1
EXHIBIT 99.1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Global Industrial Technologies, Inc.:

We have audited the accompanying combined balance sheet of the Surface
Mining and Equipment Business of Global Industrial Technologies, Inc. (the
"Company") as of October 31, 1996, and the related combined statements of
operations, equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Surface Mining and
Equipment Business of Global Industrial Technologies, Inc., as of October 31,
1996 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP

ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
June 27, 1997

1
2

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED BALANCE SHEET
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)

ASSETS
CURRENT ASSETS:
Cash.............................. $ 910
Trade receivables................. 17,032
Receivable from affiliated
entity.......................... 41
Inventories....................... 37,438
Prepaid expenses and other current
assets.......................... 228
-------
Total Current Assets......... 55,649
OTHER ASSETS:
Intangible assets................. 1,372
Other assets...................... 940
-------
2,312
PROPERTY, PLANT AND EQUIPMENT:
Land.............................. 625
Buildings and improvements........ 12,040
Machinery and equipment........... 45,021
Less accumulated depreciation..... (49,098)
-------
8,588
-------
$66,549
=======
LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses........................ $12,132
Payable to affiliated entity...... 684
Liabilities to customers on
uncompleted contracts and
warranties...................... 4,310
-------
Total Current Liabilities.... 17,126
LONG-TERM LIABILITIES:
Postretirement benefits........... 6,725
Deferred expenses and other....... 4,343
-------
11,068
COMBINED EQUITY................... 38,355
-------
$66,549
=======

See notes to combined financial statements.

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3

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)

REVENUES:
Net sales................................................. $ 109,625
Other income.............................................. 555
---------
110,180
---------
COSTS AND EXPENSES:
Cost of products sold..................................... 93,026
Product development, selling, administrative and
miscellaneous expenses................................. 16,514
Allocated administrative expenses......................... 2,200
Allocated interest expense................................ 228
---------
111,968
---------
LOSS BEFORE INCOME TAXES.................................... (1,788)
ALLOCATED INCOME TAX BENEFIT................................ (662)
---------
NET LOSS.................................................... $ (1,126)
=========

See notes to combined financial statements.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED STATEMENT OF EQUITY
YEAR ENDED OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)

INVESTMENT CUMULATIVE PENSION TOTAL
BY TRANSLATION LIABILITY COMBINED
GLOBAL ADJUSTMENT ADJUSTMENT EQUITY
---------- ----------- ---------- --------

Balance at November 1, 1995...................... $25,850 $(3,889) $(2,413) $19,548
Net loss....................................... (1,126) -- -- (1,126)
Capital contribution from Global............... 19,601 -- -- 19,601
Translation adjustments........................ -- (287) -- (287)
Additional minimum liability................... -- -- 619 619
------- ------- ------- -------
Balance at October 31, 1996...................... $44,325 $(4,176) $(1,794) $38,355
======= ======= ======= =======

See notes to combined financial statements.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $ (1,126)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 2,028
Gain on sale of property, plant and equipment............. (34)
Changes in assets and liabilities:
Trade receivables...................................... (2,316)
Receivable from affiliated entity...................... (41)
Inventories............................................ (4,149)
Other current assets................................... 5,327
Other assets........................................... 131
Current liabilities.................................... (18,002)
Payable to affiliated entity........................... 684
--------
Net cash used in operating activities............. (17,498)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment................ (1,761)
Proceeds from sale of property, plant and equipment....... 69
--------
Net cash used in investing activities............. (1,692)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions from Global......................... 19,601
--------
Effect of exchange rate changes on cash................... (287)
--------
Net increase in cash........................................ 124
Cash at beginning of year................................... 786
--------
Cash at end of year......................................... $ 910
========

See notes to combined financial statements.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF ACCOUNTING POLICIES

NATURE OF OPERATIONS

The accompanying combined financial statements include all of the
operations, assets and liabilities of the surface mining and equipment business
(the "Marion Business") of Global Industrial Technologies, Inc. ("Global"). The
Marion Business consists principally of walking draglines and electric mining
shovels and related replacement parts. Major markets for the surface mining
industry are coal mining, copper and iron ore mining and phosphate production.

USE OF ESTIMATES

The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.

PRINCIPLES OF COMBINATION AND PRESENTATION

These financial statements combine subsidiaries, branches or divisions of
Global that operate in the surface mining and equipment business as if they were
organized under one business unit. Such statements include the following:

- The Marion Power Shovel Company

- Marion Power Shovel Pty. Ltd.

- The South Africa Branch of INTOOL International B.V.

