10-Q 1 form10-q.txt FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2006 Commission File No. 333-27665 CONTINENTAL GLOBAL GROUP, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 31-1506889 -------- ---------- (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) CO-REGISTRANTS AND SUBSIDIARY GUARANTORS Continental Conveyor & Equipment Company Delaware 34-1603197 Goodman Conveyor Company Delaware 34-1603196 Continental Conveyor & Equipment Continental Global Group, Inc. Company Goodman Conveyor Company 438 Industrial Drive 438 Industrial Drive Route 178 South Winfield, Alabama 35594 Winfield, Alabama 35594 Belton, South Carolina 29627 (205) 487-6492 (205) 487-6492 (864) 338-7793

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Indicate by check mark 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [x] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [x] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. As of July 31, 2006, there were 100 shares of the registrant's common stock outstanding. INDEX CONTINENTAL GLOBAL GROUP, INC. Page Part I Financial Information Number Item 1 Financial Statements (Unaudited) 1 Condensed Consolidated Balance Sheets June 30, 2006 and December 31, 2005 2 Condensed Consolidated Statements of Income Three Months and Six Months ended June 30, 2006 and 2005 3 Condensed Consolidated Statements of Cash Flows Six Months ended June 30, 2006 and 2005 4 Notes to Condensed Consolidated Financial Statements 5-12 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 13-19 Item 3 Quantitative and Qualitative Disclosures about Market Risk 20 Item 4 Controls and Procedures 20 Part II Other Information Item 1 Legal Proceedings 21 Item 1A Risk Factors 21 Item 6 Exhibits 21 Signatures 22

Part I. Financial Information Item 1. Financial Statements (Unaudited) 1 Continental Global Group, Inc. Condensed Consolidated Balance Sheets

~~Page~~June ~~Part~~30 IDecember ~~Financial~~31 ~~Information~~2006 ~~Number~~2005 ~~Item~~-------------------- 1-------------------- ~~Financial Statements~~ (Unaudited) (Audited) Assets: Current assets: Cash and cash equivalents $ 985,507 $ 543,400 Accounts receivable, net 67,927,084 49,294,104 Inventories 51,031,253 42,170,889 Deferred income taxes 1,416,666 ~~Condensed~~1,466,751 ~~Consolidated~~Other ~~Balance~~current ~~Sheets~~assets ~~September~~1,629,781 301,980,832 ~~2001~~-------------------- -------------------- Total current assets 122,990,291 95,455,976 Property, plant and ~~December~~equipment 3136,629,763 ~~2000~~35,387,432 2Less ~~Condensed~~accumulated ~~Consolidated~~depreciation ~~Statements~~22,362,981 of21,821,194 ~~Operations~~-------------------- ~~Three~~-------------------- ~~Months~~14,266,782 13,566,238 Goodwill 13,789,054 13,789,054 Deferred financing costs 389,927 649,878 Other assets 697,516 745,199 -------------------- -------------------- $ 152,133,570 $ 124,206,345 ==================== ==================== Liabilities and ~~Nine~~Stockholder's ~~Months~~Equity ~~ended~~(Deficit): ~~September~~Current 30liabilities: Notes payable $ 14,759,968 ~~2001~~$ 12,485,090 Trade accounts payable 41,032,591 33,797,142 Accrued compensation and ~~2000~~employee 3benefits ~~Condensed~~8,674,827 ~~Consolidated~~7,270,396 ~~Statements~~Accrued interest on senior notes 295,075 295,075 Other accrued liabilities 12,441,142 9,376,016 Management fees payable to Nesco, Inc. 4,299,046 2,996,054 Income taxes payable 2,227,001 2,942,570 Current maturities of ~~Cash~~long-term ~~Flows~~obligations ~~Nine~~19,366,944 ~~Months~~7,829,379 ~~ended~~-------------------- ~~September~~-------------------- 30Total current liabilities 103,096,594 ~~2001~~76,991,722 ~~and~~Pension ~~2000~~obligations 1,602,471 1,483,305 Deferred income taxes 4,680,263 ~~Notes~~4,790,887 Senior notes 77,513,404 91,316,624 Note payable to ~~Condensed~~N.E.S. ~~Consolidated~~Investment ~~Financial~~Co. ~~Statements~~13,752,485 513,171,985 Other long-14term ~~Item~~obligations, 2less ~~Management~~current maturities 4,686,589 4,697,353 Stockholder's ~~Discussion~~equity ~~and~~(deficit): ~~Analysis~~Common ofstock, ~~Financial~~$0.01 ~~Condition~~par ~~and~~value, ~~Results~~authorized of5,000,000 ~~Operations~~shares, ~~15-19~~issued ~~Item~~and 3outstanding ~~Quantitative~~100 ~~and~~shares ~~Qualitative~~1 ~~Disclosures~~1 ~~about~~Paid-in ~~Market~~capital ~~Risk~~1,993,687 201,993,687 ~~Part~~Accumulated IIdeficit ~~Other~~(48,601,382) ~~Information~~(63,536,195) ~~Item~~Accumulated other comprehensive loss (6,590,542) ~~Exhibits~~(6,703,024) ~~and~~-------------------- ~~Reports~~-------------------- on(53,198,236) ~~Form~~(68,245,531) 8-K------------------- 21-------------------- ~~Signatures~~$ 22152,133,570 $ 124,206,345 ==================== ====================

See notes to condensed consolidated financial statements. 2 Continental Global Group, Inc. Condensed Consolidated Statements of Income

~~September~~Three months ended June 30 ~~December~~Six 31months ~~2001~~ended ~~2000~~June 30 2006 2005 2006 2005 ---------------------------------- ------------------------------------- (Unaudited) (~~Audited~~Unaudited) ~~ASSETS:~~Net ~~Current~~sales ~~assets:~~$ ~~Cash~~94,216,160 ~~and~~$ ~~cash~~73,631,333 ~~equivalents~~ $ 16181,~~472~~228,~~928~~705 $ 16138,~~941~~686,~~949~~047 ~~Accounts~~Cost ~~receivable,~~of ~~net~~products ~~35,299,270~~sold 2872,~~468~~701,~~042~~099 ~~Inventories 27~~56,~~729~~879,~~418~~372 28141,~~076~~043,~~134~~253 ~~Other current assets 804~~109,~~993 632~~371,~~012~~598 ---------------------------------- ------------------------------------- ~~Total~~Gross ~~current~~profit ~~assets~~21,515,061 8016,~~306~~751,~~609~~961 7440,~~118~~185,~~137~~452 ~~Property~~29,314,449 ~~plant~~Operating expenses: Selling and ~~equipment~~engineering 254,~~885~~477,~~970~~566 263,~~162~~961,~~365~~146 ~~Less~~8,490,844 ~~accumulated~~7,649,024 ~~depreciation~~General 12and administrative 3,~~458~~570,~~035~~751 113,~~575~~134,~~056~~759 6,687,809 6,309,786 Management fee 699,966 505,925 1,302,992 815,727 Amortization expense 6,590 6,590 13,180 13,180 Restructuring charges - 39,192 - 41,682 ---------------------------------- ------------------------------------- ~~13,427,935~~Total ~~14,587,309~~operating ~~Goodwill,~~expenses ~~net 16~~8,~~968~~754,~~204~~873 177,~~922~~647,~~783~~612 ~~Deferred financing costs 2~~16,~~859~~494,~~462~~825 314,~~249~~829,~~389~~399 ~~Deferred income taxes 681,239~~ - ~~Other assets 176,593 258,437~~ --------------------------------- ------------------------------------- $Operating ~~114,420,042~~income ~~$ 110~~12,~~136~~760,~~055~~188 ~~==================== ==================== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT): Current liabilities: Notes payable $ 18~~9,~~378~~104,~~080~~349 ~~$ 15~~23,~~630~~690,~~900~~627 ~~Trade accounts payable 20~~14,~~343~~485,~~251~~050 ~~17,463,905~~Other ~~Accrued~~expense: ~~compensation~~Interest ~~and employee benefits 4~~expense,~~926,247~~ ~~4,648,933~~net ~~Accrued interest on senior notes 6~~1,~~600~~256,~~000~~366 31,~~300~~341,~~000~~059 ~~Deferred income taxes 1~~2,~~408~~487,~~983~~679 12,~~594~~433,~~089~~848 ~~Other~~Miscellaneous ~~accrued~~expense ~~liabilities 5~~168,~~378,404~~546 3457,~~398,710~~581 ~~Current maturities of long-term obligations 1~~92,~~329,155~~541 1524,~~931,676~~577 ---------------------------------- ------------------------------------- Total ~~current~~other ~~liabilities~~expenses 581,~~364~~424,~~120~~912 471,~~968~~798,~~213~~640 ~~Deferred income taxes - 440~~2,~~894 Senior notes 120~~580,~~000,000~~220 ~~120~~2,~~000~~958,~~000~~425 ~~Other~~---------------------------------- ~~long~~-~~term~~------------------------------------ ~~obligations,~~Income ~~less~~before ~~current~~income ~~maturities~~taxes 211,~~432~~335,~~072~~276 27,~~790~~305,~~135~~709 ~~Stockholder's equity (deficit): Common stock~~21, ~~$0.01 par value~~110,407 ~~authorized 5~~11,~~000~~526,~~000~~625 ~~shares,~~Income ~~issued~~tax ~~and~~expense ~~outstanding 100 shares 1 1 Paid-in capital 1~~3,~~993~~322,~~687~~750 12,~~993~~180,~~687~~203 ~~Accumulated deficit (62~~6,~~409~~175,~~773)~~594 ~~(58~~3,~~195~~108,~~967)~~805 ~~Accumulated other comprehensive loss (5,960,065) (4,860,908)~~ -------------------- --------------~~------~~ ~~(66,376,150) (61,063,187)~~ -------------------- -----------------~~---~~ Net income $ ~~114~~8,~~420~~012,~~042~~526 $ ~~110~~5,~~136~~125,~~055~~506 $ 14,934,813 $ 8,417,820 ================================== =====================================

