JOY GLOBAL INC - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - JOY GLOBAL INC	Financial_Report.xls
EX-31.1 - EXHIBIT 31.1 - JOY GLOBAL INC	joy-01302015xex311x10q.htm
EX-10.2 - EXHIBIT 10.2 - JOY GLOBAL INC	joy-01302015xex102x10q.htm
EX-31.2 - EXHIBIT 31.2 - JOY GLOBAL INC	joy-01302015xex312x10q.htm
EX-10.3 - EXHIBIT 10.3 - JOY GLOBAL INC	joy-01302015xex103x10q.htm
EX-10.5 - EXHIBIT 10.5 - JOY GLOBAL INC	joy-01302015xex105x10q.htm
EX-10.4 - EXHIBIT 10.4 - JOY GLOBAL INC	joy-01302015xex104x10q.htm
EX-32.1 - EXHIBIT 32.1 - JOY GLOBAL INC	joy-01302015xex321x10q.htm
EX-10.1 - EXHIBIT 10.1 - JOY GLOBAL INC	joy-01302015xex101x10q.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________

FORM 10-Q

____________________________________________

(MARK ONE)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED January 30, 2015



¨	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 001-09299

____________________________________________

JOY GLOBAL INC.

(Exact Name of Registrant as Specified in Its Charter)

____________________________________________



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

100 East Wisconsin Ave, Suite 2780

Milwaukee, Wisconsin 53202

(Address of Principal Executive Offices) (Zip Code)

(414) 319-8500

(Registrant’s Telephone Number, Including Area Code)

____________________________________________

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.) Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



LARGE ACCELERATED FILER	ý	ACCELERATED FILER	¨

NON-ACCELERATED FILER	¨	SMALLER REPORTING COMPANY	¨

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

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



Class		February 27, 2015
Common Stock, $1 par value		97,374,611

Table of Contents

JOY GLOBAL INC.

FORM 10-Q INDEX

January 30, 2015



	PAGE NO.
PART I. – FINANCIAL INFORMATION

Item 1 – Financial Statements

Condensed Consolidated Statements of Income - Quarters Ended January 30, 2015 and January 31, 2014	3

Condensed Consolidated Statements of Comprehensive Income (Loss) - Quarters Ended January 30, 2015 and January 31, 2014	4

Condensed Consolidated Balance Sheets - January 30, 2015 and October 31, 2014	5

Condensed Consolidated Statements of Cash Flows - Quarters Ended January 30, 2015 and January 31, 2014	6

Condensed Notes to Interim Consolidated Financial Statements	7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	33

Item 4 – Controls and Procedures	33

PART II. – OTHER INFORMATION

Item 1 – Legal Proceedings	34

Item 1A – Risk Factors	34

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

Item 3 – Defaults Upon Senior Securities	34

Item 4 – Mine Safety Disclosures	34

Item 5 – Other Information	34

Item 6 – Exhibits	36

Signatures	37

Table of Contents

Forward-Looking Statements

This document contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives, pending acquisitions, expected operating results and other non-historical information, and the assumptions on which those statements are based. These statements constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are identified by forward-looking terms such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "indicate," "intend," "may be," "objective," "plan," "potential," "predict," "should," "will be," and similar expressions. Forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from any forward-looking statement. In addition, certain market outlook information and other market statistical data contained herein is based on third party sources that we cannot independently verify, but that we believe to be reliable. Important factors that could cause our actual results to differ materially from the results anticipated by the forward-looking statements include general economic and industry conditions in the markets in which we operate, risks associated with conducting business in foreign countries, risks associated with acquisitions and the other risks discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for our fiscal year ended October 31, 2014 and in other filings that we make with the U.S. Securities and Exchange Commission (the "SEC"). Any or all of these factors could cause our results of operations, financial condition or liquidity for future periods to differ materially from those expressed in or implied by any forward-looking statement. Furthermore, there may be other factors that could cause our actual results to differ materially from the results referred to in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events, except as required by law.

Table of Contents

PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements

JOY GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)



	Quarter Ended
	January 30, 2015			January 31, 2014
Net sales	$	703,873		$	839,312
Cost of sales	520,746			604,178
Product development, selling and administrative expenses	137,634			153,029
Other income	(3,213		)	(3,140		)
Operating income	48,706			85,245
Interest income	2,940			2,583
Interest expense	(15,897		)	(16,403		)
Income before income taxes	35,749			71,425
Provision for income taxes	12,155			22,564
Net income	$	23,594		$	48,861

Basic earnings per share	$	0.24		$	0.48
Diluted earnings per share	$	0.24		$	0.48
Dividends per share	$	0.20		$	0.175
Weighted average shares outstanding:
Basic	97,547			101,796
Diluted	98,138			102,667

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

JOY GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)



	Quarter Ended
	January 30, 2015			January 31, 2014
Net income	$	23,594		$	48,861
Other comprehensive income (loss):
Change in unrecognized pension and other postretirement obligations, net of taxes of $1,905 and $1,624	4,232			3,804
Derivative instrument fair market value adjustment, net of taxes of $1,520 and $1,023	3,688			2,510
Foreign currency translation adjustment on long-term intercompany foreign loans	(10,893		)	597
Other foreign currency translation adjustment	(109,377		)	(53,369		)
Total other comprehensive loss, net of taxes	(112,350		)	(46,458		)
Comprehensive (loss) income	$	(88,756	)	$	2,403

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

JOY GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)



	January 30, 2015		October 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	152,326	$	270,191
Accounts receivable, net	888,675		1,059,709
Inventories	1,176,048		1,108,308
Other current assets	174,909		180,151
Total current assets	2,391,958		2,618,359
Property, plant and equipment, net	864,719		892,440
Other assets:
Other intangible assets, net	311,029		319,269
Goodwill	1,493,301		1,516,693
Deferred income taxes	64,819		70,181
Other non-current assets	169,281		180,044
Total other assets	2,038,430		2,086,187
Total assets	$	5,295,107	$	5,596,986
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term obligations	$	16,672	$	11,739
Trade accounts payable	322,887		395,945
Employee compensation and benefits	85,000		136,911
Advance payments and progress billings	312,401		285,939
Accrued warranties	58,528		67,272
Other accrued liabilities	227,734		265,600
Current liabilities of discontinued operations	11,582		11,582
Total current liabilities	1,034,804		1,174,988
Long-term obligations	1,264,988		1,269,541
Other liabilities:
Liabilities for postretirement benefits	19,290		19,609
Accrued pension costs	137,252		144,379
Other non-current liabilities	152,401		147,472
Total other liabilities	308,943		311,460
Shareholders’ equity	2,686,372		2,840,997
Total liabilities and shareholders’ equity	$	5,295,107	$	5,596,986

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

JOY GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



	Quarter Ended
	January 30, 2015			January 31, 2014
Operating Activities:
Net income	$	23,594		$	48,861
Adjustments to continuing operations:
Depreciation and amortization	33,679			32,766
Changes in deferred income taxes	11,657			(7,586		)
Contributions to defined benefit employee pension plans	(10,220		)	(2,973		)
Defined benefit employee pension plan expense	154			2,618
Share-based compensation expense	7,554			6,032
Changes in long-term receivables	2,350			9,388
Other adjustments to continuing operations, net	346			1,009
Changes in working capital items attributed to continuing operations:
Accounts receivable, net	138,034			116,079
Inventories	(110,367		)	(29,446		)
Other current assets	(16,370		)	(16,904		)
Trade accounts payable	(65,315		)	(96,117		)
Employee compensation and benefits	(48,215		)	(32,158		)
Advance payments and progress billings	42,497			90,453
Accrued warranties	(6,593		)	(7,573		)
Other accrued liabilities	(21,140		)	(49,610		)
Net cash (used) provided by operating activities of continuing operations	(18,355		)	64,839
Net cash provided by operating activities of discontinued operations	—			67
Net cash (used) provided by operating activities	(18,355		)	64,906
Investing Activities:
Property, plant and equipment acquired	(22,258		)	(26,655		)
Proceeds from sale of property, plant and equipment	756			2,081
Other investing activities, net	141			(21		)
Net cash used by investing activities	(21,361		)	(24,595		)
Financing Activities:
Common stock issued	273			1,985
Dividends paid	(19,489		)	(17,850		)
Repayments of term loan	—			(12,500		)
Treasury stock purchased	(50,000		)	(122,036		)
Other financing activities, net	440			(1,543		)
Net cash used by financing activities	(68,776		)	(151,944		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(9,373		)	(3,177		)
Decrease in Cash and Cash Equivalents	(117,865		)	(114,810		)
Cash and Cash Equivalents at Beginning of Period	270,191			405,709
Cash and Cash Equivalents at End of Period	$	152,326		$	290,899

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

JOY GLOBAL INC.

CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Description of Business

Joy Global Inc. (the "Company") is a leading manufacturer and servicer of high productivity mining equipment for the extraction of metals and minerals. We manufacture and market original equipment and parts and perform services for both underground and surface mining, as well as certain industrial applications. Our equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands, gold and other minerals. We operate in two business segments: Underground Mining Machinery ("Underground") and Surface Mining Equipment ("Surface"). We are a major manufacturer of underground mining machinery for the extraction of coal and other bedded minerals. We are also a major producer of surface mining equipment for the extraction of copper, coal and other minerals and ores. We offer comprehensive direct service, which includes our smart service offerings, near major mining regions worldwide and provide extensive operational support for many types of equipment used in mining. Our principal manufacturing facilities are located in the United States, including facilities in Alabama, Pennsylvania, Texas and Wisconsin, and internationally, including facilities in Australia, Canada, China, South Africa and the United Kingdom.


2.	Basis of Presentation

The Condensed Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited and are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to SEC rules and regulations. In our opinion, all adjustments necessary for the fair presentation on a going concern basis of the results of operations, cash flows and financial position for all periods presented have been made. All such adjustments made are of a normal recurring nature. The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate realization of assets and settlement of liabilities in the future could differ from those estimates.

These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.


3.	Acquisitions

Acquisition of Mining Technologies International Inc.

On May 30, 2014, we closed on the purchase of certain assets of Mining Technologies International Inc. ("MTI") for $44.4 million dollars. MTI is a Canadian manufacturer of underground hard rock mining equipment serving the North American markets and a world leading supplier of raise bore drilling consumables. We have acquired substantially all of the assets associated with MTI’s hard rock drilling, loaders, dump trucks, shaft sinking and raise bore product lines. MTI's results of operations have been included in the accompanying financial statements as part of the Underground segment from the acquisition date forward.

In connection with the acquisition, we have recorded goodwill of approximately $0.3 million and intangible assets of approximately $9.9 million. The intangible assets are primarily comprised of customer relationships and designs and drawings, which are being amortized over their respective estimated useful lives.