- The Canadian mining division of Global-GIX Canada, Inc.

The historical equity of these operations as well as permanent advances
from Global have been reported as "Combined Equity" in the Combined Balance
Sheet. Within Combined Equity, the Investment by Global account represents the
net assets invested in the Marion Business by Global including the advances that
will not be repaid.

INVENTORIES

Inventories are stated at lower of cost (last-in, first-out method) or
market (market or estimated net realizable value). The excess of replacement
cost over the carrying value of inventories determined on a last-in, first-out
basis was $10,939,000. Advances from customers are netted against inventories to
the extent of related accumulated costs.

PROPERTY, PLANT AND EQUIPMENT

Fixed assets are recorded at cost. Depreciation is provided over the
estimated useful lives of respective assets using the straight-line method for
financial reporting and accelerated methods for income tax purposes. Estimated
useful lives used for financial reporting purposes range from ten to forty years
for buildings and improvements and five to fifteen years for machinery and
equipment.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of foreign operations are translated into U.S.
dollars using year-end exchange rates. Revenues and expenses are translated at
the average rates during the year. Adjustments resulting from this translation
are deferred and reflected as a separate component of Combined Equity.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Revenue from dragline contracts is recognized using the
percentage-of-completion method. Revenue from shovel contracts and all other
sales is recognized at time of shipment. At the time a loss on a contract
becomes known, the amount of the estimated loss is recognized in the combined
financial statements. Included in current liabilities as liabilities to
customers on uncompleted contracts are advances collected under shovel contracts
of $1,041,000.

IMPAIRMENT OF LONG-LIVED ASSETS

In 1995, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment when certain events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. This pronouncement is required to be adopted by the Marion
Business for the fiscal year beginning November 1, 1996. As of November 1, 1996,
adoption did not have a significant effect on the financial position or results
of operations of the Marion Business. See Note L.

NOTE B -- TRADE RECEIVABLES

Trade receivables include the excess of revenues over advances of $426,000
related to a dragline contract. Billings on long-term contracts are made in
accordance with the payment terms as defined in the individual contracts.

Trade receivables are reduced by an allowance for losses of $213,000.

NOTE C -- INVENTORIES

Inventories at cost include material, labor and overhead and consist of the
following:

(DOLLARS IN THOUSANDS)

Raw materials and parts.................................. $ 5,254
Work in process.......................................... 8,799
Finished products (primarily replacement parts).......... 34,324
--------
48,377
LIFO and other reserves.................................. (10,939)
--------
$ 37,438
========

NOTE D -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

(DOLLARS IN THOUSANDS)

Trade accounts payable................................... $ 6,492
Wages and salaries....................................... 2,411
Insurance reserves....................................... 1,410
Other.................................................... 1,819
-------
$12,132
=======

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SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E -- INCOME TAXES

The income and expenses of the Marion Business are included in the
consolidated local tax returns of various Global entities.The tax benefit or
liability incurred by Global for such inclusion in its consolidated tax returns
is to be reimbursed to or paid by the Marion Business.For purposes of the
combined financial statements, current taxes payable or receivable as well as
net deferred tax assets are recorded as part of the Investment by Global account
in Combined Equity.

Loss before income taxes consists of the following:

(DOLLARS IN THOUSANDS)

United States............................................ $(4,406)
Foreign.................................................. 2,618
-------
Total.................................................... $(1,788)
=======

The allocated income tax benefit consists of the following:

(DOLLARS IN THOUSANDS)

Foreign income taxes:
Current................................................ $ 921
Deferred............................................... 72
-------
Total.................................................. 993
-------
U.S. and state income taxes:
Current................................................ (1,307)
Deferred............................................... (348)
-------
Total.................................................. (1,655)
-------
Total allocated income tax benefit....................... $ (662)
=======

The total allocated income tax benefit differs from amounts expected by
applying the Federal statutory income tax rate to loss before income taxes as
set forth in the following table:

TAX
EXPENSE
(BENEFIT) PERCENT
--------- -------
(DOLLARS IN THOUSANDS)

Tax benefit at Federal statutory rate.................... $(626) (35.0)%
State income taxes net of Federal income tax benefit..... (48) (2.7)
Other items.............................................. 12 0.7
----- ------
Total income tax benefit................................. $(662) (37.0)%
===== ======

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of net deferred tax assets which are included in the
Investment by Global account in Combined Equity are as follows:

(DOLLARS IN THOUSANDS)

