The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes. References made to years are for fiscal year periods. Dollar amounts are in thousands, except share and per-share data and as indicated.

The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Joy Global Inc. and its subsidiaries for 2012, 2011, and 2010. For a more complete understanding of this discussion, please read the Notes to Consolidated Financial Statements included in this report.

We have been manufacturing mining equipment for over 125 years. We operate in two business segments: Underground Mining Machinery and Surface Mining Equipment. We are a leading manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. Our Underground Mining Machinery segment is a major manufacturer of underground mining equipment for the extraction of coal and other bedded minerals. Our Surface Mining Equipment segment 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. Both segments offer comprehensive service locations near major mining regions worldwide.

In addition to selling original equipment, we provide parts, components, repairs, rebuilds, diagnostic analysis, training, and other aftermarket services for our installed base of machines. We also provide aftermarket services for equipment manufactured by other companies, including manufacturers with which we have ongoing relationships and which we refer to as "Alliance Partners." We emphasize our aftermarket products and services as an integral part of lowering our customers' cost per unit of production and are focused on continuing to grow this part of our business.

LeTourneau Technologies, Inc.

On June 22, 2011 we purchased LeTourneau Technologies, Inc. for approximately $1.1 billion. We purchased all of the outstanding capital stock. LeTourneau designs, builds and supports equipment for the mining industry and has been a leader in the earthmoving equipment industry since the 1920s. LeTourneau operated in three business segments, mining, steel products and drilling products. The mining products business is the world's leading manufacturer of large wheel loaders for surface mining, providing the industry's largest model sizes and payload capacities.

On October 24, 2011 we completed the sale of LeTourneau Technologies Drilling Systems, Inc. to Cameron International Corporation for $375.0 million in cash, subject to a post-closing working capital adjustment of which $56.3 million was paid in 2012. The LeTourneau facilities in Houston, Texas and Vicksburg, Mississippi were sold to Cameron International Corporation in conjunction with this transaction. We entered into a Transition Manufacturing and Supply Agreement to allow for the orderly transfer of drilling products production from Longview and a Steel Supply Agreement to allow the buyer time to develop other sources. In conjunction with our entrance into the Transition Manufacturing and Supply Agreement, we recognized an upfront loss and related liability of $23.3 million in our 2011 fiscal year for unreimbursable manufacturing costs. The results of the drilling products business are included in discontinued operations on the accompanying consolidated statement of income and the assets and liabilities of the drilling products business are reflected as assets and liabilities of discontinued operations on the accompanying consolidated balance sheet. The results of the mining and steel businesses (collectively "the mining equipment business") are included in our Surface Mining Equipment segment. From the date of acquisition until our 2011 fiscal year end, the mining equipment business of LeTourneau had net sales of $144.9 million and operating income of $23.2 million. 2011 operating income was reduced by $8.8 million for non-recurring purchase accounting charges, of which $7.7 million was attributable to acquired inventory. In fiscal year 2012, the mining equipment business of LeTourneau had net sales of $451.4 million and operating income of $73.8 million. 2012 operating income was reduced by $13.7 million for non-recurring purchase accounting charges, of which $11.5 million was attributable to acquired inventory.

