LONG OPPORTUNITY: JOY (NYSE)

JOY GLOBAL’S DEBT & EQUITY: MARKET MISPRICING OF

BANKRUPTCY & CLIMATE CHANGE RISKS

Disclaimer

1

The opinions expressed in this presentation by Lateral Capital Management, Inc. (“LMCI”) are not an

investment recommendation and are not meant to be relied upon in reaching an investment

decision. LCMI and its employees, consultants and contractors are not acting in an investment, tax,

legal or any other advisory capacity.

The opinions expressed herein address a limited number of aspects regarding a potential investment

in securities of the companies mentioned and are not a substitute for a comprehensive investment

analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an

incomplete set of information, and has limitations as to its accuracy.

LCMI recommends that potential and existing investors conduct a thorough investment analysis of

their own, including a detailed review of the companies' SEC filings, and consulting a qualified

investment advisor. This material is based on information obtained from sources believed to be

reliable, but the reliability of that source information.

Any opinions or estimates constitute a best judgment as of the date of this presentation and are

subject to change without notice. LCMI explicitly disclaims any liability that may arise from the use of

this material.

Executive Summary

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By early 2016, the Joy Global (NYSE:JOY) stock price had declined around 90% from its 2012 highs At the time, its bonds traded as if the stockholder equity was worthless

And that most bondholders would need to take a drastic haircut

We estimate that JOY’s cash flow from operations (“CFFO”) would need to decline at a 20% CAGR from 2016

to 2021 for its 2019 and 2021 maturities to not be repaid in full

Importantly, JOY’s net working capital asset was greater than its entire third party debt obligations

JOY had also not implemented several strategic and operational alternatives which are commonly used to

address liquidity concerns In other words, it had plenty of “dry powder” to manage any credit concerns

Many investors are understandably concerned that the commodity downturn is not a cyclical bear market but

a structural change in the global coal industry However, the COP21 Paris Agreement is not as punitive on coal production as some forecasters are currently assuming

JOY should also benefit from any commercial and/or technological breakthroughs in Carbon Capture &

Storage (“CCS”)

JOY should also be a major beneficiary of the global fossil-fuel “divestment” campaign The divestment movement has, to date, focused on commodity miners and not their suppliers

JOY stockholders should experience quite material stock price appreciation as the JOY bonds return to a

more accurate reflection of its liquidity prospects

Plummeting Coal Prices Have Forced Several Coal Miners Into Bankruptcy

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Despite the precipitous drop in coal prices, global coal inventories continue to climb

Figure 1

JOY’s Stock Price Has Underperformed Its Capital Goods Peers

4

While supplying capital equipment to miners in the copper, crude oil, gold and iron ore sectors, JOY’s

principal sales segment is coal miners Figure 2

JOY’s Senior Unsecured Bonds Trade As If Its Equity Is Worthless

5

While Moody’s lowered the JOY bond rating from investment grade to high yield (i.e. fallen angel), a

rating one-notch below investment grade doesn’t seem to explain all of the 37 point drop in bond prices Figure 3

JOY Has A (Surprisingly) “Empty Runway” of Debt Maturities Until 2019

6

In late 2015, JOY repurchased its 2016 maturities. The face value of the 2019 senior unsecured bonds

is only slightly more than JOY’s current CFFO annual run-rate Figure 4

JOY Liquidity Projection: Assuming 20% CFFO Reduction CAGR

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We also assume no reduction in annual capex despite the assumption of drastic CFFO reductions.

Despite the increase in JOY’s leverage ratios, there appears to be more than adequate liquidity to meet

both of its 2019 and 2021 debt maturitiesFigure 5

Projected 2021 JOY Liquidity: “Scorched Earth” Scenarios

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In most of these projections there are no cash taxes payable after utilizing NOLs. During the coal

price declines of 2014 and 2015 JOY actually reduced its capex spend by 30% to 40% each year Figure 6

Forex Exposure Risks?

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While a stronger US dollar will adversely impact JOY’s US dollar reported earnings (as it did in fiscal

2015), historically there is a robust inverse relationship between commodity prices and the US dollar Figure 7

Despite the Depressed Commodity Price Environment, JOY Improved Its CFFO

10

While Rocky Mountain coal prices approx. 5% in the last 3 quarters of fiscal 2015, most US coal basins

experienced 20% to 30% price declines. Similarly, iron ore prices slid 40% and copper was down 30% Figure 8

JOY Management Appears Conservative Regarding Its Future Prospects

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Their projection for global mining industry capex sees material declines until 2018 at the earliest; and

only modest increases after that date Figure 9

Projected Chinese Coal-Fired Generation in a “2-Degree World”

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EIA sees continued investment in newer, more efficient coal-fired generation until 2030 and beyond

Figure 10

Similarly, EIA Expects India’s Coal-Fired Generation To Rise For Decades

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Figure 11

Outside of China & India, COP21 Should Result in Global Coal Reductions

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The reduction in thermal coal consumption will require JOY to refocus its efforts away from core

markets of Australia, Latin America and North America. In 2015 65% of JOY revenues were ex-US Figure 12

JOY Global Revenues By Commodity Type

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Thermal coal is JOY’s largest single revenue source by commodity type, however, it only constitutes

around 40% of JOY’s consolidated revenues. Revenue growth can still be generated from met coal,

copper and other less “environmentally sensitive” commoditiesFigure 13

IEA Carbon Capture & Storage Projections By Sector and Region

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COP21 has increased the incentives for governments and industry to ensure that CC&S becomes

commercially viable. JOY’s stock price has embedded within it a free option on the future success of

CC&SFigure 14

Recap

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A conservative analysis suggests that JOY’s bond holders only risk non-payment of their

principal if CFFO declines by more than 20% p.a. each and every year until 2022

This further assumes no reduction in current levels of capex

Management also possesses a number of corporate finance levers it can pull, if needed, to enhance its

current liquidity profile

The bond market is signaling – incorrectly in our view - that the JOY equity is currently worthless.

This creates a unique, very lucrative risk-reward proposition for equity holders

As the bond market reprices the JOY bonds to more accurately reflect any future liquidity

concerns, we anticipate a substantial stock price rally for JOY shareholders

The risks from COP21 / the Paris Agreement for the global mining sector might be over-stated,

especially as it relates to China & India’s coal-fired electric generation investment

The successful deployment of commercially viable CC&S was given a major boost by COP21

and could provide additional upside potential for JOY shareholders

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