See notes to condensed consolidated financial statements. 3 Continental Global Group, Inc. Condensed Consolidated Statements of Cash Flows

~~Three~~Six months ended ~~Nine~~June ~~months ended September~~ 30 ~~September~~2006 302005 ~~2001 2000 2001 2000~~ ----------------------~~-------------~~ ---------------------~~-------------------~~ (Unaudited) ~~(Unaudited)~~Operating activities: Net ~~sales~~income $ 5214,~~499~~934,~~085~~813 $ 418,~~100~~417,~~246~~820 $Adjustments ~~143,065,846~~to $reconcile ~~124,229,785~~net ~~Cost~~income ofto ~~products~~net ~~sold~~cash ~~45,354,154~~provided ~~34,159,862~~by ~~119,966,043~~(used ~~104,351,136~~in) ~~-----------------------------------~~operating ~~----------------------------------------~~activities: ~~Gross~~Provision ~~profit~~for ~~7,144,931~~depreciation ~~6,940,384~~and 23amortization 1,~~099~~066,~~803~~227 191,~~878~~013,~~649~~770 ~~Operating~~Amortization ~~expenses:~~of ~~Selling~~deferred ~~and~~financing ~~engineering~~costs 3259,~~133,689~~951 3259,~~113,329~~951 ~~9,083,959~~Deferred ~~9,668,617~~income ~~General~~taxes ~~and administrative 2~~(429,~~018,907~~827) 2(144,~~069,216~~183) ~~6,255,842~~Non-cash ~~6,844,525~~interest ~~Management~~paid ~~fee~~in-kind ~~127~~580,~~519~~500 ~~119~~450,~~148~~000 ~~472,110~~Loss ~~252,080~~(gain) ~~Amortization~~on ~~expense~~disposal ~~146,092~~of ~~151,824~~assets ~~439~~8,~~867~~006 ~~461~~(36,~~705~~171) ~~Restructuring~~Changes ~~charges~~in -operating ~~1,129~~assets -and ~~211~~liabilities (14,~~522~~154,564) (10,550,099) ---------------------- --------------------- Net cash provided by (used in) operating activities 2,265,106 (588,912) ---------------------- --------------------- ~~Total~~Investing ~~operating~~activities: ~~expenses~~Purchases 5of property,~~426~~ plant,~~207~~ 5and equipment (1,~~454~~707,~~646~~353) 16(1,~~251~~346,~~778~~625) 17Proceeds from sale of property,~~438~~ plant,~~449~~ and equipment 8,806 41,486 ---------------------- --------------------- Net cash used in investing activities (1,698,547) (1,305,139) ---------------------- --------------------- ~~Operating~~Financing ~~income~~activities: ~~1,718,724~~Net 1increase in borrowings on notes payable 2,~~485~~231,~~738~~588 65,~~848,~~025 2,~~440,200~~592 ~~Other~~Proceeds ~~expenses:~~from ~~Interest~~long-term ~~expense~~obligations 31,~~962~~324,~~243~~367 3773,~~965,712~~500 ~~11,901,801~~Payments ~~11,831,211~~on ~~Interest~~Senior ~~income~~Notes (~~142~~3,~~321) (264~~073,~~493~~220) (~~546~~3,~~316) (762~~073,~~493~~219) ~~Miscellaneous,~~Principal ~~net~~payments ~~161,179~~on ~~31,824~~long-term ~~991~~obligations (539,~~524~~118) (17809,~~080~~914) ----------------------~~-------------~~ ---------------------~~-------------------~~ ~~Total~~Net ~~other~~cash ~~expenses~~provided ~~3,981,101~~by 3(used in) financing activities (56,~~733,043~~383) 121,~~347~~915,~~009~~959 11Effect of exchange rate changes on cash (68,~~051,638~~069) 905 ----------------------~~-------------~~ ---------------------~~-------------------~~ ~~Loss~~Increase ~~before~~in ~~income~~cash ~~taxes~~and ~~(2,262,377)~~cash ~~(2,247,305)~~equivalents (5442,~~498,984)~~107 (822,~~611,438)~~813 ~~Income~~Cash ~~tax~~and ~~benefit~~cash ~~(353,938)~~equivalents -at (1beginning of period 543,~~285~~400 887,~~178)~~256 - ---------------------~~--------------~~ ---------------------~~-------------------~~ ~~Net~~Cash ~~loss~~and $cash ~~(1,908,439)~~equivalents $at ~~(2,247,305)~~end of period $ (4985,~~213,806)~~507 $ (8910,~~611,438)~~069 ======================~~=============~~ =====================~~===================~~

See notes to condensed consolidated financial statements. 4 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 A. Organization and Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. For further information, refer to the consolidated financial statements and footnotes of Continental Global Group, Inc. and subsidiaries for the year ended December 31, 2005, included in the Company's Form 10-K. B. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. Inventories Inventories, which consist of raw materials, manufactured and purchased parts, and work in process, are stated at the lower of cost or market. Since inventory records are maintained on a job order basis, it is not practical to segregate inventories into their major classes. The cost for approximately 67% of inventories at June 30, 2006 and December 31, 2005 is determined using the last-in, first-out (LIFO) method with the remainder determined using the first-in, first-out (FIFO) method. Had the FIFO method of inventory (which approximates replacement cost) been used to cost all inventories, inventories would have increased by approximately $4,677,000 and $4,302,000 at June 30, 2006 and December 31, 2005, respectively. D. Warranty Costs The Company's products are generally covered by warranties against defects in material and workmanship for periods up to two years from the date of sale or installation of the product. The Company records a provision for estimated warranty cost based on historical experience and expectations of future conditions and continuously assesses the adequacy of its product warranty accrual and makes adjustments as needed. A summary of accrued warranty costs follows: 2006 2005 ----------------- ----------------- Balance as of January 1 $ 1,731,456 $ 1,634,049 Provision for warranties 702,967 774,230 Settlements made during the period (372,526) (478,893) Effect of exchange rate changes 10,603 (32,220) ----------------- ----------------- Balance as of June 30 $ 2,072,500 $ 1,897,166 ================= ================= 5 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 E. Comprehensive Income The components of comprehensive income for the three months and six months ended June 30 are as follows:

~~Nine~~Three months ended ~~September~~June 30 ~~2001~~Six ~~2000~~months ~~----------------------~~ended ~~---------------------~~June ~~(Unaudited)~~30 ~~Operating~~2006 ~~activities:~~2005 ~~Net~~2006 ~~loss~~2005 $ (4,213,806) $ (8,611,438) Adjustments to reconcile net loss to net cash used in operating activities: Provision for depreciation and amortization 2,122,068 2,334,490 Amortization of deferred financing costs 389,927 389,926 Deferred income taxes (1,285,178) - ~~Loss (gain) on disposal of assets (11,348) 21,113 Changes in operating assets and liabilities 2,636,950 1,868,910~~ ---------------------- -----------~~----------~~ ~~Net cash used in operating activities (361,387) (3,996,999)~~ ---------------------- -----------~~----------~~ ~~Investing~~Net ~~activities:~~income ~~Purchases~~$ ~~of property~~8, ~~plant~~012,526 ~~and~~$ ~~equipment (799~~5,~~936) (1~~125,~~457,485)~~506 ~~Proceeds~~$ ~~from sale of property~~14, ~~plant~~934,813 ~~and~~$ ~~equipment 95~~8,~~724 118~~417,~~271~~820 ~~Acquisition~~Other ofcomprehensive ~~business~~income (~~1,606,806~~loss): -Foreign ~~----------------------~~currency ~~---------------------~~translation ~~Net~~adjustment ~~cash~~287,427 ~~used in investing activities~~ (2170,~~311,018~~827) 112,482 (1320,~~339,214~~615) ~~----------------------~~Change ~~--------------------- Financing activities: Net increase~~ in ~~borrowings~~fair onvalue ~~notes~~of ~~payable~~derivative 3hedge,~~020,047~~ ~~5,553,382~~net ~~Proceeds~~of ~~from~~tax ~~long~~-~~term~~ ~~obligations~~(556) - ~~775,887 Principal payments on long-term obligations~~ (~~796~~5,~~465~~889) ~~(1,323,750)~~ ---------------------- ------------~~---------~~ ~~Net cash provided by financing activities 2,223,582 5,005,519 Effect of exchange rate changes on cash (20,198) 8,578~~ ---------------------- -----------~~----------~~ ~~Decrease~~Comprehensive inincome ~~cash~~$ ~~and cash equivalents (469~~8,~~021) (322~~299,~~116)~~953 ~~Cash~~$ ~~and cash equivalents at beginning of period 16~~4,~~941~~954,~~949~~123 ~~18,299,610 ---------------------- --------------------- Cash and cash equivalents at end of period~~ $ 1615,~~472~~047,~~928~~295 $ 178,~~977~~091,~~494~~316 ================================== =================================

