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Refundable income taxes and related interest 11,289 (2,584) (6,268)
Other current assets 259 10,008 (439)
Trade accounts payable 16,488 (1,757) (3,302)
Employee compensation and bene¬ts 698 (15,564) (3,702)
Accrued plant closing costs (3,888) (14,148) 20,496
Other current liabilities (3,181) (15,927) (3,030)
Decrease in operating working capital $ 7,039 $ 11,605 $ 72,172


(The accompanying notes are an integral part of the financial statements.)
Harnischfeger Corporation




3-37


CONSOLIDATED STATEMENT OF SHAREHOLDERS™ EQUITY

Capital in
Excess of Cumulative
(Dollar amounts in thousands Preferred Common Par Value Retained Translation
except per share ¬gures) Stock Stock of Shares Earnings Adjustments Total

Balance at October 31, 1981 $10,000 $10,085 $ 87,932 $120,005 $ ” $228,022
Cumulative translation adjustments through
October 31, 1981 (1,195) (1,195)
Issuance of Common Stock:
10,000 shares to Kobe Steel, Ltd. 10 91 101
38,161 shares under stock purchase and
dividend reinvestment plans 39 309 348
Net (loss) (76,531) (76,531)
Cash dividends paid on:
Preferred stock (350) (350)
Common stock $.20 per share (2,019) (2,019)
Translation adjustments, net of deferred income
taxes of $128 (2,928) (2,928)
Part 2 Business Analysis and Valuation Tools




Balance at October 31, 1982 10,000 10,134 88,332 41,105 (4,123) 145,448
Net (loss) (34,630) (34,630)
Translation adjustments, including deferred
income taxes of $33 (899) (899)
Balance at October 31, 1983 10,000 10,134 88,332 6,475 (5,022) 109,919
Issuance of:
2,150,000 shares of common stock 2,150 19,160 21,310
2,000,000 common stock purchase warrants 6,663 6,663

17,500 shares of Series A $7.00 cumulative
convertible preferred stock in discharge of
dividends payable on preferred stock 1,750 (1,750) ”
Net income 15,176 15,176
Translation adjustments, net of deferred income
taxes of $300 (5,874) (5,874)
Other 178 178
Balance at October 31, 1984 $11,750 $12,284 $114,333 $ 19,901 $(10,896) $147,372
Overview of Accounting Analysis




(The accompanying notes are an integral part of the financial statements.)
119
120 Overview of Accounting Analysis




3-38
Overview of Accounting Analysis




FINANCIAL NOTES used for ¬nancial reporting purposes (See Note 2).
For U.S. income tax purposes, depreciation lives are
based principally on the Class Life Asset Deprecia-
Note 1
tion Range for additions, other than buildings, in the
Summary of Signi¬cant Accounting Policies:
years 1973 through 1980, and on the Accelerated
Consolidation”The consolidated ¬nancial state- Cost Recovery System for all additions after 1980.
ments include the accounts of all majority-owned Discontinued facilities held for sale are carried at




Harnischfeger Corporation
subsidiaries except a wholly-owned domestic the lower of cost less accumulated depreciation or
¬nance subsidiary, a subsidiary organized in 1982 estimated realizable value, which aggregated $4.9
as a temporary successor to a distributor, both of million and $3.6 million at October 31, 1984 and
which are accounted for under the equity method, 1983, respectively, and were included in Other
and a wholly-owned Brazilian subsidiary, which is Assets in the accompanying Balance Sheet.
Business Analysis and
2
carried at estimated net realizable value due to eco-
Valuation Tools Pension Plans”The Corporation has pension
nomic uncertainty. All related signi¬cant intercom-
plans covering substantially all of its employees.
pany balances and transactions have been
Pension expenses of the principal de¬ned bene¬t
eliminated in consolidation.
plans consist of current service costs of such plans
Financial statements of certain consolidated sub-
and amortization of the prior service costs and actu-
sidiaries, principally foreign, are included, effective
arial gains and losses over periods ranging from 10
in ¬scal year 1984, on the basis of their ¬scal years
to 30 years. The Corporation™s policy is to fund at a
ending September 30; previously, certain of such
minimum the amount required under the Employee
subsidiaries had ¬scal years ending July (See Note
Retirement Income Security Act of 1974.
3 2). Such ¬scal periods have been adopted by the
Income Taxes”The consolidated tax provision is
Overview of Accounting Analysis
subsidiaries in order to provide for a more timely
Harnis- computed based on income and expenses recorded
consolidation with the Corporation.
chfeger Cor- in the Statement of Operations. Prepaid or deferred
Inventories”The Corporation values its invento-
poration taxes are recorded for the difference between such
ries at the lower of cost or market. Cost is deter-
taxes and taxes computed for tax returns. The Cor-
mined by the last-in, ¬rst-out (LIFO) method for
poration and its domestic subsidiaries ¬le a consoli-
inventories located principally in the United States,
dated federal income tax return. The operating
and by the ¬rst-in, ¬rst-out (FIFO) method for inven-
results of Harnischfeger GmbH are included in the
tories of foreign subsidiaries.
Corporation™s U.S. income tax returns.
Operating Plants, Equipment and Deprecia- Additional taxes are provided on the earnings of
tion”Properties are stated at cost. Maintenance foreign subsidiaries which are intended to be remit-
and repairs are charged to expense as incurred and ted to the Corporation. Such taxes are not provided
expenditures for betterments and renewals are capi- on subsidiaries™ unremitted earnings which are
talized. Effective in 1981, interest is capitalized for intended to be permanently reinvested.
qualifying assets during their acquisition period. Investment tax credits are accounted for under the
Capitalized interest is amortized on the same basis ¬‚ow-through method as a reduction of the income
as the related asset. When properties are sold or tax provision, if applicable, in the year the related
otherwise disposed of, the cost and accumulated asset is placed in service.
depreciation are removed from the accounts and Reporting Format”Certain previously reported
any gain or loss is included in income. items have been conformed to the current year™s
Depreciation of plants and equipment is provided presentation.
over the estimated useful lives of the related assets,
or over the lease terms of capital leases, using, Note 2
effective in ¬scal year 1984, the straight-line method
Accounting Changes:
for ¬nancial reporting, and principally accelerated
Effective November 1, 1983, the Corporation
methods for tax reporting purposes. Previously,
includes in its net sales products purchased from
accelerated methods, where applicable, were also
121
Overview of Accounting Analysis




