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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

[  X  ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED        May 3, 2003      

OR

[       ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD from                       to                      

Commission File number 1-9299

JOY GLOBAL INC.
(Exact Name of Registrant as Specified in Its Charter)

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

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS.

Indicate by checkmark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.         Yes [ X ]          No [     ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).           Yes [ X ]           No [     ]

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

JOY GLOBAL INC.

FORM 10-Q -- INDEX
May 3, 2003

PART I. - FINANCIAL INFORMATION

Item 1.   Financial Statements

JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)

See accompanying notes to condensed consolidated financial statements

JOY GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)

See accompanying notes to condensed consolidated financial statements

JOY GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited)
(In thousands)

See accompanying notes to condensed consolidated financial statements

JOY GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 3, 2003
(Unaudited)

1. Description of Business

Joy Global Inc. (the “Company” or “we,” “us” and “our”) manufactures and markets products classified into two business segments: underground mining machinery (Joy Mining Machinery or “Joy”) and surface mining equipment (P&H Mining Equipment or “P&H”). Joy is a major manufacturer of underground mining equipment for the extraction of coal and other bedded minerals and offers comprehensive service locations near major mining regions worldwide. P&H is a major producer of surface mining equipment for the extraction of ores and minerals and provides extensive operational support for many types of equipment used in surface mining.

2. Basis of Presentation

The Condensed Consolidated Financial Statements presented in this quarterly report on Form 10-Q are unaudited and have been prepared by us in accordance with accounting principles generally accepted in the United States for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission.

In the opinion of management, all adjustments necessary for the fair presentation on a going concern basis of the results of operations, cash flows and financial position for all periods presented have been made. All adjustments made are of a normal recurring nature except for those relating to fresh start accounting which are more fully discussed in these notes.

These financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended November 2, 2002. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of the financial statements in conformity with generally accepted accounting principles for interim financial information requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts could differ from the estimates.

Upon emergence from bankruptcy during fiscal 2001, we adopted the principles of fresh start accounting set forth in the American Institute of Certified Public Accountants Statement of Position No. 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.”

Effective with the beginning of fiscal 2003, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 145. SFAS No. 145 requires that gains and losses from extinguishment of debt be classified as extraordinary items only if they meet the criteria in Accounting Principles Board (“APB”) Opinion No. 30. Applying the provisions of APB Opinion No. 30 will distinguish transactions that are part of any entity’s recurring operations from those that are unusual and infrequent. In accordance with SFAS No. 145, we have reclassified previously reported extraordinary losses on early retirement of debt to a separate line item above the caption “Income (loss) before income taxes and minority interest” in our Condensed Consolidated Statement of Operations for the three and six months ended May 4, 2002. The reclassification had no effect on the previously reported net loss and reduced previously reported income from continuing operations before extraordinary item by $4.9 million ($0.10 per share) for the three and six months ended May 4, 2002.

3. Acquisitions

Effective November 4, 2002, the Company signed an agreement for the acquisition of the 25% interest in our Australian surface mining equipment subsidiary owned by Kobelco Construction Machinery Co. Limited. Payment of the purchase price of approximately $12.3 million, which included $11.2 million of minority interest and $1.1 million in intangible assets, was made on March 18, 2003. As a result, our ownership of the subsidiary increased to 100% and we removed minority interest from our Condensed Consolidated Financial Statements.

4. Borrowings and Credit Facilities

On June 25, 2002, we entered into an amended and restated Credit Agreement (“Credit Agreement”) which consists of a $250 million revolving loan maturing on October 31, 2005. Substantially all of our assets and our domestic subsidiaries’ assets are pledged as collateral under the Credit Agreement. Outstanding borrowings bear interest equal to either LIBOR plus the applicable margin (3.25% to 2.25%) or the Base Rate (defined as the higher of the Prime Rate or the Federal Funds Effective Rate plus 0.50%) plus the applicable margin (2.25% to 1.25%) at our option depending on certain of our financial ratios. We pay a commitment fee ranging from 0.50% to 0.75% on the unused portion of the revolving loan. The Credit Agreement was amended as of October 31, 2002, to, among other things, lower financial covenants for the quarter ended November 2, 2002 and for each quarter in fiscal 2003. At May 3, 2003, we were in compliance with these financial covenants. Earlier in 2002 we issued $200 million in 8.75% Senior Subordinated Notes due March 15, 2012.

Both the Senior Subordinated Note Indenture and Credit Agreement contain restrictions and financial covenants relating to, among other things, minimum financial performance and limitations on the incurrence of additional indebtedness and liens, asset sales, and capital expenditures. The covenants in the Senior Subordinated Note Indenture are less restrictive than the covenants in the Credit Agreement. Interest coverage, leverage and EBITDA covenants in the Credit Agreement generally become more restrictive over the term of the agreement.