F. Employee Benefit Plans The components of net periodic benefit cost for the three months and six months ended June 30 are as follows:

Three months ended ~~Nine~~Six months ended ~~September~~June 30 ~~September~~June 30 ~~2001~~2006 ~~2000~~2005 ~~2001~~2006 ~~2000~~2005 --------------- ---------------~~----~~ --------------- ---------------~~-----~~ ~~Net~~Service ~~loss~~cost $ (151,~~908,439)~~203 $ (253,~~247,305)~~857 $ (4102,~~213,806)~~406 $ (8107,~~611~~714 Interest cost 132,~~438)~~349 ~~Other~~128,347 ~~comprehensive~~264,698 ~~loss:~~256,694 ~~Foreign~~Expected ~~currency~~return ~~translation~~on ~~adjustment~~plan assets (96154,~~699~~472) (1146,~~048,208~~479) (1308,~~099,157~~944) (2292,~~360,922~~958) Amortization of prior service cost 19,342 11,161 38,684 22,322 Recognized loss 11,161 14,898 22,322 29,796 --------------- ---------------~~----~~ --------------- ---------------~~-----~~ ~~Comprehensive~~Net ~~loss~~periodic benefit cost $ (259,~~005,138)~~583 $ (361,~~295,513)~~784 $ (5119,~~312,963)~~166 $ ~~(10~~123,~~972,360)~~568 =============== ===============~~====~~ =============== ===============~~=====~~

G. Income Taxes Income taxes are provided using the liability method in accordance with SFAS No. 109, "Accounting for Income Taxes". For tax reporting purposes, the Company is included in the consolidated federal tax return of N.E.S. Investment Co. However, for financial reporting purposes, the Company's tax provision has been calculated on a stand-alone basis. The Company has subsidiaries located in Australia, the United Kingdom, and South Africa, which are subject to income taxes in their respective countries. The Company's effective income tax rate is less than the statutory rate primarily due to a favorable income tax benefit for interest payments on the New Series A and Series B Notes due 2008 which are recorded as a reduction of the outstanding indebtedness for financial reporting purposes. In addition, the Company has not recognized income tax expense in certain of its foreign subsidiaries due to the reversal of an income tax valuation allowance. 6 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 H. Segment Information While the Company primarily manages its operations on a geographical basis, the Company operates in two principal business segments: conveyor equipment and manufactured housing products. The conveyor equipment business markets its products in four main business areas. The mining equipment business area includes the design, manufacture and testing of complete belt conveyor systems and components for mining application primarily in the coal industry. The conveyor components business area manufactures and sells components for conveyor systems primarily for resale through distributor networks. The engineered systems business area uses specialized project management and engineering skills to combine mining equipment products, purchased equipment, steel fabrication and other outside services for sale as complete conveyor equipment systems that meet specific customer requirements. The bulk conveyor equipment business area designs and manufactures a complete range of conveyor equipment sold to transport bulk materials, such as cement, lime, food products and industrial waste. The Company's manufactured housing products business manufactures and/or refurbishes axle components sold directly to the manufactured housing industry. As part of this segment the Company also sells mounted tire and rim assemblies to the manufactured housing industry. Included in the other category is primarily the manufacture and sale of air filtration equipment for use in enclosed environments, principally in the textile industry.

Three months ended ~~Nine~~June 30 Six months ended ~~September~~June 30 ~~September~~2006 302005 ~~2001~~2006 ~~2000~~2005 ~~2001 2000~~ ------------------------------------------------------------------- (in thousands) (in thousands) Net sales: Conveyor equipment $ 4685,~~747~~908 $ 3665,~~695~~766 $ ~~130~~163,~~990~~260 $ ~~107~~123,~~016~~252 Manufactured housing products 58,~~534~~021 37,~~770~~701 1117,~~113~~493 15,~~380~~140 Other ~~218~~287 ~~635~~164 ~~963~~476 ~~1,834~~294 ------------------------------------------------------------------- Total net sales $ 5294,~~499~~216 $ 4173,~~100~~631 $ ~~143~~181,~~066~~229 $ ~~124~~138,~~230~~686 =================================================================== Segment operating income ~~(loss)~~: Conveyor equipment $ 213,~~125~~470 $ 29,~~131~~599 $ 824,~~414~~628 $ 415,~~250~~317 Manufactured housing products ~~111~~576 ~~(163)~~403 ~~111~~1,287 ~~(135)~~753 Other ~~(95)~~19 7237 ~~(83)~~46 ~~158~~67 ------------------------------------------------------------------- Total segment operating income 214,~~141~~065 210,~~040~~039 825,~~442~~961 416,~~273~~137 Management fee ~~128~~700 ~~119~~506 ~~472~~1,303 ~~252~~816 Amortization expense ~~146~~7 ~~152~~7 ~~440~~13 ~~462~~13 Restructuring charges - 139 - ~~212~~42 Corporate expense ~~148~~598 ~~282~~383 ~~682~~954 ~~907~~781 ------------------------------------------------------------------- Total operating income 112,~~719~~760 19,~~486~~104 623,~~848~~691 214,~~440~~485 Interest expense, 3net 1,~~962~~256 31,~~966~~341 112,~~902~~488 112,~~831~~434 ~~Interest income (142) (265) (546) (763)~~ Miscellaneous, ~~net~~expense ~~161~~169 32457 ~~991~~93 ~~(17)~~524 ------------------------------------------------------------------- ~~Loss~~Income before income taxes $ (211,~~262)~~335 $ (27,~~247)~~306 $ (521,~~499)~~110 $ (811,~~611)~~527 ===================================================================

7 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 I. Guarantor and Non-Guarantor Subsidiaries The Company's domestic subsidiaries, Continental Conveyor & Equipment Company (CCE) and Goodman Conveyor Company (GCC), both of which are wholly owned, are the guarantors of the Senior Notes. The guarantees are full, unconditional, and joint and several. Separate financial statements of these guarantor subsidiaries are not presented as management has determined that they would not be material to investors. The Company's Australian, United Kingdom and South African subsidiaries are not guarantors of the Senior Notes. Summarized consolidating balance sheets as of June 30, 2006 and December 31, 2005 for the Company, the guarantor subsidiaries, and the non-guarantor subsidiaries are as follows (in thousands):

Combined Combined Guarantor Non-Guarantor ~~September~~June 30, ~~2001~~2006: The Company Subsidiaries Subsidiaries Eliminations Total ------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ ~~15,430~~149 $ ~~922~~662 $ ~~121~~174 $ - $ ~~16,473~~985 Accounts receivable, net - 2636,~~910~~663 831,~~409~~444 (20180) 3567,~~299~~927 Inventories - 2441,~~660~~419 39,~~070~~612 - 2751,~~730~~031 Deferred income taxes 81 1,079 257 - 1,417 Other current assets 921,856 2,307 1,~~141~~418 ~~188~~ (~~533~~23,951) ~~805~~1,630 ------------------------------------------------------------------------------- Total current assets 1522,~~439~~086 5382,~~633~~130 1142,~~788~~905 (~~553~~24,131) 80122,~~307~~990 Property, plant, and equipment, net - 98,~~651~~389 35,~~777~~878 - 1314,~~428~~267 Goodwill, ~~net~~ - 1610,~~359~~986 ~~609~~2,803 - 1613,~~968~~789 Investment in subsidiaries 60,~~009~~309 1635,~~800~~788 - (7696,~~809~~097) - Deferred financing costs ~~2,859~~390 - - - ~~2,859~~390 ~~Deferred~~Other ~~income~~assets ~~taxes~~1,138 5,~~809~~027 -83 ~~245~~ (5,~~373~~550) ~~681~~698 ~~Other assets 45 2,197 61 (2,126) 177~~ ------------------------------------------------------------------------------- Total assets $ 8483,~~161~~923 $ 98142,~~640~~320 $ 1651,~~480~~669 $ (84125,~~861~~778) $ ~~114~~152,~~420~~134 =============================================================================== Current liabilities: Notes payable $ - $ 157,~~867~~689 $ 37,~~428~~841 $ (~~917~~770) $ 1814,~~378~~760 Trade accounts payable ~~287~~215 1421,~~721~~754 521,~~393~~121 (582,057) 2041,~~343~~033 Accrued compensation and employee benefits -135 46,~~273~~250 ~~653~~2,290 - 48,~~926~~675 Accrued interest ~~6,600~~295 - - - 295 Other accrued liabilities 2,198 5,468 6,~~600~~802 ~~Deferred~~(2,027) ~~income~~12,441 ~~taxes~~Management -fee 1payable 4,~~409~~299 - - 1- 4,~~409~~299 ~~Other~~Income ~~accrued~~taxes ~~liabilities~~payable ~~521~~- 324,~~337~~064 ~~2,085~~- (~~564~~21,837) 52,~~379~~227 Current maturities of long-term obligations -16,876 500 1,~~313~~991 16 - 119,~~329~~367 ------------------------------------------------------------------------------- Total current liabilities 724,~~408~~018 4065,~~920~~725 1140,~~575~~045 (126,~~539~~691) 58103,~~364~~097 Pension obligation - 1,602 - - 1,602 Deferred income taxes - 5,~~373~~818 - (51,~~373~~138) -4,680 Senior ~~Notes~~notes ~~120~~77,~~000~~513 - - - ~~120~~77,~~000~~513 N/P to N.E.S. Investment Co. 13,753 - - - 13,753 Other long-term obligations - 23,~~402~~667 13,~~136~~448 (12,~~106~~428) 24,~~432~~687 Stockholder's equity (deficit) (4331,~~247~~361) 4965,~~945~~508 38,~~769~~176 (7695,~~843~~521) (6653,~~376~~198) ------------------------------------------------------------------------------- Total liabilities and stockholder's equity (deficit) $ 8483,~~161~~923 $ 98142,~~640~~320 $ 1651,~~480~~669 $ (84125,~~861~~778) $ ~~114~~152,~~420~~134 ===============================================================================