4.	Inventories

Consolidated inventories consist of the following:



In thousands	January 30, 2015		October 31, 2014
Finished goods	$	881,321	$	835,227
Work in process	216,305		203,805
Raw materials	78,422		69,276
Total inventories	$	1,176,048	$	1,108,308

Finished goods include finished components and parts in addition to any finished equipment.


5.	Warranties

Table of Contents

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

The following table reconciles the changes in the product warranty reserve:



	Quarter Ended
In thousands	January 30, 2015			January 31, 2014
Balance, beginning of period	$	67,272		$	85,732
Accrual for warranty expensed during the period	6,180			7,366
Settlements made during the period	(11,375		)	(14,941		)
Effect of foreign currency translation	(3,549		)	(353		)
Balance, end of period	$	58,528		$	77,804


6.	Borrowings and Credit Facilities

On July 29, 2014, we entered into a $1.0 billion unsecured revolving credit facility that matures on July 29, 2019 (as amended, the "Credit Agreement"). Under the Credit Agreement, we also may request an increase of up to $250.0 million of additional aggregate revolving commitments, subject to the terms and conditions contained in the Credit Agreement. The Credit Agreement simultaneously replaced the $1.0 billion revolving credit agreement dated as of October 12, 2012 (the "Prior Credit Agreement"), that was scheduled to expire on November 12, 2017. Under the terms of the Credit Agreement, we pay a commitment fee ranging from 0.09% to 0.30% on the unused portion of the revolving credit facility based on our credit rating. Letters of credit issued under applicable provisions of the Credit Agreement represent an unfunded utilization of the Credit Agreement for purposes of calculating the periodic commitment fee due. Eurodollar rate loans bear interest for a period from the applicable borrowing date until a date one week or one, two, three or six months thereafter, as selected by the Company, at the corresponding Eurodollar rate plus a margin of 1.0% to 2.0% depending on the Company's credit rating. Base rate loans bear interest from the applicable borrowing date at a rate equal to (i) the highest of (a) the federal funds rate plus 0.5%, (b) the rate of interest in effect for such day as publicly announced by the administrative agent as its "prime rate," or (c) a daily rate equal to the one-month Eurodollar rate plus 1.0%, plus (ii) a margin that varies according to the Company's credit rating. Swing line loans bear interest at either the base rate described above or the daily floating Eurodollar rate plus the applicable margin, as selected by the Company. The Credit Agreement is guaranteed by each of our current and future material domestic subsidiaries and requires the maintenance of certain financial covenants, including leverage and interest coverage ratios. The Credit Agreement also restricts payment of dividends or other returns of capital to shareholders when we are not in compliance with the financial covenants in the agreement. As of January 30, 2015, we were in compliance with all financial covenants of the Credit Agreement and had no restrictions on the payment of dividends or other returns of capital to shareholders.

As of January 30, 2015, there were no direct borrowings under the Credit Agreement. Total interest expense recognized for direct borrowings under the Credit Agreement for the quarters ended January 30, 2015 and January 31, 2014 is $0.2 million and less than $0.1 million, respectively. Outstanding standby letters of credit issued under the Credit Agreement, which count toward the $1.0 billion credit limit, totaled $175.3 million. As of January 30, 2015, there was $824.7 million available for borrowings under the Credit Agreement.

On July 29, 2014, we also entered into a term loan agreement which matures July 29, 2019 and provides for a commitment of up to $375.0 million (as amended, the "Term Loan"). The Term Loan replaced our prior term loan, dated as of June 16, 2011 (the "Prior Term Loan"). The Prior Term Loan had been scheduled to mature on July 16, 2016 and provided an initial commitment of $500.0 million, which had been drawn in full in conjunction with our fiscal 2011 acquisition of LeTourneau Technologies, Inc. and had been amortized to $375.0 million at the date that we entered into the Term Loan. We utilized the $375.0 million commitment under the Term Loan to repay the balance outstanding under the Prior Term Loan. The Term Loan requires quarterly principal payments beginning in fiscal 2016 and contains terms and conditions that are the same as the terms and conditions of the Credit Agreement. The Term Loan is guaranteed by each of our current and future material domestic subsidiaries and requires the maintenance of certain financial covenants, including leverage and interest coverage ratios. As of January 30, 2015, we were in compliance with all financial covenants of the Term Loan.

On October 12, 2011, we issued $500.0 million aggregate principal amount of 5.125% Senior Notes due in 2021 (the "2021 Notes") at a discount of $4.2 million in an offering that was registered under the Securities Act. Interest on the 2021 Notes is paid semi-annually in arrears on October 15 and April 15 of each year, and the 2021 Notes are guaranteed by each of our current and

Table of Contents

future material domestic subsidiaries. At our option, we may redeem some or all of the 2021 Notes at a redemption price of the greater of 100% of the principal amount of the 2021 Notes to be redeemed or the sum of the present values of the principal amounts and the remaining scheduled interest payments using a discount rate equal to the sum of a treasury rate of a comparable treasury issue plus 0.5%.

In November 2006, we issued $250.0 million aggregate principal amount of 6.0% Senior Notes due 2016 and $150.0 million aggregate principal amount of 6.625% Senior Notes due 2036 (the "2016 Notes" and "2036 Notes," respectively). Interest on the 2016 Notes and 2036 Notes is paid semi-annually in arrears on May 15 and November 15 of each year, and the 2016 Notes and 2036 Notes are guaranteed by each of our current and future material domestic subsidiaries. The 2016 Notes and 2036 Notes were issued in a private placement under an exemption from registration provided by the Securities Act. In the second quarter of fiscal 2007, the 2016 Notes and 2036 Notes were exchanged for substantially identical notes in an exchange that was registered under the Securities Act. At our option, we may redeem some or all of the 2016 Notes and 2036 Notes at a redemption price of the greater of 100% of the principal amount of the 2016 Notes and 2036 Notes to be redeemed or the sum of the present values of the principal amounts and the remaining scheduled interest payments using a discount rate equal to the sum of a treasury rate of a comparable treasury issue plus 0.3% for the 2016 Notes and 0.375% for the 2036 Notes.

Direct borrowings and capital lease obligations consist of the following:



In thousands	January 30, 2015			October 31, 2014
Domestic:
Term Loan due 2019	375,000			375,000
6.0% Senior Notes due 2016	249,235			249,131
5.125% Senior Notes due 2021	496,902			496,806
6.625% Senior Notes due 2036	148,530			148,522
Other borrowings	11,896			11,634
Foreign:
Capital leases	97			187
Total obligations	1,281,660			1,281,280
Less: Amounts due within one year	(16,672		)	(11,739		)
Long-term obligations	$	1,264,988		$	1,269,541


7.	Accumulated Other Comprehensive Income (Loss)

Comprehensive income and its components are presented in the Condensed Consolidated Statements of Comprehensive Income. Changes in accumulated other comprehensive income (loss), net of taxes, consist of the following:



	Quarter ended January 30, 2015											Quarter ended January 31, 2014
	Change in Unrecognized Pension and Other Postretirement Obligations			Derivative Instrument Fair Market Value Adjustment		Foreign Currency Translation Adjustment			Total			Change in Unrecognized Pension and Other Postretirement Obligations			Derivative Instrument Fair Market Value Adjustment			Foreign Currency Translation Adjustment			Total
Beginning balance	$	(529,316	)	$	4,736	$	(10,702	)	$	(535,282	)	$	(540,122	)	$	5,028		$	27,460		$	(507,634	)
Other comprehensive income (loss) before reclassifications, net of taxes	—			2,620		(120,270		)	(117,650		)	—			4,730			(52,772		)	(48,042		)
Amounts reclassified from accumulated other comprehensive (loss) income, net of taxes	4,232			1,068		—			5,300			3,804			(2,220		)	—			1,584
Total other comprehensive income (loss), net of taxes	4,232			3,688		(120,270		)	(112,350		)	3,804			2,510			(52,772		)	(46,458		)
Ending balance	$	(525,084	)	$	8,424	$	(130,972	)	$	(647,632	)	$	(536,318	)	$	7,538		$	(25,312	)	$	(554,092	)

Details of the reclassifications from accumulated other comprehensive income (loss) are disclosed below:

Table of Contents



	Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)
	Quarter Ended						Affected Line Items in the Statements of Income
	January 30, 2015			January 31, 2014			Affected Line Items in the Statements of Income
Change in unrecognized pension and other postretirement obligations:
Amortization of prior service cost	$	51		$	166		Cost of sales/Product development, selling and administrative expense*
Amortization of net actuarial gain	6,086			5,262			Cost of sales/Product development, selling and administrative expense*
Deferred tax	(1,905		)	(1,624		)	Provision for income taxes
Amounts reclassified from accumulated other comprehensive income (loss), net of taxes	$	4,232		$	3,804

Derivative instrument fair market value adjustment:
Foreign exchange cash flow hedges	$	1,509		$	(3,126	)	Net sales/Cost of sales**
Deferred tax	(441		)	906			Provision for income taxes
Amounts reclassified from accumulated other comprehensive income (loss), net of taxes	$	1,068		$	(2,220	)

Total reclassifications for the period	$	5,300		$	1,584

* Amounts are included in the computation of net periodic benefits costs as either cost of sales or product development, selling and administrative expense as appropriate. Refer to Footnote 10, Retiree Benefits, for additional information.

** Amounts are included in either net sales or cost of sales as appropriate. Refer to Footnote 11, Derivatives, for additional information.


8.	Shareholders' Equity

In August 2013, our Board of Directors authorized the Company to repurchase up to $1.0 billion in shares of our common stock until August 2016. Under the program, the Company may repurchase shares in the open market in accordance with applicable SEC rules and regulations. During the quarter ended January 30, 2015, we purchased 954,580 shares of common stock for approximately $50.0 million. During the quarter ended January 31, 2014, we purchased 2,258,898 shares of common stock for approximately $122.0 million. Since its inception, the Company has repurchased 9,771,605 shares of common stock under the program for approximately $533.4 million, leaving $466.6 million available under the program.


9.	Share-Based Compensation

Total share-based compensation expense recognized for the quarters ended January 30, 2015 and January 31, 2014 is $7.6 million and $6.0 million, respectively. The total share-based compensation expense is reflected in our Condensed Consolidated Statements of Cash Flows in operating activities as an add back to net income.

The corresponding deferred tax asset recognized related to the share-based compensation is $1.9 million and $1.6 million for the quarters ended January 30, 2015 and January 31, 2014, respectively.