International Mining Machinery

On July 11, 2011, we entered into an SPA with TJCC Holdings Limited, a corporation controlled by The Jordan Company, L.P., to acquire approximately 41.1%, of IMM. IMM is a leading designer and manufacturer of underground coal mining equipment in China. On July 28, 2011, August 16, 2011 and September 2, 2011 we purchased shares on the open market representing an aggregate of 28.1% of the total outstanding shares of IMM. On December 20, 2011, the Anti-monopoly Bureau of the Ministry of Commerce of the People's Republic of China approved the purchase of IMM shares covered by the SPA and the acquisition closed on December 29, 2011. At such time, we acquired a controlling interest in IMM which, when aggregated with earlier open market purchases, was 69.2% of IMM's outstanding common stock. Upon closing, we recognized a $19.4 million gain on the re-measurement of our pre-existing equity interest in IMM. On January 6, 2012, in accordance with Rule 26.1 of the Hong Kong Takeovers Code, we commenced an unconditional cash tender offer to purchase the remaining outstanding IMM shares and options to purchase IMM shares that we did not own. On February 10, 2012, we completed the tender offer. As a result of the tender offer, our beneficial ownership of IMM common stock increased to 98.9%, for which we had paid aggregate consideration of approximately $1.4 billion. On July 25, 2012, we effected the compulsory acquisition of the remaining shares under applicable provisions of the Cayman Island Companies Law, under which IMM is incorporated. We paid consideration of approximately $16.2 million to complete the compulsory acquisition, using the remaining cash which had been placed in escrow to purchase IMM shares. The combined effect of these transactions resulted in our beneficial ownership of 100% of the common stock of IMM. From December 29, 2011, the date we acquired control of IMM, until our fiscal year end, IMM had net sales of $219.0 million and operating income of $9.4 million. Operating income was reduced by $27.4 million for non-recurring purchase accounting charges, of which $20.9 million was attributable to acquired inventory.

Operating Results

Bookings for 2012 were approximately $5.1 billion, a decrease of 9.3% from the prior year. Underground original equipment bookings, which included $217.6 million from IMM, were down $316.6 million, or 20.6%, when compared to the prior year. When excluding the impact of the IMM acquisition, these bookings decreased in all regions except for Africa due to the weakening coal market in the U.S. and China, as well as significant orders from customers in Australia and Russia in the prior year that did not repeat in 2012. Underground Mining Machinery aftermarket bookings were substantially flat compared to the prior year. Increases in aftermarket bookings in China, Africa, and Australia were partially offset by declining orders in the U.S. and Eurasia. Surface Mining Equipment original equipment orders, which included an incremental $236.3 million increase from the acquisition of LeTourneau, were down $221.5 million, or 16.7%, when compared to the prior year. These bookings were down in all regions except Africa and Australia due to weaker markets and the record bookings in the prior year. Surface Mining Equipment aftermarket bookings increased $186.6 million, or 14.0%. These bookings increased in South America, Australia, and Eurasia due to increased demand for parts and services. All other regions experienced declining aftermarket orders. Compared to last year, fiscal year 2012 bookings included a $97.1 million unfavorable effect of foreign currency translation.

Net sales for 2012 totaled approximately $5.7 billion compared to $4.4 billion in 2011, an increase of 28.5%. In 2012, IMM had sales of $219.0 million and LeTourneau's sales increased by $306.5 million. Aftermarket sales increased $332.4 million, or 12.7%, when compared to the prior year due to increased parts sales and machine assemblies for both the Underground Mining Machinery and Surface Mining Equipment segments. Original equipment sales increased $924.6 million, or 51.8%, when compared to the prior year due to last year's strong order rate flowing to this year's sales. Foreign currency translation unfavorably impacted sales by $51.4 million.

Operating income in 2012 was $1.2 billion compared to prior year operating income of $920.2 million, an increase of 27.4%. Operating income in 2012 and 2011 was reduced by $41.1 million and $8.8 million in non-recurring purchase accounting charges, respectively. The increase in operating income was primarily the result of increased sales volume, offset by pension curtailment charges, restructuring costs and an increase in unfavorable manufacturing variances. Foreign currency translation unfavorably impacted operating income by $11.6 million.

The results of LeTourneau's mining equipment business are included in our Surface Mining Equipment segment. In fiscal year 2012, LeTourneau's mining equipment business had bookings of $495.1 million, net sales of $451.4 million and operating income of $73.8 million. Operating income was reduced by $26.1 million for purchase accounting charges. Non-recurring purchase accounting charges amounted to $13.7 million, of which $11.5 million was attributable to acquired inventory.

The results of IMM are included in our Underground Mining Machinery segment. From December 29, 2011 through the end of our fiscal year, IMM had bookings of $217.6 million, net sales of $219.0 million and operating income of $9.4 million, Operating income was reduced by $40.1 million for purchase accounting charges. Non-recurring purchase accounting charges amounted to $27.4 million, of which $20.9 million was attributable to acquired inventories for which amortization ended in 2012.