8 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 I. Guarantor and Non-Guarantor Subsidiaries (Continued)

Combined Combined Guarantor Non-Guarantor December 31, ~~2000~~2005: The Company Subsidiaries Subsidiaries Eliminations Total ------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ ~~16,257~~40 $ ~~565~~470 $ ~~120~~33 $ - $ ~~16,942~~543 Accounts receivable, net - 2328,~~981~~139 421,~~534~~155 ~~(47)~~- 2849,~~468~~294 Inventories - 2333,~~971~~310 48,~~105~~861 - 2842,~~076~~171 Deferred income taxes 81 759 627 - 1,467 Other current assets 1518,729 2,242 1,~~509~~804 77 (~~969~~20,794) ~~632~~1,981 ------------------------------------------------------------------------------- Total current assets 1618,~~272~~850 5064,~~026~~920 832,~~836~~480 (120,~~016~~794) 7495,~~118~~456 Property, plant, and equipment, net - 107,~~218~~685 45,~~369~~881 - 1413,~~587~~566 Goodwill, ~~net~~ - 1710,~~193~~986 ~~730~~2,803 - 1713,~~923~~789 Investment in subsidiaries 60,~~009~~309 1735,~~399~~788 - (7796,~~408~~097) - Deferred financing costs ~~3,249~~650 - - - ~~3,249~~650 Other assets 1,~~424~~138 14,~~951~~916 ~~358~~118 (35,~~474~~427) ~~259~~745 ------------------------------------------------------------------------------- Total assets $ 80,~~954~~947 $ 96124,~~787~~295 $ 1441,~~293~~282 $ (81122,~~898~~318) $ ~~110~~124,~~136~~206 =============================================================================== Current liabilities: Notes payable $ - $ 137,~~831~~172 $ 36,~~270~~082 $ (~~1,470~~769) $ 1512,~~631~~485 Trade accounts payable ~~385~~239 1117,~~777~~221 518,~~646~~214 (~~345~~1,877) 1733,~~463~~797 Accrued compensation and employee benefits - 45,~~086~~139 ~~563~~2,132 - 47,~~649~~271 Accrued interest ~~3,300~~295 - - - ~~3,300~~295 ~~Deferred~~Other ~~income~~accrued ~~taxes~~liabilities -5,072 15,~~594~~482 -3,722 - (1,~~594~~904) ~~Other~~12,372 ~~accrued~~Income ~~liabilities~~taxes ~~171~~payable ~~2,534~~- 121,~~687~~623 - (~~993~~18,680) 32,~~399~~943 Current maturities of long-term obligations -6,146 500 1,~~883~~183 49 - 17,~~932~~829 ------------------------------------------------------------------------------- Total current liabilities 311,~~856~~752 3557,~~705~~137 1131,~~215~~333 (223,~~808~~230) 4776,~~968~~992 Pension obligation - 1,483 - - 1,483 Deferred income taxes - 25,~~052~~929 - (1,~~611~~138) ~~441~~4,791 Senior ~~Notes~~notes ~~120~~91,~~000~~317 - - - ~~120~~91,~~000~~317 N/P to N.E.S. Investment Co. 13,172 - - - 13,172 Other long-term obligations - 23,~~747~~917 433,129 - (2,~~790~~349) 4,697 Stockholder's equity (deficit) (4235,~~902~~294) 5655,~~283~~829 36,~~035~~820 (7795,~~479~~601) (6168,~~063~~246) ------------------------------------------------------------------------------- Total liabilities and stockholder's equity (deficit) $ 80,~~954~~947 $ 96124,~~787~~295 $ 1441,~~293~~282 $ (81122,~~898~~318) $ ~~110~~124,~~136~~206 ===============================================================================

9 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 I. Guarantor and Non-Guarantor Subsidiaries (Continued) Summarized consolidating statements of operations for the three months and six months ended June 30, 2006 and 2005, respectively, for the Company, the guarantor subsidiaries, and the non-guarantor subsidiaries are as follows (in thousands):

Combined Combined Guarantor Non-Guarantor The Company Subsidiaries Subsidiaries Eliminations Total ------------- ------------- --------------- ------------- ------------- Three months ended ~~September~~June 30, ~~2001~~2006: Net sales $ - $ 4465,~~615~~834 $ 728,~~902~~567 $ (18185) $ 5294,~~499~~216 Cost of products sold - 3848,~~353~~966 723,~~019~~920 (18185) 4572,~~354~~701 ------------- ------------- --------------- ------------- ------------- Gross profit - 616,~~262~~868 ~~883~~4,647 - 721,~~145~~515 Total operating expenses ~~160~~898 4,~~430~~955 ~~836~~2,902 - 58,~~426~~755 ------------- ------------- --------------- ------------- ------------- Operating income (loss) (~~160~~898) 11,913 1,~~832~~745 47 - 112,~~719~~760 Interest expense 3,~~442~~ ~~460~~net 60716 -319 ~~3,962~~221 ~~Interest income (142)~~ - -1,256 ~~- (142)~~ Miscellaneous, ~~net~~expense ~~(2)~~- ~~179~~102 ~~(16)~~67 - ~~161~~169 ------------- ------------- --------------- ------------- ------------- Income (loss) before income taxes (31,~~458~~614) 11,492 1,~~193~~457 3 - (211,~~262)~~335 Income tax expense (benefit) (1,~~383~~595) 14,~~029~~617 -300 - ~~(354)~~3,322 ------------- ------------- --------------- ------------- ------------- Net income ~~(loss)~~ $ (~~2,075~~19) $ ~~164~~6,875 $ 31,157 $ - $ (18,~~908)~~013 ============= ============= =============== ============= =============

Combined Combined Guarantor Non-Guarantor The Company Subsidiaries Subsidiaries Eliminations Total ------------- ------------- --------------- ------------- ------------- Three months ended ~~September~~June 30, ~~2000~~2005: Net sales $ - $ 3551,~~613~~827 $ 521,~~487~~804 $ - $ 4173,~~100~~631 Cost of products sold - 2938,~~138~~702 518,~~022~~177 - 3456,~~160~~879 ------------- ------------- --------------- ------------- ------------- Gross profit - 613,~~475~~125 ~~465~~3,627 - 616,~~940~~752 Total operating expenses ~~294~~729 4,~~356~~221 ~~804~~2,698 - 57,~~454~~648 ------------- ------------- --------------- ------------- ------------- Operating income (loss) (~~294~~729) 28,~~119~~904 ~~(339)~~929 - 19,~~486~~104 Interest expense 3,~~442~~ ~~475~~net 49650 465 226 - 31,~~966~~341 ~~Interest~~Miscellaneous expense (income) 5 466 (~~265~~14) - 457 ------------- ------------- --------------- ------------- ------------- Income (~~265~~loss) ~~Miscellaneous~~before income taxes (1,384) ~~net~~7,973 717 - 357,306 Income tax expense (3benefit) (1,092) 3,272 - 32- 2,180 ------------- ------------- --------------- ------------- ------------- Net income (loss) $ (~~3,471~~292) $ 14,~~609~~701 $ ~~(385)~~717 $ - $ (25,~~247)~~126 ============= ============= =============== ============= =============

Combined Combined Guarantor Non-Guarantor The Company Subsidiaries Subsidiaries Eliminations Total ------------- ------------- --------------- ------------- ------------- ~~Nine~~Six months ended ~~September~~June 30, ~~2001~~2006: Net sales $ - $ ~~119~~129,~~073~~922 $ 2451,~~011~~492 $ (18185) $ ~~143~~181,~~066~~229 Cost of products sold - 9997,~~091~~263 2043,~~893~~965 (18185) ~~119~~141,~~966~~043 ------------- ------------- --------------- ------------- ------------- Gross profit - 1932,~~982~~659 37,~~118~~527 - 2340,~~100~~186 Total operating expenses ~~719~~1,457 139,~~105~~548 25,~~428~~490 - 16,~~252~~495 ------------- ------------- --------------- ------------- ------------- Operating income (loss) (~~719~~1,457) 623,~~877~~111 ~~690~~2,037 - 623,~~848~~691 Interest expense 10,~~325~~ net 1,~~415~~431 ~~162~~632 425 - 112,~~902~~488 ~~Interest~~Miscellaneous ~~income~~expense (~~546~~income) - -179 - (~~546~~86) ~~Miscellaneous, net 698 318 (25)~~ - ~~991~~93 ------------- ------------- --------------- ------------- ------------- Income (loss) before income taxes (112,~~196~~888) 522,~~144~~300 ~~553~~1,698 - (521,~~499)~~110 Income tax expense (benefit) (43,~~476~~157) 38,~~191~~958 -374 - (16,~~285)~~175 ------------- ------------- --------------- ------------- ------------- Net income ~~(loss)~~$ 269 $ (613,~~720)~~342 $ 1,~~953~~324 $ ~~553 $~~ - $ (414,~~214)~~935 ============= ============= =============== ============= =============