10.	Retiree Benefits

The components of the net periodic benefit cost associated with our pension and other postretirement plans are as follows:

Table of Contents



	Pension Benefits						Postretirement Benefits
	Quarter Ended						Quarter Ended
In thousands	January 30, 2015			January 31, 2014			January 30, 2015			January 31, 2014
Service cost	$	977		$	2,721		$	253		$	260
Interest cost	19,657			20,661			300			322
Expected return on assets	(26,786		)	(26,385		)	(160		)	(147		)
Amortization of:
Prior service cost	18			133			33			33
Actuarial loss (gain)	6,288			5,488			(202		)	(226		)
Net periodic benefit cost	$	154		$	2,618		$	224		$	242

The actuarial loss (gain) arises from differences in estimates and actual experiences for certain assumptions, including changes in the discount rate and expected return on assets. For the quarter ended January 30, 2015, we contributed $10.2 million to our defined benefit employee pension plans, and we expect contributions to be approximately $15.0 million for the full fiscal year.


11.	Derivatives

We are exposed to certain foreign currency risks in the normal course of our global business operations. We enter into derivative contracts that are foreign currency forward contracts to hedge the risks of certain identified and anticipated transactions in currencies other than the functional currency of the respective operating unit. The types of risks hedged are those arising from the variability of future earnings and cash flows caused by fluctuations in foreign currency exchange rates. These contracts are for forecasted transactions and committed receivables and payables denominated in foreign currencies and are not entered into for speculative purposes. Consequently, any market-related losses on the forward contract would be offset by changes in the value of the hedged item, and, as a result, we are generally not exposed to net market risk associated with these instruments.

Each derivative is classified as either a cash flow hedge, a fair value hedge or an undesignated instrument. All derivatives are recorded at fair value on the Condensed Consolidated Balance Sheets under the heading Other current assets or under the heading Other accrued liabilities, as appropriate. Cash flows from fair value and cash flow hedges are classified within the same category as the item being hedged on the Condensed Consolidated Statements of Cash Flows. Cash flows from undesignated derivative instruments are included in operating activities on the Condensed Consolidated Statements of Cash Flows.

For derivative contracts that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative contract is recorded as a component of other comprehensive income, net of tax. This amount is reclassified into the income statement on the line associated with the underlying transaction for the periods in which the hedged transaction affects earnings. The amounts recorded in accumulated other comprehensive income for existing cash flow hedges are generally expected to be reclassified into earnings within one year, and all of the existing hedges will be reclassified into earnings by October 2015. There was no ineffectiveness related to these derivative contracts for the quarter ended January 30, 2015, and there was a gain of less than $0.1 million recorded in the Condensed Consolidated Statements of Income related to the ineffectiveness of these derivative contracts for the quarter ended January 31, 2014.

For derivative contracts that are designated and qualify as a fair value hedge, the gain or loss is recorded in the Condensed Consolidated Statements of Income under the heading Cost of sales. For the quarters ended January 30, 2015 and January 31, 2014, we recorded losses of $0.8 million and $0.3 million, respectively, related to fair value hedges, which were offset by foreign exchange fluctuations of the underlying hedged item.

For derivative contracts entered into in order to hedge revaluation of net balance sheet exposures in non-functional currency that are not designated as a fair value hedge or a cash flow hedge, the gain or loss is recorded in the Condensed Consolidated Statements of Income under the heading Cost of sales. For the quarters ended January 30, 2015 and January 31, 2014, we recorded gains of $6.8 million and $3.0 million, respectively, related to undesignated hedges, which were offset by foreign exchange fluctuations.

The following table summarizes the effect of cash flow hedges on the Condensed Consolidated Financial Statements:

Table of Contents



In thousands	Effective Portion
	Amount of Gain Recognized in Other Comprehensive Income		Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings
Derivative Hedging Relationship	Amount of Gain Recognized in Other Comprehensive Income		Location	Amount
Foreign currency forward contracts
Quarter ended January 30, 2015	$	3,699	Cost of sales	$	(1,509	)
			Sales	—
Quarter ended January 31, 2014	$	6,659	Cost of sales	$	3,076
			Sales	50

We are exposed to credit risk in the event of nonperformance by counterparties to the forward contracts. The terms of the forward contract determine the amount and timing of amounts to be exchanged, and the contract is generally subject to credit risk only when it has a positive fair value.


12.	Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during each period. Diluted earnings per share is computed similar to basic earnings per share, except that the weighted average number of shares outstanding is increased to include additional shares from the assumed exercise of stock options, performance shares and restricted stock units, if dilutive.

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



	Quarter Ended
In thousands, except per share amounts	January 30, 2015		January 31, 2014
Numerator:
Net income	$	23,594	$	48,861
Denominator:
Weighted average shares outstanding	97,547		101,796
Dilutive effect of stock options, performance shares and restricted stock units	591		871
Weighted average shares outstanding assuming dilution	98,138		102,667

Basic earnings per share	$	0.24	$	0.48
Diluted earnings per share	$	0.24	$	0.48

Options to purchase a weighted average of 2.3 million and 1.5 million shares were excluded from the calculations of diluted earnings per share for the quarters ended January 30, 2015 and January 31, 2014, respectively, as the effect would have been antidilutive.


13.	Fair Value Measurements

GAAP establishes a three level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level 1: Quoted prices in active markets for identical instruments;

Level 2: Inputs, other than quoted prices in active markets, that are observable for the instrument either directly or indirectly or quoted prices for similar instruments in active markets; and

Level 3: Unobservable inputs for the instrument where there is little or no market data, which requires the reporting entity to develop its own assumptions.

GAAP requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value and disclose the fair value of long-term obligations recorded at cost as of January 30, 2015 and October 31, 2014. As of January 30, 2015 and October 31, 2014, we did not have any Level 3 assets or liabilities.

Table of Contents



Fair Value Measurements as of January 30, 2015
In thousands	Carrying Value		Total Fair Value		Level 1		Level 2
Current Assets
Cash equivalents	$	30,107	$	30,107	$	30,107	$	—
Other Current Assets
Derivatives	$	9,284	$	9,284	$	—	$	9,284
Other Accrued Liabilities
Derivatives	$	13,757	$	13,757	$	—	$	13,757
Long-term Obligations Including Amounts due within One Year
Term Loan due 2019	$	375,000	$	377,803	$	—	$	377,803
6.0% Senior Notes due 2016	$	249,235	$	269,800	$	—	$	269,800
5.125% Senior Notes due 2021	$	496,902	$	560,700	$	—	$	560,700
6.625% Senior Notes due 2036	$	148,530	$	195,900	$	—	$	195,900



Fair Value Measurements as of October 31, 2014
In thousands	Carrying Value		Total Fair Value		Level 1		Level 2
Current Assets
Cash equivalents	$	20,776	$	20,776	$	20,776	$	—
Other Current Assets
Derivatives	$	2,820	$	2,820	$	—	$	2,820
Other Accrued Liabilities
Derivatives	$	7,294	$	7,294	$	—	$	7,294
Long-term Obligations Including Amounts due within One Year
Term Loan due 2019	$	375,000	$	379,108	$	—	$	379,108
6.0% Senior Notes due 2016	$	249,131	$	272,025	$	—	$	272,025
5.125% Senior Notes due 2021	$	496,806	$	547,000	$	—	$	547,000
6.625% Senior Notes due 2036	$	148,522	$	181,095	$	—	$	181,095

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash equivalents: The carrying value of cash equivalents approximates fair value based on the short-term nature of these instruments.

Derivatives: The fair value of forward foreign exchange contracts is based on a valuation model that discounts cash flows resulting from the differential between the contract price and the market-based forward rate.

Term Loan: The fair value of the Term Loan is estimated using discounted cash flows and market conditions.

Senior Notes: The fair market value of the senior notes is estimated based on market quotations of similar instruments at the respective period end.


14.	Contingent Liabilities

We establish reserves based on our assessment of contingencies related to legal claims asserted against us, as required by GAAP. Developments during the course of legal proceedings may affect our assessments and estimates of our contingencies, which in turn may require us to record or change the amount of a reserve, or make a payment that is different than the amount that we have reserved. In addition, as a normal part of operations, our subsidiaries undertake contractual obligations, warranties and guarantees in connection with the sale of products or services. Although the outcome of these matters cannot be predicted with certainty and favorable or unfavorable resolutions may affect the results of operations on a quarter-to-quarter basis, we believe that the outcome of such legal and other matters will not have a materially adverse effect on our future consolidated financial position, results of operations or liquidity.

Table of Contents

and commercial matters. We and our subsidiaries also become involved from time to time in proceedings relating to environmental matters and litigation arising outside the ordinary course of business.

As of January 30, 2015, we were contingently liable to banks, financial institutions and others for approximately $211.4 million for outstanding standby letters of credit, surety bonds and bank guarantees to secure the performance of sales contracts and other third party provided guarantees in the ordinary course of business. Of the $211.4 million, approximately $27.7 million relates to surety bonds and $8.5 million relates to outstanding letters of credit or other guarantees issued by non-U.S. banks for non-U.S. subsidiaries under locally provided credit facilities.

In addition, we have received a subpoena from the SEC’s Division of Enforcement concerning our 2012 acquisition of IMM and related accounting matters. We are cooperating with the SEC regarding this investigation, which is ongoing. While it is not possible to predict the timing or outcome of the SEC inquiry, we currently believe that this matter will not have a material adverse effect on the Company's future consolidated results of operation, financial position or liquidity.


15.	Segment Information

We operate in two reportable segments: Underground and Surface. Crushing and conveying operating results related to surface applications are reported as part of the Surface segment, while total crushing and conveying operating results are included in the Underground segment. Eliminations primarily consist of the surface applications of crushing and conveying included in both operating segments. The results of operations for MTI have been included in the Underground segment from the acquisition date forward.

Operating income (loss) of segments does not include interest income and expense, corporate administration expenses and the provision for income taxes.



In thousands	Underground		Surface		Corporate			Eliminations			Total
Quarter ended January 30, 2015
Net sales	$	384,663	$	347,036	$	—		$	(27,826	)	$	703,873
Operating income (loss)	$	38,197	$	29,060	$	(12,095	)	$	(6,456	)	$	48,706
Interest income	—		—		2,940			—			2,940
Interest expense	—		—		(15,897		)	—			(15,897		)
Income (loss) before income taxes	$	38,197	$	29,060	$	(25,052	)	$	(6,456	)	$	35,749
Depreciation and amortization	$	19,188	$	13,789	$	702		$	—		$	33,679
Capital expenditures	$	9,061	$	13,104	$	93		$	—		$	22,258

Quarter ended January 31, 2014
Net sales	$	477,463	$	400,696	$	—		$	(38,847	)	$	839,312
Operating income (loss)	$	62,606	$	46,152	$	(14,222	)	$	(9,291	)	$	85,245
Interest income	—		—		2,583			—			2,583
Interest expense	—		—		(16,403		)	—			(16,403		)
Income (loss) before income taxes	$	62,606	$	46,152	$	(28,042	)	$	(9,291	)	$	71,425
Depreciation and amortization	$	18,734	$	13,292	$	740		$	—		$	32,766
Capital expenditures	$	9,856	$	13,255	$	3,544		$	—		$	26,655


16.	Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue from Contracts with Customers. ASU 2014-09 provides a single principles-based, five-step model to be applied to all contracts with customers. The five steps are to (i) identify the contracts with the customer, (ii) identify the performance obligations in the contact, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when each performance obligation is satisfied. Revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. ASU 2014-09 will be effective for the Company beginning on October 28, 2017 and the standard allows for either full retrospective adoption or modified retrospective adoption. The Company is continuing to evaluate the impact that the adoption of this guidance will have on our financial condition, results of operations and the presentation of our financial statements.

