SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 July 31, 1999

  Commission    Registrant; State of Incorporation;          IRS EMPLOYER
  File Number   Address; and Telephone Number                Identification No.

  333-52529     MMH HOLDINGS, INC.                           39-1924039
                (a Delaware Corporation)
                4915 South Howell Avenue, 2nd Floor
                Milwaukee, Wisconsin  53207
                (414) 486-6100

  333-52527     MORRIS MATERIAL HANDLING, INC.               39-1716155
                (a Delaware Corporation)
                4915 South Howell Avenue, 2nd Floor
                Milwaukee, Wisconsin 53207
                (414) 486-6100

Indicate  by check mark  whether  the  registrants  (1) have  filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days.

                                   Yes X No__

Indicate the number of shares  outstanding  of each of the  issuers'  classes of
common stock, as of the latest practicable date (September 10, 1999):

MMH Holdings, Inc.               Nonvoting common stock, $.01 Par Value,
                                 1,930 shares outstanding.  Voting common stock,
                                 $.01 Par Value, 10,169 shares outstanding.

Morris Material Handling, Inc.   Common stock, $.01 Par Value, 100 shares
                                 outstanding.  MMH Holdings, Inc. holds all of
                                 the outstanding common stock of
                                 Morris Material Handling, Inc.

<PAGE>

                          MMH HOLDINGS, INC.
                    MORRIS MATERIAL HANDLING, INC.

                                 INDEX

Introduction                                                                   2

Part I -Financial Statements:

      MMH Holdings, Inc.
         Condensed Balance Sheets                                              3
         Condensed Statements of Operations and Comprehensive Income (Loss)    4
         Condensed Statements of Cash Flows                                    5
         Statements of Preferred Stock and Shareholders' Equity                6

      Morris Material Handling, Inc.
         Condensed Balance Sheets                                              7
         Condensed Statements of Operations and Comprehensive Income (Loss)    8
         Condensed Statements of Cash Flows                                    9
         Statements of Shareholder's Equity                                   10

     Notes to Financial Statements of
         MMH Holdings, Inc. and
         Morris Material Handling, Inc.                                       11

     Management's Discussion and Analysis of
     Financial Condition and Results of Operations of
         MMH Holdings, Inc. and
         Morris Material Handling, Inc.                                       23

Part II - Other Information:
     Item 1.  Legal Proceedings                                               32
     Item 2.  Changes in Securities                                           32
     Item 3.  Defaults upon Senior Securities                                 32
     Item 4.  Submission of Matters to a Vote of Security Holders             32
     Item 5.  Other Information                                               32
     Item 6.  Exhibits and Reports on Form 8-K                                32

Introduction

MMH  Holdings,  Inc.  ("Holdings")  is  a  holding  company  whose  sole  direct
subsidiary  is  Morris  Material   Handling,   Inc.  ("MMH"),   a  manufacturer,
distributor  and  service  provider  of   "through-the-air"   material  handling
equipment with operations in the United States,  United  Kingdom,  South Africa,
Singapore,  Canada,  Australia,  Thailand,  Chile and Mexico. Unless the context
requires  otherwise,  references  to the  "Company" in this combined 10-Q are to
MMH, its  subsidiaries  and their  predecessors.  For periods prior to March 30,
1998, references to the Company are to the  "through-the-air"  material handling
equipment business (the "MHE Business") of Harnischfeger  Corporation ("HarnCo")
and those subsidiaries and affiliates of HarnCo that were engaged therein.

This combined Form 10-Q is separately filed by MMH Holdings,  Inc. and by Morris
Material Handling,  Inc. The unaudited interim financial statements presented in
this combined  report  (collectively,  the "Financial  Statements")  include the
financial  statements of Holdings,  as well as separate financial statements for
MMH. Information contained herein relating to any individual Registrant is filed
by such Registrant on its own behalf.

Certain  sections  of this Form 10-Q,  including  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations,"  contain  various
forward looking  statements  within the meaning of Section 21E of the Securities
Exchange  Act of 1934,  which  represent  management's  expectations  or beliefs
concerning  future  events.  The forward  looking  statements  include,  without
limitation, the ability of the Registrants to meet their future liquidity needs.
The Registrants caution that those statements are further qualified by important
factors  that could  cause  actual  results to differ  from those in the forward
looking  statements.  Certain  factors  that might cause such a  difference  are
detailed  herein  under  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations--Cautionary Factors."

                                       2
<PAGE>

<TABLE>
                               MMH HOLDINGS, INC.
                            CONDENSED BALANCE SHEETS
                             (Dollars in Thousands)

                                     ASSETS
<CAPTION>
                                                         July 31,    October, 31
                                                             1999           1998
                                                       -----------   -----------
                                                       (Unaudited)
Current Assets
<S>                                                            <C>          <C>
   Cash and cash equivalents                             $   2,153    $   2,534
   Accounts receivable-net                                  63,561       81,947
   Inventories                                              43,568       42,561
   Other current assets                                     14,798       11,467
                                                         ---------    ---------
                                                           124,080      138,509
                                                         ---------    ---------
Property, Plant and Equipment
   Cost                                                     70,116       67,649
   Less accumulated depreciation                           (29,822)     (26,579)
                                                         ---------    ---------
                                                            40,294       41,070
                                                         ---------    ---------
Other Assets
   Goodwill                                                 42,184       39,843
   Debt financing costs                                     17,313       18,905
   Deferred income taxes                                    65,979       65,979
   Other                                                     9,997        6,691
                                                         ---------    ---------
                                                           135,473      131,418
                                                         ---------    ---------
                                                           299,847      310,997
                                                         ==========   ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
   Short-term notes payable and current
     portion of long-term obligations (Note 5)           $   3,467    $   2,262
   Revolving Credit Facility borrowings (Note 5)             7,203         --
   Bank overdrafts                                           1,889        1,252
   Trade accounts payable                                   22,221       32,893
   Advance payments and progress billings                   10,037        9,399
   Accrued interest                                          6,444        2,201
   Other current liabilities                                21,783       29,946
                                                         ---------    ---------
                                                            73,044       77,953

Revolving Credit Facility Borrowings (Note 5)               18,000        1,200
Term Loans (Note 5)                                         49,713       52,225
Acquisition Facility Line Borrowings (Note 5)                7,430        6,194
Senior Notes                                               200,000      200,000
Other Long-Term Borrowings                                   2,572        2,205
Deferred Income Taxes                                        2,578        2,698
Other Long-Term Liabilities                                  1,487         --

Minority Interest                                              521          364
Commitments and Contingencies (Note 6)
Mandatorily Redeemable Preferred Stock                     104,911       95,351
Shareholders' Equity                                      (160,409)    (127,193)
                                                         ---------    ---------
                                                           299,847      310,997
                                                         =========      =======
</TABLE>
The accompanying notes are an integral part of the financial statements.

