discontinued operations - 256,353 -
---------------- ---------------- ----------------
Net income (loss) $ (3,777) $ 1,443,779 $ (17,884)
================ ================ ================
Basic and diluted loss per share: $ (0.08)
================
Average common shares
(for per share purposes) 50,000
================
See accompanying notes to consolidated financial statements
JOY GLOBAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
Successor
Company Predecessor Company
---------------- ----------------------------------
One Month Eight Months Nine Months
Ended Ended Ended
July 31, 2001 June 23, 2001 July 31, 2000
---------------- ---------------- ----------------
Revenues
Net sales $ 104,947 $ 740,458 $ 831,658
Other income 108 1,261 3,207
---------------- ---------------- ----------------
105,055 741,719 834,865
Cost of sales 88,532 556,037 637,722
Product development, selling
and administrative expenses 16,780 141,784 156,960
Restructuring (credit) charge - (58) 5,438
---------------- ---------------- ----------------
Operating income (loss) (257) 43,956 34,745
Interest expense - net (2,044) (27,640) (21,925)
---------------- ---------------- ----------------
Income (loss) before reorganization items
and fresh start accounting adjustments (2,301) 16,316 12,820
Reorganization items - (36,434) (44,980)
Fresh start accounting adjustments - 45,057 -
---------------- ---------------- ----------------
Income (loss) before income taxes and
minority interest (2,301) 24,939 (32,160)
(Provision) benefit for income taxes (1,000) 26,755 (9,000)
Minority interest (476) (1,062) (613)
---------------- ---------------- ----------------
Income (loss) from continuing operations,
before extraordinary item and
discontinued operations (3,777) 50,632 (41,773)
Extraordinary item - gain on debt discharge - 1,124,083 -
Gain from discontinued operations - 253,183 -
---------------- ---------------- ----------------
Net income (loss) $ (3,777) $ 1,427,898 $ (41,773)
================ ================ ================
Basic and diluted loss per share: $ (0.08)
================
Average common shares
(for per share purposes) 50,000
================
See accompanying notes to consolidated financial statements
JOY GLOBAL INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
Successor Predecessor
Company Company
July 31, October 31,
2001 2000
---------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 59,426 $ 72,123
Restricted cash 24,810 -
Accounts receivable-net 183,092 177,151
Inventories-net 584,852 410,331
Other current assets 22,672 49,819
---------------- -----------------
Total current assets 874,852 709,424
Assets of discontinued operations - 15,231
Property, plant and equipment-net 257,049 177,413
Goodwill and intangible assets-net 22,880 350,778
Excess reorganization value 255,181 -
Other assets 48,987 40,082
---------------- -----------------
Total assets $ 1,458,949 $ 1,292,928
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term notes payable, including
current portion of long-term debt $ 2,722 $ 78,774
Debtor-in-possession financing - 30,000
Trade accounts payable 65,171 72,491
Income taxes payable 72,541 104,869
Other accrued liabilities 214,195 204,494
---------------- -----------------
Total current liabilities 354,629 490,628
Liabilities subject to settlement 111,782 -
Long-term debt 205,992 3,124
Other non-current liabilities 155,211 51,935
Liabilities subject to compromise - 1,220,675
Liabilities of discontinued operations - 314,725
Minority interest 7,839 6,533
Shareholders' equity (deficit) 623,496 (794,692)
---------------- -----------------
Total liabilities and shareholders'
equity (deficit) $ 1,458,949 $ 1,292,928
================ =================
See accompanying notes to consolidated financial statements
JOY GLOBAL INC.
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
(In thousands)
Successor
Company Predecessor Company
---------------------------------------
One Month Eight Months Nine Months
Ended Ended Ended
July 31, 2001 June 23, 2001 July 31, 2000
----------------- ------------------- ----------------
Operating Activities:
Net income (loss) $ (3,777) $ 1,427,898 $ (41,773)
Add (deduct) - Items not affecting cash:
Gain from discontinued operations - (253,183) -
Restructuring (credits) charges - (58) 5,438
Extraordinary item - gain on debt discharge - (1,124,083) -
Reorganization items - 7,090 14,583
Fresh start accounting gain - (45,057) -
Minority interest 476 1,062 613
Depreciation and amortization 4,042 28,821 35,121
Amortization of financing fees 243 4,286 5,770
Income taxes - net (42) (32,620) 2,409
Other - net 954 (479) 93
Changes in Working Capital Items:
(Increase) decrease in restricted cash 1,658 (26,468) -
(Increase) decrease in accounts receivable - net 36,600 (45,590) 10,083
(Increase) decrease in inventories 307 (26,302) 21,137
(Increase) decrease in other current assets 5,789 (11,701) (7,357)
(Decrease) in trade accounts payable (340) (6,196) (4,888)
(Decrease) increase in employee compensation
and benefits (6,809) (1,040) 4,047
(Decrease) increase in advance payments and
progress billings (1,003) 8,672 (15,094)
(Decrease) in other accrued liabilities (776) (9,316) (20,994)
----------------- ------------------- ----------------
Net cash provided (used) by continuing operations 37,322 (104,264) 9,188
----------------- ------------------- ----------------
Investment and Other Transactions:
Property, plant and equipment acquired (2,322) (12,670) (19,917)
Property, plant and equipment retired 262 2,445 22,382
Other - net 4,603 13,649 7,340
----------------- ------------------- ----------------
Net provided by investment and other transactions 2,543 3,424 9,805
----------------- ------------------- ----------------
Financing Activities:
Borrowings under Credit Agreement - 212,618 -
Credit Agreement financing fees (1,743) (11,207) -
Borrowings under debtor-in-possession facility - 55,000 95,000
Debtor-in-possession facility financing fees - (313) -
Repayment of borrowings under debtor-in-possession
facility - (90,000) (237,000)
Repayment of borrowings under Credit Agreement (21,618) - -
Issuance of long-term obligations 12 2,066 931
Redemption of long-term obligations - (4,127) (183)
(Decrease) in short-term notes payable- net (6,681) (71,081) (15,288)
----------------- ------------------- ----------------
Net cash (used) provided by financing activities (30,030) 92,956 (156,540)
----------------- ------------------- ----------------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (236) (726) (1,456)
Cash (Used) Provided by Discontinued Operations - (13,686) 152,978
----------------- ------------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents 9,599 (22,296) 13,975
Cash and Cash Equivalents at Beginning of Period 49,827 72,123 57,453
----------------- ------------------- ----------------
Cash and Cash Equivalents at End of Period $ 59,426 $ 49,827 $ 71,428
================= =================== ================
-10-
JOY GLOBAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2001
(Unaudited)
1. Reorganization and Emergence From Chapter 11
--------------------------------------------
Joy Global Inc. (the "Company" or the "Successor Company") was known as
Harnischfeger Industries, Inc. (the "Predecessor Company") prior to the
Company's emergence from Chapter 11 of the U.S. Bankruptcy Code (the
"Bankruptcy Code") on July 12, 2001 (the "Effective Date"). On June 7,
1999 ("the Petition Date"), the Predecessor Company and substantially all
of its domestic operating subsidiaries filed voluntary petitions for
reorganization under the Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). The
Predecessor Company operated its business and managed its assets in the
ordinary course as debtor-in-possession, and obtained court approval for
transactions outside the ordinary course of business. All liabilities of
the Predecessor Company outstanding at the Petition Date were
reclassified to liabilities subject to compromise.
By order dated May 29, 2001, the Bankruptcy Court confirmed the Third
Amended Joint Plan of Reorganization (the "Amended POR") of the
Predecessor Company. Effective July 12, 2001, Predecessor Company entered
into a secured credit facility with Deutsche Banc Alex Brown and other
lenders. Concurrently, the Predecessor Company entered into an indenture
dated July 10, 2001 (the "Senior Note Indenture") providing for the
issuance of 10.75% Senior Notes due 2006. As a result, all conditions
precedent to the effectiveness of the Amended POR were met, the Amended
POR became effective, and the Predecessor Company changed its name to Joy
Global Inc. The Company formally emerged from bankruptcy on the Effective
Date.