10 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 I. Guarantor and Non-Guarantor Subsidiaries (Continued)

Combined Combined Guarantor Non-Guarantor The Company Subsidiaries Subsidiaries Eliminations Total ------------- ------------- --------------- ------------- ------------- ~~Nine~~Six months ended ~~September~~June 30, ~~2000~~2005: Net sales $ - $ ~~107~~96,~~433~~006 $ 1642,~~797~~680 $ ~~(1)~~- $ ~~124~~138,~~229~~686 Cost of products sold - 8873,~~745~~431 1535,~~607~~941 ~~(1)~~- ~~104~~109,~~351~~372 ------------- ------------- --------------- ------------- ------------- Gross profit - 1822,~~688~~575 16,~~190~~739 - 1929,~~878~~314 Total operating expenses ~~945~~797 138,~~809~~727 25,~~684~~305 - 1714,~~438~~829 ------------- ------------- --------------- ------------- ------------- Operating income (loss) (~~945~~797) 413,~~879~~848 (1,~~494)~~434 - 214,~~440~~485 Interest expense 10,~~326~~ net 1,~~324~~300 ~~181~~741 393 - 112,~~831~~434 ~~Interest~~Miscellaneous expense (income) 11 577 (~~763~~64) - 524 ------------- ------------- --------------- ------------- ------------- Income (~~763~~loss) ~~Miscellaneous~~before income taxes (2,108) ~~net~~12,530 1,105 - 11,527 Income tax expense (6benefit) (111,987) 5,096 - ~~(17)~~- 3,109 ------------- ------------- --------------- ------------- ------------- Net income (loss) $ (~~10,508~~121) $ 37,~~561~~434 $ (1,~~664)~~105 $ - $ (8,~~611)~~418 ============= ============= =============== ============= =============

Summarized consolidating cash flow statements for the six months ended June 30, 2006 and 2005, respectively, for the Company, the guarantor subsidiaries, and the non-guarantor subsidiaries are as follows (in thousands):

Combined Combined Guarantor Non-Guarantor The Company Subsidiaries Subsidiaries Eliminations Total ------------- ------------- --------------- ------------- ------------- ~~Nine~~Six months ended ~~September~~June 30, ~~2001~~2006: Net cash provided by (used in) operating activities $ (~~7,200~~481) $ 74,~~549~~816 $ (~~727~~2,073) $ 173 $ ~~(361)~~2,265 Investing activities: Purchases of property, plant, and equipment - (~~638~~1,228) (~~162~~479) - (~~800~~1,707) Proceeds from sale of property, plant, and equipment - ~~54 42~~ - 968 ~~Acquisition of business~~ - ~~(1,607)~~8 - - ~~(1,607)~~ ------------- ------------- --------------- ------------- ------------- Net cash used in investing activities - (21,~~191~~228) (~~120~~471) - (21,~~311~~699) ------------- ------------- --------------- ------------- ------------- Financing activities: Net increase in borrowings on notes payable - 2517 1,~~238~~715 ~~782~~ - 32,~~020~~232 ~~Principal~~Proceeds ~~payments~~from on long-term obligations - ~~(761)~~- ~~(36)~~1,324 - ~~(797)~~1,324 ~~Distributions~~Payments ~~for interest~~ on ~~senior~~Senior ~~notes~~Notes ~~6,373~~ (63,~~373~~073) - - - ~~Intercompany~~(3,073) ~~loan~~Principal ~~activity~~payments on long-term obligations - (~~117~~250) ~~117~~(289) - (539) Distributions 3,663 (3,663) - - - ------------- ------------- --------------- ------------- ------------- Net cash provided by (used in) financing activities ~~6,373~~590 (53,~~013~~396) ~~863~~2,750 - ~~2,223~~(56) Exchange rate changes on cash - 12- (1565) (173) (2068) ------------- ------------- --------------- ------------- ------------- Increase ~~(decrease)~~ in cash and cash equivalents ~~(827)~~109 ~~357~~192 1141 - ~~(469)~~442 Cash and cash equivalents at beginning of period ~~16,257~~40 ~~565~~470 ~~120~~33 - ~~16,942~~543 ------------- ------------- --------------- ------------- ------------- Cash and cash equivalents at end of period $ ~~15,430~~149 $ ~~922~~662 $ ~~121~~174 $ - $ ~~16,473~~985 ============= ============= =============== ============= =============

11 Continental Global Group, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 2006 I. Guarantor and Non-Guarantor Subsidiaries (Continued)

~~I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (CONTINUED)~~ Combined Combined Guarantor Non-Guarantor The Company Subsidiaries Subsidiaries Eliminations Total ------------- ------------- --------------- ------------- ------------- ~~Nine~~Six months ended ~~September~~June 30, ~~2000~~2005: Net cash provided by (used in) operating activities $ (~~6,659~~420) $ 41,~~334~~666 $ (1,~~676~~828) $ 4(7) $ (~~3,997~~589) Investing activities: Purchases of property, plant, and equipment - (1,~~242~~116) (~~215~~230) - (1,~~457~~346) Proceeds from sale of property, plant, and equipment - 9536 235 - ~~118~~41 ------------- ------------- --------------- ------------- ------------- Net cash used in investing activities - (1,~~147~~080) (~~192~~225) - (1,~~339~~305) ------------- ------------- --------------- ------------- ------------- Financing activities: Net increase in borrowings on notes payable - 53,~~209~~553 ~~344~~1,473 - 5,~~553~~026 Proceeds from long-term obligations - ~~776~~ - 773 - ~~776~~773 ~~Principal~~Payments ~~payments~~ on ~~long-term~~Senior ~~obligations~~Notes - (13,~~283~~073) ~~(41)~~- - - (13,~~324~~073) ~~Distributions~~Principal ~~for~~payments ~~interest~~ on ~~senior~~long-term ~~notes~~obligations ~~6,012~~- (~~6,012~~346) -(464) - -(810) ~~Intercompany~~Distributions ~~loan~~3,663 ~~activity -~~ (13,~~698~~663) ~~1,698~~- - - ------------- ------------- --------------- ------------- ------------- Net cash provided by (used in) financing activities ~~6,012~~590 (~~3,008~~456) 21,~~001~~782 - 51,~~005~~916 Exchange rate changes on cash - 25- (136) ~~(4)~~7 81 ------------- ------------- --------------- ------------- ------------- Increase (decrease) in cash and cash equivalents 170 130 (~~647~~277) ~~204 120~~ - ~~(323)~~23 Cash and cash equivalents at beginning of period ~~17,244~~12 ~~955~~509 ~~101~~366 - ~~18,300~~887 ------------- ------------- --------------- ------------- ------------- Cash and cash equivalents at end of period $ ~~16,597~~182 $ ~~1,159~~639 $ ~~221~~89 $ - $ ~~17,977~~910 ============= ============= =============== ============= =============

J. New Accounting Pronouncements In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109." FIN 48 clarifies the recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt this interpretation as required. The Company is currently evaluating the impact of this Interpretation on its financial statements. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and related notes included in the Company's Form 10-K for the year ended December 31, 2005 and the unaudited financial statements and notes contained herein. General The Company, through its subsidiaries, is a leading designer and manufacturer of conveyor systems and components for mining applications, primarily in the coal industry. The Company is a holding company organized under the Delaware General Corporation Law and conducts all of its business through its direct and indirect operating subsidiaries. The Company's direct operating subsidiaries are Continental Conveyor and Equipment Company and Goodman Conveyor Company. The Company also owns indirectly all of the capital stock of Continental Conveyor & Equipment Pty. Ltd., an Australian holding company that owns all of the capital stock of four Australian operating companies. The Company also owns indirectly all of the capital stock of Continental Conveyor Ltd., a U.K. operating company, and Continental MECO (Pty.) Ltd., a South African operating company. The assets and liabilities of the Company's foreign subsidiaries are translated at current exchange rates, while revenues and expenses are translated at average rates prevailing during the year. Results of Operations The following table sets forth, on a comparative basis, selected income statement data as a percentage of net sales for the three months and six months ended June 30, 2006 and 2005.