3-39 Part 2 Business Analysis and Valuation Tools




Kobe Steel, Ltd. and sold by the Corporation, to October 31,
re¬‚ect more effectively the nature of the Corpora- 1984 1983
tion™s transactions with Kobe. Previously only the
$ 2,155 $11,910
Cash”in demand deposits
gross margin on Kobe-originated equipment was
Cash”in special accounts
included. During ¬scal year 1984 such sales aggre-
principally to support
gated $28.0 million. Also, effective November 1,
4,516 ”
letters of credit
1983, the ¬nancial statements of certain foreign
89,336 52,365
Temporary investments
Harnischfeger Corporation




subsidiaries are included on the basis of their ¬scal
$96,007 $64,275
years ending September 30 instead of the previous
years ending July 31. This change had the effect of Temporary investments consisted of short-term
increasing net sales by $5.4 million for the year U.S. and Canadian treasury bills, money market
ended October 31, 1984. The impact of these funds, time and certi¬cates of deposit, commercial
changes on net income was insigni¬cant. paper and bank repurchase agreements and bank-
In 1984, the Corporation has computed depreci- ers™ acceptances. Temporary investments are stated
ation expense on plants, machinery and equipment at cost plus accrued interest, which approximates
using the straight-line method for ¬nancial reporting market value.
purposes. Prior to 1984, the Corporation used prin-
Note 4
cipally accelerated methods for its U.S. operating
plants. The cumulative effect of this change, which Long-Term Debt, Bank Credit Lines and Interest
was applied retroactively to all assets previously sub- Expense:
jected to accelerated depreciation, increased net Outstanding long-term debt payable to unaf¬li-
income for 1984 by $11.0 million or $.93 per com- ated lenders was as follows (in thousands of dollars):
mon and common equivalent share. The impact of
the new method on income for the year 1984 before October 31,
the cumulative effect was insigni¬cant. 1984 1983
As a result of the review of its depreciation policy,
Parent Company:
the Corporation, effective November 1, 1983, has
15% Senior Notes due $
changed its estimated depreciation lives on certain April 15, 1994 $ 47,700 ”
U.S. plants, machinery and equipment and residual 12% Subordinated Deben-
values on certain machinery and equipment, which tures, with an effective
increased net income for 1984 by $3.2 million or interest rate of 16.3%;
$.27 per share. No income tax effect was applied to sinking fund redemption
this change. payments of $7,500 due
annually on April 15 in
The changes in accounting for depreciation were
1994“2003, and ¬nal
made to conform the Corporation™s depreciation
payment of $25,000 in
policy to those used by manufacturers in the Corpo-
2004 100,000 ”
ration™s and similar industries and to provide a more
Term Obligations”
equitable allocation of the cost of plants, machinery
Insurance company debt:
and equipment over their useful lives. 9% Notes ” 20,000
9 7/8 Notes ” 38,750
Note 3
8 7/8 Notes ” 40,500
Cash and Temporary Investments: Bank debt, at 105% of
prime ” 25,000
Cash and temporary investments consisted of the
Paper purchase debt, at
following (in thousands of dollars):
prime or LIBOR, plus
11„4% ” 18,519
9.23% Mortgage Note due
monthly to April, 1998 4,327 4,481
152,027 147,250
122 Overview of Accounting Analysis




3-40
Overview of Accounting Analysis




Statement of
October 31,
Year Ended October 31,
Operations
1984 1983
1984 1983 1982
Consolidated Subsidiaries:
$1,165 $2,662 $9,978
Revenues
Notes payable to banks in
German marks ” 9,889 Less:
Operating
Contract payable in 1985“
Expenses 1,530 3,386 14,613
1989, in South African

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