                                       3
<PAGE>

<TABLE>
                               MMH HOLDINGS, INC.
       CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)
                             (Dollars in Thousands)

<CAPTION>
                                  For the Three Months    For the Nine Months
                                    Ended July 31,          Ended July 31,
                                  ---------------------    -------------------
                                       1999        1998        1999       1998
                                  --------- -----------    -------- ----------
Revenues
<S>                               <C>         <C>         <C>         <C>
   Net Sales                      $  72,709   $  74,426   $ 212,478   $ 231,675
   Other Income - Net                   453         391         600       1,117
                                  ---------   ---------   ---------   ---------
                                     73,162      74,817     213,078     232,792

Cost of Sales                        52,210      52,152     157,266     167,324

Selling, General and
  Administrative Expenses            18,298      14,582      53,585      44,096
HII Management Fee                     --          --          --         1,155
Non-Recurring Employee Benefit Costs   --          --          --         1,906
                                  ---------   ---------   ---------   ---------

Operating Income                      2,654       8,083       2,227      18,311

Interest Expense - Net
  HII Affiliates                       --          --          --        (1,448)
  Third Party                        (7,521)     (7,013)    (21,952)     (9,716)
                                   ---------   ---------   ---------   ---------

Income (Loss) Before
  Income Taxes and Minority Interest (4,867)      1,070     (19,725)      7,147

Provision for Income Taxes             (576)       (450)     (1,641)     (2,896)
Minority Interest                        13          (4)         40          34
                                  ---------   ---------   ---------   ---------

Net Income (Loss)                    (5,430)        616     (21,326)      4,285

Foreign Currency Translation
Adjustments                            (869)       (765)     (2,246)     (2,285)
                                  ---------   ---------   ---------   ---------

Comprehensive Income (Loss)       $  (6,299)  $    (149)  $ (23,572)  $   2,000
                                  =========   =========   =========   =========
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       4
<PAGE>

<TABLE>

                               MMH HOLDINGS, INC.
                        CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (Dollars in Thousands)

<CAPTION>
                                                          For the Nine Months
                                                             Ended July 31,
                                                         ----------------------
                                                              1999         1998
                                                         ----------------------
Operating Activities
<S>                                                       <C>         <C>
     Net income (loss)                                    $ (21,326)  $   4,285
     Add (deduct) - items not
     affecting cash used for operating activities:
          Depreciation and amortization                       6,057       5,196
          Amortization of debt financing costs                1,603         655
          Deferred income taxes - net                            41         411
          Divestiture bonus                                     --        1,216
          Other                                                 (40)        (34)
     Changes in working capital,
     excluding the effects of acquisition
     opening balance sheets:
          Accounts receivable                                18,212       4,246
          Inventories                                            34      (5,563)
          Other current assets                               (3,762)     (2,466)
          Trade accounts payable and bank overdrafts        (10,512)    (14,104)
          Advance payments and progress billings                366         941
          Accrued warranties                                   (145)     (1,428)
          Accrued interest                                    4,243       6,884
          Other current liabilities                          (6,958)       (375)
          Activity with parent and other affiliates-net        --         1,748
                                                          ---------   ---------
Net cash provided by (used for)operating activities         (12,187)      1,612
                                                          ---------   ---------
Investment and Other Transactions
     Capital Expenditures - net                              (6,208)     (3,556)
     Acquisition of businesses-net of cash acquired          (5,070)     (3,203)
     Net issuance of loans to senior management                 (80)       (900)
     Other - net                                               (570)       (941)
                                                          ---------   ---------
Net cash used for investment and other transactions         (11,928)     (8,600)
                                                          ---------   ---------
Financing Activities
     Changes in short-term debt,
       notes payable and Revolving Credit
       Facility borrowings                                   23,916       6,324
     Proceeds from Acquisition  Line borrowings               1,235        --
     Proceeds from Senior Note Offering                        --       200,000
     Proceeds from New Credit Facility                         --        55,000
     Redemption of common stock and preferred stock            --      (287,000)
     Net proceeds from issuance of
       Series A preferred stock and related common shares      --        57,094
     Stock redemption transaction costs                        --        (3,181)
     Debt financing costs                                      --       (18,889)
     Repayments of long-term obligations                     (1,388)       (338)
                                                          ---------   ---------
 Net cash provided by financing activities                   23,763       9,010
                                                          ---------   ---------
Effect of Exchange Rate Changes on
     Cash and Cash Equivalents                                  (29)         28
                                                          ---------   ---------
Increase (Decrease) in Cash and Cash Equivalents               (381)      2,050
Cash and Cash Equivalents
     Beginning of Period                                      2,534       1,532
                                                          ---------   ---------
     End of Period                                        $   2,153   $   3,582
                                                          =========   =========
</TABLE>
The accompanying notes are an integral part of the financial statements.

                                       5
<PAGE>

<TABLE>

                                                          MMH HOLDINGS, INC.
                                         STATEMENTS OF PREFERRED STOCK AND SHAREHOLDERS' EQUITY
                                               FOR THE NINE MONTHS ENDED JULY 31, 1999
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)

                                                              Preferred Stock
                                     -----------------------------------------------------------------------------------------------
                                           Series A                    Series B                 Series C
                                     -----------------------------------------------------------------------------------------------
                                     Shares       Carrying     Shares          Carrying     Shares        Carrying
                                     Outstanding  Value        Outstanding     Value        Outstanding   Value          Total
                                     -----------------------------------------------------------------------------------------------

<S>                                  <C>        <C>               <C>        <C>               <C>         <C>            <C>
Balance at October 31, 1998          61,188     $  59,217         5,105      $   5,156         30,678      $  30,978      $  95,351

Net loss                               --            --            --             --             --             --             --

Change in
foreign currency translation           --            --            --             --             --             --             --

Net issuance
of loans to senior management          --            --            --             --             --             --             --

Preferred stock dividends             3,667         5,665           313            483          1,918          2,976          9,124

Amortization of
preferred stock discount               --             436          --             --             --             --              436
                                    -----------------------------------------------------------------------------------------------
Balance at July 31, 1999             64,855     $  65,318         5,418      $   5,639         32,596      $  33,954      $ 104,911
                                    ===============================================================================================
</TABLE>
<TABLE>
<CAPTION>

                                      Common Stock          Parent           Accumulated
                                    -------------------     Investment/      Other                       Total
                                    Shares        Par       Additional       Comprehensive  Retained     Shareholders'
                                    Outstanding   Value     Paid-in-Capital  Loss           Earnings     Equity
                                    ------------------------------------------------------------------------------------------------

<S>                                  <C>            <C>      <C>            <C>            <C>            <C>
Balance at October 31, 1998          10,889         $--      $(121,860)     $  (2,741)     $  (2,592)      $(127,193)

Net loss                               --            --            --             --          (21,326)       (21,326)

Change in
foreign currency translation           --            --            --           (2,246)          --           (2,246)

Net issuance
of loans to senior management          --            --            --             --              (80)           (80)

Preferred stock dividends              --            --            --             --           (9,128)        (9,128)

Amortization of
preferred stock discount               --            --            --             --             (436)          (436)
                                     -----------------------------------------------------------------------------------------------
Balance at July 31, 1999             10,889          $--      $(121,860)     $  (4,987)     $ (33,562)     $(160,409)
                                     ===============================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       6
<PAGE>

<TABLE>
                         MORRIS MATERIAL HANDLING, INC.
                            CONDENSED BALANCE SHEETS
                             (Dollars in Thousands)

<CAPTION>

                                                       July 31,      October 31,
                                                           1999            1998
                                                    ------------   -------------
                                                     (Unaudited)
                                     ASSETS
Current Assets
<S>                                                     <C>           <C>
   Cash and cash equivalents                            $   2,153     $   2,534
   Accounts receivable-net                                 63,561        81,947
   Inventories                                             43,568        42,561
   Other current assets                                    14,798        11,467
                                                        ---------     ---------
                                                          124,080       138,509
                                                        ---------     ---------
Property, Plant and Equipment
   Cost                                                    70,116        67,649
   Less accumulated depreciation                          (29,822)      (26,579)
                                                        ---------     ---------
                                                           40,294        41,070
                                                        ---------     ---------
Other Assets
   Goodwill                                                42,184        39,843
   Debt financing costs                                    17,313        18,905
   Deferred income taxes                                   65,979        65,979
   Other                                                    9,997         6,691
                                                        ---------     ---------
                                                          135,473       131,418
                                                        ---------     ---------
                                                        $ 299,847     $ 310,997
                                                        =========     =========