On July 31, 2001, the Company distributed 39,743,681 shares of common
stock to holders of allowed pre-petition claims against the Predecessor
Company. The initial distribution equated one share of Joy Global Inc.
common stock to a $28.60 allowed claim and was based on approximately
$1.43 billion of "current adjusted claims", approximately $1.14 billion
of which related to resolved claims and approximately $290 million of
which related to provisions for unresolved claims. Future distributions
of stock are expected to take place at six-month intervals as the
remaining bankruptcy related claims are resolved. The Company estimates
that, if such claims are resolved as the Company currently anticipates,
"total projected claims" or the total amount of claims after all claims
have been resolved will be approximately $1.20 billion. While this number
has not changed significantly since it was included in the Amended POR,
given the uncertainties inherent in the claims resolution process, there
can be no assurance that the remaining claims will be resolved for the
amounts currently estimated by the Company. The amount of stock
distributed in each future distribution to holders of pre-petition claims
against the Predecessor Company is contingent on the resolution of such
claims. A total of fifty million shares will ultimately be distributed to
creditors. For purposes of these financial statements, all fifty million
shares have been treated as outstanding.
Beginning August 9, 2001, the Company distributed a total of $108.9
million in 10.75% Senior Notes due 2006 (the "Senior Notes") to holders
of allowed pre-petition claims against the Company's principal operating
subsidiaries, P&H Mining Equipment and Joy Mining Machinery, and their
domestic subsidiaries. The Company believes that substantially all of
such claims were resolved prior to the distribution and that no
significant future distributions of Senior Notes will be necessary.
2. Basis of Presentation
The Financial Statements presented in this Form 10-Q are unaudited and
have been prepared by the Company according to the rules and regulations
of the Securities and Exchange Commission and according to the principles
of fresh start accounting set forth in the American Institute of
Certified Public Accountants Statement of Position No. 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP
90-7"). As a result of the application of fresh start accounting at June
23, 2001, the Company's financial results for the period ended July 31,
2001 include two different bases of accounting and, accordingly, the
operating results and cash flows of the Successor Company and the
Predecessor Company have been separately disclosed. The Company chose
June 23, 2001 to coincide with the Company's normal financial closing for
the month of June, which is based on a fiscal quarter made up of two four
-week fiscal months followed by a five-week fiscal month. The Successor
Company's financial statements are not comparable to the Predecessor
Company's financial statements.
The following table describes the periods presented in the financial
statements and related notes thereto:
Period Referred to as
Results for the Successor Company
From June 24, 2001 through July 31, 2001 "Successor Company 2001 One Month"
Results for the Predecessor Company
From May 1, 2001 through June 23, 2001 "Predecessor Company 2001 Two Months"
Results for the Predecessor Company
Three months ended July 31, 2000 "2000 Third Quarter"
Results for the Predecessor Company
From November 1, 2000 through June 23, 2001 "Predecessor Company 2001 Eight Months"
Results for the Predecessor Company
Nine months ended July 31, 2000 "2000 Nine Months"
The following table describes the periods presented in the Management's
Discussion and Analysis of Financial Condition and Results of Operations:
Combined Successor Company 2001
One Month and Predecessor
Company 2001 Two Months "2001 Third Quarter"
Combined Successor Company 2001
One Month and Predecessor
Company 2001 Eight Months "2001 Nine Months"
In the opinion of management, 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, except for those
relating to fresh start accounting which are more fully discussed in
these notes.
These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Predecessor
Company's Annual Report on Form 10-K for the fiscal year ended October
31, 2000. 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 generally
accepted accounting principles for interim financial information requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
amounts could differ from the estimates.
3. Fresh Start Accounting
Although July 12, 2001 was the Effective Date of the Company's emergence
from bankruptcy, for financial reporting convenience purposes, the
Company accounted for the consummation of the Amended POR as of June 23,
2001. The reorganized enterprise value of the Company on the
Effective Date was established at $960 million based on a calculation of
the present value of the free cash flows under the Company's financial
projections including the estimated effects of the Company's net
operating loss carry-forwards and excess cash.
The Company adopted the provisions of Statement of Financial Accounting
Standards ("FAS") No. 141 "Business Combinations" and 142 "Goodwill and
Other Intangible Assets" at emergence from bankruptcy. The allocation of
the Company's reorganized entity value is preliminary and subject to
revision upon completion of certain asset appraisals that are currently
underway.
In accordance with the principles of fresh start accounting, the Company
has adjusted the value of its assets and liabilities to their fair values
as of June 23, 2001 with the excess of the reorganized entity value over
the fair value of assets and liabilities reported as excess
reorganization value in the Consolidated Balance Sheet. The Company's
excess reorganization value is not being amortized. The net effect of all
fresh start accounting adjustments resulted in a gain of $45.1 million,
which is reflected in the Predecessor Company Statement of Operations for
the two-month and eight-month periods ended June 23, 2001. The effects of
the Amended POR and the application of fresh start accounting on the
Company's pre-confirmation consolidated balance sheet are as follows:
JOY GLOBAL INC.
REORGANIZED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 23, 2001
-------------------
(Unaudited)
Predecessor Successor
Company Company
June 23, Debt Fresh Start Discontinued Exit June 23,
In thousands 2001 Discharge Adjustments Operations Financing 2001
- ---------------------------------- ----------- --------- ----------- ------------ ----------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 49,889 $ - $ - $ (62)(j) $ - $ 49,827
Restricted cash - - - - 26,468 (l) 26,468
Accounts receivable-net 220,400 - - (202)(j) - 220,198
Inventories 436,921 - 156,798 (d) - - 593,719
Other current assets 53,121 - (34,145)(e) - 7,200 (m) 26,176
----------- ---------- ----------- ------------ ----------- -------------
Total current assets 760,331 - 122,653 (264) 33,668 916,388
Assets of discontinued operations 8,892 (8,892)(l) - -
Property, plant and equipment, net 169,946 - 88,460 (f) - - 258,406
Goodwill and intangible assets, net 334,249 - (310,074)(g) - - 24,175
Excess reorganization value - - 255,181 (h) - - 255,181
Other assets 41,033 - (5,122)(e) - 11,207 (n) 47,118
----------- ---------- ----------- ------------ ----------- -------------
Total assets $1,314,451 $ - $ 151,098 $ (9,156) $ 44,875 $ 1,501,268
=========== ========== =========== ============ =========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term notes payable, including
current portion of long-term debt $ 79,784 $ - $ - $ - $ (72,408)(o) $ 7,376
DIP financing 80,000 - - - (80,000)(p) -
Trade accounts payable 65,639 - - - - 65,639
Income taxes payable 71,190 - 1,420 (i) - - 72,610
Other accrued liabilities 221,440 - 8,533 (e) - (8,901)(q) 221,072
----------- ---------- ----------- ------------ ----------- -------------
Total current liabilities 518,053 - 9,953 - (161,309) 366,697
Liabilities subject to settlement - 118,992 (a) - - (6,434)(r) 112,558
Long term debt 2,523 12,600 (b) - - 212,618 (s) 227,741
Other non-current liabilities 58,447 - 96,088 (e) - - 154,535
Liabilities subject to compromise 1,255,675 (1,255,675)(c) - - - -
Liabilities of discontinued operations 265,509 - - (265,509)(k) - -
Minority interest 7,839 - - - - 7,839
Shareholders' equity (deficit) (793,595) 1,124,083 45,057 256,353 - 631,898
----------- ---------- ----------- ------------ ----------- -------------
Total liabilities and shareholders'
equity $1,314,451 $ - $ 151,098 $ (9,156) $ 44,875 $ 1,501,268
=========== ========== =========== ============ =========== =============
-22-
Adjustments reflected in the Reorganized Condensed Consolidated Balance Sheet
are as follows:
(a) Pre-petition liabilities to be converted to Senior Notes (See Note 4).
(b) Reclassification of reinstated industrial revenue bonds from liabilities
subject to compromise.
(c) Discharge of pre-petition obligations (liabilities subject to compromise)
from continuing operations.