Table of Contents


17.	Subsidiary Guarantors for 2016 Notes and 2036 Notes

The following tables present condensed consolidated financial information as of January 30, 2015 and October 31, 2014 and for the quarters ended January 30, 2015 and January 31, 2014 for: (a) the Company; (b) on a combined basis, the guarantors of the 2016 Notes and 2036 Notes issued in November 2006, which include the significant domestic operations of Joy Global Underground Mining LLC, Joy Global Surface Mining Inc, N.E.S. Investment Co., Joy Global Conveyors Inc., Joy Global Longview Operations LLC and certain immaterial wholly owned subsidiaries of Joy Global Longview Operations LLC (the "Subsidiary Guarantors"); and (c) on a combined basis, the non-guarantors, which include all of our foreign subsidiaries and a number of small domestic subsidiaries (the "Non-Guarantor Subsidiaries").

The borrowings are fully and unconditionally guaranteed on a joint and several unsecured basis by the Subsidiary Guarantors, which are direct and indirect 100% owned subsidiaries of the Company. We conduct all of our business and derive essentially all of our income from our subsidiaries. Therefore, our ability to make payments on the obligations is dependent on the earnings and distribution of funds from our subsidiaries. There are no restrictions on the ability of any of our domestic subsidiaries to transfer funds to the parent company. Separate financial statements of the Subsidiary Guarantors are not presented because we believe such separate statements or disclosures would not be useful to investors.

Condensed Consolidating Statement of Income Quarter ended January 30, 2015

In thousands	Parent Company			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	441,075		$	473,089		$	(210,291	)	$	703,873
Cost of sales	—			321,204			362,940			(163,398		)	520,746
Product development, selling and administrative expenses	9,848			55,491			72,295			—			137,634
Other (income) expense	—			4,637			(7,850		)	—			(3,213		)
Operating income (loss)	(9,848		)	59,743			45,704			(46,893		)	48,706
Intercompany items	16,770			(23,708		)	(6,040		)	12,978			—
Interest (expense) income, net	(15,598		)	1,634			1,007			—			(12,957		)
Income (loss) before income taxes and equity in income of subsidiaries	(8,676		)	37,669			40,671			(33,915		)	35,749
Provision (benefit) for income taxes	17,492			2,996			(8,333		)	—			12,155
Equity in income of subsidiaries	23,594			43,472			—			(67,066		)	—
Net income (loss)	$	(2,574	)	$	78,145		$	49,004		$	(100,981	)	$	23,594

Comprehensive (loss) income	$	(114,924	)	$	79,554		$	(77,904	)	$	24,518		$	(88,756	)

Table of Contents

Condensed Consolidating Statement of Income Quarter ended January 31, 2014

In thousands	Parent Company			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	480,672		$	602,765		$	(244,125	)	$	839,312
Cost of sales	—			363,067			445,839			(204,728		)	604,178
Product development, selling and administrative expenses	14,669			67,835			70,525			—			153,029
Other (income) expense	(473		)	1,949			(4,616		)	—			(3,140		)
Operating income (loss)	(14,196		)	47,821			91,017			(39,397		)	85,245
Intercompany items	17,278			(19,986		)	(9,071		)	11,779			—
Interest (expense) income, net	(16,045		)	1,885			340			—			(13,820		)
Income (loss) before income taxes and equity in income of subsidiaries	(12,963		)	29,720			82,286			(27,618		)	71,425
Provision (benefit) for income taxes	(5,054		)	26,368			1,250			—			22,564
Equity in income of subsidiaries	56,770			33,013			—			(89,783		)	—
Net income	$	48,861		$	36,365		$	81,036		$	(117,401	)	$	48,861

Comprehensive income	$	2,403		$	34,830		$	33,332		$	(68,162	)	$	2,403

Table of Contents

Condensed Consolidating Balance Sheet As of January 30, 2015

In thousands	Parent Company			Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	10,550		$	3,427	$	138,349	$	—		$	152,326
Accounts receivable, net	—			391,317		520,196		(22,838		)	888,675
Inventories	—			490,101		793,318		(107,371		)	1,176,048
Other current assets	73,001			13,833		88,060		15			174,909
Total current assets	83,551			898,678		1,539,923		(130,194		)	2,391,958
Property, plant and equipment, net	24,116			340,593		504,871		(4,861		)	864,719
Other assets:
Other intangible assets, net	—			224,217		86,812		—			311,029
Goodwill	—			453,374		1,039,927		—			1,493,301
Deferred income taxes	(6,958		)	—		71,777		—			64,819
Other non-current assets	4,082,542			1,976,228		2,535,322		(8,424,811		)	169,281
Total other assets	4,075,584			2,653,819		3,733,838		(8,424,811		)	2,038,430
Total assets	$	4,183,251		$	3,893,090	$	5,778,632	$	(8,559,866	)	$	5,295,107
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term obligations	$	4,688		$	11,896	$	88	$	—		$	16,672
Trade accounts payable	2,306			173,934		146,647		—			322,887
Employee compensation and benefits	6,819			34,472		43,709		—			85,000
Advance payments and progress billings	—			123,984		215,298		(26,881		)	312,401
Accrued warranties	—			15,175		43,353		—			58,528
Other accrued liabilities	71,946			58,521		104,888		(7,621		)	227,734
Current liabilities of discontinued operations	—			11,582		—		—			11,582
Total current liabilities	85,759			429,564		553,983		(34,502		)	1,034,804
Long-term obligations	1,264,979			—		9		—			1,264,988
Other liabilities:
Liabilities for postretirement benefits	18,420			870		—		—			19,290
Accrued pension costs	124,560			8,748		3,944		—			137,252
Other non-current liabilities	3,161			7,978		141,262		—			152,401
Total other liabilities	146,141			17,596		145,206		—			308,943
Shareholders’ equity	2,686,372			3,445,930		5,079,434		(8,525,364		)	2,686,372
Total liabilities and shareholders’ equity	$	4,183,251		$	3,893,090	$	5,778,632	$	(8,559,866	)	$	5,295,107

Table of Contents

Condensed Consolidating Balance Sheet As of October 31, 2014

In thousands	Parent Company			Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	54,874		$	16,429	$	198,888	$	—		$	270,191
Accounts receivable, net	—			400,456		675,515		(16,262		)	1,059,709
Inventories	—			470,194		753,922		(115,808		)	1,108,308
Other current assets	87,945			9,520		82,671		15			180,151
Total current assets	142,819			896,599		1,710,996		(132,055		)	2,618,359
Property, plant and equipment, net	23,660			346,761		525,642		(3,623		)	892,440
Other assets:
Other intangible assets, net	—			228,950		90,319		—			319,269
Goodwill	—			453,374		1,063,319		—			1,516,693
Deferred income taxes	159			—		70,022		—			70,181
Other non-current assets	4,191,771			2,102,499		2,644,843		(8,759,069		)	180,044
Total other assets	4,191,930			2,784,823		3,868,503		(8,759,069		)	2,086,187
Total assets	$	4,358,409		$	4,028,183	$	6,105,141	$	(8,894,747	)	$	5,596,986
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term obligations	$	—		$	11,634	$	105	$	—		$	11,739
Trade accounts payable	3,134			215,235		177,576		—			395,945
Employee compensation and benefits	11,639			58,374		66,898		—			136,911
Advance payments and progress billings	—			117,768		193,165		(24,994		)	285,939
Accrued warranties	—			17,002		50,270		—			67,272
Other accrued liabilities	94,097			54,523		124,244		(7,264		)	265,600
Current liabilities of discontinued operations	—			11,582		—		—			11,582
Total current liabilities	108,870			486,118		612,258		(32,258		)	1,174,988
Long-term obligations	1,269,459			—		82		—			1,269,541
Other liabilities:
Liabilities for postretirement benefits	18,743			866		—		—			19,609
Accrued pension costs	132,448			7,529		4,402		—			144,379
Other non-current liabilities	(12,108		)	7,780		151,800		—			147,472
Total other liabilities	139,083			16,175		156,202		—			311,460
Shareholders’ equity	2,840,997			3,525,890		5,336,599		(8,862,489		)	2,840,997
Total liabilities and shareholders’ equity	$	4,358,409		$	4,028,183	$	6,105,141	$	(8,894,747	)	$	5,596,986

Table of Contents

Condensed Consolidating Statement of Cash Flows Quarter ended January 30, 2015

In thousands	Parent Company			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Consolidated
Operating Activities:
Net cash (used) provided by operating activities	$	25,892		$	(7,426	)	$	(36,821	)	$	(18,355	)
Investing Activities:
Property, plant and equipment acquired	(93		)	(5,971		)	(16,194		)	(22,258		)
Proceeds from sale of property, plant and equipment	—			133			623			756
Other investing activities, net	(1,168		)	—			1,309			141
Net cash used by investing activities	(1,261		)	(5,838		)	(14,262		)	(21,361		)
Financing Activities:
Common stock issued	273			—			—			273
Dividends paid	(19,489		)	—			—			(19,489		)
Treasury stock purchased	(50,000		)	—			—			(50,000		)
Other financing activities, net	261			262			(83		)	440
Net cash (used) provided by financing activities	(68,955		)	262			(83		)	(68,776		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	—			—			(9,373		)	(9,373		)
Decrease in Cash and Cash Equivalents	(44,324		)	(13,002		)	(60,539		)	(117,865		)
Cash and Cash Equivalents at Beginning of Period	54,874			16,429			198,888			270,191
Cash and Cash Equivalents at End of Period	$	10,550		$	3,427		$	138,349		$	152,326

