Harnischfeger Corporation

In: Business and Management

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Case 3-20 Harnischfeger Corp

Depreciation

In February 1985, Peter Roberts, the research director of Exeter Group,
a small Boston-based investment advisory service specializing in turnaround stocks, was
reviewing the 1984 annual report of Harnischfeger Corporation (Exhibit 4). His atten-
tion was drawn by the $1.28 per share net profit Harnischfeger reported for 1984. He Business Analy2sis and knew that barely three years earlier the company had faced a severe financial crisis. Har- Valuation Tools nischfeger had defaulted on its debt and stopped dividend payments after reporting a
hefty $7.64 per share net loss in fiscal 1982. The company’s poor performance continued
in 1983, leading to a net loss of $3.49 per share. Roberts was intrigued by Harnisch-
feger’s rapid turnaround and wondered whether he should recommend purchase of the
company’s stock (see Exhibit 3 for selected data on Harnischfeger’s stock).
COMPANY BUSINESS AND PRODUCTS 3
Overview of Accounting Analysis
Harnischfeger Corporation was a machinery company based in Milwaukee, Wisconsin. The company had originally been started as a partnership in 1884 and was incorporated in Wisconsin in 1910 under the name Pawling and Harnischfeger. Its name was changed to the present one in 1924. The company went public in 1929 and was listed on the New York Stock Exchange.
The company’s two major segments were the P&H Heavy Equipment Group, con- sisting of the Construction Equipment and the Mining and Electrical Equipment divi- sions, and the Industrial Technologies Group, consisting of the Material Handling Equipment and the Harnischfeger Engineers divisions. The sales mix of the company in 1983 consisted of: Construction Equipment 32 percent; Mining and Electrical Equip- ment 33 percent, Material Handling Equipment 29 percent, and Harnischfeger Engi- neers 6 percent.
Harnischfeger was a leading producer…...

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