                      LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
 Short-term notes payable and current
   portion of long-term obligations (Note 5)            $   3,467     $   2,262
 Revolving Credit Facility borrowings (Note 5)              7,203          --
 Bank overdrafts                                            1,889         1,252
 Trade accounts payable                                    22,221        32,893
 Advance payments and progress billings                    10,037         9,399
 Accrued interest                                           6,444         2,201
 Other current liabilities                                 21,783        29,946
                                                        ---------     ---------
                                                           73,044        77,953

Revolving Credit Facility Borrowings (Note 5)              18,000         1,200
Term Loans (Note 5)                                        49,713        52,225
Acquisition Facility Line Borrowings (Note 5)               7,430         6,194
Senior Notes                                              200,000       200,000
Other Long-Term Borrowings                                  2,572         2,205
Deferred Income Taxes                                       2,578         2,698
Other Long-Term Liabilities                                 1,487          --

Minority Interest                                             521           364
Commitments and Contingencies (Note 6)
Shareholder's Equity                                      (55,498)      (31,842)
                                                        ---------     ---------
                                                        $ 299,847     $ 310,997
                                                        =========     =========

</TABLE>

The accompanying notes are an intergral part of the financial statements

                                       7
<PAGE>

<TABLE>

                         MORRIS MATERIAL HANDLING, INC.
       CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)
                             (Dollars in Thousands)
<CAPTION>
                                 For the Three Months     For the Nine Months
                                   Ended July 31,           Ended July 31,
                                 -----------------------  ----------------------
                                    1999          1998        1999       1998
                                  -----------  ----------  ---------  ----------
Revenues
<S>                               <C>         <C>         <C>         <C>
   Net Sales                      $  72,709   $  74,426   $ 212,478   $ 231,675
   Other Income - Net                   453         391         600       1,117
                                  ---------   ---------   ---------   ---------
                                     73,162      74,817     213,078     232,792

Cost of Sales                        52,210      52,152     157,266     167,324

Selling, General and
  Administrative Expenses            18,298      14,582      53,585      44,096
HII Management Fee                     --          --          --         1,155
Non-Recurring Employee Benefit Costs   --          --          --         1,906
                                  ---------   ---------   ---------   ---------
Operating Income                      2,654       8,083       2,227      18,311

Interest Expense - Net
  HII Affiliates                       --          --          --        (1,448)
  Third Party                        (7,521)     (7,013)    (21,952)     (9,716)
                                  ---------   ---------   ---------   ---------
Income (Loss) Before
  Income Taxes and Minority Interest (4,867)      1,070     (19,725)      7,147

Provision for Income Taxes             (576)       (450)     (1,641)     (2,896)
Minority Interest                        13          (4)         40          34
                                  ---------   ---------   ---------   ---------

Net Income (Loss)                    (5,430)        616     (21,326)      4,285

Foreign Currency Translation
  Adjustments                          (869)       (765)     (2,246)     (2,285)
                                  ---------   ---------   ---------   ---------
Comprehensive Income (Loss)       $  (6,299)  $    (149)  $ (23,572)  $   2,000
                                  =========   =========   =========   =========

</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       8
<PAGE>

<TABLE>

                         MORRIS MATERIAL HANDLING, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (Dollars in Thousands)

                                                            For the Nine Months
                                                               Ended July 31,
                                                             1999          1998
                                                         -----------------------
Operating Activities
<S>                                                      <C>          <C>
 Net income (loss)                                       $ (21,326)   $   4,285
 Add (deduct) - items not affecting cash
 used for operating activities:
    Depreciation and amortization                            6,057        5,196
    Amortization of debt financing costs                     1,603          655
    Deferred income taxes - net                                 41          411
    Divestiture bonus                                         --          1,216
    Other                                                      (40)         (34)
 Changes in working capital, excluding the effects
 of acquisition opening balance sheets:
    Accounts receivable                                     18,212        4,246
    Inventories                                                 34       (5,563)
    Other current assets                                    (3,762)      (2,466)
    Trade accounts payable and bank overdrafts             (10,512)     (14,104)
    Advance payments and progress billings                     366          941
    Accrued warranties                                        (145)      (1,428)
    Accrued interest                                         4,243        6,884
    Other current liabilities                               (6,958)        (375)
    Activity with parent and other affiliates-net             --          1,748
                                                         ---------    ---------
Net cash provided by (used for) operating activities       (12,187)       1,612
                                                         ---------    ---------
Investment and Other Transactions
   Capital expenditures - net                               (6,208)      (3,556)
   Acquisition of businesses - net of cash acquired         (5,070)      (3,203)
   Net issuance of loans to senior management                  (80)        (900)
   Other - net                                                (570)        (941)
                                                         ---------    ---------
Net cash used for investment and other transactions        (11,928)      (8,600)
                                                         ---------    ---------
Financing Activities
  Changes in short-term debt, notes
    payable and Revolving Credit
    Facility borrowings                                      23,916        6,324
  Proceeds from Acquisition Facility Line borrowings         1,235         --
  Proceeds from Senior Note Offering                          --        200,000
  Proceeds from New Credit Facility                           --         55,000
  Dividend to and redemption of shares held by Holdings       --       (233,087)
  Debt Financing Costs                                        --        (18,889)
  Repayments of long-term obligations                       (1,388)        (338)
                                                         ---------    ---------
Net cash provided by financing activities                   23,763        9,010
                                                         ---------    ---------
Effect of Exchange Rate Changes on
  Cash and Cash Equivalents                                    (29)          28
                                                         ---------    ---------
Increase (Decrease) in Cash and Cash Equivalents              (381)       2,050
Cash and Cash Equivalents
     Beginning of Period                                     2,534        1,532
                                                         ---------    ---------
     End of Period                                       $   2,153    $   3,582
                                                         =========    =========
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       9
<PAGE>

<TABLE>

                                                   MORRIS MATERIAL HANDLING, INC.
                                                  STATEMENT OF SHAREHOLDER'S EQUITY
                                               FOR THE NINE MONTHS ENDED JULY 31, 1999
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)

                              ----------------------------------------------------------------------------------
                                Common Stock       Parent            Accumulated
                               --------------      Investment/       Other                       Total
                              Shares       Par     Additional        Comprehensive   Retained    Shareholder's
                              Outstanding  Value   Paid-in-Capital   Loss            Earnings    Equity
                              ----------------------------------------------------------------------------------

<S>                                 <C>       <C>      <C>             <C>             <C>             <C>
Balance at October 31, 1998         100       $--      $(33,392)       $ (2,741)       $  4,291        $(31,842)

Net loss                           --          --          --              --           (21,326)        (21,326)

Change in foreign
currency translation               --          --          --            (2,246)           --            (2,246)

Distribution to Holdings           --          --          --              --                (4)             (4)

Net issuance of loans to
senior management                  --          --          --              --               (80)            (80)
                             ----------------------------------------------------------------------------------
Balance at July 31, 1999            100       $--      $(33,392)       $ (4,987)       $(17,119)       $(55,498)
                             ==================================================================================
</TABLE>

The accompanying notes are an integral part of the financial statements.