Condensed Consolidating Statement of Cash Flow Quarter ended January 31, 2014

In thousands	Parent Company			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Consolidated
Operating Activities:
Net cash provided (used) by operating activities of continuing operations	$	61,014		$	(9,829	)	$	13,654		$	64,839
Net cash provided by operating activities of discontinued operations	—			67			—			67
Net cash provided (used) by operating activities	61,014			(9,762		)	13,654			64,906
Investing Activities:
Property, plant and equipment acquired	(3,544		)	(4,084		)	(19,027		)	(26,655		)
Proceeds from sale of property, plant and equipment	—			1,277			804			2,081
Other investing activities, net	(21		)	—			—			(21		)
Net cash used by investing activities	(3,565		)	(2,807		)	(18,223		)	(24,595		)
Financing Activities:
Common stock issued	1,985			—			—			1,985
Dividends paid	(17,850		)	—			—			(17,850		)
Repayments of term loan	(12,500		)	—			—			(12,500		)
Treasury stock purchased	(122,036		)	—			—			(122,036		)
Other financing activities, net	(284		)	(1,212		)	(47		)	(1,543		)
Net cash used by financing activities	(150,685		)	(1,212		)	(47		)	(151,944		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	—			—			(3,177		)	(3,177		)
Decrease in Cash and Cash Equivalents	(93,236		)	(13,781		)	(7,793		)	(114,810		)
Cash and Cash Equivalents at Beginning of Period	122,901			20,361			262,447			405,709
Cash and Cash Equivalents at End of Period	$	29,665		$	6,580		$	254,654		$	290,899

Table of Contents


18.	Subsidiary Guarantors for Credit Agreement, Term Loan and 2021 Notes

The following tables present condensed consolidated financial information as of January 30, 2015 and October 31, 2014 and for the quarters ended January 30, 2015 and January 31, 2014 for: (a) the Company; (b) on a combined basis, the guarantors of the Credit Agreement, the Term Loan and the 2021 Notes issued in October 2011, which include Joy Global Underground Mining LLC, Joy Global Surface Mining Inc, N.E.S. Investment Co., Joy Global Conveyors Inc. and Joy Global Longview Operations LLC (the "Supplemental Subsidiary Guarantors"); and (c) on a combined basis, the non-guarantors, which include all of our foreign subsidiaries and a number of small domestic subsidiaries ("Non-Guarantor Subsidiaries").

The borrowings are fully and unconditionally guaranteed on a joint and several unsecured basis by the Supplemental Subsidiary Guarantors, which are direct and indirect 100% owned subsidiaries of the Company. We conduct all of our business and derive essentially all of our income from our subsidiaries. Therefore, our ability to make payments on the obligations is dependent on the earnings and distribution of funds from our subsidiaries. There are no restrictions on the ability of any of our domestic subsidiaries to transfer funds to the parent company. Separate financial statements of the Supplemental Subsidiary Guarantors are not presented because we believe such separate statements or disclosures would not be useful to investors.

Condensed Consolidating Statement of Income Quarter ended January 30, 2015

In thousands	Parent Company			Supplemental Subsidiary Guarantors			Supplemental Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	439,592		$	474,572		$	(210,291	)	$	703,873
Cost of sales	—			319,552			364,592			(163,398		)	520,746
Product development, selling and administrative expenses	9,848			55,491			72,295			—			137,634
Other (income) expense	—			4,640			(7,853		)	—			(3,213		)
Operating income (loss)	(9,848		)	59,909			45,538			(46,893		)	48,706
Intercompany items	16,770			(23,708		)	(6,040		)	12,978			—
Interest (expense) income, net	(15,598		)	1,689			952			—			(12,957		)
Income (loss) before income taxes and equity in income of subsidiaries	(8,676		)	37,890			40,450			(33,915		)	35,749
Provision (benefit) for income taxes	17,492			3,010			(8,347		)	—			12,155
Equity in income of subsidiaries	23,594			43,472			—			(67,066		)	—
Net income (loss)	$	(2,574	)	$	78,352		$	48,797		$	(100,981	)	$	23,594

Comprehensive (loss) income	$	(114,924	)	$	79,761		$	(78,111	)	$	24,518		$	(88,756	)

Table of Contents

Condensed Consolidating Statement of Income Quarter ended January 31, 2014

In thousands	Parent Company			Supplemental Subsidiary Guarantors			Supplemental Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	478,576		$	604,861		$	(244,125	)	$	839,312
Cost of sales	—			361,369			447,537			(204,728		)	604,178
Product development, selling and administrative expenses	14,669			67,591			70,769			—			153,029
Other (income) expense	(473		)	2,330			(4,997		)	—			(3,140		)
Operating income (loss)	(14,196		)	47,286			91,552			(39,397		)	85,245
Intercompany items	17,278			(19,986		)	(9,071		)	11,779			—
Interest (expense) income, net	(16,045		)	1,854			371			—			(13,820		)
Income (loss) before income taxes and equity in income of subsidiaries	(12,963		)	29,154			82,852			(27,618		)	71,425
Provision (benefit) for income taxes	(5,054		)	27,256			362			—			22,564
Equity in income of subsidiaries	56,770			33,013			—			(89,783		)	—
Net income	$	48,861		$	34,911		$	82,490		$	(117,401	)	$	48,861

Comprehensive income	$	2,403		$	33,376		$	34,786		$	(68,162	)	$	2,403

Table of Contents

Condensed Consolidating Balance Sheet As of January 30, 2015

In thousands	Parent Company			Supplemental Subsidiary Guarantors		Supplemental Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	10,550		$	3,427	$	138,349	$	—		$	152,326
Accounts receivable, net	—			384,043		527,470		(22,838		)	888,675
Inventories	—			490,101		793,318		(107,371		)	1,176,048
Other current assets	73,001			13,833		88,060		15			174,909
Total current assets	83,551			891,404		1,547,197		(130,194		)	2,391,958
Property, plant and equipment, net	24,116			338,978		506,486		(4,861		)	864,719
Other assets:
Other intangible assets, net	—			224,217		86,812		—			311,029
Goodwill	—			453,374		1,039,927		—			1,493,301
Deferred income taxes	(6,958		)	—		71,777		—			64,819
Other non-current assets	4,082,542			1,941,959		2,569,591		(8,424,811		)	169,281
Total other assets	4,075,584			2,619,550		3,768,107		(8,424,811		)	2,038,430
Total assets	$	4,183,251		$	3,849,932	$	5,821,790	$	(8,559,866	)	$	5,295,107
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term obligations	$	4,688		$	11,896	$	88	$	—		$	16,672
Trade accounts payable	2,306			173,583		146,998		—			322,887
Employee compensation and benefits	6,819			34,472		43,709		—			85,000
Advance payments and progress billings	—			123,984		215,298		(26,881		)	312,401
Accrued warranties	—			15,175		43,353		—			58,528
Other accrued liabilities	71,946			58,521		104,888		(7,621		)	227,734
Current liabilities of discontinued operations	—			11,582		—		—			11,582
Total current liabilities	85,759			429,213		554,334		(34,502		)	1,034,804
Long-term obligations	1,264,979			—		9		—			1,264,988
Other liabilities:
Liabilities for postretirement benefits	18,420			870		—		—			19,290
Accrued pension costs	124,560			8,748		3,944		—			137,252
Other non-current liabilities	3,161			7,978		141,262		—			152,401
Total other liabilities	146,141			17,596		145,206		—			308,943
Shareholders’ equity	2,686,372			3,403,123		5,122,241		(8,525,364		)	2,686,372
Total liabilities and shareholders’ equity	$	4,183,251		$	3,849,932	$	5,821,790	$	(8,559,866	)	$	5,295,107

Table of Contents

Condensed Consolidating Balance Sheet As of October 31, 2014

In thousands	Parent Company			Supplemental Subsidiary Guarantors		Supplemental Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	54,874		$	16,429	$	198,888	$	—		$	270,191
Accounts receivable, net	—			391,672		684,299		(16,262		)	1,059,709
Inventories	—			470,194		753,922		(115,808		)	1,108,308
Other current assets	87,945			9,520		82,671		15			180,151
Total current assets	142,819			887,815		1,719,780		(132,055		)	2,618,359
Property, plant and equipment, net	23,660			345,117		527,286		(3,623		)	892,440
Other assets:
Other intangible assets, net	—			228,950		90,319		—			319,269
Goodwill	—			453,374		1,063,319		—			1,516,693
Deferred income taxes	159			—		70,022		—			70,181
Other non-current assets	4,191,771			2,106,760		2,640,582		(8,759,069		)	180,044
Total other assets	4,191,930			2,789,084		3,864,242		(8,759,069		)	2,086,187
Total assets	$	4,358,409		$	4,022,016	$	6,111,308	$	(8,894,747	)	$	5,596,986
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term obligations	$	—		$	11,634	$	105	$	—		$	11,739
Trade accounts payable	3,134			214,603		178,208		—			395,945
Employee compensation and benefits	11,639			58,374		66,898		—			136,911
Advance payments and progress billings	—			117,768		193,165		(24,994		)	285,939
Accrued warranties	—			17,002		50,270		—			67,272
Other accrued liabilities	94,097			54,523		124,244		(7,264		)	265,600
Current liabilities of discontinued operations	—			11,582		—		—			11,582
Total current liabilities	108,870			485,486		612,890		(32,258		)	1,174,988
Long-term obligations	1,269,459			—		82		—			1,269,541
Other liabilities:
Liabilities for postretirement benefits	18,743			866		—		—			19,609
Accrued pension costs	132,448			7,529		4,402		—			144,379
Other non-current liabilities	(12,108		)	7,780		151,800		—			147,472
Total other liabilities	139,083			16,175		156,202		—			311,460
Shareholders’ equity	2,840,997			3,520,355		5,342,134		(8,862,489		)	2,840,997
Total liabilities and shareholders’ equity	$	4,358,409		$	4,022,016	$	6,111,308	$	(8,894,747	)	$	5,596,986

Table of Contents

Condensed Consolidating Statement of Cash Flows Quarter ended January 30, 2015

In thousands	Parent Company			Supplemental Subsidiary Guarantors			Supplemental Non-Guarantor Subsidiaries			Consolidated
Operating Activities:
Net cash (used) provided by operating activities	$	25,892		$	(7,426	)	$	(36,821	)	$	(18,355	)
Investing Activities:
Property, plant and equipment acquired	(93		)	(5,971		)	(16,194		)	(22,258		)
Proceeds from sale of property, plant and equipment	—			133			623			756
Other investing activities, net	(1,168		)	—			1,309			141
Net cash used by investing activities	(1,261		)	(5,838		)	(14,262		)	(21,361		)
Financing Activities:
Common stock issued	273			—			—			273
Dividends paid	(19,489		)	—			—			(19,489		)
Treasury stock purchased	(50,000		)	—			—			(50,000		)
Other financing activities, net	261			262			(83		)	440
Net cash (used) provided by financing activities	(68,955		)	262			(83		)	(68,776		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	—			—			(9,373		)	(9,373		)
Decrease in Cash and Cash Equivalents	(44,324		)	(13,002		)	(60,539		)	(117,865		)
Cash and Cash Equivalents at Beginning of Period	54,874			16,429			198,888			270,191
Cash and Cash Equivalents at End of Period	$	10,550		$	3,427		$	138,349		$	152,326