Deferred tax assets:
Accrued and other liabilities............................. $3,524
Postretirement benefits................................... 2,435
Inventory valuation provisions............................ 2,319
Other items............................................... 63
--------
Total deferred tax assets................................... 8,341
Deferred tax liabilities -- Excess of book basis over tax
basis of property, plant and equipment.................... (503)
--------
Net deferred tax asset recognized in the Combined Balance
Sheet as a reduction of the Investment by Global account
in Combined Equity........................................ $7,838
========

Cumulative undistributed earnings of foreign operations that are considered
to be permanently reinvested, and on which U.S. income taxes have not been
provided by the Marion Business, amounted to approximately $23,700,000 at
October 31, 1996. It is not practicable to estimate the amount of additional tax
which would be payable upon repatriation of such earnings; however, due to
foreign tax credit limitations, higher effective U.S. income tax rates and
foreign withholding taxes, additional taxes could be incurred.

NOTE F -- PENSION AND RETIREMENT PLANS

The Marion Business has two defined benefit pension plans which cover
substantially all hourly bargaining and nonbargaining unit employees in the
United States. Plan benefits are based primarily on years of service. In
addition, the Marion Business' salaried employees participate in the Global
Industrial Technologies, Inc. RIP Plan, which benefits are based primarily on
years of service and employees' qualifying compensation during the final years
of employment. All plans are funded in accordance with applicable laws and
regulations. Substantially all plan assets are invested in cash, short-term
investments, equity securities and fixed-income instruments. The remaining plan
assets are primarily invested in real estate.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the domestic plans' funded status as of the
August 1, 1996 measurement date:

GLOBAL MARION BUSINESS
SALARIED PLAN HOURLY PLANS
------------- ---------------
ASSETS
EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED
BENEFITS(1) ASSETS(2)
----------- ---------------
(DOLLARS IN THOUSANDS)

Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested........................................... $(36,474) $(23,673)
Non-vested....................................... (1,547) (573)
-------- --------
Total accumulated benefit obligation............. $(38,021) $(24,246)
======== ========
Projected benefit obligation for services rendered
to date.......................................... $(54,300) $(24,246)
Plan assets at fair value.......................... 39,556 19,903
-------- --------
Projected benefit obligation in excess of plan
assets........................................... (14,744) (4,343)
Unrecognized prior service cost.................... (76) 1,371
Unrecognized net loss.............................. 16,020 3,121
Unrecognized transition asset...................... (402) (310)
Adjustment for minimum liability................... -- (4,182)
-------- --------
Prepaid (accrued) pension cost..................... $ 798 $ (4,343)
======== ========

- -------------------------
(1) Consists of the Global Industrial Technologies, Inc. RIP Plan. The Marion
Business' portion of the accumulated benefit obligation of this plan is
estimated to be $7,839,000. The Marion Business' year end accrual is
included in the Investment by Global account in Combined Equity.

(2) Consists of the two defined benefit plans for hourly employees. Included in
the Combined Balance Sheet is an intangible asset and a reduction of
Combined Equity of $1,372,000 (net of tax) and $1,794,000 (net of tax),
respectively, to reflect the additional minimum liability.

The weighted average discount rate, rate of increase in future compensation
levels, and expected long-term rate of return on assets used to develop the
projected benefit obligation were 8%, 4.5% and 9%, respectively.

Net domestic periodic pension cost for the two hourly defined benefit plans
includes the following components:

(DOLLARS IN THOUSANDS)

Service cost............................................... $ 218
Interest cost.............................................. 1,864
Actual return on plan assets............................... (1,879)
Net amortization and deferral.............................. 35
-------
Net periodic pension cost.................................. $ 238
=======

The Marion Business' portion of the net periodic pension cost for the
Global Industrial Technologies, Inc. RIP Plan was $532,000 for 1996.

The Marion Business participates in Global's 401(k) savings plan. The
Marion Business' expense for 1996 was $227,000 for its portion of the matching
contribution.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE G -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Marion Business provides certain health care and life insurance
benefits for substantially all retired United States bargaining and
nonbargaining unit employees meeting eligibility requirements. The Marion
Business' policy is to fund these benefits as claims and premiums are paid.