(d) Increase inventory to its estimated fair value.
(e) Adjustment of post retirement and pension assets and liabilities to
estimated fair value.
(f) Increase property, plant and equipment to their estimated fair values.
(g) Elimination of the Company's historical goodwill.
(h) Record excess of reorganized entity value over the fair value of the
Company's assets and liabilities.
(i) Adjustment of income taxes to reflect the Company's estimated future
liability.
(j) Elimination of certain non-Beloit subsidiaries that were liquidated
pursuant to the Amended POR.
(k) Elimination of the assets and liabilities of Beloit transferred to the
liquidating trust pursuant to the Amended POR.
(l) Restricted cash represents the estimated amount of professional fees to be
settled post-emergence pursuant to the Amended POR.
(m) Record the $7.2 million Beloit note receivable as a third party note,
including a 100% provision for uncollectable amounts which was recorded in
the Predeceesor Company June 23, 2001 other current liabilities account.
(n) Finance fees to be amortized over the life of the Credit Agreement.
(o) Repayment of foreign debt.
(p) Repayment of debtor-in-possession financing facility.
(q) Payment for employee retention plan and interest on reinstated industrial
revenue bonds.
(r) Payment for executory contract cure amounts and personal property tax
escrow.
(s) Borrowings under Credit Agreement.
4. Borrowings and Credit Facilities
On the Effective Date, obligations relating to the Predecessor Company's
debtor-in-possession financing facility and certain foreign credit
facilities were paid in full and the Company's $350 million Credit
Agreement dated as of June 29, 2001 with Deutsche Banc Alex Brown and a
group of lenders (the "Credit Agreement") became effective. The Credit
Agreement consists of a $250 million revolving loan maturing on October
31, 2005 and a $100 million term loan maturing on April 30, 2005. The
Credit Agreement is secured by substantially all of the assets of the
Company and its subsidiaries. Outstanding borrowings bear interest equal
to either LIBOR plus the applicable margin (3.25% to 2.25%), or the Base
Rate (as defined in the Credit Agreement) plus the applicable margin
(2.25% to 1.25%) at the Company's option depending on certain of its
financial ratios. The Company pays a commitment fee ranging from 0.5% to
0.75% on the unused portion of the revolving loan.
The Senior Notes were issued under the Senior Notes Indenture between the
Company and BNY Midwest Trust Company, as Trustee. Beginning August 9,
2001, approximately $108.9 million of the notes were issued to unsecured
creditors of the Company's principal operating subsidiaries, P&H Mining
Equipment and Joy Mining Machinery, and their subsidiaries. The Senior
Notes are unsecured. The principal amount of the Senior Notes is due at
maturity on July 10, 2006. Interest is payable semi-annually on April 30
and October 31 commencing on October 31, 2001.
Both the Credit Agreement and Senior Note Indenture contain restrictions
and financial covenants relating to, among other things, minimum
financial performance and limitations on the incurrence of additional
indebtedness and liens, asset sales, and capital expenditures. The
covenants in the Senior Note Indenture are less restrictive than the
covenants in the Credit Agreement. Interest coverage, leverage and EBITDA
covenants in the Credit Agreement become more restrictive over the term
of the agreement.
At July 31, 2001, outstanding borrowings under the Credit Agreement were
$191 million. In addition, outstanding letters of credit issued under the
Credit Agreement, which count toward the $350 million credit limit,
totaled approximately $76.5 million.
5. Contingent liabilities:
-----------------------
The Company and certain of its present and former senior executives were
named defendants in a class action, captioned In re: Harnischfeger
Industries, Inc. Securities Litigation, in the United States District
Court for the Eastern District of Wisconsin seeking damages in an
unspecified amount on behalf of an alleged class of purchasers of the
Company's common stock based principally on allegations that the
Company's disclosures with respect to certain Beloit contracts violated
federal securities laws. The Company and the individual defendants have
reached an agreement in principle to settle this action. This agreement,
if finalized, will be subject to the approval of the United States
District Court after notice to the plaintiff class. The settlement does
not involve any material payment by the Company.
The Company or its subsidiaries are also involved in a number of
proceedings and potential proceedings relating to environmental matters.
Although it is difficult to estimate the potential exposure to the
Company related to these environmental matters, the Company believes that
the resolution of these matters will not have a materially adverse effect
on its consolidated financial position or results of operations.
The Company or its subsidiaries are also parties to litigation matters
and claims that are normal in the course of their operations. Also, as a
normal part of their operations, the Company's subsidiaries undertake
certain contractual obligations, warranties and guarantees in connection
with the sale of products or services. Although the outcome of these
matters cannot be predicted with certainty and favorable or unfavorable
resolution may affect the results of operations on a quarter-to-quarter
basis, management believes that such matters will not have a material
adverse effect on the Company's consolidated financial position.
6. Shareholders' Equity
The Company has 150,000,000 shares of authorized common stock, par value
$1.00 per share, 50,000,000 of which were deemed issued and outstanding
for accounting purpose at July 31, 2001. A total of 39,743,681 shares
were distributed on July 31, 2001 in the initial distribution of stock to
creditors and 10,256,319 shares are designated for distribution under the
Amended POR and held in a disputed claims equity reserve pending
resolution of certain claims against the Predecessor Company.
As provided in the Amended POR, the Company adopted the Joy Global Inc
2001 Stock Incentive Plan which authorizes the grant of up to 5,556,000
stock options, performance units and other stock-based awards to
officers, employees and directors. The initial grant of approximately
nine hundred thousand stock options to approximately 175 individuals
occurred on July 16, 2001. The options were granted with a $13.76
exercise price, an estimated market value consistent with the valuation
of the Company prepared for the Amended POR. The Company plans to grant a
similar number of stock options on November 1, 2001, February 1, 2002 and
May 1, 2002 with exercise prices of such options set at then-current
market prices.
A separate Statement of Sharholders' Equity is not required to be
presented for interim periods. However, other comprehensive income of
$229.7 and $1,415.8 million for the year ended October 31, 2000 and the
Predecessor Company 2001 Eight Months, respectively, consisted of net
income (loss), currency translation adjustments, minimum pension
liability adjustments and FAS 133 "Accounting for Derivative Instruments
and Hedging Activities" adjustments. Other comprehensive loss of $8.4
million for the Successor Company 2001 One Month consisted of net loss,
currency translation adjustments and FAS 133 adjustments.
Per share and share information for the Predecessor Company for all
periods presented in the Consolidated Statement of Operations have been
omitted as such information is not deemed to be meaningful.
7. Reorganization Items
Reorganization expenses are items of income, expense and loss realized or
incurred by the Predecessor Company as a result of its decision to
reorganize under Chapter 11 of the Bankruptcy Code. Reorganization items
included in the Statement of Operations for the Predecessor Company
include the following:
Eight months Nine months
ended ended
Reorganization Items (in thousands) June 23, 2001 July 31, 2000
- --------------------------------------------------------------------------------------------------------------
Professional fees directly related to the bankruptcy filing $ 30,639 * $ 25,361
Amortization of debtor-in-possession financing costs 4,148 5,625
Accrued retention plan costs 2,228 4,614
Write-down of property sold - 9,000
Rejected equipment leases - 1,399
Interest earned on DIP proceeds (581) (1,019)
--------------- --------------
$ 36,434 $ 44,980
=============== ==============
* Includes success bonuses for outside professionals accrued in the second quarter.
8. Restructuring Charges
The Predecessor Company recognized restructuring charges of $6.1 million
and $12.0 million during fiscal 2000 and 1999, respectively, relating to
certain facility rationalization and employee severance costs associated
with Joy Mining Machinery's global operating structure realignment and
reduction. Approximately $1.2 million of restructuring reserves remaining
from these charges were eliminated through the application of fresh start
accounting.
9. Discontinued Operations
The Predecessor Company classified Beloit Corporation, the Company's
former pulp and paper making machinery subsidiary ("Beloit"), and its
subsidiaries as a discontinued operation in its Consolidated Financial
Statements as of October 31, 1999. Most of Beloit's assets were sold
pursuant to Bankruptcy Court approved procedures prior to the Effective
Date. The Predecessor Company's equity interest in Beloit was transferred
to a liquidating trust on the Effective Date as provided for in the
Amended POR.