Table of Contents

Condensed Consolidating Statement of Cash Flows Quarter ended January 31, 2014

In thousands	Parent Company			Supplemental Subsidiary Guarantors			Supplemental Non-Guarantor Subsidiaries			Consolidated
Operating Activities:
Net cash provided (used) by operating activities of continuing operations	$	61,014		$	(9,829	)	$	13,654		$	64,839
Net cash provided by operating activities of discontinued operations	—			67			—			67
Net cash provided (used) by operating activities	61,014			(9,762		)	13,654			64,906
Investing Activities:
Property, plant and equipment acquired	(3,544		)	(4,084		)	(19,027		)	(26,655		)
Proceeds from sale of property, plant and equipment	—			1,277			804			2,081
Other investing activities, net	(21		)	—			—			(21		)
Net cash used by investing activities	(3,565		)	(2,807		)	(18,223		)	(24,595		)
Financing Activities:
Common stock issued	1,985			—			—			1,985
Dividends paid	(17,850		)	—			—			(17,850		)
Repayments of term loan	(12,500		)	—			—			(12,500		)
Treasury stock purchased	(122,036		)	—			—			(122,036		)
Other financing activities, net	(284		)	(1,212		)	(47		)	(1,543		)
Net cash used by financing activities	(150,685		)	(1,212		)	(47		)	(151,944		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	—			—			(3,177		)	(3,177		)
Decrease in Cash and Cash Equivalents	(93,236		)	(13,781		)	(7,793		)	(114,810		)
Cash and Cash Equivalents at Beginning of Period	122,901			20,361			262,447			405,709
Cash and Cash Equivalents at End of Period	$	29,665		$	6,580		$	254,654		$	290,899


19.	Subsequent Events

On February 18, 2015, our Board of Directors declared a cash dividend of $0.20 per outstanding share of common stock. The dividend will be paid on March 18, 2015 to all shareholders of record at the close of business on March 4, 2015.

Table of Contents

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

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes to the Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.

Overview

Joy Global Inc. is a leading manufacturer and servicer of high productivity mining equipment for the extraction of metals and minerals. We manufacture and market original equipment and parts and perform services for both underground and surface mining, as well as certain industrial applications. Our equipment is used in major mining regions throughout the world to mine coal, copper, iron ore, oil sands, gold and other minerals. We operate in two business segments: Underground and Surface. We are a major manufacturer of underground mining machinery for the extraction of coal and other bedded minerals. We are also a major producer of surface mining equipment for the extraction of copper, coal and other minerals and ores. We offer comprehensive direct service, which includes our smart service offerings, near major mining regions worldwide and provide extensive operational support for many types of equipment used in mining. Our principal manufacturing facilities are located in the United States, including facilities in Alabama, Pennsylvania, Texas and Wisconsin, and internationally, including facilities in Australia, Canada, China, South Africa and the United Kingdom.

Operating Results

Quarter Ended January 30, 2015 Compared With Quarter Ended January 31, 2014

Net sales in the first quarter of fiscal 2015 were $703.9 million, compared to $839.3 million in the first quarter of fiscal 2014. The decrease in net sales of $135.4 million, or 16%, in the current year first quarter reflected a decrease in original equipment sales of $77.7 million, or 29%, and a decrease in service sales of $57.7 million, or 10%. Original equipment decreased in all regions except Latin America, which was flat, and China, which was aided by the sale of a locally produced longwall system. The decrease in original equipment sales was led by Australia, which decreased by $34.9 million. Service sales decreased in all regions except China. The decrease in service sales was led by Australia and Africa, which decreased by $20.5 million and $17.2 million, respectively. The decrease in sales was due in part to wider-scale customer shutdowns during the holiday season in fiscal 2015. Compared to the prior year first quarter, net sales in the first quarter of fiscal 2015 included a $16.9 million unfavorable effect of foreign currency translation, due primarily to the decline in the value of the Australian dollar and South African rand relative to the U.S. dollar.

Operating income in the first quarter of fiscal 2015 was $48.7 million, or 6.9% of net sales, compared to $85.2 million, or 10.2% of net sales, in the first quarter of fiscal 2014. The decrease in operating income of $36.5 million, or 43%, in the current year first quarter was due to margins on lower sales volumes of $50.6 million and a less favorable product mix of $7.8 million. These items were partially offset by higher manufacturing cost absorption of $4.2 million, lower period costs (defined as any costs of sales other than those costs associated with selling inventory at standard costs) of $2.3 million and reduced product development, selling and administrative expenses of $15.4 million. Compared to the prior year first quarter, operating income in the first quarter of fiscal 2015 included a $0.5 million unfavorable effect of foreign currency translation.

Net income was $23.6 million, or $0.24 per diluted share, in the first quarter of fiscal 2015, compared to $48.9 million, or $0.48 per diluted share, in the first quarter of fiscal 2014.

Bookings in the first quarter of fiscal 2015 were $700.2 million, compared to $860.5 million in the first quarter of fiscal 2014. The decrease in bookings of $160.3 million, or 19%, in the current year first quarter reflected a decrease in original equipment bookings of $74.1 million, or 30%, and a decrease in service orders of $86.3 million, or 14%. Original equipment bookings decreased in Eurasia, Latin America and China by $53.0 million, $39.4 million and $26.4 million, respectively, with increases in all other regions. Service bookings decreased in all regions except Africa. The decrease in service bookings was led by North America and Latin America, which decreased by $32.7 million and $28.1 million, respectively. Compared to the prior year first quarter, bookings in the first quarter of fiscal 2015 included a $49.7 million unfavorable effect of foreign currency translation, due primarily to the decline in the value of the Australian dollar relative to the U.S. dollar.

Market Outlook

The outlook for global growth in 2015 has been reduced in recent months as the slowing trends seen in the second half of 2014 have continued. Weak commodity prices, diverging monetary policy and weak world trade all present challenges to the growth outlook. After showing some signs of improvement, growth in Europe remains stagnant. Slowing housing market activity and a movement towards consumer driven growth has China adjusting to a new normal level of economic activity. The strength

Table of Contents

seen in the U.S. economy during the second half of 2014 now faces headwinds from slowing activity in the energy sector. Combined, these challenges contribute to a decidedly more difficult end market unfolding for the company in 2015.

The decline in oil prices seen during the second half of 2014 has continued. Record production, elevated inventories, and weakening global demand are expected to result in oil prices remaining depressed through mid-2015, if not longer depending upon the speed of the supply response.

Although the underlying fundamentals of copper remain strong with low global inventory levels and a production deficit in 2014, near-term demand uncertainty has driven prices down since December 2014. New supply growth is expected to move the global copper market to a surplus in 2015 / 2016 before returning to a longer-term deficit.

Entering 2015, U.S. coal markets were expected to be under pressure from power plant retirements and the looming implementation of increasingly stringent regulations. Over the last several months, added pressures have materialized from lower natural gas prices, and exports have been hampered by a stronger U.S. dollar. Current natural gas prices have declined as record production has increased inventories. Forward curves for natural gas point to prices for 2015 that will continue to pressure major U.S. coal basins. Exports are also facing challenges in global markets based on seaborne thermal coal and metallurgical coal prices. U.S. coal exports are expected to decline in 2015. The combined effect is likely to see U.S. coal demand decline in 2015 which will have a direct impact on overall production.

The challenges seen in seaborne thermal coal markets are expected to persist throughout 2015 as supply growth continues to outpace a strained demand environment. Despite Indian coal imports growing annually, strong production in Indonesia coupled with growth in Australian exports have left the seaborne thermal coal market well supplied.

Conversely, seaborne metallurgical coal markets appear closer to finding an equilibrium balance. The production curtailments announced in 2014 are expected to support prices at current levels, with the possibility of some marginal improvement by year-end. On the demand side, the largest driver remains the health of global steel consumption which is expected to increase in 2015. The combination of continued supply restraint and stable demand should continue to drive metallurgical coal back to an equilibrium point.

Global steel consumption will continue to influence seaborne iron ore markets. With additional supply set to reach the market in 2015, global iron ore prices will remain under pressure. Should a substantive downward revision to global steel markets occur, iron ore prices could trend lower.

The increase in economic uncertainty along with further deterioration in commodity prices continues to adversely impact our business. While mining capital expenditures were expected to decline in 2015, further reductions in spending have been announced in recent weeks as the industry battles depressed commodity prices and an uncertain demand outlook. Mine productivity improvements and cost reductions are the focus of the industry as further mine and asset consolidation is expected to take place in 2015.

Company Outlook

The macroeconomic and commodity price environment that marked the beginning of our fiscal year has worsened in recent months. Lower commodity prices have decreased our customers' cash flows and they are continuing to reduce capital expenditures and delay maintenance in an uncertain demand environment.

Our direct service business remains a critical and stabilizing force for us, but we have recently seen slowing in the bookings profile as maintenance and rebuild schedules are stretched. There has also been evidence of commodity production declines in some end markets that is also impacting our service bookings. Although production declines will help to rebalance supply and demand fundamentals, they will also put pressure on our near-term service booking activity.

In light of the slower market environment, we are accelerating our facility optimization plan and are taking additional cost reduction actions to those previously announced. We are committed to prudently managing our business for softer market conditions, while retaining our ability to ramp up capacity when growth returns.

As a company, we’ve traversed difficult market conditions before while maintaining our commitment to the future. We continue to do that today and remain focused on working with our customers to deliver differentiated, innovative solutions that they need to maximize their mine performance.

Results of Operations

Quarter Ended January 30, 2015 Compared With Quarter Ended January 31, 2014

Table of Contents

Net Sales

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



	Quarter Ended
In thousands	January 30, 2015			January 31, 2014			$ Change			% Change
Net Sales
Underground	$	384,663		$	477,463		$	(92,800	)	(19.4	)
Surface	347,036			400,696			(53,660		)	(13.4	)
Eliminations	(27,826		)	(38,847		)	11,021
Total Sales	$	703,873		$	839,312		$	(135,439	)	(16.1	)

Underground net sales in the first quarter of fiscal 2015 were $384.7 million, compared to $477.5 million in the first quarter of fiscal 2014. The decrease in Underground net sales of $92.8 million, or 19%, in the current year first quarter reflected a decrease in original equipment sales of $68.9 million, or 37%, and a decrease in service sales of $23.9 million, or 8%. Original equipment sales decreased in all regions. The decrease in original equipment sales was led by Australia, which decreased by $26.7 million. Service sales decreased in all regions except North America and China. The decrease in service sales was led by Australia and Africa, which decreased by $14.2 million and $13.1 million, respectively. Compared to the prior year first quarter, Underground net sales in the first quarter of fiscal 2015 included an $11.1 million unfavorable effect of foreign currency translation.