At May 3, 2003, there were no outstanding borrowings under the Credit Agreement. Outstanding letters of credit issued under the Credit Agreement, which count toward the $250 million credit limit, totaled approximately $68.5 million. The available balance is also limited by a borrowing base calculation. At May 3, 2003, there was approximately $95.2 million available for borrowings under the Credit Agreement.

5. Shareholders’ Equity

We have 150,000,000 shares of authorized common stock, par value $1.00 per share, 50,000,000 of which will ultimately be distributed in connection with our July 12, 2001 (“Effective Date”) emergence from bankruptcy and are deemed outstanding for accounting purposes at the Effective Date. Under our Plan of Reorganization (“POR”), the 50,000,000 shares are being distributed at approximately six month intervals to holders of allowed claims in the bankruptcy case as the remaining open bankruptcy claims are resolved. On January 31, 2003, we released our fourth distribution under the POR amounting to 1,505,777 shares of common stock, bringing total distributions to date under the POR to 47,632,702 shares. The fourth distribution was based on approximately $1.26 billion of “current adjusted claims” and, when combined with the prior distributions, equated one share of Joy Global Inc. common stock for each $25.13 of allowed claim. As of May 3, 2003, 2,367,298 shares are designated for future distribution under the POR and held in a disputed claim equity reserve pending resolution of remaining open bankruptcy claims.

Our stock incentive plan authorizes the grant of up to 8,056,000 stock options, performance units and other stock-based awards to officers, employees and directors. As of May 3, 2003, stock option grants aggregating approximately 4.6 million shares had been made to approximately 250 individuals. Options to purchase 15,000 shares have also been granted to each of our six outside directors. On February 25, 2003, grants of 5,582 restricted stock units were made to each of our six outside directors. The grants replace annual stock option grants made to outside directors in prior years. The restricted stock units vest one year after the grant date and provide that a number of shares of common stock equal to the number of vested units will be delivered one year after the director's service on the board terminates.

The 2001 and 2003 Performance Unit Award Programs under our Stock Incentive Plan provide long-term incentive compensation opportunities to certain senior executives. Up to approximately 742,000 shares of Common Stock may be earned by the senior executives under the 2001 and 2003 Performance Unit Award Programs if, at the end of a three and one quarter year award cycle, for the 2001 Performance Unit Awards, or at the end of a three year award cycle, for the 2003 Performance Unit Awards, cumulative net cash flow, as defined in the performance award agreements, exceeds certain threshold amounts. Each performance unit represents the right to earn one share of common stock. Awards can range from 0% to 150% of the target award opportunities. In the event of a change in control, the performance units are paid out in cash based on the greater of actual performance or target award. As of May 3, 2003, the compensation expense charge for these awards was $1.45 million.

As of May 3, 2003, awards under the stock incentive plan, our stock-based employee compensation plan, were accounted for under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. The following table illustrates the effect on net income and earnings (loss) per share if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

Separate Statements of Shareholders’ Equity are not required to be presented for interim periods. However, comprehensive income (loss) consisted of the following:

6. Basic and Diluted Net Income Per Share

Basic net income per share is computed based on the weighted-average number of ordinary shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during each period, plus dilutive potential ordinary shares considered outstanding during the period, in accordance with SFAS No. 128, “Earnings per Share.” Under SFAS No. 128, additional shares associated with the performance units and the restricted stock units are not to be included in the diluted earnings per share denominator until the performance and vesting criteria have been met. Options to purchase shares of common stock that were outstanding at the three and six months ended May 3, 2003 and at the three and six months ended May 4, 2002 are not included in the computation of diluted earnings per share because the additional shares would reduce the loss per share amount from operations and, therefore, would be anti-dilutive.

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

7. Contingent Liabilities:

The Company and its subsidiaries are parties to litigation matters and claims that are normal in the course of their operations. Also, as a normal part of their operations, the Company’s subsidiaries undertake certain contractual obligations, warranties and guarantees in connection with the sale of products or services. Although the outcome of these matters cannot be predicted with certainty and favorable or unfavorable resolution may affect the results of operations on a quarter-to-quarter basis, management believes that such matters will not have a materially adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

Certain specific contingent liabilities are discussed in our annual report on Form 10-K for the year ended November 2, 2002, and our quarterly report on Form 10-Q for the quarter ended February 1, 2003.

By notice dated May 16, 2003, Sokolovskava Investment Company (“SIC”), a mining company in Russia, filed a request for arbitration with the International Court of Arbitration against Joy Mining Machinery Limited (“Joy MM”), an indirect subsidiary of the Company in the United Kingdom, to recover damages alleged to have arisen out of contracts entered into by Joy MM and SIC in 1995 and 1996 for the supply of underground mining equipment and related services. The request for arbitration seeks damages for loss of profit, delay, repairs, loss of use and other consequential damages of at least $67 million. The company vigorously disputes the claim.