~~Fair~~Three ~~Value,~~months ~~(dollars~~ended inSix ~~thousands)~~months ~~2001~~ended ~~2002~~June ~~2003~~30 ~~2004~~June ~~2005 Thereafter Total 9/~~30/01* -------------------------- -------------------------~~------------------------------------------------------~~ ~~Long-Term~~2006 ~~Obligations,~~2005 ~~including~~2006 ~~current~~2005 ~~portion~~Net ~~Fixed~~sales ~~Rate~~100.0% $100.0% -100.0% $100.0% -Cost $of -products $sold -77.2 $77.2 -77.8 $78.9 ~~120,000~~Gross $profit ~~120,000~~22.8 ~~$60,000~~22.8 ~~Average~~22.2 ~~interest~~21.1 ~~rate~~SG&A ~~11%~~expenses ~~11%~~8.5 ~~11%~~9.6 ~~11%~~8.4 ~~11%~~10.1 ~~11%~~Management fee 0.7 0.7 0.7 0.6 Restructuring charges - 0.1 - - Operating income 13.6 12.4 13.1 10.4

Three months ended June 30, 2006, compared to three months ended June 30, 2005: Net Sales Net sales for the quarter increased $20.6 million, or 28%, from $73.6 million in 2005 to $94.2 million in 2006. Net sales in the Company's conveyor equipment segment have been favorably impacted as a result of the strong demand for coal. Net sales in the domestic operations of the Company's conveyor equipment segment increased $13.6 million primarily due to increased sales volumes. The increased sales volumes resulted from improved market conditions in the coal industry which resulted in increased capital spending by the Company's major customers in this industry. The capital investment needs of these customers could change in the future. The Company's domestic subsidiaries began the quarter with a backlog of $104.6 million compared to $56.1 million in the corresponding period of 2005. Net sales in the foreign operations of the Company's conveyor equipment segment increased $6.6 million, net of a $0.6 million decrease due to changes in foreign 13 currency translation rates. When adjusted for foreign currency fluctuations, net sales in the Company's Australian and the United Kingdom subsidiaries increased by $5.1 million and $2.8 million respectively, and net sales in South Africa decreased by $0.7 million. The increase in Australia resulted from increased shipments due to improved market conditions. Australia began the quarter with a backlog of $32.0 million compared to $13.2 million in the corresponding period of 2005. The increase in the United Kingdom was due to improved market conditions with higher sales to the OEM (original equipment manufacturer) market. Net sales in the Company's manufactured housing products segment increased $0.3 million primarily due to a change in the product mix with more sales of new manufactured products which have a higher selling price than refurbished products. Based on the Manufactured Housing Institute Economic Report for June 2006, shipments of manufactured homes for the second quarter of 2006 decreased 5.2% from the same period of the prior year. Net sales in the Company's other segment increased $0.1 million. Gross Profit Gross profit for the quarter increased $4.8 million, or 29%, from $16.7 million in 2005 to $21.5 million in 2006 due to increased sales volume. Gross profit in the domestic operations of the Company's conveyor equipment segment increased $3.5 million and gross profit in the foreign operations of the conveyor equipment segment increased $1.0 million. Gross profit in the Company's manufactured housing products segment increased $0.3 million due to a change in the product mix with more sales of new manufactured products which have a higher selling price than refurbished products. While gross profit as a percentage of net sales was unchanged from 2005 to 2006, the Company did experience some increases in the costs of materials. These increased costs were offset by a more efficient utilization of overhead expenses due to the increased sales volumes. SG&A Expenses SG&A expenses for the quarter increased $0.9 million, or 13%, from $7.1 million in 2005 to $8.0 million in 2006. This increase resulted from increased employee expenses at the Company's domestic subsidiaries. SG&A expenses as a percentage of net sales improved to 8.5% in the current quarter compared to 9.6% in the second quarter of 2005. This improvement is due to improved leverage as a result of the increased sales volume. Operating Income Operating income for the quarter increased $3.7 million, or 41%, from $9.1 million in 2005 to $12.8 million in 2006. This increase resulted from the $4.8 million increase in gross profit, offset by the $0.9 million increase in SG&A expenses and a $0.2 million increase in management fees. Management fees are based on the Company's Adjusted EBITDA earnings and this increase is a direct result of the increased profits. Income Tax Expense Income taxes for the quarter increased $1.1 million, or 52%, from $2.2 million in 2005 to $3.3 million in 2006. The increase resulted from the Company's increased profits. The Company's effective income tax rate of 29% is less than the statutory rate primarily due to a favorable income tax benefit for interest payments on the New Series A and Series B Notes due 2008 which are recorded as a reduction of the outstanding indebtedness for financial reporting purposes. In addition, the Company has not recognized income tax expense in certain of its foreign subsidiaries due to the reversal of an income tax valuation allowance. 14 Net Income Net income increased $2.9 million, or 57%, from $5.1 million in 2005 to $8.0 million in 2006. The increase resulted from the $3.7 million increase in operating income combined with decreases in interest expense and miscellaneous expenses of $0.1 million and $0.2 million, respectively, and partially offset by the $1.1 million increase in income tax expense. Six months ended June 30, 2006, compared to six months ended June 30, 2005: Net Sales Net sales for the six-month period increased $42.5 million, or 31%, from $138.7 million in 2005 to $181.2 million in 2006. Net sales in the domestic operations of the Company's conveyor equipment segment increased $31.4 million due to increased sales volumes. The increase in sales volume was due primarily to the strong market conditions in the coal industry over the preceding twelve months. The Company's domestic subsidiaries began the period with a backlog of $92.4 million compared to $21.5 million on January 1, 2005. The increased capital spending by the Company's major customers in the coal industry contributed to the strong backlog. The capital investment needs of these customers could change in the future. Net sales in the foreign operations of the Company's conveyor equipment segment increased $8.6 million, net of a $2.1 million decrease due to changes in foreign currency translation rates. When adjusted for foreign currency fluctuations, net sales in the Company's Australian and the United Kingdom subsidiaries increased $6.4 million and $5.5 million respectively, and net sales in the South African subsidiary decreased by $1.2 million. The increase in Australia resulted from improved market conditions with a large export system sale occurring during the period. The backlog in the Australian subsidiary was $34.7 million at the beginning of 2006, an increase of $20.7 million from the beginning of 2005. The increase in the United Kingdom was due to increased sales of both engineered systems projects and component sales to the OEM (original equipment manufacturer) industry. In South Africa, market conditions were very strong during the first half of 2005 but during the second quarter of 2006, the subsidiary has experienced some delays from its customers in placing orders. Net sales in the Company's manufactured housing products segment increased $2.3 million as a result of increased shipments and a change in the product mix with more sales of new manufactured products which have a higher selling price than refurbished products. Based on the Manufactured Housing Institute Economic Report for June 2006, shipments of manufactured homes for the first six months of 2006 increased only 1.7% from the same period in 2005. While shipments to FEMA and other hurricane related demand contributed to this increase, FEMA production was concluded in February 2006 and as discussed above, shipments of manufactured homes for the second quarter of 2006 decreased 5.2% from the same period in 2005. Net sales in the Company's other segment increased $0.2 million. Gross Profit Gross profit for the six-month period increased $10.9 million, or 37%, from $29.3 million in 2005 to $40.2 million in 2006. This increase in gross profit resulted from a $9.7 million increase due to increased sales volume combined with a $1.2 million increase due to improved margins. Gross profit in the domestic operations of the Company's conveyor equipment segment increased $9.4 million. This increase was primarily due to increased sales volume which contributed to an increase in manufacturing direct labor hours providing a more efficient utilization of overhead expenses and improved gross profit margins. Gross profit in the foreign operations of the conveyor equipment segment increased $0.8 million due to increased sales volume. Gross profit in the manufactured housing segment increased $0.7 million due to increased sales volume and increased selling prices. Gross profit as a percentage of net sales increased from 21.1% in 2005 to 22.2% in 2006. While the Company experienced some increases in the cost of materials, these increased costs were more than offset by a more efficient utilization of overhead expenses due to the increased sales volumes. 15 SG&A Expenses SG&A expenses for the six-month period increased $1.2 million, or 9%, from $14.0 million in 2005 to $15.2 million in 2006. SG&A expenses in the Company's domestic operations increased $1.0 million due to increased selling expenses as a result of higher net sales and increased administrative expenses resulting from higher employee expenses. SG&A expenses in the foreign operation increased $0.2 million. SG&A expenses as a percentage of net sales improved to 8.4% for the first half of 2006 compared to 10.1% for the first half of 2005. This improvement is due to improved leverage as a result of the increased sales volume. Operating Income Operating income for the six-month period increased $9.2 million, or 63%, from $14.5 million in 2005 to $23.7 million in 2006. The increase resulted from the $10.9 million increase in gross profit, offset by the $1.2 million increase in SG&A expenses and a $0.5 million increase in management fees. Management fees are based on the Company's Adjusted EBITDA earnings and this increase is a direct result of the increased profits. Income Tax Expense Income tax expense for the six-month period increased $3.1 million, or 100%, from $3.1 million in 2005 to $6.2 million in 2006. The increase resulted from the Company's increased profits. The Company's effective income tax rate increased from 27% in 2005 to 29% in 2006. This increase is primarily due to the expiration of net operating loss carryforwards in its Australian subsidiary. The Company's effective income tax rate is less than the statutory rate primarily due to a favorable income tax benefit for interest payments on the New Series A and Series B Notes due 2008 which are recorded as a reduction of the outstanding indebtedness for financial reporting purposes. In addition, the Company has not recognized income tax expense in certain of its foreign subsidiaries due to the reversal of an income tax valuation allowance. Net Income Net income for the six-month period increased $6.5 million, or 77%, from $8.4 million in 2005 to $14.9 million in 2006. The increase resulted from the $9.2 million increase in operating income combined with a $0.4 million decrease in miscellaneous expenses and partially offset by the $3.1 million increase in income tax expense. Backlog Backlog at June 30, 2006 was $142.6 million, an increase of $5.5 million, or 4%, from $137.1 million at December 31, 2005 and a decrease of $1.5 million, or 1%, from $144.1 million at March 31, 2006. At June 30, 2006, backlog in the domestic operations of the Company's conveyor equipment segment was $94.5 million, a decrease of $10.2 million from March 31, 2006, and backlog in the foreign operations of the Company's conveyor equipment segment was $48.1 million, an increase of $8.7 million from March 31, 2006. Management believes that in excess of 80% of the backlog will be shipped in 2006. Liquidity and Capital Resources Net cash provided by (used in) operating activities was $2.3 million and $(0.6) million for the six months ended June 30, 2006 and 2005, respectively. Net cash provided by operating activities in 2006 resulted from net income of $14.9 million, combined with non-cash expenses of $1.5 million, and partially offset by a net increase in operating assets and liabilities of $14.1 million. The net 16 increase in operating assets primarily resulted from increased accounts receivable and inventory balances. The increase in accounts receivable resulted from increased sales in the second quarter of 2006 compared to the fourth quarter of 2005. The increase in inventory resulted from increased production to support the increased backlog in the domestic operations. Net cash used in operating activities in 2005 resulted from net income of $8.4 million, combined with non-cash expenses of $1.5 million and offset by a net increase in operating assets and liabilities of $10.5 million. Net cash used in investing activities was $1.7 million and $1.3 million for the six months ended June 30, 2006 and 2005, respectively, and represents net purchases of property, plant, and equipment for both years. Net cash provided by (used in) financing activities was $(0.1) million and $1.9 million for the six months ended June 30, 2006 and 2005, respectively. Net cash used in financing activities in 2006 resulted from a $3.1 million semi-annual interest payment on the Company's New Series A and Series B Senior Notes, which was recorded as a reduction in the balance of outstanding indebtedness, combined with principal payments on long-term obligations of $0.5 million, partially offset by a net increase in borrowings on notes payable of $2.2 million and proceeds from long-term obligations of $1.3 million. Net borrowings on notes payable in the domestic subsidiaries increased $0.5 million and net borrowings on notes payable in the foreign subsidiaries increased $1.7 million. Proceeds from long-term obligations primarily represent additional proceeds on the Australian subsidiary's term loan with National Australia Bank. Net cash provided by financing activities in 2005 resulted from a net increase in borrowings on notes payable of $5.0 million combined with proceeds from long-term obligations of $0.8 million and offset by a $3.1 million semi-annual interest payment on the Company's New Series A and Series B Senior Notes and principal payments on long-term obligations of $0.8 million. The Company's primary capital requirements consist of capital expenditures and debt service. The Company utilizes cash on hand and its available credit facilities to satisfy these requirements. Capital expenditures for the first six months of 2006 were $1.7 million, which included expenditures to improve productivity and for maintenance capital. In addition to the Company's debt service requirements for interest expense, as of June 30, 2006, the Company had outstanding principal balances on its domestic and foreign credit facilities of approximately $7.7 million and $7.1 million, respectively. The Company's Senior Notes outstanding indebtedness has been classified as short and long-term liabilities as of June 30, 2006 based upon the payment terms of the debt. The following table summarizes the reduction in the balance of the Senior Notes