The Predecessor Company recorded a gain from discontinued operations of
$256.4 million for the Predecessor Company 2001 Two Months. This gain was
primarily attributable to the write off of a negative investment in
Beloit of approximately $1,063.4 million offset by the write off of
Beloit receivables of approximately $809.7 million.
10. Income Taxes
-------------
The Company's provision for income taxes primarily represents foreign,
state and local taxes. An income tax benefit of approximately $35.0
million was recorded as the Company revised its estimates of its income
tax liabilities on a global basis as more information became available
to help refine the calculation of these tax liabilities.
The Company did not record its net operating loss on the balance sheet.
The ultimate realization of net operating loss and tax credit benefits
that existed as of the Effective Date will first reduce any excess
reorganization value until exhausted and thereafter be reported as
additional paid in capital.
11. Inventories
-----------
Consolidated inventories consisted of the following:
July 31, October 31,
Consolidated Inventories (in thousands) 2001 2000
- -------------------------------------------- ------------- --------------
Finished goods $ 309,762 $ 208,473
Work in process and purchased parts 242,841 224,554
Raw materials 32,249 29,127
------------- --------------
584,852 462,154
Less excess of current cost over stated
LIFO value - (51,823)
------------- --------------
$ 584,852 $ 410,331
============= ==============
Inventories at July 31, 2001 were written up to fair value in accordance
with the principles of fresh start accounting. As of July 31, 2001, the
net inventory write-up was $147.9 million with the write-up of non-LIFO
inventories being charged to cost of sales as they are sold. Inventories
valued using the LIFO method represented approximately 64% of
consolidated inventories at October 31, 2000.
12. Segment Information
Business Segment Information
At July 31, 2001, the Company had two reportable segments, Surface Mining
Equipment and Underground Mining Machinery. Operating income (loss) of
the segments does not include interest income or expense and provision
(benefit) for income taxes. There are no significant intersegment sales.
Identifiable assets are those used in the Company's operations in each
segment. Corporate assets consist primarily of property, deferred
financing costs, cash, restricted cash, and excess reorganization value.
In thousands
- ---------------------------------------- ------------------------------------------------------------------------------------------
Net Operating Depreciation and Capital Identifiable
Sales (1) Income (Loss) Amortization Expenditures Assets
------------ --------------- -------------------- --------------- --------------
Successor Company 2001 One Month
Surface Mining $ 45,326 $ 1,139 (2) $ 1,504 $ 1,143 $ 577,495
Underground Mining 59,621 130 (2) 2,530 1,177 719,290
------------ --------------- -------------------- --------------- --------------
Total continuing operations 104,947 1,269 4,034 2,320 1,296,785
Discontinued operations - - - - -
Corporate - (1,526) 251 2 162,164
------------ -------------- -------------------- --------------- --------------
Consolidated Total $ 104,947 $ (257) $ 4,285 $ 2,322 $ 1,458,949
============ ============== ==================== =============== ==============
Predecessor Company 2001 Two Months
Surface Mining $ 77,402 $ 5,008 $ 2,177 $ 1,134
Underground Mining 107,795 10,077 4,522 1,508
------------ -------------- -------------------- ---------------
Total continuing operations 185,197 15,085 6,699 2,642
Discontinued operations - - - -
Corporate - (2,728) 1,035 18
------------ -------------- -------------------- ---------------
Consolidated Total $ 185,197 $ 12,357 $ 7,734 $ 2,660
============ ============== ==================== ===============
2000 Third Quarter
Surface Mining $ 116,378 $ 14,514 $ 3,929 $ 4,352 $ 411,804
Underground Mining 145,274 1,410 (3) 7,402 704 838,553
------------ -------------- -------------------- --------------- --------------
Total continuing operations 261,652 15,924 11,331 5,056 1,250,357
Discontinued operations - - - - 28,403
Corporate - (3,831) 2,129 - 63,208
------------ -------------- -------------------- --------------- --------------
Consolidated Total $ 261,652 $ 12,093 $ 13,460 $ 5,056 $ 1,341,968
============ ============== ==================== =============== ==============
Predecessor Company 2001 Eight Months
Surface Mining $ 304,413 $ 23,902 $ 8,866 $ 5,954
Underground Mining 436,045 30,269 19,379 5,937
------------ -------------- -------------------- ---------------
Total continuing operations 740,458 54,171 28,245 11,891
Discontinued operations - - - -
Corporate - (10,215) 4,862 779
------------ -------------- -------------------- ---------------
Consolidated Total $ 740,458 $ 43,956 $ 33,107 $ 12,670
============ ============== ==================== ===============
2000 Nine Months
Surface Mining $ 372,589 $ 39,682 $ 12,168 $ 15,075 $ 411,804
Underground Mining 459,069 7,129 (4) 22,242 4,842 838,553
------------ -------------- -------------------- --------------- --------------
Total continuing operations 831,658 46,811 34,410 19,917 1,250,357
Discontinued operations - - - - 28,403
Corporate - (12,066) 6,481 - 63,208
------------ -------------- -------------------- --------------- --------------
Consolidated Total $ 831,658 $ 34,745 $ 40,891 $ 19,917 $ 1,341,968
============ ============== ==================== =============== ==============
(1) Certain reclassifications have been made to conform to EITF Issue
No. 00-10, "Accounting for Shipping and Handling Fees and Costs."
(2) Successor Company 2001 One Month includes net charges of $2,331 and $6,847
for surface mining equipment and underground mining machinery,
respectively, associated with the amortization of the revaluation of
inventories, depreciation of the revaluation of property, plant and
equipment, and elimination of the amortization of previous goodwill, all of
which are the result of the application of fresh start accounting.
(3) After restructuring credits of $(1,041) for the 2000 Third Quarter.
(4) After restructuring charges of $5,438 for the 2000 Nine Months.
Geographical Segment Information
In thousands
- ------------------------------------------------------------------------------------------------------------------------------
Sales to
Total Interarea Unaffiliated Operating Identifiable
Sales (1) Sales Customers Income (Loss) Assets
--------------- -------------- --------------- ------------- -----------------
Successor Company 2001 One Month
United States $ 64,225 $ (11,569) $ 52,656 $ 369 $1,959,238
Europe 14,900 (1,727) 13,173 1,186 155,020
Other Foreign 39,685 (567) 39,118 1,078 261,102
Interarea Eliminations (13,863) 13,863 - (1,364) (1,078,575)
--------------- -------------- --------------- ------------- -----------------
$104,947 $ - $104,947 $ 1,269 $1,296,785
=============== ============== =============== ============= =================
Predecessor Company 2001 Two Months
United States $111,873 $ (20,721) $ 91,152 $ 6,014
Europe 34,861 (5,354) 29,507 5,009
Other Foreign 66,421 (1,883) 64,538 7,999
Interarea Eliminations (27,958) 27,958 - (3,937)
--------------- -------------- --------------- -------------
$185,197 $ - $185,197 $15,085
=============== ============== =============== =============
2000 Third Quarter
United States $195,641 $ (29,607) $166,034 $ 8,946 $1,314,121
Europe 37,240 (15,009) 22,231 6,059 300,322
Other Foreign 78,056 (4,678) 73,378 9,372 270,606
Interarea Eliminations (49,294) 49,294 - (8,453) (634,692)
--------------- -------------- --------------- ------------- -----------------
$261,652 $ - $261,652 $15,924 $1,250,357
=============== ============== =============== ============= =================
Predecessor Company 2001 Eight Months
United States $507,118 $ (95,097) $412,021 $24,794
Europe 133,278 (41,998) 91,280 24,353
Other Foreign 245,382 (8,225) 237,157 24,572
Interarea Eliminations (145,320) 145,320 - (19,548)
--------------- -------------- --------------- -------------
$740,458 $ - $740,458 $54,171
=============== ============== =============== =============
2000 Nine Months
United States $611,985 $ (80,862) $531,123 $39,610 $1,314,121
Europe 115,190 (43,389) 71,801 4,607 300,322
Other Foreign 242,456 (13,722) 228,734 23,014 270,606
Interarea Eliminations (137,973) 137,973 - (20,420) (634,692)
--------------- -------------- --------------- ------------- -----------------
$831,658 $ - $831,658 $46,811 $1,250,357
=============== ============== =============== ============= =================
(1) Certain reclassifications have been made to conform to EITF Issue No.