Income from continuing operations attributable to Joy Global Inc. was approximately $767.1 million, or $7.18 per diluted share, in 2012 compared to $631.0 million, or $5.92 per diluted share, in 2011.

2012 Compared with 2011

Sales

The following table sets forth 2012 and 2011 net sales as derived from our Consolidated Statement of Income:

                                                                        $              %
  In thousands                      2012             2011            Change         Change

  Net Sales
  Underground Mining Machinery   $ 3,107,488      $ 2,576,625      $   530,863         20.6 %
  Surface Mining Equipment         2,737,488        1,959,353          778,135         39.7 %
  Eliminations                      (184,087 )       (132,072 )        (52,015 )

  Total                          $ 5,660,889      $ 4,403,906      $ 1,256,983         28.5 %

Underground Mining Machinery net sales for 2012 were $3.1 billion compared to $2.6 billion for 2011, and included a $136.2 million increase in aftermarket sales, a $175.7 million increase in original equipment sales and $219.0 million in sales from the acquisition of IMM. Aftermarket sales increased in China and Australia by $111.5 million and $46.6 million, respectively, primarily due to increased demand for parts. Original equipment sales increased in Australia and Eurasia by $214.8 million and $36.0 million, respectively, primarily due to increased roof support sales in both regions and increased bolter miner and conveyor system sales in Australia. The increase in original equipment sales from Australia and Eurasia was partially offset by decreases in sales from China and North America. Foreign currency translation unfavorably impacted sales by $39.7 million.

Surface Mining Equipment net sales for 2012 were $2.7 billion compared to $2.0 billion for 2011, which included a $93.8 million increase in aftermarket sales, a $377.9 million increase in original equipment sales and a $306.4 million increase in sales from the acquisition of LeTourneau. Aftermarket sales increased in all regions except China primarily due to increased demand for parts. Original equipment sales increased in all regions except Africa, primarily due to last year's strong order rate flowing to this year's sales. Foreign currency translation unfavorably impacted sales by $11.7 million.

Operating Income

The following table sets forth 2012 and 2011 operating income as derived from
our Consolidated Statement of Income:



                                                   2012                                         2011
                                      Operating                 %                  Operating                 %
In thousands                        Income (loss)          of Net Sales          Income (loss)          of Net Sales

Operating income (loss):
Underground Mining Machinery       $       671,797                  21.6 %      $       595,262                  23.1 %
Surface Mining Equipment                   592,687                  21.7 %              422,472                  21.6 %
Corporate Expenses                         (51,079 )                                    (65,693 )
Eliminations                               (40,846 )                                    (31,862 )

Total                              $     1,172,559                  20.7 %      $       920,179                  20.9 %

Operating income for the Underground Mining Machinery segment was $671.8 million in fiscal 2012, compared to operating income of $595.3 million in fiscal 2011. The Underground Mining Machinery segment return on sales was reduced by 1.3 points from a year ago due to IMM, including the non-recurring purchase accounting charges of $27.4 million from the acquisition. In addition to the $9.4 million attributable to IMM, operating income was favorably impacted by $127.1 million due to higher sales volumes, which was partially offset by $23.2 million of increased period costs, $6.5 million of restructuring costs, and $2.1 million due to pension curtailment and special termination benefit charges. Foreign currency translation unfavorably impacted operating income by $11.5 million.

Operating income for the Surface Mining Equipment segment was $592.7 million in fiscal 2012, compared to operating income of $422.5 million in fiscal 2011. Operating income in 2012 increased $50.6 million from the acquisition of LeTourneau. LeTourneau's 2012 and 2011 operating income was reduced by $13.7 million and $8.8 million, respectively, for non-recurring purchase accounting charges. In addition to the $50.6 million increase from LeTourneau, operating income was favorably impacted by $148.3 million due to higher sales volumes, which was partially offset by $37.2 million of increased period costs, $10.3 million due to pension curtailment and special termination benefit charges, and $2.4 million of restructuring charges.