based upon the payment requirements over the terms of the Series A and Series B Notes: Balance at June 30, 2006 of Senior Notes, including current portion of $16,876,438 $ 94,389,842 Interest payments on Series A Notes, 2006-2008 (13,317,280) Interest payments on Series B Notes, 2006-2008 (2,048,812) Maturity of outstanding 11% Senior Notes due 2007 (10,730,000) --------------- Maturity of Series A and Series B Notes due 2008 $ 68,293,750 =============== At June 30, 2006, the Company had cash and cash equivalents of approximately $1.0 million and approximately $13.5 million available for use under its domestic credit facility, representing approximately $14.5 million of liquidity. This availability figure reflects a reserve of $5.0 million for the retirement of the Company's outstanding 11% Senior Notes due 2007. Without this reserve, the Company would have had approximately $18.5 million available for use under its domestic credit facility. The Company will reserve an additional $2.5 million in each of the third and fourth quarters of 2006 for the retirement of 17 this debt. With the completion of the debt exchange in October 2004, the Company reduced its annual debt service requirements related to interest payments on its Senior debt by approximately $5.9 million. Annual debt service on the New Series A and Series B Notes due 2008 combined with the outstanding Senior Notes due 2007 is approximately $7.3 million, down from $13.2 million prior to the debt exchange. In order to partially fund the cash payments as additional consideration to the Series A and Series B bondholders, the Company increased the balance of a term loan with Bank One by approximately $3.8 million and entered into subordinated promissory notes with N.E.S. Investment Co. in the amount of $12 million. The debt service requirements for interest related to these debt instruments in 2005 was approximately $0.3 million in cash and $1.0 million in kind. The Company expects current financial resources, existing lines of credit, and funds from operations to be adequate to meet anticipated cash requirements. International Operations The Company transacts business in a number of countries throughout the world and has facilities in the United States, Australia, the United Kingdom, and South Africa. As a result, the Company is subject to business risks inherent in non-U.S. operations, including political and economic uncertainty, import and export limitations, exchange controls and currency fluctuations. The Company believes that the risks related to its foreign operations are mitigated by the relative political and economic stability of the countries in which its largest foreign operations are located. The principal foreign currencies in which the Company transacts business are the Australian dollar, the British pound sterling, and the South African rand. As the U.S. dollar strengthens and weakens against these foreign currencies, the Company's financial results will be affected. As discussed previously, the Company's net sales for the six months ended June 30, 2006 decreased by approximately $2.1 million from the corresponding period in the prior year due to changes in foreign currency translation rates. The fluctuation of the U.S. dollar versus other currencies also resulted in foreign currency translation gains (losses) included in the accumulated other comprehensive income (loss) component of stockholder's equity (deficit) of approximately $0.3 million and $(0.2) million for the six months ended June 30, 2006 and 2005, respectively. New Accounting Pronouncements In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109." FIN 48 clarifies the recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt this interpretation as required. The Company is currently evaluating the impact of this Interpretation on its financial statements. Cautionary Statement for Safe Harbor Purposes This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements within the meaning of the federal securities laws. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance as opposed to historical items and include statements of anticipated events or trends and expectations and beliefs relating to matters that are not historical in nature. Such forward looking statements are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company, 18 that could cause actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. In addition, the Company's future results of operations, financial condition, liquidity and capital resources could be materially adversely affected by, among other things, economic and political uncertainties or prolonged economic recession. 19 Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company's interest income and expense are most sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Company's cash equivalents as well as interest paid on its debt. To mitigate the impact of fluctuations in U.S. interest rates, the Company generally borrows on a long-term basis to maintain a debt structure that is fixed rate in nature. A portion of the Company's operations consists of manufacturing and sales activities in foreign jurisdictions. The Company manufactures and sells its products in the United States, Australia, the United Kingdom, and South Africa. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company distributes its products. The Company's operating results are exposed to changes in exchange rates between the U.S. dollar and the Australian dollar, the British pound sterling, and the South African rand. Item 4. Controls and Procedures As of June 30, 2006, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings with the Securities and Exchange Commission. There were no significant changes in the Company's internal controls over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 20 Part II. Other Information Item 1. Legal Proceedings There are pending or threatened against the Company or its subsidiaries various claims and lawsuits, all arising from the ordinary course of business with respect to commercial and products liability matters, which seek remedies or damages. The Company believes that any liability that may finally be determined with respect to commercial and product liability claims should not have a material adverse effect on its financial condition. Legal costs are generally expensed when incurred. At June 30, 2006 and December 31, 2005, the Company's Consolidated Balance Sheet includes an accrued liability for any pending or threatened claim with respect to any commercial and products liability matter of $0.3 million, and was included in current liabilities as Other Accrued Liabilities. In August and September 2003, Continental Conveyor & Equipment Company was served as one of fifty-eight known and unknown defendants in nineteen separate actions pending in various state courts in the State of Alabama alleging various contract, tort and warranty claims. All claims in such actions arose out of alleged injuries and deaths occurring at the Jim Walters Resources No. 5 Mine which occurred on September 23, 2001. A settlement of these actions has been agreed to by the parties involved, pending approval by the courts. The proposed settlement does not materially impact the Company's financial condition. Item 1A. Risk Factors There have been no material changes to the Company's risk factors as described in the Company's Report on Form 10-K for the year ended December 31, 2005. Item 6. Exhibits Exhibits: Refer to the index of exhibits. 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONTINENTAL GLOBAL GROUP, INC. By: /s/ Jimmy L. Dickinson ----------------------- Jimmy L. Dickinson Vice President and Chief Financial Officer (As duly authorized representative and as Principal Financial and Accounting Officer) CONTINENTAL CONVEYOR & EQUIPMENT COMPANY By: /s/ Jimmy L. Dickinson ----------------------- Jimmy L. Dickinson Vice President - Finance (As duly authorized representative and as Principal Financial and Accounting Officer) GOODMAN CONVEYOR COMPANY By: /s/ J. Mark Etchberger ----------------------- J. Mark Etchberger Controller (As duly authorized representative and as Principal Financial and Accounting Officer) Date: August 14, 2006 22 Continental Global Group, Inc. Form 10-Q Index of Exhibits Exhibit Number Description of Exhibit 3.1 (a) Certificate of Incorporation of Continental Global Group, Inc., as currently in effect. * (b) Certificate of Amendment of Certificate of Incorporation of Continental Global Group, Inc. (Filed as Exhibit 3.1(b) to the Company's Form 10-K for the year ended December 31, 2005, and is incorporated herein by reference.) 3.2 By-Laws of Continental Global Group, Inc., as currently in effect. * 3.3 Certificate of Incorporation of Continental Conveyor & Equipment Company, as currently in effect. * 3.4 By-Laws of Continental Conveyor & Equipment Company, as currently in effect. * 3.5 Certificate of Incorporation of Goodman Conveyor Company, as currently in effect. * 3.6 By-Laws of Goodman Conveyor Company, as currently in effect. * 4.1 Indenture, dated as of April 1, 1997, among Continental Global Group, Inc., Continental Conveyor & Equipment Company, Goodman Conveyor Company, and the Trustee (containing, as exhibits, specimens of the Series A Notes and the Series B Notes). * 4.2 Supplemental Indenture, dated as of October 4, 2004, between Continental Global Group, Inc., Continental Conveyor & Equipment Pty., Ltd., Continental ACE Pty., Goodman Conveyor Company, Continental Conveyor & Equipment Company, and Wells Fargo Bank, National Association, as trustee. (Filed as Exhibit 4.2 to the Company's Form 10-Q for the quarter ended September 30, 2004, and is incorporated herein by reference.) 4.3 Indenture, dated October 4, 2004, among Continental Global Group, Inc., Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Wells Fargo Bank, National Association. (Filed as Exhibit 4.1 to Form 8-K filed by the Company on October 7, 2004, and is incorporated herein by reference.) 4.4 9% Convertible Subordinated Promissory Note, dated October 4, 2004, from Continental Global Group, Inc. to N.E.S. Investment Co. in the amount of $10,000,000. (Filed as Exhibit 4.3 to Form 8-K filed by the Company on October 7, 2004, and is incorporated herein by reference.) 10.1 Second Amended and Restated Credit Facility and Security Agreement, dated October 4, 2004, by and among Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Bank One, N.A. (Filed as Exhibit 4.2 to Form 8-K filed by the Company on October 7, 2004, and is incorporated herein by reference.) 10.2 Management Agreement, dated as of April 1, 1997, between Continental Global Group, Inc. and Nesco, Inc. * 10.3 Employment Agreement, effective February 13, 2006, between Continental Global Group, Inc. and Ronald Kaplan. (Filed as Exhibit 10.3 to Form 8-K filed by the Company on March 17, 2006, and is incorporated herein by reference.) 10.4 Reserved Continental Global Group, Inc. Form 10-Q Index of Exhibits Exhibit Number Description of Exhibit 10.5 First Amendment to Second Amended and Restated Credit Facility and Security Agreement, dated March 9, 2006, by Continental Conveyor & Equipment Company, Goodman Conveyor Company, and JP Morgan Chase Bank, N.A., successor by merger to Bank One, N.A. (Filed as Exhibit 10.5 to the Company's Form 10-K for the year ended December 31, 2005, and is incorporated herein by reference.) 10.6 Forbearance Agreement, effective as of April 26, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co., and CFSC Wayland Advisers, Inc. (Filed as Exhibit 10.6 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.7 Forbearance Agreement, effective as of May 1, 2004, by and among Bank One, NA, Continental Conveyor & Equipment Company, and Goodman Conveyor Company. (Filed as Exhibit 10.7 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.8 Amendment 1, dated as of May 27, 2004, to Forbearance Agreement effective as of April 26, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co., and CFSC Wayland Advisers, Inc. (Filed as Exhibit 10.8 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.9 Forbearance Agreement, effective as of June 1, 2004, by and among Bank One, NA, Continental Conveyor & Equipment Company, and Goodman Conveyor Company. (Filed as Exhibit 10.9 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.10 Amendment 2, dated as of June 14, 2004, to Forbearance Agreement effective as of April 26, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co., and CFSC Wayland Advisers, Inc. (Filed as Exhibit 10.10 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.11 Forbearance Agreement, effective as of June 15, 2004, by and among Bank One, NA, Continental Conveyor & Equipment Company, and Goodman Conveyor Company. (Filed as Exhibit 10.11 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.12 Commitment Letter, dated as of July 12, 2004, from Bank One, NA to Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Continental Global Group, Inc. (Filed as Exhibit 10.12 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.13 Amendment 3, dated as of July 13, 2004, to Forbearance Agreement effective as of April 26, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co., and Wayzata Advisers LLC. (Filed as Exhibit 10.13 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) 10.14 Forbearance Agreement, effective as of July 13, 2004, by and among Bank One, NA, Continental Conveyor & Equipment Company, and Goodman Conveyor Company. (Filed as Exhibit 10.14 to the Company's Form 10-K for the year ended December 31, 2003, and is incorporated herein by reference.) Continental Global Group, Inc. Form 10-Q Index of Exhibits Exhibit Number Description of Exhibit 10.15 Forbearance Agreement, effective as of July 29, 2004, by and among Bank One, NA, Continental Conveyor & Equipment Company, and Goodman Conveyor Company. (Filed as Exhibit 10.15 to the Company's Form 10-Q for the quarter ended June 30, 2004, and is incorporated herein by reference.) 10.16 Forbearance Agreement, effective as of August 31, 2004, by and among Bank One, NA, Continental Conveyor & Equipment Company, and Goodman Conveyor Company. (Filed as Exhibit 10.16 to the Company's Form 10-Q for the quarter ended September 30, 2004, and is incorporated herein by reference.) 10.17 Restructuring Agreement, dated as of July 22, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co. and Wayzata Investment Partners LLC. (Filed as Exhibit 99.1 to Form 8-K filed by the Company on July 23, 2004, and is incorporated herein by reference.) 10.18 First Amendment, dated as of July 30, 2004, to Restructuring Agreement, dated as of July 22, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co. and Wayzata Investment Partners LLC. (Filed as Exhibit 99.1 to Form 8-K filed by the Company on August 3, 2004, and is incorporated herein by reference.) 10.19 Second Amendment, dated as of October 1, 2004, to Restructuring Agreement, dated as of July 22, 2004, by and among Continental Global Group, Inc., N.E.S. Investment Co. and Wayzata Investment Partners LLC. (Filed as Exhibit 10.19 to the Company's Form 10-Q for the quarter ended September 30, 2004, and is incorporated herein by reference.) 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18, U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Certain instruments with respect to long-term debt have not been filed as exhibits as the total amount of securities authorized under any one of such instruments does not exceed 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees to furnish to the Commission a copy of each such instrument upon request. * Incorporated by reference from Form S-4 Registration Number 333-27665 filed under the Securities Act of 1933.