The following table sets forth the Plan's status and amounts recognized in
the combined financial statements:

(DOLLARS IN THOUSANDS)

Accumulated postretirement benefit obligation:
Retirees................................................. $(4,612)
Fully eligible active plan participants.................. (1,450)
Other active plan participants........................... (994)
-------
(7,056)
Unrecognized prior service cost............................ (1,036)
Unrecognized net loss...................................... 875
-------
Accrued postretirement benefit cost recognized in the
Combined Balance Sheet................................... $(7,217)
=======

Net periodic postretirement benefit cost includes the following components:

(DOLLARS IN THOUSANDS)

Service cost............................................... $ 107
Interest cost.............................................. 503
Amortization of prior service cost......................... (120)
--------
Net periodic postretirement benefit cost................... $ 490
========

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The assumed health care cost trend
rate used in measuring the accumulated postretirement benefit obligation was 11%
at October 31, 1996, declining .5% each year thereafter, to 5% in the year 2008
and beyond. A 1% increase in the assumed health care cost trend rate for each
year would increase the accumulated postretirement benefit obligation by
$270,000 and would increase the net periodic postretirement benefit cost for
1996 by $13,000.

NOTE H -- RESEARCH AND DEVELOPMENT

Expenditures for design and development of new products and improvements of
existing mining machinery products, including overhead, are charged to product
development expense as incurred and aggregated $5,713,000 in 1996.

NOTE I -- FOREIGN OPERATIONS, EXPORT SALES AND SIGNIFICANT CUSTOMERS

The Marion Business designs, manufactures and sells products in a single
industry segment, surface mining and equipment. Operations are conducted
primarily in the United States, Australia, Canada and South Africa.

Financial information by geographical area is summarized in the following
table. Each geographic area represents the origin of the financial information
presented. Transfers between geographic areas represent intercompany export
sales of goods produced in the United States and are accounted for based on
established sales prices between the related entities. Eliminations for
operating earnings (loss) include elimination of intercompany profit in
inventory and general

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

corporate expenses. Identifiable assets of each entity are those related to the
operations of those entities. United States assets consist of all other
operating assets.

TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC TOTAL EARNINGS IDENTIFIABLE
CUSTOMERS AREAS NET SALES (LOSS) ASSETS
------------ ---------- --------- --------- ------------
(DOLLARS IN THOUSANDS)

United States.......................... $ 66,081 $ 27,984 $ 94,065 $(4,076) $42,983
Australia.............................. 27,191 -- 27,191 1,682 19,922
South Africa........................... 14,448 -- 14,448 887 5,218
Other Foreign.......................... 1,905 651 2,556 157 6,238
Eliminations........................... -- (28,635) (28,635) (210) (7,812)
-------- -------- -------- ------- -------
$109,625 $ -- $109,625 $(1,560) $66,549
======== ======== ======== ======= =======

Export sales from United States operations, excluding sales to affiliates,
amounted to $44,164,000 in 1996.

Two customers accounted for approximately 42% of the Marion Business' net
sales in 1996. The Marion Business is not dependent upon any one customer.

NOTE J -- TRANSACTIONS WITH GLOBAL

The Marion Business has historically depended on Global for substantial
support, particularly financial. Global also performs certain services such as
insurance claim processing, data processing, and legal and tax support. Total
costs allocated to the Marion Business and included in the combined financial
statements are the following:

(a) Administrative costs of $2,200,000 allocated based on the Marion
Business' percentage of Global's total working capital, gross property,
plant and equipment and goodwill.

(b) Interest expense of $228,000 allocated on the same basis as (a) above.

(d) Income taxes as discussed in Note E.

Global provides financing to the Marion Business through a non-interest
bearing intercompany account. This intercompany account has been classified with
the Investment by Global account in Combined Equity.

NOTE K -- COMMITMENTS, CONTINGENCIES AND CREDIT RISKS

The Marion Business is involved in various litigation arising in the normal
course of business. It is the view of management that the Marion Business'
recovery or liability, if any, under pending litigation is not expected to have
a material effect on the Marion Business' financial position or results of
operations, although no assurance to that effect can be given.

The Marion Business has product liability insurance subject to a deductible
of $1,000,000 per occurrence and has various limits of liability depending on
the insurance policy year in question. It is the view of management that the
final resolution of said claims and other similar claims which are likely to
arise in the future will not individually or in the aggregate have a material
effect on the Marion Business' financial position or results of operations,
although no assurance to that effect can be given.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The Marion Business has obligations under various operating leases and
rental and service agreements. The expense relating to these agreements was
$639,000 in 1996. Future minimum annual payments under noncancellable agreements
are as follows:

(DOLLARS IN THOUSANDS)

1997......................................... $405
1998......................................... 273
1999......................................... 159
2000......................................... 24
2001......................................... --
After 2001................................... --
------
$861
======

A significant portion of the Marion Business' combined net sales are to
customers whose activities are related to the coal, copper and iron ore mining
industries, including some who are located in foreign countries. The Marion
Business generally extends credit to these customers and, therefore, collection
of receivables may be affected by the mining industry economy and the economic
conditions in the countries where the customers are located. However, the Marion
Business closely monitors extension of credit and has not experienced
significant credit losses. Also, most foreign sales are made to large,
well-established companies. The Marion Business generally requires collateral or
guarantees on foreign sales to smaller companies.