The Company and its subsidiaries are involved in proceedings and potential proceedings relating to environmental matters. Although it is difficult to estimate the potential exposure to the Company related to these environmental matters, the Company believes that the resolution of these matters will not have a materially adverse effect on its consolidated financial position, results of operations or liquidity.

8. Inventories

Consolidated inventories consisted of the following:

9. Warranties

We provide for the estimated costs that may be incurred under product warranties to remedy deficiencies of quality or performance of our products. These product warranties extend over either a specified period of time, units of production or machine hours depending upon the product subject to the warranty. We accrue a provision for estimated future warranty costs based upon the historical relationship of warranty costs to sales. Warranty reserve is included in other accrued liabilities in the Condensed Consolidated Balance Sheet. 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 Company's product warranty reserve as of and for the Three and Six Months ended May 3, 2003:

10. Restructuring Charges

Costs associated with restructuring activities, other than those activities covered by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or that involve an entity newly acquired in a business combination, are accounted for in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. Accordingly, costs associated with such activities are recorded as restructuring costs in the consolidated statements of operations when the liability is incurred. Below is a summary of the activity related to restructuring costs recorded pursuant to SFAS No. 146 for the three and six months ended May 3, 2003.

During the 2003 First Quarter, we began implementing a manufacturing capacity rationalization at our P&H Mining Equipment Milwaukee location. A reduction of factory space by 350,000 square feet will result in a facility that is more efficient yet still capable of producing the entire world’s needs for the P&H range of surface mining products. The rationalization will take most of fiscal 2003 to complete, and is expected to result in first year savings greater than the cash costs to implement. The expected costs are estimated at $2.1 million. In accordance with SFAS No. 144, approximately $1.2 million of restructuring charges were incurred for property, plant and equipment determined to be either held for sale or disposed of other than by sale in the 2003 First Quarter. In addition, approximately $0.2 million were incurred in accordance with SFAS No. 146 in the 2003 Second Quarter.

During the 2003 Second Quarter, Joy Mining Machinery began implementing a manufacturing capacity rationalization plan for North America. The expected costs for the Joy North American manufacturing capacity rationalization are estimated at $3.9 million. During the 2003 Second Quarter, Joy recorded charges of $0.07 million for termination benefits related to the involuntary termination of 15 employees, charges of $0.5 million for the abandonment of excess warehousing equipment at its Franklin, Pennsylvania facility and $0.2 million for other equipment relocation costs.

11. Reorganization Items

Reorganization items include income, expense and loss that were realized or incurred as a result of our reorganization under Chapter 11 of the Bankruptcy Code. At May 4, 2002, the $5.8 million reorganization item represented the collection of a fully reserved note from Beloit Corporation and professional fee settlements offset by legal fees, a loss on the sale of a building related to pre-emergence activities and a write-down of a note receivable related to a discontinued operation.

12. Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities,” which requires the consolidation of certain special purpose or variable interest entities. FIN 46 is applicable to financial statements issued after June 15, 2003. We do not expect the adoption of this statement to have a material impact on our financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. Although we are still in the process of reviewing the new statement, we do not expect the adoption of this statement to have a material impact on our financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 will be implemented by reporting the cumulative effect of a change in accounting principle for financial instruments created before the issuance date of the statement and still existing at the beginning of the period of adoption. Although we are still in the process of reviewing the new statement, we do not expect the adoption of this statement to have a material impact on our financial statements.

13. Segment Information

At May 3, 2003, we had two reportable segments: Underground Mining Machinery and Surface Mining Equipment. Operating income (loss) of the segments does not include interest income or expense and provision (benefit) for income taxes. There are no significant intersegment sales. Total assets are those used in our operations in each segment. Corporate assets consist primarily of deferred financing costs, cash and cash equivalents and deferred income taxes.

(1) - Includes fresh start accounting charges of $3.0 million, $6.0 million, $4.7 million and $42.1 million for Underground Mining Machinery and $2.3 million, $5.5 million, $5.2 million and $26.5 million for Surface Mining Equipment for the 2003 Second Quarter, 2003 Six Months, 2002 Second Quarter and 2002 Six Months, respectively.

14. Subsidiary Guarantors

The following tables present condensed consolidated financial information for the 2003 Second Quarter, 2002 Second Quarter, 2003 Six Months and 2002 Six Months for: (a) the Company; (b) on a combined basis, the guarantors of the Credit Agreement and Senior Subordinated Notes, which include substantially all the domestic subsidiaries of the Company (“Subsidiary Guarantors”); and (c) on a combined basis, the non-guarantors, which include all of the foreign subsidiaries of the Company (“Non-Guarantor Subsidiaries”). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantors are unconditionally, jointly, and severally liable under the guarantees, and we believe such separate statements or disclosures would not be useful to investors.

Condensed Consolidated
Statement of Operations
(Unaudited)
(In thousands)

Condensed Consolidated
Statement of Operations
(Unaudited)
(In thousands)

Condensed Consolidated
Balance Sheet
May 3, 2003
(Unaudited)
(In thousands)