00-10, "Accounting for Shipping and Handling Fees and Costs."
13. New Accounting Pronouncements adopted by the Predecessor Company
The Predecessor Company adopted FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" during the first quarter of fiscal
2001. The adoption of FAS 133 resulted in the Company recognizing a fair
value adjustment related to certain derivative instruments of $0.6
million for the Predecessor Company 2001 Eight Months.
The Predecessor Company adopted Emerging Issues Task Force ("EITF") No.
00-10, "Accounting for Shipping and Handling Fees and Costs" during the
first quarter of fiscal 2001. The adoption resulted in the Company
reclassifying certain shipping and handling costs that were recovered
from customers. The financial statement effect was to increase net sales
and cost of sales by approximately $0.4 million and $0.9 million for the
Predecessor Company 2001 Two Months and 2000 Third Quarter, respectively,
and $2.9 million and $2.6 million for the Predecessor Company 2001 Eight
Months and 2000 Nine Months, respectively.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
- --------------------------------------------------------------------------------
Management's Discussion and Analysis contains forward-looking statements. When
used in this document, terms such as "anticipate", "believe", "estimate",
"expect", "indicate", "may be", "objective", "plan", "predict", and "will be"
are intended to identify such statements. Forward-looking statements are
subject to certain risks, uncertainties and assumptions which could cause
actual results to differ materially from those projected, including those,
without limitation, described in Item 5 - Other Information - "Cautionary
Factors" in Part II of this report.
The Company emerged from bankruptcy during its third quarter financial reporting
period of fiscal 2001. For financial statement purposes, the Company's results
of operations and cash flows have been separated as pre- and post-June 23, 2001
due to a change in the basis of accounting in the underlying assets and
liabilities. For purposes of this Management's Discussion and Analysis, certain
financial data of the third quarter financial reporting period have been
combined for comparative purposes.
The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Company and the related notes to the Consolidated
Financial Statements.
RESULTS OF OPERATIONS
2001 Third Quarter as compared to 2000 Third Quarter
The following table sets forth the combined net sales of the Company included in
the Consolidated Statement of Operations:
2001 2000
Third Third
Net Sales (in thousands) Quarter Quarter
- --------------------------------------------------------------------------------
Surface Mining Equipment $ 122,728 $ 116,378
Underground Mining Machinery 167,416 145,274
------------- --------------
$ 290,144 $ 261,652
============= ==============
Total net sales for the 2001 Third Quarter were 11% greater than total net sales
in the 2000 Third Quarter.
Net sales for surface mining equipment in the 2001 Third Quarter were $6.4
million higher than net sales for the 2000 Third Quarter. The increase was due
to an improvement in aftermarket sales as a result of higher parts sales in
North and South America and higher service sales in Australia and South America.
The increase in aftermarket sales was partially offset by a decrease in electric
mining shovel and drill sales, primarily in the copper and iron ore markets.
Net sales for underground mining machinery for the 2001 Third Quarter were $22.1
million greater than net sales for the 2000 Third Quarter. The increase in net
sales occurred for both new equipment and aftermarket products and services. The
improvement in new machine sales this year as compared to last year was
primarily due to the depressed levels of new machine sales last year and an
increase in activity for continuous miners and shuttle cars in the United States
and South Africa this year. Aftermarket sales levels compared to a year ago
continued the improvement realized in the first two quarters of the 2001 fiscal
year. Aftermarket shipments in the United States and from the United Kingdom
continued to be higher than a year ago. The stronger demand for coal and the
associated higher prices coal producers are receiving have benefitted
aftermarket sales in the United States while the growing population of Joy
equipment in operation in China has resulted in higher levels of repair parts
and rebuild sales into that country.
The following table sets forth the elements of the combined operating income of
the Company included in the Consolidated Statement of Operations:
2001 2000
Third Third
Operating Income (in thousands) Quarter Quarter
- -------------------------------------------------------------------------------
Surface Mining Equipment $ 6,147 (1) $ 14,514
Underground Mining Machinery 10,207 (1) 1,410 (2)
Corporate Expenses (4,254) (3,831)
------------- --------------
$ 12,100 $ 12,093
============= ==============
(1) Includes net charges of $2,331 and $6,847 for surface mining
equipment and underground mining machinery, respectively,
associated with the amortization of the revaluation of inventories,
depreciation of the revaluation of property, plant and equipment,
and elimination of the amortization of previous goodwill, all of
which are the result of the application of fresh start accounting.
(2) Includes restructuring credits of $(1,041).
After giving affect to the net charges associated with fresh start accounting,
operating income for the 2001 Third Quarter was approximately the same as the
2000 Third Quarter. Eliminating the effect of these non-cash charges, the
Company's operating income increased from $11.1 million for the 2000 Third
Quarter to $21.3 million for the 2001 Third Quarter.
Operating income for surface mining equipment for the 2001 Third Quarter, after
eliminating the effects of the items listed in the footnote above, was $8.5
million compared to $14.5 million for the 2000 Third Quarter. This decrease was
the result of lower levels of new equipment shipments during the quarter and
higher product costs as a result of lower production volumes.
Operating income for underground mining machinery for the 2001 Third Quarter,
after eliminating the effects of the items listed in the footnote above, was
$17.1 million compared to $0.4 million for the 2000 Third Quarter. The
improvement in operating income was due to the increase in sales volumes, the
favorable impact of increased manufacturing burden absorption and the benefits
of cost reduction programs implemented over the last several years.
The Company's reorganization under Chapter 11 of the U.S. Bankruptcy Code was
completed during the third quarter of fiscal 2001. As a result, the two month
period prior to the Effective Date, which fell within the quarter, includes a
number of charges and credits associated with the implementation of the Amended
POR and the application of fresh start accounting. These items included
increases in interest expense of approximately $14.9 million associated with
pre-petition claims against P&H Mining Equipment and Joy Mining Machinery and
their subsidiaries for the period from the Petition Date through the Effective
Date and $2.5 million of interest on pre-petition industrial revenue bonds that
were reinstated. A gain of $45.1 million was recognized due to fresh start
accounting adjustments of inventory, fixed assets, pension assets and
liabilities, goodwill and excess reorganization value. An income tax benefit of
approximately $35.0 million was recorded as the Company revised its estimates of
its income tax liabilities on a global basis as more information became
available to help refine the calculation of these tax liabilities. This benefit
is exclusive of future benefits from net operating loss carry-forwards the
Company may realize. In addition, the implementation of the Amended POR included
the issuance of stock in the Successor Company to holders of pre-petition claims
against the Predecessor Company which resulted in the recognition of a $1.1
billion gain on debt discharge. The Amended POR provided for the divestiture of
Beloit. This caused the elimination of the intercompany investment in Beloit,
accumulated losses, and intercompany receivables that resulted in the
recognition of a net gain from discontinued operations of approximately $256.4
million.
2001 Nine Months as compared to 2000 Nine Months
The following table sets forth the combined net sales of the Company included in
the Consolidated Statement of Operations:
2001 2000
Nine Nine
Net Sales (in thousands) Months Months
- --------------------------------------------------------------------------------
Surface Mining Equipment $ 349,739 $ 372,589
Underground Mining Machinery 495,666 459,069
------------- --------------
$ 845,405 $ 831,658
============= ==============
Net sales for the 2001 Nine Months were slightly higher than net sales for the
2000 Nine Months.
Net sales for surface mining equipment in the 2001 Nine Months were $22.9
million lower than net sales in the 2000 Nine Months. A decrease in sales of
electric mining shovels and drills was partially offset by increases in repair
parts and service sales. Sales of capital equipment strengthened in Australia
and Indonesia but were offset by lower sales in North and South America as
compared to a year ago. Aftermarket sales were strong in all regions.