Surface net sales in the first quarter of fiscal 2015 were $347.0 million, compared to $400.7 million in the first quarter of fiscal 2014. The decrease in Surface net sales of $53.7 million, or 13%, in the current year first quarter reflected a decrease in original equipment sales of $15.5 million, or 16%, and a decrease in service sales of $38.1 million, or 13%. Original equipment sales decreased in all regions except Latin America, which was flat, and China. The decrease in original equipment sales was led by North America, which decreased by $11.4 million. Service sales decreased in all regions. The decrease in service sales was also led by North America, which decreased by $16.6 million. Compared to the prior year first quarter, Surface net sales in the first quarter of fiscal 2015 included a $5.8 million unfavorable effect of foreign currency translation.

Operating Income

The following table sets forth the operating income included in our Condensed Consolidated Statements of Income:



	Quarter Ended
	January 30, 2015				January 31, 2014
	Operating				Operating
In thousands	Income			% of Net Sales	Income			% of Net Sales
Operating Income
Underground	$	38,197		9.9	$	62,606		13.1
Surface	29,060			8.4	46,152			11.5
Corporate Expense	(12,095		)		(14,222		)
Eliminations	(6,456		)		(9,291		)
Total Operating Income	$	48,706		6.9	$	85,245		10.2

Underground operating income in the first quarter of fiscal 2015 was $38.2 million, or 9.9% of net sales, compared to $62.6 million, or 13.1% of net sales, in the first quarter of fiscal 2014. The decrease in Underground operating income of $24.4 million, or 39%, in the current year first quarter was primarily due to margins on lower sales volumes of $32.2 million. This item was partially offset by higher manufacturing cost absorption of $3.2 million, lower period costs of $1.2 million and reduced product development, selling and administrative expenses of $5.5 million. Compared to the prior year first quarter, Underground operating income in the first quarter of fiscal 2015 included a $1.0 million unfavorable effect of foreign currency translation.

Surface operating income in the first quarter of fiscal 2015 was $29.1 million, or 8.4% of net sales, compared to $46.2 million, or 11.5% of net sales, in the first quarter of fiscal 2014. The decrease in Surface operating income of $17.1 million, or 37%, in the current year first quarter was due to margins on lower sales volumes of $20.7 million and a less favorable product mix of $7.5 million. These items were partially offset by reduced product development, selling and administrative expenses of $7.3 million. Compared to the prior year first quarter, Surface operating income in the first quarter of fiscal 2015 included a $0.5 million favorable impact of foreign currency translation.

Table of Contents

Corporate expense in the first quarter of fiscal 2015 was $12.1 million, compared to $14.2 million in the first quarter of fiscal 2014. The decrease in corporate expense of $2.1 million, or 15%, is primarily due to reduced administrative expenses of $2.6 million, partially offset by a decrease in other income of $0.5 million.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense in the first quarter of fiscal 2015 was $137.6 million, or 19.6% of net sales, compared to $153.0 million, or 18.2% of net sales, in the first quarter of fiscal 2014. The decrease in product development, selling and administrative expense of $15.4 million, or 10%, was due primarily to cost savings from the Company's restructuring programs, as well as lower incentive based compensation expense, decreased bad debt, and lower pension expense. These items were partially offset by increased expenses from the third quarter fiscal 2014 acquisition of MTI.

Restructuring activities continued in the quarter to optimize the company's manufacturing footprint and to better align its overall cost structure with anticipated demand.

Net Interest Expense

Net interest expense in the first quarter of fiscal 2015 was $13.0 million, compared to $13.8 million in the first quarter of fiscal 2014. The decrease in net interest expense of $0.8 million, or 6%, was primarily due to the reduction in the borrowing spreads and commitment fees as a result of the third quarter fiscal 2014 refinancing, as well as increased interest rates on interest bearing assets.

Provision for Income Taxes

The provision for income taxes in the first quarter of fiscal 2015 was $12.1 million, compared to $22.6 million in the first quarter of fiscal 2014. The effective income tax rate was 34.0% in the first quarter of fiscal 2015, compared to 31.6% in the first quarter of fiscal 2014. Net discrete tax expense of $0.4 million was recorded in the first quarter of fiscal 2015, compared to a benefit of $0.4 million in the first quarter of fiscal 2014. The increase in the effective tax rate for the quarter, excluding discrete items, was primarily attributable to a change in geographical mix of projected earnings.

Bookings

Bookings represent new customer orders for original equipment and services, exclusive of long-term maintenance and repair arrangements and life cycle management arrangements awarded to us during the reporting period. Customer orders represent arrangements to purchase specific original equipment or services. We record bookings when firm orders are received and add the bookings to our backlog. Bookings for the quarters ended January 30, 2015 and January 31, 2014 are as follows:



	Quarter Ended
In thousands	January 30, 2015			January 31, 2014			$ Change			% Change
Bookings
Underground	$	406,909		$	451,051		$	(44,142	)	(9.8	)
Surface	310,799			433,457			(122,658		)	(28.3	)
Eliminations	(17,558		)	(23,982		)	6,424
Total Bookings	$	700,150		$	860,526		$	(160,376	)	(18.6	)

Underground bookings in the first quarter of fiscal 2015 were $406.9 million, compared to $451.1 million in the first quarter of fiscal 2014. The decrease in Underground bookings of $44.1 million, or 10%, in the current year first quarter reflected a decrease in original equipment bookings of $23.6 million, or 16%, and a decrease in service orders of $20.5 million, or 7%. Original equipment orders decreased in Eurasia and China by $53.4 million and $23.8 million, respectively, with increases in all other regions. Service orders decreased in all regions except Africa. The decrease in service orders was led by Australia, which decreased by $15.4 million. Compared to the prior year first quarter, Underground bookings in the first quarter of fiscal 2015 included a $38.7 million unfavorable impact of foreign currency translation, due primarily to the decline in the value of the Australian dollar relative to the U.S. dollar.

Surface bookings in the first quarter of fiscal 2015 were $310.8 million, compared to $433.5 million in the first quarter of fiscal 2014. The decrease in Surface bookings of $122.7 million, or 28%, in the current year first quarter reflected a decrease in original equipment bookings of $53.7 million, or 48%, and a decrease in service orders of $69.0 million, or 21%. Original equipment orders decreased in all regions. The decrease in original equipment orders was led by Latin America, which decreased by $39.4 million. Service orders decreased in all regions except Africa, which was flat, and China. The decrease in service orders was led by North America and Latin America, which decreased by $31.5 million and $28.1 million, respectively. Compared to the prior

Table of Contents

year first quarter, Surface bookings in the first quarter of fiscal 2015 included an $11.0 million unfavorable impact of foreign currency translation.

Backlog represents unfilled customer orders for our original equipment and service, exclusive of long-term maintenance and repair arrangements and life cycle management arrangements. Customer orders included in backlog represent contracts to purchase specific original equipment or services. The backlog amounts reported exclude sales already recognized by period end under the percentage-of-completion method of accounting. The following table provides backlog as of January 30, 2015 and October 31, 2014:



In thousands	January 30, 2015			October 31, 2014
Backlog
Underground	$	752,037		$	729,791
Surface	593,624			629,861
Eliminations	(16,001		)	(26,269		)
Total Backlog	$	1,329,660		$	1,333,383

Liquidity and Capital Resources

The following table summarizes the major elements of our working capital as of January 30, 2015 and October 31, 2014:



In thousands	January 30, 2015			October 31, 2014
Accounts receivable, net	$	888,675		$	1,059,709
Inventories	1,176,048			1,108,308
Trade accounts payable	(322,887		)	(395,945		)
Advance payments and progress billings	(312,401		)	(285,939		)
Trade Working Capital	$	1,429,435		$	1,486,133
Other current assets	174,909			180,151
Short-term borrowings, including current portion of long-term obligations	(16,672		)	(11,739		)
Employee compensation and benefits	(85,000		)	(136,911		)
Accrued warranties	(58,528		)	(67,272		)
Other accrued liabilities	(227,734		)	(265,600		)
Working Capital Excluding Cash and Cash Equivalents	$	1,216,410		$	1,184,762
Cash and cash equivalents	152,326			270,191
Working Capital	$	1,368,736		$	1,454,953

We currently use trade working capital and cash flows from continuing operations as two financial measurements to evaluate the performance of our operations and our ability to meet our financial obligations. We require trade working capital investment because our direct service model requires us to maintain certain inventory levels in order to maximize our customers’ machine availability. This information also provides management with a focus on our receivable terms and collectability efforts and our ability to obtain advance payments on original equipment orders. As part of the continuous improvement of our purchasing and manufacturing processes, we continue to strive for alignment of inventory levels with customer demand and current production schedules.

Cash used by continuing operating activities during the first quarter of fiscal 2015 was $18.4 million, compared to $64.8 million provided by continuing operating activities during the first quarter of fiscal 2014. The decrease in cash from continuing operations was primarily due to lower earnings, an increase in inventories and a reduction in advance payments resulting from a decline in original equipment order activity. These decreases were partially offset by collections of accounts receivable and reduced payments on accounts payable.

Cash used by investing activities during the first quarter of fiscal 2015 was $21.4 million, compared to $24.6 million during the first quarter of fiscal 2014. The decrease in cash used by investing activities was primarily due to a decline in capital expenditures.

Cash used by financing activities during the first quarter of fiscal 2015 was $68.8 million, compared to $151.9 million during the first quarter of fiscal 2014. The decrease in cash used by financing activities was primarily due to a decrease in treasury share repurchases and a decrease in required repayments made on the Term Loan due to the change in the repayment schedule associated with the debt refinancing that occurred in the third quarter of fiscal 2014.

Table of Contents

On November 18, 2014, our Board of Directors declared a cash dividend of $0.20 per outstanding share of common stock. The dividend was paid on December 18, 2014 to all shareholders of record at the close of business on December 4, 2014. In addition, on February 18, 2015, our Board of Directors declared a cash dividend of $0.20 per outstanding share of common stock. The dividend will be paid on March 18, 2015 to all shareholders of record at the close of business on March 4, 2015.

Retiree Benefits

We sponsor pension plans in the U.S. and in other countries. The significance of the funding requirements of these plans is largely dependent on the value of the plan assets, the investment returns on the plan assets, actuarial assumptions, including discount rates, and the impact of the Pension Protection Act of 2006. For the quarter ended January 30, 2015, we contributed $10.2 million to our defined benefit employee pension plans. We expect contributions to our defined benefit pension plans to be approximately $15.0 million for the full fiscal year.