Exhibit Number Description of Exhibit ------ ---------------------- 3.1 (a) Certificate of Incorporation of Continental Global Group, Inc., as currently in effect. * (b) Certificate of Amendment of Certificate of Incorporation of Continental Global Group, Inc. (Filed as Exhibit 3.1(b) to the Company's Form 10-Q for the quarter ended September 30, 2000, and is incorporated herein by reference.) 3.2 By-Laws of Continental Global Group, Inc., as currently in effect. * 3.3 Certificate of Incorporation of Continental Conveyor & Equipment Company, as currently * in effect. 3.4 By-Laws of Continental Conveyor & Equipment Company, as currently in effect. * 3.5 Certificate of Incorporation of Goodman Conveyor Company, as currently in effect. * 3.6 By-Laws of Goodman Conveyor Company, as currently in effect. * 4.1 Indenture, dated as of April 1, 1997, among Continental Global * Group, Inc., Continental Conveyor & Equipment Company, Goodman Conveyor Company, and the Trustee (containing, as exhibits, specimens of the Series A Notes and the Series B Notes). 10.1 (a) Revolving Credit Facility, dated as of September 14, 1992, as * amended by Amendments I, II, and III, among Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Bank One, Cleveland, NA. (b) Amendment IV, dated as of December 31, 1998, to the Revolving Credit Facility, dated as of September 14, 1992, among Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1 (b) to the Company's Form 10-Q for the quarter ended March 31, 1999, and is incorporated herein by reference.) (c) Letter of Amendment, dated as of July 26, 1999, to the Revolving Credit Facility, dated as of September 14, 1992, among Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1 (c) to the Company's Form 10-Q for the quarter ended June 30, 1999, and is incorporated herein by reference.) (d) Letter of Amendment, dated as of November 4, 1999, to the Revolving Credit Facility, dated as of September 14, 1992, among Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1 (d) to the Company's Form 10-Q for the quarter ended September 30, 1999, and is incorporated herein by reference.) (e) Amendment VI, dated as of March 28, 2000, to the Revolving Credit Facility, dated as of September 14, 1992, among Continental Conveyor & Equipment Company, Goodman Conveyor Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1 (e) to the Company's Form 10-K for the year ended December 31, 1999, and is incorporated herein by reference.)

Filing Compare · CONTINENTAL GLOBAL GROUP INC