                                       10
<PAGE>

                               MMH HOLDINGS, INC.
                         MORRIS MATERIAL HANDLING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                    UNAUDITED

(Dollar amounts in thousands unless indicated)

Note 1 - Basis of Presentation

On January 28, 1998, Harnischfeger Industries, Inc. ("HII") reached an agreement
with MHE  Investments,  Inc.  ("MHE  Investments"),  an  affiliate  of Chartwell
Investments  Inc.  ("Chartwell"),  for the sale of an  approximately  80 percent
common ownership  interest in HII's Material  Handling  Equipment  Business (the
"MHE Business").  As more fully described in Note 2, the resulting  transactions
(the "Recapitalization"),  which closed on March 30, 1998 (the "Recapitalization
Closing"),  led  to  a  significant  change  in  the  capital  structure  and  a
reorganization of the underlying legal entities of the MHE Business. As a result
of the Recapitalization, MMH Holdings, Inc. ("Holdings"), a pre-existing company
engaged  in the  MHE  Business,  became  an  indirect  holding  company  for the
operating  entities engaged in the MHE Business.  Specifically,  Morris Material
Handling,   Inc.  ("MMH"  and  collectively  with  its  subsidiaries  and  their
predecessors,  the "Company"),  a newly formed wholly-owned direct subsidiary of
Holdings, directly or indirectly acquired the various operating entities engaged
in the  MHE  Business.  Holdings  was  recapitalized  in  order  to  effect  the
redemption of certain  shares of common stock of Holdings held by  Harnischfeger
Corporation ("HarnCo").  As a result of the reorganization of the legal entities
of the MHE Business,  Holdings and MMH became the successor companies to the MHE
Business.  The transactions  have been accounted for as a  recapitalization  and
accordingly,  the financial statements presented herewith reflect the underlying
historical accounting basis of the MHE Business.

For periods prior to the  Recapitalization  Closing,  the  financial  statements
presented represent the combined financial statements of the entities comprising
the  MHE  Business.  For  purposes  hereof,  it is  assumed  that  Holdings  has
historically  owned the capital  stock of MMH, that all of the assets of the MHE
Business were owned by  subsidiaries of MMH and that,  immediately  prior to the
consummation  of  the   Recapitalization,   the  historical  combined  financial
statements of Holdings were identical to those of the Company.

All significant  intercompany  balances and  transactions  have been eliminated.
Payables and receivables with HII and affiliates  prior to the  Recapitalization
are recorded as a component of parent investment.

The accompanying  unaudited  financial  statements should be read in conjunction
with the combined  1998 Annual  Report on Form 10-K of Holdings and the Company.
In the opinion of management,  all adjustments,  normal and recurring in nature,
necessary  for a fair  presentation  of  results  of  operations  and  financial
position have been included in the accompanying balance sheets and statements of
operations. The results of operations for the three months and nine months ended
July 31, 1999, respectively,  are not, however,  indicative of the results which
may be expected for fiscal 1999.

Note 2 - Recapitalization Transaction

The   Recapitalization   was  effectuated  pursuant  to  the  January  28,  1998
Recapitalization  Agreement among MHE  Investments,  HarnCo and certain of HII's
affiliates. Pursuant to this agreement, HarnCo and other HII affiliates effected
a number  of  transactions  which  resulted  in  Holdings  owning,  directly  or
indirectly, the equity interests of all of the operating entities engaged in the
MHE  Business.  Holdings,  in turn,  formed MMH as a wholly owned  subsidiary to
directly or indirectly hold the various  operating  entities  engaged in the MHE
Business.

The principal  transactions  effected as part of the  Recapitalization  were the
following:  (i) MHE  Investments  acquired (x) 7,907 shares of Holdings'  common
stock  for  $25.1  million  and (y)  $28.9  million  liquidation  preference  of
Holdings'  12 1/2%  Series C Junior  Voting  Exchangeable  Preferred  Stock (the
"Series C Junior Voting Preferred  Stock") from HarnCo,  (ii) Holdings  redeemed
certain  shares of its common stock and Series C Junior Voting  Preferred  Stock
held by HarnCo for $287 million in cash (including a $5 million  prepayment of a
potential  post-closing  redemption  price  adjustment) and  approximately  $4.8
million liquidation preference of Holdings' 12 1/4% Series B Junior Exchangeable


                                       11
<PAGE>

Preferred  Stock  (the  "Series B Junior  Preferred  Stock");  and (iii)  HarnCo
retained 2,261 shares of Holdings' common stock.

To finance the  Recapitalization,  Holdings  sold $60 million of Series A Units,
consisting  of $57.7  million  liquidation  preference of Holdings' 12% Series A
Senior Exchangeable  Preferred Stock (the "Series A Senior Preferred Stock") and
$2.3 million of Holdings'  non-voting common stock, to institutional  investors.
In  addition,  MMH  issued  (the "Note  Offering")  $200  million  of  aggregate
principal  amount  of 9 1/2%  senior  notes due 2008 (the  "Senior  Notes")  and
entered into a senior secured credit  facility (the "New Credit  Facility") (See
Notes  5 and 6).  MMH  also  entered  into a  surety  arrangement  (the  "Surety
Arrangement")  to provide credit support for its  post-Recapitalization  Closing
operations.  MMH used a portion of the $200 million aggregate  proceeds from the
Note Offering and $55 million aggregate borrowings under the New Credit Facility
to redeem certain of its common shares from Holdings and pay Holdings a dividend
which on a combined basis totaled $233.8  million.  Holdings,  in turn, used the
proceeds  from this  redemption,  together  with the proceeds of the sale of the
Series A Units, to finance the cash portion of the redemption price for HarnCo's
shares.  The remainder of the proceeds were used by Holdings and MMH (i) to make
loans to senior  management to acquire  indirect  equity  interests in Holdings,
(ii) to fund  certain  transaction  fees and  expenses  and  (iii)  for  general
corporate purposes.

At July 31, 1999, MHE Investments owned  approximately 72.6% of the common stock
of Holdings  and $32.6  million  liquidation  preference  of the Series C Junior
Voting Preferred Stock and HarnCo owned  approximately 20.8% of the common stock
of  Holdings  and $5.4  million  liquidation  preference  of the Series B Junior
Preferred  Stock.  The remaining  equity  interests  were held by  institutional
investors and consisted of non-voting stock  representing  approximately 6.6% of
the  outstanding  common  stock  of  Holdings  and  $64.9  million   liquidation
preference of the Series A Senior Preferred Stock.

Note 3 - Acquisitions

During  the  nine  months  ended  July  31,  1999,  the  Company  completed  one
acquisition  with an aggregate  purchase price of $3,158,  net of cash acquired.
During  1998,  the  Company  completed  several  acquisitions  for an  aggregate
purchase price of $8,891, net of cash acquired.  These acquisitions were related
to the  Company's  aftermarket  business  and  were  accounted  for as  purchase
transactions  with the purchase  prices  allocated to the fair value of specific
assets acquired and liabilities assumed. Resultant goodwill of the transactions,
$1,934 for the 1999 transaction and $8,343 for the 1998  transactions,  is being
amortized over 30 to 40 years.  The 1999  acquisition  and one 1998  acquisition
were  partially  financed by the sellers,  resulting in deferred  purchase price
which will be paid in 2004 and 2005 (in the case of the 1999 acquisition) and in
installments through 2006 (in the case of one 1998 acquisition).