Net sales for underground mining machinery in the 2001 Nine Months were $36.6
million higher than net sales for the 2000 Nine Months. Sales of new machines
during the 2001 Nine Months were slightly higher than the depressed levels of
last year, while aftermarket sales of repair parts and component repairs were
substantially higher than they were for the same period last year. The
improvement in aftermarket sales in the United States is associated with
underground coal production and the price coal producers are able to obtain for
their coal sales. Increased aftermarket sales out of the United Kingdom into
China are related to the new equipment sold into that market over the last
several years.
The following table sets forth the elements of the combined operating income of
the Company included in the Consolidated Statement of Operations:
2001 2000
Nine Nine
Operating Income (in thousands) Months Months
- --------------------------------------------------------------------------------
Surface Mining Equipment $ 25,041 (1) $ 39,682
Underground Mining Machinery 30,399 (1) 7,129 (2)
Corporate Expenses (11,741) (12,066)
------------- --------------
$ 43,699 $ 34,745
============= ==============
(1) Includes net charges of $2,331 and $6,847 for surface mining
equipment and underground mining machinery, respectively,
associated with the amortization of the revaluation of inventories,
depreciation of the revaluation of property, plant and equipment,
and elimination of the amortization of previous goodwill, all of
which are the result of the application of fresh start accounting.
(2) Includes restructuring charges of $5,438.
Operating income for the Company before the charges listed in the footnote above
for 2001 Nine Months was $52.9 million compared to $40.2 for 2000 Nine Months.
Operating income for surface mining equipment for the 2001 Nine Months, after
eliminating the impact of the items listed in the footnote above, was $12.3
million lower than operating results achieved during the 2000 Nine Months. The
decrease was the result of lower levels of new equipment shipments and lower
manufacturing absorption associated with lower demand for new equipment.
Operating income for underground mining machinery for the 2001 Nine Months,
after eliminating the impact of the items listed in the footnote above, was
$37.2 million compared to $12.6 million for the 2000 Nine Months. The
improvement was due to the increase in net sales, the increase in manufacturing
burden absorption, and the benefits of cost reduction programs.
Backlog and Bookings
The Company believes that bookings and especially backlog may not necessarily be
good indicators of the underlying strength of its business. This is due to a
large number of factors, some of which include the mix of original equipment and
aftermarket business, the "lumpiness" of original equipment business and how it
flows through backlog and the variability of unit prices and margins of the
Company's various products and services.
The Company's backlog as of July 31, 2001 was $221.6 million compared to $226.9
million at the beginning of the fiscal year. This includes backlogs within
surface mining equipment as of July 31, 2001 of $63.2 million compared to $75.7
million at the end of October 2000, and within underground mining machinery of
$158.4 million as of July 31, 2001 compared to $151.2 million at the end of
October 2000. The changes in backlog levels in the two segments reflect lower
orders of shovels and drills and increased orders for continuous miners,
respectively. These backlog amounts exclude customer arrangements under
long-term equipment life cycle management programs that extend for up to
thirteen years and totaled approximately $400 million as of July 31, 2001.
New order bookings for the 2001 Third Quarter totaled $265.7 million, an
increase of $25.9 million or 10.8% from the prior year. For the 2001 Nine
Months, total bookings were $840.0 million compared with $741.6 million during
the 2000 Nine Months, an increase of $98.4 million or 13.3%. Increased bookings
for the 2001 Third Quarter and 2001 Nine Months were primarily due to increases
in bookings for underground machinery, both original equipment as well as
after-market products and services.
FINANCIAL CONDITION
On the Effective Date, outstanding borrowings of $80 million under the
Predecessor Company's debtor-in-possession financing facility were paid in full,
that facility terminated, and the Company's $350 million Credit Agreement dated
as of June 29, 2001 with Deutsche Banc Alex Brown and a group of lenders (the
"Credit Agreement") became effective. Also on the Effective Date, $72.4 million
was advanced to two foreign subsidiaries in the form of intercompany loans and
used to repay local credit facilities which were then cancelled. Initial cash
borrowings under the Credit Agreement were approximately $212.6 million, with
the balance of the initial borrowings used primarily for other emergence related
matters.
Both the Credit Agreement and Senior Note Indenture for the Company's $108.9
million in outstanding Senior Notes contain restrictions and financial covenants
relating to, among other things, minimum financial performance and limitations
on the incurrence of additional indebtedness and liens, asset sales, and capital
expenditures. The covenants in the Senior Note Indenture are less restrictive
than the covenants in the Credit Agreement. Interest coverage, leverage and
EBITDA covenants in the Credit Agreement become more restrictive over the term
of the agreement.
At July 31, 2001, outstanding borrowings under the Credit Agreement were $191
million. In addition, outstanding letters of credit issued under the Credit
Agreement, which count toward the $350 million credit limit, totaled
approximately $76.5 million. As provided in the Amended POR, approximately $75.7
million of these letters of credit were issued to back up letters of credit and
bank guarantees that were outstanding as of the Effective Date.
Cash Flow from Continuing Operations
Net cash flow used in continuing operations was $66.9 million for the 2001 Nine
Months compared to net cash provided by continuing operations of $9.2 million
for the 2000 Nine Months. The use of cash in the 2001 Nine Months was primarily
the result of the establishment of a $24.8 million restricted cash account, a
$26.0 million increase in inventories, a $9.0 million increase in accounts
receivable, and a $24.5 million decrease in accounts payable, employee
compensation and other accrued liabilities. The restricted cash account is to be
used for the payment of professional fees associated with the implementation of
the Amended POR. The increase in inventories is primarily the result of the
delay in receiving orders for new equipment that were anticipated to be received
earlier in the fiscal year. The decrease in other accrued liabilities is
associated with the payment of professional fees, employee incentive awards for
the first half of the 2001 fiscal year, and employee retention awards related to
the emergence from Chapter 11.
Funding for the cash used in continuing operations during the 2001 Nine Months
was provided by the debtor-in-possession facility and, after the Effective Date,
the Credit Agreement.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Volatility in interest rates and foreign exchange rates can impact the Company's
earnings, equity and cash flow. From time to time the Company undertakes
transactions to hedge this impact. Under FAS 133, the hedge instrument is
considered effective if it offsets partially or completely the negative impact
on earnings, equity and cash flow due to fluctuations in interest and foreign
exchange rates. In accordance with the Company's policy, the Company does not
execute derivatives that are speculative or that increase the Company's risk
from either interest rate or foreign exchange rate fluctuations. At July 31,
2001 the Company was not party to any interest rate derivative contracts.
Foreign exchange derivatives at that date were exclusively in the form of
forward exchange contracts executed over the counter. The counterparties to
these contracts are several commercial banks, all of which hold investment grade
ratings. There is a concentration of these contracts at The Chase Manhattan Bank
which, as of July 31, 2001, was the only institution entering into new forward
foreign exchange contracts with the Company and those subsidiaries involved in
the reorganization proceedings.
The Company has adopted a Foreign Exchange Risk Management Policy. It is a
risk-averse policy under which most exposures that impact earnings and cash flow
are fully hedged, subject to a net $5 million equivalent of permitted exposures
per currency. Exposures that impact only equity or do not have a cash flow
impact are generally not hedged with derivatives. There are two categories of
foreign exchange exposures that are hedged: assets and liabilities denominated
in a foreign currency and future committed receipts or payments denominated in a
foreign currency. These exposures normally arise from imports and exports of
goods and from intercompany trade and lending activity.
As of July 31, 2001, the nominal or face value of forward foreign exchange
contracts to which the Company was a party was $86.2 million in absolute U.S.
dollar equivalent terms.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
See Item 3 - Legal Proceedings of Part I of the Company's annual
report on Form 10-K for the year ended October 31, 2000 and Item 1 -
Legal Proceedings of Item II of the Company's quarterly reports on
Form 10-Q for the quarters ended January 31 and April 30, 2001.