Credit Agreement

On July 29, 2014, we entered into a $1.0 billion unsecured revolving credit facility that matures on July 29, 2019. Under the Credit Agreement, we also may request an increase of up to $250.0 million of additional aggregate revolving commitments, subject to the terms and conditions contained in the Credit Agreement. The Credit Agreement simultaneously replaced the $1.0 billion revolving credit agreement dated as of October 12, 2012 that was scheduled to expire on November 12, 2017. Under the terms of the Credit Agreement, we pay a commitment fee ranging from 0.09% to 0.30% on the unused portion of the revolving credit facility based on our credit rating. Letters of credit issued under applicable provisions of the Credit Agreement represent an unfunded utilization of the Credit Agreement for purposes of calculating the periodic commitment fee due. Eurodollar rate loans bear interest for a period from the applicable borrowing date until a date one week or one, two, three or six months thereafter, as selected by the Company, at the corresponding Eurodollar rate plus a margin of 1.0% to 2.0% depending on the Company's credit rating. Base rate loans bear interest from the applicable borrowing date at a rate equal to (i) the highest of (a) the federal funds rate plus 0.5%, (b) the rate of interest in effect for such day as publicly announced by the administrative agent as its "prime rate," or (c) a daily rate equal to the one-month Eurodollar rate plus 1.0%, plus (ii) a margin that varies according to the Company's credit rating. Swing line loans bear interest at either the base rate described above or the daily floating Eurodollar rate plus the applicable margin, as selected by the Company. The Credit Agreement is guaranteed by each of our current and future material domestic subsidiaries and requires the maintenance of certain financial covenants, including leverage and interest coverage ratios. The Credit Agreement also restricts payment of dividends or other returns of capital to shareholders when we are not in compliance with the financial covenants in the agreement. As of January 30, 2015, we were in compliance with all financial covenants of the Credit Agreement and had no restrictions on the payment of dividends or other returns of capital to shareholders.

On July 29, 2014, we also entered into a term loan agreement which matures July 29, 2019 and provides for a commitment of up to $375.0 million. The Term Loan replaced our prior term loan, dated as of June 16, 2011. The Prior Term Loan had been scheduled to mature on July 16, 2016 and provided an initial commitment of $500.0 million, which had been drawn in full in conjunction with our fiscal 2011 acquisition of LeTourneau Technologies, Inc. and had been amortized to $375.0 million at the date that we entered into the Term Loan. We utilized the $375.0 million commitment under the Term Loan to repay the balance outstanding under the Prior Term Loan. The Term Loan requires quarterly principal payments beginning in fiscal 2016 and contains terms and conditions that are the same as the terms and conditions of the Credit Agreement. The Term Loan is guaranteed by each of our current and future material domestic subsidiaries and requires the maintenance of certain financial covenants, including leverage and interest coverage ratios. As of January 30, 2015, we were in compliance with all financial covenants of the Term Loan.

On October 12, 2011, we issued $500.0 million aggregate principal amount of 5.125% Senior Notes due in 2021 at a discount of $4.2 million in an offering that was registered under the Securities Act. Interest on the 2021 Notes is paid semi-annually in arrears on October 15 and April 15 of each year, and the 2021 Notes are guaranteed by each of our current and future material domestic subsidiaries. At our option, we may redeem some or all of the 2021 Notes at a redemption price of the greater of 100% of the principal amount of the 2021 Notes to be redeemed or the sum of the present values of the principal amounts and the remaining scheduled interest payments using a discount rate equal to the sum of a treasury rate of a comparable treasury issue plus 0.5%.

In November 2006, we issued $250.0 million aggregate principal amount of 6.0% Senior Notes due 2016 and $150.0 million aggregate principal amount of 6.625% Senior Notes due 2036. Interest on the 2016 Notes and 2036 Notes is paid semi-annually in arrears on May 15 and November 15 of each year, and the 2016 Notes and 2036 Notes are guaranteed by each of our current

Table of Contents

and future material domestic subsidiaries. The 2016 Notes and 2036 Notes were issued in a private placement under an exemption from registration provided by the Securities Act. In the second quarter of fiscal 2007, the 2016 Notes and 2036 Notes were exchanged for substantially identical notes in an exchange that was registered under the Securities Act. At our option, we may redeem some or all of the 2016 Notes and 2036 Notes at a redemption price of the greater of 100% of the principal amount of the 2016 Notes and 2036 Notes to be redeemed or the sum of the present values of the principal amounts and the remaining scheduled interest payments using a discount rate equal to the sum of a treasury rate of a comparable treasury issue plus 0.3% for the 2016 Notes and 0.375% for the 2036 Notes.

Stock Repurchase Program

Advance Payments and Progress Billings

As part of the negotiation process associated with original equipment orders, contracts generally require advance payments and progress billings from our customers to support the procurement of inventory and other resources. As of January 30, 2015, advance payments and progress billings were $312.4 million. As orders are shipped or costs are incurred, the advance payments and progress billings are recognized as revenue in the consolidated financial statements.

Financial Condition

We believe our liquidity and capital resources are adequate to meet our projected needs. We had $152.3 million in cash and cash equivalents as of January 30, 2015 and $824.7 million available for borrowings under the Credit Agreement. Requirements for working capital, dividends, pension contributions, capital expenditures, acquisitions, stock repurchases and principal and interest payments on our Term Loan and Senior Notes will be adequately funded by cash on hand and continuing operations, supplemented by short and long term borrowings, as required.

Off-Balance Sheet Arrangements

We lease various assets under operating leases. No significant changes to lease commitments have occurred since our year ended October 31, 2014. We have no other off-balance sheet arrangements.

Critical Accounting Estimates, Assumptions and Policies

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

We believe our accounting policies for revenue recognition, inventories, goodwill and other intangible assets, accrued warranties, pension and postretirement benefits and costs and income taxes are the policies that most frequently require us to make estimates and judgments, and therefore are critical to the understanding of our results of operations. See Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended October 31, 2014 for a discussion of these policies. There were no material changes to these policies since our year ended October 31, 2014.

New Accounting Pronouncements

Our new accounting pronouncements are set forth under Part I, Item 1 of this Quarterly Report on Form 10-Q and are incorporated herein by reference.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As more fully described in our Annual Report on Form 10-K for the year ended October 31, 2014, we are exposed to various types of market risks, such as interest rate risk, commodity price risk and foreign currency risk. We monitor our risks on a continuous basis and generally enter into forward foreign currency contracts to minimize our foreign currency exposures. We do not engage in speculation in our derivative strategies. Gains and losses from foreign currency contract activities are offset by changes in the underlying costs of the transactions being hedged. There have been no material changes to our primary market risk exposures or how such risks are managed since our year ended October 31, 2014.

Item 4. Controls and Procedures

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

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

There have not been any changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during our quarter ended January 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We and our subsidiaries are involved in various unresolved legal matters that arise in the normal course of operations, the most prevalent of which relate to product liability (including approximately 3,300 asbestos and silica-related cases), employment and commercial matters. We and our subsidiaries also become involved from time to time in proceedings relating to environmental matters and litigation arising outside the ordinary course of business.

SEC Investigation. In the fourth quarter of 2014, we received a subpoena from the SEC’s Division of Enforcement concerning our 2012 acquisition of International Mining Machinery Holdings Limited and related accounting matters. This investigation is discussed in Note 14, Contingent Liabilities, of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended October 31, 2014. There were no material developments with respect to this matter in the first quarter of fiscal 2015.

Delaware Chancery Litigation. On November 12, 2014, Ironworkers Local No. 25 Pension Fund (“Plaintiff”) brought suit in the Court of Chancery of the State of Delaware (Case No. 10341) against the Company, members of its Board of Directors, and Bank of America Corporation (“Bank of America”), in its capacity as Administrative Agent under the Credit Agreement and Term Loan. Plaintiff alleges that the Company’s directors breached their fiduciary duties by unjustifiably permitting the Credit Agreement and Term Loan each to contain what Plaintiff calls a “dead hand proxy put” change of control provision, which would provide for the acceleration of amounts outstanding under the Credit Agreement in the event that a majority of the board of directors is replaced in a proxy contest. The plaintiff alleged that this provision, which has been present in a number of the Company's prior credit facilities, has a coercive effect on stockholder voting for change on the board of directors and entrenches the Company’s incumbent directors. The complaint further asserted that Bank of America aided and abetted the defendant directors in their alleged breach of fiduciary duties. On January 27, 2015, the Company and Bank of America executed amendments to the Credit Agreement and Term Loan to remove the "dead hand proxy put." On January 28, 2015, Plaintiff wrote a letter informing the court that the amendments had rendered their claims moot and that they would coordinate with the Company regarding dismissal of the claims and Plaintiff's application for an award of attorneys' fees.

Item 1A. Risk Factors

During the quarter ended January 30, 2015, there were no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for our fiscal year ended October 31, 2014.

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

During the first quarter of fiscal 2015, we made the following purchases of our common stock:



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased Under the Publicly Announced Program*	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program* (in millions)
November 1 - November 28, 2014	566,500	$	53.36	566,500	$	486.3
November 29, 2014 - January 2, 2015	388,080	$	50.94	388,080	$	466.6
January 3 - January 30, 2015	—			—	$	466.6

* In August 2013, our Board of Directors authorized the Company to repurchase up to $1.0 billion in shares of common stock until August 2016. Under the program, the Company may repurchase shares in the open market in accordance with applicable SEC rules and regulations.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Table of Contents

Not applicable.

Table of Contents

Item 6. Exhibits



10.1	Form of Nonqualified Stock Option Agreement, dated December 2, 2014, between the registrant and each of its executive officers in connection with nonqualified stock options granted under the Joy Global Inc. 2007 Stock Incentive Plan.

10.2	Form of Performance Share Agreement, dated December 2, 2014, between the registrant and each of its executive officers in connection with performance share awards granted under the Joy Global Inc. 2007 Stock Incentive Plan.

10.3	Form of Restricted Stock Unit Award Agreement, dated December 2, 2014, between the registrant and each of its executive officers in connection with restricted stock unit awards granted under the Joy Global Inc. 2007 Stock Incentive Plan.

10.4	Second Amendment to Amended and Restated Credit Agreement, dated as of January 27, 2015, among Joy Global Inc., as Borrower, the Guarantors, the lenders party thereto and Bank of America, N.A., as Administrative Agent.

10.5	Second Amendment to Second Amended and Restated Credit Agreement, dated as of January 27, 2015, among Joy Global Inc., as Borrower, the Guarantors, the lenders party thereto and Bank of America, N.A., as Administrative Agent.

31.1	Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certifications

31.2	Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certifications

32.1	Section 1350 Certifications

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Milwaukee, Wisconsin, on March 6, 2015.



	JOY GLOBAL INC.
	(Registrant)

Date: March 6, 2015	/s/ James M. Sullivan
	James M. Sullivan
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

Date: March 6, 2015	/s/ Matthew S. Kulasa
	Matthew S. Kulasa
	Vice President, Controller and Chief Accounting Officer
	(Principal Accounting Officer)

JOY GLOBAL INC - FORM 10-Q - March 6, 2015

Attached files

JOY GLOBAL INC Reports