During the nine months ended July 31, 1999, the Company made final consideration
payments  of $1,507  related to two 1998  acquisitions.  With  respect to a 1995
acquisition, the Company made a final contingent consideration payment of $1,413
in the nine months ended July 31, 1999. Additionally, a payment of $100 was made
toward the 1998 acquisition that was partially  financed by the seller. On a pro
forma  basis,  the 1999 and 1998  acquisitions  were not  material to results of
operations  reported  for the nine months  ended July 31, 1999 and  accordingly,
such information is not presented.

Note 4 - Inventories

Inventories consisted of the following:

<TABLE>
<CAPTION>

                                                     July 31,        October 31,
                                                       1999             1998
                                                  ---------------  ------------
<S>                                                  <C>               <C>
Raw material                                         $ 16,997          $ 14,517
Work-in-process                                        22,547            20,545
Finished parts                                         11,171            14,910
                                                     ---------         --------
                                                       50,715            49,972
Less excess of current cost
over stated LIFO value                                 (7,147)           (7,411)
                                                    ==========          ========
                                                     $ 43,568          $ 42,561
                                                    ==========          ========
</TABLE>

                                       12
<PAGE>

Note 5 - Indebtedness

The New Credit Facility and the indenture  governing the Senior Notes (the "Note
Indenture")  contain a number of  covenants  that,  among  other  things,  limit
Holdings' and its  subsidiaries'  ability to prepay  subordinated  indebtedness,
dispose of certain assets, create liens, make capital expenditures, make certain
investments or acquisitions  and otherwise  restrict  corporate  activities.  In
addition, the New Credit Facility limits Holdings' and its subsidiaries' ability
to incur  indebtedness  and the Note  Indenture  limits  the  Company's  and its
subsidiaries'  ability  to incur  indebtedness.  The New  Credit  Facility  also
requires  Holdings and its subsidiaries to comply with certain  financial ratios
and  borrowing  condition  tests based on quarterly  measurements  of the latest
twelve months results of operations,  under which Holdings and its  subsidiaries
are required to achieve and maintain certain financial and operating  results. A
breach  of any of these  covenants  would  result  in a  default  under the Note
Indenture or the New Credit Facility, or both. In the event of any such default,
the lenders under the New Credit Facility and/or the holders of the Senior Notes
could elect to declare all amounts borrowed under the New Credit Facility and/or
the Senior Notes, as applicable,  together with accrued interest thereon,  to be
due and payable  which would also result in an event of default under the Surety
Arrangement.

The Company did not meet certain of the financial covenants under the New Credit
Facility for the period ended  January 31, 1999 and did not meet such  financial
covenants and certain additional  financial covenants for the period ended April
30, 1999.  The Company  obtained a waiver of such  financial  covenants  through
August 2, 1999. The waiver permitted the Company to borrow certain amounts under
the Revolving Credit Facility to meet its working capital requirements;  however
the Company  could not,  without  prior lender  consent,  (i) borrow any amounts
under the  Acquisition  Facility,  (ii) borrow any amounts  under the  Revolving
Credit  Facility  in excess of the  aggregate  amount  of the  Revolving  Credit
Facility  borrowings that the Company has repaid subsequent to January 31, 1999,
or (iii)  request the  issuance of letters of credit,  bid bonds or  performance
bonds in an aggregate amount after March 2, 1999 in excess of $5.0 million.

On August 2, 1999, the Company  obtained an amendment to the New Credit Facility
(the "Amendment") which cured past financial  covenant  violations and reset the
financial  covenants  until April 2001.  The Company is in  compliance  with the
financial  covenants under the New Credit  Facility,  as amended.  The Amendment
increased the cash  availability  under the Revolving Credit Facility from $35.7
million under the previous  waiver  agreement to $40.7 million.  At September 8,
1999, after giving effect to the Amendment,  the Company has, subject to certain
conditions,  the ability to borrow up to  approximately  $40.7 million under the
Revolving Credit Facility,  of which $19.1 million is outstanding.  In addition,
the  Company  has the  ability  to  obtain  letters  of  credit,  bid  bonds and
performance  bonds in an amount not to exceed $10.0  million in the aggregate of
which $6.3 million have been issued.

In connection with, and as a condition to, the Amendment, certain of the current
indirect equity holders in Holdings  purchased a $5.0 million  participation  in
the New Credit  Facility and received  certain  non-voting  equity  interests in
Holdings,  consisting  of 10% of the then  outstanding  common stock of Holdings
and, subject to certain  conditions,  the right to receive  additional shares of
non-voting  common  stock of  Holdings on December 3, 1999 for a total of 25% of
the outstanding common stock of Holdings.

The  Company   incurred   significant   indebtedness   in  connection  with  the
Recapitalization.  As of September 8, 1999, the Company had approximately $279.4
million of indebtedness outstanding. Since the Recapitalization, the Company has
been able to satisfy its cash requirements from cash generated by operations and
borrowings  under  the  Revolving  Credit  Facility.  However,  in order to have
sufficient  cash flow to satisfy its future cash needs for  operations  and debt
service,  the  Company  needs to be able to borrow  under the  Revolving  Credit
Facility  in  sufficient  amounts  and  will  have to  materially  improve  cash
generated  from  operations  in the near future.  The Company  also  anticipates
incurring $2.0 million of cash expenditures  during the fourth quarter of fiscal
1999  for  severance  and  reorganization   charges  associated  with  continued
restructuring  of the  Company's  operations,  in  addition  to cash  needed for
operations and capital expenditures.

Note 6 - Commitments and Contingencies

To  secure  the  performance  of  sales  contracts   related  to  the  Company's
operations, MMH was contingently liable to financial institutions and others for
the  following at July 31,  1999:  (i) $7.1  million of  outstanding  letters of
credit and surety bonds under the New Credit  Facility,  (ii) $1.8 million under
the Surety  Arrangement for  outstanding  surety bonds and (iii) $3.8 million of
surety bonds with other institutions. Prior to the Recapitalization Closing, HII
and its  affiliates  (the  "HII  Group")  provided  credit  support  for the MHE


                                       13
<PAGE>

Business.  As part of the  Recapitalization,  HII  agreed to  maintain  in place
credit  support  (including  letters of credit and surety bonds) in existence at
the  Recapitalization  Closing and the Company  agreed to reimburse  HII for any
payments made by the HII Group with respect to such credit support.  At July 31,
1999,  approximately  $27.0  million  of HII Group  letters of credit and surety
bonds remained outstanding.

As of the Recapitalization Closing, HarnCo retained certain income and other tax
liabilities relating to the MHE Business, all environmental liabilities relating
to  previously  shared  facilities,  any  liabilities  for  which  HarnCo or its
affiliates  have been named as potentially  responsible  parties with respect to
Superfund sites, and any liabilities  arising in connection with claims alleging
exposure to asbestos  (to the extent there is  insurance  coverage  therefor) in
connection  with  the  MHE  Business  prior  to  the  Recapitalization  Closing.
Additionally,  HarnCo retained all liability for medical and disability  benefit
claims for current United States  employees  made prior to the  Recapitalization
Closing and all claims with  respect to any of the HII benefit  plans for former
United States employees.