Corporate expense decreased by $14.6 million primarily due to the IMM remeasurement gain of $19.4 million upon obtaining a controlling interest in IMM in December 2011.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense was $736.8 million, or 13.0% of sales, in 2012, compared to $602.0 million, or 13.7% of sales, in 2011. The inclusion of LeTourneau and IMM increased product development, selling and administrative expenses by $74.6 million. In addition to the $74.6 million attributable to the acquisitions' operations, product development costs increased by an additional $9.6 million driven by research and development activities on new or existing products and increased personnel for smart services activities. Selling costs increased by $13.3 million to support increased sales volumes and aftermarket infrastructure. The increase in administrative expenses of $37.1 million relates to restructuring charges of $9.9 million and increased performance based compensation of $8.0 million.

Net Interest Expense

Net interest expense was $67.4 million in 2012, compared to $24.3 million in 2011. Net interest expense increased as a result of borrowings used to fund the acquisitions. We entered into a $500.0 million term loan dated June 16, 2011 for the acquisition of LeTourneau, issued $500.0 million of Senior Notes on October 12, 2011 in anticipation of completing the IMM transaction, and on February 10, 2012 we drew on an additional term loan of $250.0 million for the acquisition of IMM.

Provision for Income Taxes

Income tax expense for 2012 was $337.9 million as compared to $264.8 million in 2011. The effective income tax rates from continuing operations were 30.6% and 29.6% for 2012 and 2011, respectively. The main drivers of the variance in tax rates when compared to the statutory rate of 35% were the geographic mix of earnings with the corresponding net favorable differences in foreign statutory tax rates.

Net discrete tax benefits of $7.6 million were recorded in 2012 as compared to net discrete tax benefits of $5.4 million in 2011.

2011 Compared with 2010

Sales

The following table sets forth 2011 and 2010 net sales as derived from our Consolidated Statement of Income:

                                                                       $             %
    In thousands                    2011             2010           Change        Change

    Net Sales
    Underground Mining Machine   $ 2,576,625      $ 2,126,788      $ 449,837         21.2 %
    Surface Mining Equipment       1,959,353        1,518,605        440,748         29.0 %
    Eliminations                    (132,072 )       (121,059 )      (11,013 )

    Total                        $ 4,403,906      $ 3,524,334      $ 879,572         25.0 %

Underground Mining Machinery net sales for 2011 were $2.6 billion compared to $2.1 billion for 2010, and included a $287.7 million increase in aftermarket sales and a $162.1 million increase in original equipment sales. Aftermarket sales increased across all regions. Specifically, aftermarket sales increased in the U.S. and Australasia by $113.5 million and $55.6 million, respectively, primarily due to the strengthening of the parts and rebuild markets in these regions. Additionally, strong parts demand in China caused aftermarket sales to increase by 56.8%, or $52.1 million. The increase in original equipment sales was led primarily by increased room and pillar sales in both the U.S. and South Africa and by roof support sales for longwall application equipment orders in Australasia. These increases were partially offset by decreased longwall equipment volumes in Eurasia and China. Foreign currency translation favorably impacted sales by $77.4 million.

Surface Mining Equipment net sales for 2011 were $2.0 billion compared to $1.5 billion for 2010, which included a $189.2 million increase in aftermarket sales, a $106.6 million increase in original equipment sales and $144.9 million in sales from the mining equipment business of LeTourneau. Aftermarket sales increased across all regions and were led by increased sales in North and South America of $64.5 million and $91.6 million, respectively. Original equipment sales of electric mining shovels and drills increased across all regions, with the exception of North America. Foreign currency translation favorably impacted sales by $31.9 million.

Operating Income

The following table sets forth 2011 and 2010 operating income as derived from
our Consolidated Statement of Income:



                                                   2011                                         2010
                                      Operating                 %                  Operating                 %
In thousands                        Income (loss)          of Net Sales          Income (loss)          of Net Sales

Operating income (loss):
Underground Mining Machinery       $       595,262                  23.1 %      $       433,902                  20.4 %
Surface Mining Equipment                   422,472                  21.6 %              336,236                  22.1 %
Corporate Expense                          (65,693 )                                    (43,126 )
Eliminations                               (31,862 )                                    (29,909 )

Total                              $       920,179                  20.9 %      $       697,103                  19.8 %

Operating income for the Underground Mining Machinery segment was $595.3 million in fiscal 2011, compared to operating income of $433.9 million in fiscal 2010. Operating income was favorably impacted by $175.1 million due to higher sales volumes, $52.2 million due to favorable manufacturing overhead absorption and $45.4 million in favorable overall price realization. These increases were partially offset by $67.9 million of unfavorable changes in material price variances due to rising steel costs and other surcharges, $49.4 million of increased product development, selling and administrative expenses and $6.6 million from a prior year foreign currency gain that was not repeated in the current year. Foreign currency translation favorably impacted operating income by $17.9 million.

