Cash provided by continuing operations was $464 million in fiscal 2012, compared to cash provided by continuing operations of $500 million a year ago. The decrease in cash provided by continuing operations was the result of an increase in accounts receivable primarily due to the timing of sales, increased inventory to support the strong sales activity for the year, reduced accounts payable and by a reduction in advance payments resulting from a decline in new original equipment order activity.
Capital expenditures were $242 million in fiscal 2012, compared to $111 million in the prior year, due to continued investments in manufacturing capacity in emerging markets and aftermarket service infrastructure. Capital expenditures for fiscal 2013 are expected to be approximately $200 million.
During 2012, the markets served by the Company weathered a series of conditions and events that slowed the demand for the Company’s products. Early in the year, the U.S. thermal coal market experienced a significant loss of coal demand to natural gas for power generation. By early summer, U.S. economic growth remained sluggish and lingering sovereign debt issues pushed Europe to the brink of recession. With weakness in both of its main trading partners, China exports began to soften and its economic and industrial growth decelerated. China consumes the majority of the world’s mined commodities, which has a disproportional impact on commodity demand. Additionally, growth in steel production has been flat for the year and this limited demand upside for iron ore and metallurgical coal.This slowing of demand occurred while new mines were coming on line and some mines, particularly in Australia, were returning to production. A supply surplus resulted that has pushed the prices of many commodities down to the marginal cost of production, which has reduced miners’ cash flow available for reinvestment and reduced the number of projects that meet the necessary economic threshold.
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