HarnCo has been and is  currently  a defendant  in a number of asbestos  related
lawsuits  and will likely be named in future such  actions.  Most suits  involve
multiple  defendants  including  asbestos  manufacturers.   MMH  has  agreed  to
indemnify HarnCo and its affiliates with respect to any liabilities in excess of
insurance  arising  in  connection  with  past and  future  asbestos  litigation
relating to the MHE Business.  HII's  insurance  program  included  coverage for
asbestos related claim activity through 1986, when coverage for asbestos related
claims ceased to be available.  HII's insurer has provided first dollar coverage
for policy periods through 1976. During the 1977 to 1985 policy periods, HII had
a variety of policies,  with  retention  levels  ranging from  $100,000 to $15.0
million and total  coverage  limits ranging from $12.5 million to $50.0 million.
To date,  HII's  insurer has paid all  indemnification  liabilities  relating to
asbestos  claims (which  amounts have not been material to the MHE Business) but
there can be no assurance  such insurers will continue to do so in the future or
that there will be  insurance  coverage for such  claims.  In  addition,  policy
primary  aggregate  levels were exhausted in certain years,  which would require
the  participation  of excess  insurers  for future  claim  activity.  Given its
experience to date with such claims,  the Company  believes that its exposure to
asbestos related claims is not material, but there can be no assurance that such
liability will not in fact be material.

All of the Company's  agreements  and  arrangements  with HII and its affiliates
(including  those  referred  to above and those  relating  to the  provision  of
services  and  materials  by HII and its  affiliates  to the  Company)  could be
materially  adversely  affected by the fact that on June 7, 1999 (the  "Petition
Date"), HII and certain of its United States affiliates (including HarnCo) filed
voluntary  petitions for relief under Chapter 11 of the United States Bankruptcy
Code (the  "Bankruptcy  Code") in the  United  States  Bankruptcy  Court for the
District  of  Delaware  (the  "HII  Bankruptcy").   Certain  provisions  of  the
Bankruptcy Code allow a debtor to avoid, delay and/or reduce its contractual and
other  obligations to third parties.  There can be no assurance that HII and its
affiliates  will not attempt to utilize  such  provisions  to cease  performance
under their agreements with the Company. The inability of the Company to receive
the benefits of one or more of these  agreements or the  termination  of ongoing
arrangements  between  the  Company  and  affiliates  of  HII  could  materially
adversely  affect the Company's  operations  and financial  performance.  In the
event that any of the  liabilities  retained  by HII and its  affiliates  remain
unsatisfied as of the Petition Date, the Company's right to indemnification  for
any such  amounts  it has paid on behalf of HII and its  affiliates  may also be
avoided, delayed or reduced.

Each of HII and certain of its  affiliates on the one hand,  and the Company and
certain of its affiliates,  on the other hand, have  receivables and payables to
the other  which may be affected by the HII  Bankruptcy.

In October  1998,  the  Company  received a request to  arbitrate a claim from a
former  customer  which  arose  out of an  accident  that  occurred  in  Ireland
involving  two cranes  sold by the  Company in 1992.  The claim  alleges  direct
damages  of  approximately  $12.8  million  plus lost  revenue  due to  business
interruption. In addition, the Company has been notified by the port operator of
its  intention to pursue a claim  against the Company for its damages  (which it
estimates  are  between $4 million and $5 million)  arising  from the  accident.
Management  intends to  vigorously  defend  this  matter.  One of the  Company's
insurance  carriers  has agreed to provide  defense  coverage for one of the two
cranes  involved in the accident and limited  indemnification  if the Company is
unsuccessful in defending the claim.  The Company is continuing to work with its
insurance broker to determine the availability of additional insurance coverage,
if any. The  contract  between the Company and the  claimant  provides  that the
contract is governed  by Irish law and that all  disputes  are to be resolved by
arbitration  in Ireland.  While the Company  believes it will obtain a favorable
resolution,  no assurances can be made as to the final outcome of the claim.  If
the Company were found liable for the full amount of the claim, there could be a
material adverse effect on the Company's operations and financial performance.


                                       14
<PAGE>

The Company is a party to various other litigation  matters,  including  product
liability  and other claims,  which are normal in the course of its  operations.
Also,  as a  normal  part of its  operations,  the  Company  undertakes  certain
contractual  obligations  and warranties in connection with the sale of products
or services.  Although  the outcome of these  matters  cannot be predicted  with
certainty, management believes that the resolution of such matters will not have
a material adverse effect on the consolidated  results of operations,  financial
position or cash flows of Holdings or the Company.

Under the terms of the Recapitalization Agreement, HarnCo retained all liability
for the only two open  environmental  clean-up  claims brought against HarnCo in
the Milwaukee,  Wisconsin  area. The Company and its management are not aware of
any  other  material  environmental  clean-up  claim  which  is  pending  or  is
threatened  against the  Company,  but there can be no  assurance  that any such
claim will not be asserted  against the Company in the future.  In addition,  as
noted above,  the Company's  right to  indemnification  against  HarnCo for such
liabilities  may be avoided,  delayed or reduced as a result of HarnCo's  filing
for bankruptcy protection.

Note 7 - Income Taxes

Realization of deferred tax assets is dependent on generating sufficient taxable
income prior to  expiration  of net  operating  loss  carryforwards.  During the
second  quarter,  the  Company  re-estimated  its future  operating  results and
determined its deferred tax asset  valuation  allowance  required an increase of
$5.9 million which was  recognized as income tax expense.  Additional  valuation
allowance  provisions  of $1.9 million were recorded  during the third  quarter.
Although realization is not assured,  management believes it is more likely than
not that the net deferred tax assets  recorded  will be realized.  The amount of
the deferred tax assets not considered  realizable,  however, could be increased
in the near term if estimates of future taxable income are reduced.

Note 8 - Geographical Information

Geographical  information  for the nine  months  ended  July 31,  1999 and 1998,
respectively, are as follows:

<TABLE>
<CAPTION>

                                          Sales to      Operating  End of Period
                 Total         Interarea  Unaffiliated  Income     Identifiable
                 Net Sales     Sales      Customers     (Loss)     Assets
                 ---------------------------------------------------------------

July 31, 1999
<S>                <C>         <C>         <C>         <C>         <C>
United States      $ 130,985   $    --     $ 130,985   $   2,230   $ 202,038
 Europe               36,889      (4,146)     32,743      (3,542)     51,012
 Other Foreign        48,750        --        48,750       3,539      46,797
 Interearea
 Eliminations         (4,146)      4,146        --          --          --
                ---------------------------------------------------------------
                   $ 212,478   $    --     $ 212,478   $   2,227   $ 299,847
                ===============================================================
</TABLE>
<TABLE>
<CAPTION>

                                          Sales to     Operating  End of Period
                 Total        Interarea   Unaffiliated Income     Identifiable
                 Net Sales    Sales       Customers    (Loss)     Assets
                 ---------------------------------------------------------------

July 31, 1998
<S>               <C>         <C>         <C>        <C>        <C>
 United States    $ 146,876   $    --     $ 146,876  $  14,240  $ 204,826
 Europe              54,647      (9,154)     45,493        683     58,888
 Other Foreign       39,306        --        39,306      3,388     33,431
 Interearea
 Eliminations        (9,154)      9,154        --         --         --
                 ---------------------------------------------------------------
                  $ 231,675   $    --     $ 231,675  $  18,311  $ 297,145
                ===============================================================
</TABLE>

                                       15
<PAGE>

Note 9 - Supplemental Condensed Financial Information

In connection with the Recapitalization,  MMH, a direct wholly-owned  subsidiary
of  Holdings,  issued  Senior  Notes  that are  guaranteed  by  certain of MMH's
subsidiaries (the "Guarantor Subsidiaries").  Each of the Guarantor Subsidiaries
is a wholly-owned subsidiary,  directly or indirectly, of MMH and the guarantees
are full, unconditional and joint and several. Both Holdings and MMH are holding
companies  with no material  operating  assets.  All of the  Company's  business
operations  are conducted  through  subsidiaries  of MMH and  accordingly,  both
Holdings and MMH are  dependent  on the  operating  subsidiaries  of MMH to fund
their cash needs, including debt service and tax obligations.