NOTE L -- DIVESTITURE

In January, 1997, Global announced its strategic decision to divest itself
of the surface mining equipment business (i.e. the Marion Business).

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

JUNE 30, OCTOBER 31,
1997 1996
-------- -----------

ASSETS
CURRENT ASSETS:
Cash..................... $ 240 $ 910
Receivables.............. 9,679 17,032
Receivable from
affiliated entity...... -- 41
Inventories.............. 37,427 37,438
Prepaid expenses and
other current assets... 91 228
-------- --------
Total Current
Assets............. 47,437 55,649
OTHER ASSETS:
Intangible assets........ 1,372 1,372
Other assets............. 361 940
-------- --------
1,733 2,312
PROPERTY, PLANT AND
EQUIPMENT:
Land..................... 625 625
Buildings and
improvements........... 12,040 12,040
Machinery and
equipment.............. 46,103 45,021
Less accumulated
depreciation........... (49,622) (49,098)
-------- --------
9,146 8,588
-------- --------
$ 58,316 $ 66,549
======== ========

JUNE 30, OCTOBER 31,
1997 1996
-------- -----------

LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses........ $ 9,401 $12,132
Payable to affiliated
entity.................. 839 684
Liabilities to customers
on uncompleted contracts
and warranties.......... 4,011 4,310
------- -------
Total Current
Liabilities......... 14,251 17,126
LONG-TERM LIABILITIES:
Postretirement benefits... 6,725 6,725
Deferred expenses and
other................... 4,344 4,343
------- -------
11,069 11,068
COMBINED EQUITY........... 32,996 38,355
------- -------
$58,316 $66,549
======= =======

See notes to combined financial statements.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

EIGHT MONTHS ENDED JUNE 30,
---------------------------
1997 1996
---- ----

REVENUES:
Net sales................................................. $41,032 $65,019
Other income.............................................. 37 131
------- -------
41,069 65,150
------- -------
COSTS AND EXPENSES:
Cost of products sold..................................... 37,082 55,177
Product development, selling, administrative
and miscellaneous expenses................................ 10,122 10,886
Allocated administrative expenses......................... 1,622 1,406
Allocated interest expense................................ 1,040 152
------- -------
49,866 67,621
------- -------
LOSS BEFORE INCOME TAXES.................................... (8,797) (2,471)
ALLOCATED INCOME TAX BENEFIT................................ (3,373) (966)
------- -------
NET LOSS.................................................... $(5,424) $(1,505)
======= =======

See notes to combined financial statements.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

EIGHT MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(5,424) $(1,505)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................... 1,024 1,255
Changes in assets and liabilities:
Trade receivables......................................... 7,353 663
Receivable from affiliated entity......................... 41 --
Inventories............................................... 11 (11,264)
Other current assets...................................... 137 4,780
Other assets.............................................. 80 51
Current liabilities....................................... (3,030) (14,067)
Payable to affiliated entity.............................. 155 463
------- -------
Net cash provided by (used in) operating activities......... 347 (19,624)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................. (1,082) (846)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions from Global........................... 448 19,264
------- -------
Effect of exchange rate changes on cash..................... (383) 420
------- -------
Net decrease in cash........................................ (670) (786)
Cash at beginning of period................................. 910 786
------- -------
Cash at end of period....................................... $ 240 $ --
======= =======

See notes to combined financial statements.

SURFACE MINING AND EQUIPMENT BUSINESS OF GLOBAL INDUSTRIAL TECHNOLOGIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited combined financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Adjustments consisted of only normal recurring accruals.
Operating results for the eight months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending October 31,
1997.

NOTE B -- DIVESTITURE

In January, 1997, Global Industrial Technologies, Inc. announced its
strategic decision to divest itself of the surface mining equipment business.

NOTE C -- INVENTORIES

Inventories at cost include material, labor and overhead and consist of the
following:

JUNE 30, OCTOBER 31,
1997 1996
-------- -----------

Raw materials and parts................................. $ 5,919 $ 5,254
Work-in-process......................................... 10,183 8,799
Finished products (primarily replacement parts)......... 32,264 34,324
-------- --------
48,366 48,377
LIFO and other reserves................................. (10,939) (10,939)
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$ 37,427 $ 37,438
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