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Joy Global Inc. Notes to Consolidated Financial Statements October 31, 2008 idiary in the United On April 19, 2004, Joy South Africa declared a dividend to our wholly owned subsidiary in the United accordance with Kingdom the in the amount of approximately $46 million. As part of the transaction and in accordance with the nsaction. In August South African Tax Act (“Act”), Joy South Africa was not required to pay tax on the transaction. In August e Joy South Africa 2004 the South African Revenue Service (“SARS”) stated that it disagreed with the Joy South Africa received a notice interpretation of of the Act and would attempt to collect this tax. In September 2005, we received a notice of cluding interest assessment and from SARS, which as of October 2007 was approximately $8.0 million, including interest and assessment based penalties. on During the fourth quarter of fiscal 2007, we recorded a liability related to the assessment based on we would agree the to increased probability of a negative outcome and representing an amount for which we would agree to million, inclusive settle. of In December 2008, we reached agreement with SARS in the matter for $4.2 million, inclusive of in March 2009. interest, which approximated the accrued amount. The settlement is expected to be paid in March 2009. ns, and others At for October 31, 2008, we were contingently liable to banks, financial institutions, and others for rety bonds securing approximately $179.4 million for outstanding letters of credit, bank guarantees, and surety bonds securing ess. Of the $179.4 performance of sales contracts and other guarantees in the ordinary course of business. Of the $179.4 remaining workers million, approximately $4.0 million remains in place and is substantially attributable to remaining workers g letters of credit compensation or obligations of Beloit Corporation and $21.1 million relates to outstanding letters of credit or ed credit facilities. other guarantees issued by non-U.S. banks for non-U.S. subsidiaries under locally provided credit facilities. g to environmental From time to time we and our subsidiaries become involved in proceedings relating to environmental a materially adverse matters. We believe that the resolution of such environmental matters will not have a materially adverse pany. effect on our consolidated financial position, results of operations or liquidity of the Company. ternational financial We have entered into various forward foreign exchange contracts with major international financial ign exchange rates. institutions for the purpose of hedging our risk of loss associated with changes in foreign exchange rates. 008, the notional These or contracts involve off-balance-sheet market and credit risk. As of October 31, 2008, the notional or terms, was $537.1 face value of forward foreign exchange contracts, in absolute U.S. dollar equivalent terms, was $537.1 million. re foreign currency Forward exchange contracts are entered into to protect the value of committed future foreign currency tract would be offset receipts and disbursements and consequently any market related loss on the forward contract would be offset d to net market by risk changes in the value of the hedged item. As a result, we are generally not exposed to net market risk associated with these instruments. rties to our forward We are exposed to credit-related losses in the event of non-performance by counterparties to our forward k of America N.A., exchange contracts. We currently have a concentration of these contracts held with Bank of America N.A., , including Bank which of maintains an investment grade rating. We do not expect any counterparties, including Bank of isk only when it America, has N.A. to fail to meet their obligations. A contract is generally subject to credit risk only when it has a positive fair value and the maximum exposure is the amount of the positive fair value. 19. Disclosure About Fair Value of Financial Instruments h class of financial The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: he short maturity Cash of and Cash Equivalents: The carrying value approximates fair value because of the short maturity of those instruments. es fair value as Credit the Facility and Term Loan: The carrying value of the Credit Facility approximates fair value as the previously defined). facility bears a floating rate of interest expressed in relation to LIBOR or the Base Rate (previously defined). f borrowing for Consequently, an the cost of this instrument always approximates the market cost of borrowing for an equivalent maturity and risk class. F-36 F-36
Joy Global Inc. Notes to Consolidated Financial Statements October 31, 2008 Senior Notes: The fair market value of the Senior Notes is estimated based on market quotations at yearend. Forward Exchange Contracts: The fair value of forward exchange contracts represents the estimated amounts receivable (payable) to terminate such contracts at the reporting date based on foreign exchange market prices at that date. The estimated fair values of financial instruments at October 31, 2008 and October 26, 2007 are as follows: In thousands Carrying Value Fair Value October 31, 2008 Cash and cash equivalents $ 201,575 $ 201,575 6.0 % Senior Notes 247,073 211,825 6.625% Senior Notes 148,374 114,869 Term Loan 161,875 161,875 Other borrowings 10,105 10,105 Forward exchange contracts (28,850) (28,850) October 26, 2007 Cash and cash equivalents $ 173,248 $ 173,248 6.0 % Senior Notes 246,797 254,298 6.625% Senior Notes 148,355 155,372 Other borrowings 1,345 1,345 Forward exchange contracts 5,302 5,302 The fair values of forward exchange contracts at October 31, 2008 are analyzed in the following table of U.S. dollar equivalent terms: In thousands of U.S. Dollars Fair Value Buy Sell U.S. Dollar $ 8,412 $ (6,870) Australian Dollar (8,084) 273 British Pound Sterling (26,471) 4,505 Canadian Dollar (2,319) 1,091 South African Rand (1,437) 102 Euro (99) (20) Brazilian Real (1,507) 216 Czech Koruna (22) - Hungarian Forint (90) 8 Chinese Yuan (1,435) - Chilean Peso (1,431) 6,284 Polish Zloty 44 - We are exposed to fluctuations in foreign currency exchange rates and interest rates. To manage these risks, we use derivative instruments, in this case, forward exchange contracts. Derivative instruments used in hedging activities are viewed as risk management tools, involve little complexity, and are not used for trading or speculative purposes. As part of our risk management process, we monitor concentrations of credit risk associated with financial institutions. We also monitor the creditworthiness of our customers to which we grant credit terms in the F-37
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global reach. leading technology. j
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f i n a n c i a l h i g h l i g h t
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than doubled from 2007, while after
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future revenues. The ultra-class dr
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UNITED STATES SECURITIES AND EXCHAN
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PART I This document contains forwa
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connected bridge structures that ut
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Fiscal 2008 Developments: • First
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Raw Materials Joy purchases electri
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• costs and difficulties in integ
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Demand for our products may be adve
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Item 2. Properties As of October 31
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(1) Under a month to month lease (2
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Executive Officers of the Registran
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The following graph sets forth the
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Item 7. Management’s Discussion a
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Operating Income The following tabl
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Operating Income The following tabl
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