Separate  financial  statements of the Guarantor  Subsidiaries are not presented
because  management has determined that they would not be material to investors.
The following  supplemental  financial information sets forth the balance sheet,
statement of operations and cash flow information for the Guarantor Subsidiaries
and  for  MMH's  other  subsidiaries  (the  "Non-Guarantor  Subsidiaries").  The
supplemental  financial  information  reflects the  investments of the Guarantor
Subsidiaries  in the  Non-Guarantor  Subsidiaries  using  the  equity  method of
accounting. For purposes of this presentation, it is assumed that, historically,
all of the assets of the MHE Business were  wholly-owned by subsidiaries of MMH,
which  is an  entity  that  was  formed  by  Holdings  in  connection  with  the
Recapitalization and accordingly, the historical financial statements of MMH and
Holdings are identical following completion of the Recapitalization.

                                       16
<PAGE>
<TABLE>
                                         SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                                            JULY 31, 1999
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)
<CAPTION>
                                                                                           Consolidated
                                                                    Morris                 Morris                       Consolidated
                                                       Non          Material               Material   MMH                        MMH
                                          Guarantor    Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares    Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                          ------------------------------------------------------------------------------------------
ASSETS
Current Assets
<S>                                            <C>          <C>         <C>    <C>         <C>              <C>      <C>     <C>
   Cash and cash equivalents                   $2,046       $107        $-          $-     $2,153           $-       $-      $2,153
   Accounts receivable - net                   59,494      4,067         -           -     63,561            -        -      63,561
   Intercompany accounts receivable            24,163          -     4,500    (28,663)          -            -        -          -
   Inventories                                 40,474      3,094         -           -     43,568            -        -      43,568
   Other current assets                         7,913        742     6,143           -     14,798            -        -      14,798
                                          ------------------------------------------------------------------------------------------
                                              134,090      8,010    10,643    (28,663)    124,080            -        -     124,080
                                          ------------------------------------------------------------------------------------------
Property, Plant and Equipment                  37,557      2,737         -           -     40,294            -        -      40,294
                                          ------------------------------------------------------------------------------------------
  Other Assets
   Goodwill                                    39,458      2,726         -           -     42,184            -        -      42,184
   Debt financing costs                             -          -    17,313           -     17,313            -        -      17,313
   Noncurrent intercompany receivable           3,770          -    89,406    (93,176)          -            -        -           -
   Investment in affiliates                      (34)          -    64,937    (64,903)          -     (55,498)   55,498           -
   Deferred income taxes                            -          -    65,979           -     65,979            -        -      65,979
   Other                                        9,965          -        32           -      9,997            -        -       9,997
                                          ------------------------------------------------------------------------------------------
                                               53,159      2,726   237,667   (158,079)    135,473     (55,498)   55,498     135,473
                                          ------------------------------------------------------------------------------------------
                                             $224,806    $13,473  $248,310  $(186,742)   $299,847    $(55,498)  $55,498    $299,847
                                          ==========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Short-term notes payable and current
     portion of long-term obligations            $202        $40    $3,225          $-     $3,467           $-       $-      $3,467
   Revolving credit facility borrowings         7,203          -         -           -      7,203            -        -       7,203
   Bank overdrafts                                 13      1,876         -           -      1,889            -        -       1,889
   Trade accounts payable                      21,159      1,062         -           -     22,221            -        -      22,221
   Intercompany accounts payable                4,500      4,698    19,465    (28,663)          -            -        -           -
   Advance payments and progress billings      10,037          -         -           -     10,037            -        -      10,037
   Accrued interest                                 -          -     6,444           -      6,444            -        -       6,444
   Other current liabilities                   21,575        942     (734)           -     21,783            -        -      21,783
                                          ------------------------------------------------------------------------------------------
                                               64,689      8,618    28,400    (28,663)     73,044            -        -      73,044
Revolving Credit Facility Borrowings                -          -    18,000           -     18,000            -        -      18,000
Term Loans                                          -          -    49,713           -     49,713            -        -      49,713
Acquisition Facility Line Borrowings                -          -     7,430           -      7,430            -        -       7,430
Senior Notes                                        -          -   200,000                200,000                           200,000
Other Long-Term Borrowings                      1,974        598         -           -      2,572            -        -       2,572
Noncurrent Intercompany Payable                89,406      3,770         -    (93,176)          -            -        -           -
Deferred Income Taxes                           2,578          -         -           -      2,578            -        -       2,578
Other Long-Term Liabilities                     1,222                  265                  1,487                             1,487
Minority Interest                                   -          -         -         521        521            -        -         521
Mandatorily Redeemable Preferred Stock              -          -         -           -          -      104,911        -     104,911
Stockholders' Equity                           64,937        487  (55,498)    (65,424)   (55,498)    (160,409)   55,498   (160,409)
                                          ------------------------------------------------------------------------------------------
                                             $224,806    $13,473  $248,310  $(186,742)   $299,847    $(55,498)  $55,498    $299,847
                                          ==========================================================================================
</TABLE>
                                       17
<PAGE>
<TABLE>
                                         SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                                          OCTOBER 31, 1998
                                                       (Dollars in Thousands)
<CAPTION>
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                          ------------------------------------------------------------------------------------------
ASSETS
Current Assets
<S>                                            <C>        <C>          <C>           <C>     <C>             <C>        <C>   <C>
   Cash and cash equivalents                   $2,214     $320         $-            $-      $2,534          0          0     $2,534
   Accounts receivable - net                   76,000    5,947          -             -      81,947                           81,947
   Intercompany accounts receivable            20,687        -      6,915      (27,602)           -                                -
   Inventories                                 39,749    2,812          -             -      42,561                           42,561
   Other current assets                         5,218      384      5,865             -      11,467                           11,467
                                             ---------------------------------------------------------------------------------------
                                              143,868    9,463     12,780      (27,602)     138,509           -          -   138,509
                                             ---------------------------------------------------------------------------------------
Property, Plant and Equipment                  38,295    2,775          -             -      41,070                           41,070
                                             ---------------------------------------------------------------------------------------
Other Assets
   Goodwill                                    37,767    2,076          -             -      39,843                           39,843
   Debt financing costs                             -        -     18,905             -      18,905                           18,905
   Noncurrent intercompany receivable           3,853        -     83,416      (87,269)           -                                -
   Investment in affiliates                       331        -     66,732      (67,063)           -    (31,842)     31,842         -
   Deferred income taxes                            -        -     65,979             -      65,979                           65,979
   Other                                        6,691        -          -             -       6,691                            6,691
                                             ---------------------------------------------------------------------------------------
                                               48,642    2,076    235,032     (154,332)     131,418    (31,842)     31,842   131,418
                                             ---------------------------------------------------------------------------------------
                                             $230,805  $14,314   $247,812    $(181,934)    $310,997   $(31,842)    $31,842  $310,997
                                             =======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Short-term notes payable and current
     portion of long-term obligations            $122      $40     $2,100                    $2,262                           $2,262
   Bank overdrafts                                  -    1,252          -                     1,252                            1,252
   Trade accounts payable                      30,539    2,354          -                    32,893                           32,893
   Intercompany accounts payable                6,915    4,130     16,557      (27,602)           -                                -
   Advance payments and progress billings       9,394        5          -                     9,399                            9,399
   Accrued interest                                 -        -      2,201                     2,201                            2,201
   Other current liabilities                   29,763    1,329    (1,146)                    29,946                           29,946
                                             ---------------------------------------------------------------------------------------
                                               76,733    9,110     19,712      (27,602)      77,953           -          -    77,953
                                             ---------------------------------------------------------------------------------------
Revolving Credit Facility Borrowings                -        -      1,200                     1,200                            1,200
Term loans                                          -        -     52,225             -      52,225                           52,225
Acquisition Facility Line Borrowings                -        -      6,194             -       6,194                            6,194
Senior Notes                                        -        -    200,000             -     200,000                          200,000
Other Long-Term Obligations                     1,226      656        323             -       2,205                            2,205
Noncurrent Intercompany Payable                83,416    3,853          -      (87,269)           -                                -
Deferred Income Taxes                           2,698        -          -             -       2,698                            2,698