Item 2 - Changes in Securities
Pursuant to the Amended POR, on July 12, 2001, all outstanding shares
of the common stock of Harnischfeger Industries, Inc., $1.00 par
value, the Predecessor Company, were cancelled.
Also as of July 12, 2001, 150,000,000 shares of new common stock of
Joy Global Inc., $1.00 par value, were authorized and 50,000,000
shares were designated for distribution to holders of allowed claims
against the Predecessor Company.
As provided in the Amended POR, the Company adopted the Joy Global Inc
2001 Stock Incentive Plan which authorizes the grant of up to
5,556,000 stock options, performance units and other stock-based
awards to officers, employees and directors. The initial grant of
approximately nine hundred thousand stock options to approximately 175
individuals occurred on July 16, 2001. The options were granted with a
$13.76 exercise price, consistent with the valuation of the Company
prepared for the Amended POR. The Company plans to grant a similar
number of stock options on November 1, 2001, February 1, 2002 and May
1, 2002 with exercise prices of such options set at then-current
market prices.
Item 3 - Defaults upon Senior Securities
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
third quarter of fiscal 2001.
Item 5 - Other Information - "Cautionary Factors"
This report and other documents or oral statements which have been and
will be prepared or made in the future contain or may contain
forward-looking statements by or on behalf of the Company. Such
statements are based upon management's expectations at the time they
are made. Actual results may differ materially. In addition to the
assumptions and other factors referred to specifically in connection
with such statements, the following factors, among others, could cause
actual results to differ materially from those contemplated.
The Company's principal businesses involve designing, manufacturing,
marketing and servicing large, complex machines. Significant periods
of time are necessary to design and build these machines. Large
amounts of capital must be devoted by the Company's customers to
purchase these machines and to finance the mines that use these
machines. The Company's success in obtaining and managing a relatively
small number of sales opportunities, including the Company's success
in securing payment for such sales and meeting the requirements of
warranties and guarantees associated with such sales, can affect the
Company's financial performance. In addition, many mines are located
in undeveloped or developing economies where business conditions are
less predictable. In recent years, up to 47% of the Company's total
sales occurred outside the United States.
Other factors that could cause actual results to differ materially
from those contemplated include:
|X| Factors relating to the Company's Chapter 11 filing, such as: the
Company's success in implementing its plan of reorganization; and
the Company's ability to comply with covenants in its financing
facilities.
|X| Factors affecting customers' purchases of new equipment,
rebuilds, parts and services such as: production capacity,
stockpiles, and production and consumption rates of coal, copper,
iron, gold, oil and other ores and minerals; the cash flows of
customers; the cost and availability of financing to customers
and the ability of customers to obtain regulatory approval for
investments in mining projects; consolidations among customers;
the effects of rising energy costs on customer operations; work
stoppages at customers or providers of transportation; and the
timing, severity and duration of customer buying cycles.
|X| Factors affecting the Company's ability to capture available
sales opportunities, including: customers' perceptions of the
quality and value of the Company's products and services as
compared to competitors' products and services; whether the
Company has successful reference installations to display to
customers; customers' perceptions of the health and stability of
the Company as compared to its competitors; the Company's ability
to assist customers with competitive financing programs; and the
availability of manufacturing capacity at the Company's
factories.
|X| Factors affecting the Company's ability to successfully manage
sales it obtains, such as: the accuracy of the Company's cost and
time estimates; the adequacy of the Company's cost and control
systems; and the Company's success in delivering products and
completing service projects on time and within budget; the
Company's success in recruiting and retaining managers and key
employees; wage stability and cooperative labor relations; plant
capacity and utilization; and whether acquisitions are
assimilated and divestitures completed without notable surprises
or unexpected difficulties.
|X| Factors affecting the Company's general business, such as:
unforeseen patent, tax, product, environmental, employee health
and benefit, or contractual liabilities; 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 and
intangible assets; and leverage and debt service.
|X| Factors affecting general business levels, such as: political and
economic turmoil in major markets such as the United States,
Canada, Europe, Asia and the Pacific Rim, South Africa, Australia
and Chile; environmental and trade regulations; and the stability
and ease of exchange of currencies.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
First Supplemental Indenture by and among Joy Global Inc. as
Issuer, the Guarantors and BNY Midwest Trust Company as Trustee
dated as of August 3, 2001
(b) Reports on Form 8-K
Form 8-K Report dated as of July 12, 2001 Other Events
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JOY GLOBAL INC.
---------------
(Registrant)
/s/ Donald C. Roof
-------------------------------
Donald C. Roof
Executive Vice President,
Date September 13, 2001 Chief Financial Officer and Treasurer
/s/ Michael S. Olsen
-------------------------------
Michael S. Olsen
Vice President and Controller and Chief
Date September 13, 2001 Accounting Officer
Exhibit 4
____________________________________________________
FIRST SUPPLEMENTAL INDENTURE
by and among
JOY GLOBAL INC.
(f/k/a HARNISCHFEGER INDUSTRIES, INC.),
as Issuer,
THE GUARANTORS NAMED HEREIN
and
BNY MIDWEST TRUST COMPANY
as Trustee
Dated as of August 3, 2001
___________
Up to $167,000,000
10.75% SENIOR NOTES DUE 2006
________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I Relation to Indenture; Definitions................................31
Section 1.1 Relation to Indenture...............................31
Section 1.2 Definitions.........................................31
ARTICLE II Form of Senior Notes and Notation of Senior Subsidiary Guarantee..32
Section 2.1 Form of the Senior Notes............................32
Section 2.2. Form of Notation of Senior Subsidiary Guarantee.....32
ARTICLE III Delivery of Notation of Senior Subsidiary Guarantee...............32
Section 3.1. Delivery of Notation of Senior Subsidiary Guarantee.32
ARTICLE IV Miscellaneous Provisions..........................................32
Section 4.1. Trustee Not Responsible for Recitals................32
Section 4.2. Adoption, Ratification and Confirmation.............32
Section 4.3. Counterparts........................................32
Section 4.4. Governing Law.......................................32
AMENDED EXHIBITS
EXHIBIT A FORM OF SENIOR NOTE
JOY GLOBAL INC.
FIRST SUPPLEMENTAL INDENTURE TO
INDENTURE DATED JULY 10, 2001
U.S. $167,000,000
10.75% SENIOR NOTES DUE 2006
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of August 3, 2001, by and among
Joy Global Inc., formerly known as Harnischfeger Industries, Inc. (the
"Corporation"), a Delaware corporation, the Guarantors identified on Schedule I
attached hereto (collectively, the "Guarantors") and BNY Midwest Trust Company,
an Illinois banking corporation, as trustee (the "Trustee").
RECITALS
The Corporation has heretofore executed and delivered to the Trustee an
Indenture for 10.75% Senior Notes Due 2006, dated as of July 10, 2001 (the
"Indenture").
Section 9.1 of the Indenture provides that the Corporation, the Guarantors
and the Trustee may enter into an indenture supplemental to the Indenture (a) to
cure, correct or supplement any provision of the Indenture or (b) to make any
other change to the Indenture, provided that such other change shall not
adversely affect the rights of any Holder of Senior Notes in any material
respect.
Section 9.3 of the Indenture provides that upon execution of any indenture
supplemental to the Indenture, the Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of the Indenture
for all purposes, and further that the respective rights, limitations of rights,
obligations, duties and immunities under the Indenture of the Trustee, the
Corporation, the Guarantors and the Holders of the Senior Notes shall thereafter
be determined, exercised and enforced subject in all respects to such
supplemental indenture.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually agreed, for the
equal and proportionate benefit of the Holders of the Senior Notes as follows:
ARTICLE I
Relation to Indenture; Definitions
Section 1.1 Relation to Indenture. This First Supplemental Indenture
constitutes an integral part of the Indenture.
Section 1.2 Definitions. For all purposes of this First Supplemental
Indenture:
(a) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture.
(b) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this First
Supplemental Indenture.
(c) The terms "herein," "hereof," "hereunder" and other words of similar
import refer to this First Supplemental Indenture.