Operating income for the Surface Mining Equipment segment was $422.5 million in fiscal 2011, compared to operating income of $336.2 million in fiscal 2010. Operating income was favorably impacted by $172.4 million due to higher sales volumes, $17.7 million due to favorable manufacturing overhead absorption and $11.3 million of cancellation charges. Operating income in 2011 includes $23.2 million from LeTourneau's mining equipment business which includes purchase accounting charges of $12.2 million. Partially offsetting these increases were $41.1 million of unfavorable changes in material price variances due to rising material costs and surcharges and $48.0 million of increased product development, selling and administrative expense.

Corporate expense increased due to acquisition transaction costs of $19.7 million.

Product Development, Selling and Administrative Expense

Product development, selling and administrative expense was $602.0 million, or 13.7% of sales, in 2011, compared to $480.6 million, or 13.6% of sales, in 2010. Before acquisition transaction costs of $19.7 million in 2011, product development, selling and administrative expenses totaled $582.3 million, or 13.2% of sales. Product development costs increased by $20.8 million, which is attributable to research and development activities on new or existing products and increased personnel for smart services activities. Selling costs increased by $34.0 million due to travel, warehouse costs to support increased parts volumes and the inclusion of $5.6 million from LeTourneau's mining equipment business. Administrative expenses increased primarily due to acquisition transaction costs.

Net Interest Expense

Net interest expense was $24.3 million in 2011, compared to $16.8 million in 2010. Net interest expense increased as a result of additional borrowings. We entered into a $500.0 million term loan dated June 16, 2011 for the acquisition of LeTourneau and issued $500.0 million of Senior Notes on October 12, 2011 in anticipation of completing the IMM transaction.

Provision for Income Taxes

Income tax expense for 2011 was $264.8 million, as compared to $217.5 million in 2010. The effective income tax rates from continuing operations were 29.6% and 32.0%, for 2011 and 2010, respectively. The main drivers of the variance in tax rates when compared to the statutory rate of 35% were the geographic mix of earnings with the corresponding net favorable differences in foreign statutory tax rates and the utilization of tax credits and tax holidays, offset by increased state income taxes and the establishment of valuation reserves.

A net discrete tax benefit of $5.4 million was recorded in 2011 as compared to a net discrete tax benefit of $3.4 million in 2010. A review of uncertain income tax positions was performed throughout 2011 and 2010 as part of the overall income tax provision and a net benefit of $2.9 million and $4.4 million, respectively, was recorded on a global basis.

Reorganization Items

Reorganization items include income, expenses, and losses that were realized or incurred by our predecessor as a result of its decision to reorganize under Chapter 11 of the Bankruptcy Code. We emerged from protection under Chapter 11 of the U.S. Bankruptcy Code on July 12, 2001.

Net reorganization items for 2012, 2011, and 2010 consisted of the following:

In thousands                                               2012      2011         2010

Professional fees directly related to the reorganization      -        (35 )      (1,310 )

Net reorganization expense                                 $  -      $ (35 )    $ (1,310 )

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these 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, excess inventory, warranty, intangible assets, 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 the accounting policies described below 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.

Revenue Recognition

We recognize revenue on aftermarket products and services when the following criteria are satisfied: persuasive evidence of an arrangement exists, product delivery and title transfer has occurred or the services have been rendered, the price is fixed and determinable, and collectability is reasonably assured. We recognize revenue on long-term contracts, such as for the manufacture of mining shovels, draglines, roof support systems and conveyor systems, using the percentage-of-completion method. When using the percentage-of-completion method, . . .