ARTICLE II
Form of Senior Notes and Notation of Senior Subsidiary Guarantee
Section 2.1 Form of the Senior Notes. The Senior Notes shall be
substantially in the form set forth on Exhibit A attached hereto. Exhibit A of
the Indenture shall be deleted in its entirety and replaced with revised Exhibit
A attached hereto.
Section 2.2. Form of Notation of Senior Subsidiary Guarantee. The Notation
of Senior Subsidiary Guarantee shall be substantially in the form set forth on
Exhibit B attached hereto. Exhibit B of the Indenture shall be deleted in its
entirety and replaced with revised Exhibit B attached hereto.
ARTICLE III
Delivery of Notation of Senior Subsidiary Guarantee
Section 3.1. Delivery of Notation of Senior Subsidiary Guarantee. The first
paragraph of Section 15.3 of the Indenture is hereby stricken and replaced by
the following:
"To evidence its Senior Subsidiary Guarantee set forth in Section 15.1,
each Guarantor hereby agrees that a notation of such Senior Subsidiary
Guarantee substantially in the form included in Exhibit B hereto shall be
endorsed by an officer of such Guarantor and delivered to the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents. The Trustee shall deliver a copy
of such notation to any Holder upon such Holder's request."
ARTICLE IV
Miscellaneous Provisions
Section 4.1. Trustee Not Responsible for Recitals. The recitals herein
contained are made by the Corporation and the Guarantors and not by the
Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
Section 4.2. Adoption, Ratification and Confirmation. The Indenture,
as supplemented and amended by this First Supplemental Indenture, is in all
respects hereby adopted, ratified and confirmed.
Section 4.3. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the same
instrument.
Section 4.4. Governing Law. This First Supplemental Indenture, the
Indenture, the Senior Subsidiary Guarantees and the Senior Notes shall be
deemed to be contracts made under the laws of the State of New York, and
for all purposes shall be governed by and construed in accordance with the
laws of said State, without regard to conflict of laws principles thereof.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first
above written.
JOY GLOBAL INC.
AMERICAN ALLOY CORPORATION, as Guarantor
AMERICAN LONGWALL FACE CONVEYORS INC., as Guarantor
AMERICAN LONGWALL, INC., as Guarantor
AMERICAN LONGWALL REBUILD, INC., as Guarantor
AMERICAN LONGWALL ROOF SUPPORTS, INC., as Guarantor
BENEFIT, INC., as Guarantor
DOBSON PARK INDUSTRIES INC., as Guarantor
FIELD REPAIR SERVICES, LLC, as Guarantor
HARNISCHFEGER CORPORATION a/k/a P&H Mining and
a/k/a Harnco, as Guarantor
HARNISCHFEGER CREDIT CORPORATION, as Guarantor
HARNISCHFEGER TECHNOLOGIES, INC., as Guarantor
HARNISCHFEGER WORLD SERVICES CORPORATION, as Guarantor
HCHC, INC., as Guarantor
HCHC UK HOLDINGS, INC., as Guarantor
HIHC, INC., as Guarantor
J.P.P., INC. as Guarantor
JOY INTERNATIONAL SALES CORPORATION, as Guarantor
JOY MM DELAWARE, INC., as Guarantor
JOY POWER PRODUCTS, INC., as Guarantor
JOY TECHNOLOGIES INC. d/b/a Joy Mining Machinery, as Guarantor
JOY TECHNOLOGIES DELAWARE INC., as Guarantor
JTI UK HOLDINGS, INC., as Guarantor
MINING SERVICES, INC., as Guarantor
PEABODY & WIND ENGINEERING CORPORATION, as Guarantor
RCHH, INC., as Guarantor
SOUTH SHORE CORPORATION, as Guarantor
SOUTH SHORE DEVELOPMENT LLC, as Guarantor
THE HORSBURGH & SCOTT COMPANY, as Guarantor
By: ________________________________________
Eric B. Fonstad
Their: Secretary
BNY MIDWEST TRUST COMPANY, as Trustee
By: _______________________________________
EXHIBIT A
(Form of Face of Senior Note)
JOY GLOBAL INC.
10.75% Senior Notes Due 2006
CUSIP No. 481165 AA 6
No. __________ $________
Joy Global Inc. (formerly known as Harnischfeger Industries, Inc.), a
Delaware corporation (herein called the "Corporation", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to __________________, or registered assigns,
the principal sum of _____________________ Dollars on April 30, 2006, and to pay
interest thereon from the Effective Date or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on April 30th and October 31st in each year, commencing October 31, 2001, at the
rate of 10.75% per annum, until the principal hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Senior Note (or one or more Predecessor Senior Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15th or October 15th, as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Senior Note (or one or more Predecessor Senior Notes) is registered at the close
of business on a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to Holder not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Senior Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture. Payment
of the principal of, premium, if any, and interest on this Senior Note will be
made at the office or agency of the Corporation maintained for that purpose in
New York, New York, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Corporation payment of interest may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Senior Note Register. Interest shall be calculated
on the basis of a 360-day year of twelve 30-day months.
Reference is hereby made to the further provisions of this Senior Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Senior Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly
executed under its corporate seal.
___________________________________
By_________________________________
Attest:
______________________________
(Form of Reverse of Senior Note)
This Senior Note is one of a duly authorized issue of Senior Notes of the
Corporation designated as its 10.75% Senior Notes Due 2006 (herein called the
"Senior Notes"), limited in aggregate principal amount to $167,000,000, issued
and to be issued under an Indenture, dated as of July 10, 2001 (herein called
the "Indenture"), between the Corporation, the Guarantors and BNY Midwest Trust
Company, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the
Corporation, the Trustee and the Holders of the Senior Notes and of the terms
upon which the Senior Notes are, and are to be, authenticated and delivered.
The Senior Notes are subject to redemption upon not less than 30 days nor
more than 60 days' notice by mail, at any time, as a whole or in part, at the
election of the Corporation, at the Redemption Price equal to the percentage of
the principal amount set forth in the Indenture, together in the case of any
such redemption with accrued interest and premium, if any, to the Redemption
Date, but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Senior Notes, or one or
more predecessor Senior Notes, of record at the close of business on the
relevant record dates referred to on the face hereof, all as provided in the
Indenture.
In the event of redemption of this Senior Note in part only, a new Senior
Note or Senior Notes for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of all
the Senior Notes may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Senior Notes under the
Indenture at any time by the Corporation and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Senior Notes then
outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Senior Notes then
outstanding, on behalf of the Holders of all the Senior Notes, to waive
compliance by the Corporation with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Senior Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Senior Note and of
any Senior Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Senior Note. No reference herein to the Indenture and no
provision of this Senior Note or of the Indenture shall alter or impair the
obligation of the Corporation, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Senior Note at the times,
place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Senior Note is registrable in the Senior Note
Register, upon surrender of this Senior Note for registration of transfer at the
office or agency of the Corporation in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation and the Senior Note registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Senior
Notes, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Senior Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Senior Notes are
exchangeable for a like aggregate principal amount of Senior Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer or
exchange, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Senior Note for registration of transfer,
the Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this Senior Note is registered as the owner
hereof for all purposes, whether or not this Senior Note be overdue, and neither
the Corporation, the Trustee nor any such agent shall be affected by notice to
the contrary.
All terms used in this Senior Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
This Senior Note shall be deemed to be a contract made under the laws of
the State of New York, and for all purposes shall be governed by and construed
in accordance with the laws of said State, without regard to conflict of laws
principles thereof.
Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by the Corporation
pursuant to Section 3.12 or Section 3.14 of the Indenture, check the box below:
[GRAPHIC OMITTED] Section 3.12 [GRAPHIC OMITTED] Section 3.14
If you want to elect to have only part of the Senior Note purchased by the
Corporation pursuant to Section 3.12 or Section 3.14 of the Indenture, state the
amount you elect to have purchased: $_____________
Date:
Your Signature:
(Sign exactly as your name appears on the face of this Senior Note)
Tax Identification No:
SIGNATURE GUARANTEE: _____________________________
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
The Holder of this Senior Note has the benefit of a guarantee which has been
executed by the Corporation and other Guarantors and is on file with the
Trustee.