Minority Interest                                   -        -          -           364         364                              364
Mandatorily Redeemable Preferred Stock              -        -          -             -           -      95,351               95,351
Stockholders' Equity                           66,732      695   (31,842)      (67,427)    (31,842)   (127,193)     31,842 (127,193)
                                             ---------------------------------------------------------------------------------------
                                             $154,072  $14,314   $247,812    $(181,934)    $310,997   $(31,842)    $31,842  $310,997
                                             =======================================================================================
</TABLE>
                                       18
<PAGE>
<TABLE>
                                    SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)
 <CAPTION>
                                                                 FOR THE NINE MONTHS ENDED JULY 31, 1999
                                          ------------------------------------------------------------------------------------------
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations     Inc.
                                          ------------------------------------------------------------------------------------------
Revenues
<S>                                     <C>         <C>           <C>      <C>         <C>                <C>         <C> <C>
  Net Sales                             $ 200,730   $  12,347     $  -      $    (599)  $ 212,478       $-          $-     $ 212,478
  Other Income - net                          600        --          --          --           600        --          --          600
                                        -------------------------------------------------------------------------------------------
                                          201,330      12,347        --          (599)    213,078        --          --      213,078
Cost of Sales                             148,388       9,477        --          (599)    157,266        --          --      157,266
Selling, General and
   Administrative Expenses                 49,340       2,743       1,502        --        53,585        --          --       53,585
                                        -------------------------------------------------------------------------------------------
Operating Income (Loss)                     3,602         127      (1,502)       --         2,227        --          --        2,227
Interest (Expense) Income - net
   Affiliates                              (4,719)       (281)      5,000        --          --          --          --           --
   Third Party                               (542)       (342)    (21,068)       --       (21,952)       --          --     (21,952)
                                         -------------------------------------------------------------------------------------------
Loss Before Income Taxes, Equity in
  Earnings (Loss) of Subsidiaries and
  Minority Interest                        (1,659)       (496)    (17,570)       --       (19,725)       --          --     (19,725)
Provision for Income Taxes                 (1,641)       --          --          --        (1,641)       --          --      (1,641)
Equity in Earnings (Loss) of Subsidiaries    (456)       --        (3,756)      4,212        --       (21,326)     21,326         --
Minority Interest                            --          --          --            40          40        --          --           40
                                         -------------------------------------------------------------------------------------------
Net Income (Loss)                       $  (3,756)  $    (496)  $ (21,326)  $   4,252   $ (21,326)  $ (21,326)  $  21,326  $(21,326)
                                         ===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                               FOR THE THREE MONTHS ENDED JULY 31, 1999
                                        -------------------------------------------------------------------------------------------
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                        -------------------------------------------------------------------------------------------
Revenues
<S>                                   <C>        <C>            <C>          <C>         <C>           <C>        <C>    <C>
 Net Sales                            $ 69,016   $  3,940       $-           $    (247)  $ 72,709      $-         $-     $ 72,709
 Other Income - net                        453       --         --                --          453       --         --         453
                                       -------------------------------------------------------------------------------------------
                                        69,469      3,940       --                (247)    73,162       --         --      73,162
Cost of Sales                           49,386      3,071       --                (247)    52,210       --         --      52,210
Selling, General and
   Administrative Expenses              16,554        917        827              --       18,298       --         --      18,298
                                        -------------------------------------------------------------------------------------------
Operating Income (Loss)                  3,529        (48)      (827)             --        2,654       --         --       2,654
Interest (Expense) Income - net
   Affiliates                           (1,545)       (89)     1,634              --         --         --         --        --
   Third Party                            (237)      (102)    (7,182)             --       (7,521)      --         --      (7,521)
                                         -------------------------------------------------------------------------------------------
Loss Before Income Taxes, Equity in
 Earnings (Loss) of Subsidiaries and
 Minority Interest                       1,747       (239)    (6,375)             --       (4,867)      --         --      (4,867)
Provision for Income Taxes                (576)      --         --                --         (576)      --         --        (576)
Equity in Earnings(Loss)of Subsidiaries   (226)      --          945             (719)       --       (5,430)     5,430      --
Minority Interest                         --         --         --                 13         13       --         --          13
                                        -------------------------------------------------------------------------------------------
Net Income (Loss)                     $    945   $   (239)  $ (5,430)        $   (706)  $ (5,430)   $ (5,430)  $  5,430  $ (5,430)
                                        ===========================================================================================
</TABLE>
                                       19
<PAGE>
<TABLE>
                                          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)
<CAPTION>
                                                         FOR THE NINE MONTHS ENDED JULY 31, 1998
                                        -------------------------------------------------------------------------------------------
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                        --------------------------------------------------------------------------------------------
Revenues
<S>                                    <C>         <C>           <C>       <C>         <C>          <C>        <C>        <C>
   Net Sales                           $ 219,633   $  16,449     $  --     $  (4,407)  $ 231,675    $   --     $   --     $ 231,675
   Other Income - net                      1,117        --          --                     1,117        --         --         1,117
                                         -------------------------------------------------------------------------------------------
                                         220,750      16,449        --        (4,407)    232,792        --         --       232,792
Cost of Sales                            158,828      12,903        --        (4,407)    167,324        --         --       167,324
Selling, General and
   Administrative Expenses                40,507       3,256         333        --        44,096        --         --        44,096
HII Management Fee                         1,155        --          --          --         1,155        --         --         1,155
Non-Recurring Employee Benefit Costs         690        --         1,216        --         1,906        --         --         1,906
                                        -------------------------------------------------------------------------------------------
Operating Income (Loss)                   19,570         290      (1,549)       --        18,311        --         --        18,311
Interest (Expense) Income - net
   Affiliates                             (3,726)       (124)      2,402        --        (1,448)       --         --        (1,448)
   Third Party                              (204)       (401)     (9,111)       --        (9,716)       --         --        (9,716)
                                         -------------------------------------------------------------------------------------------
Income (Loss) Before Income
  Taxes, Equity in Earnings (Loss)
  of Subsidiaries and Minority Interest   15,640        (235)     (8,258)       --         7,147        --         --         7,147
Provision for Income Taxes                (2,896)       --          --          --        (2,896)       --         --        (2,896)
Equity in Earnings(Loss)of Subsidiaries     (201)       --        12,543     (12,342)       --         4,285     (4,285)       --
Minority Interest                           --          --          --            34          34        --         --            34
                                        -------------------------------------------------------------------------------------------
Net Income (Loss)                      $  12,543   $    (235)  $   4,285   $ (12,308)  $   4,285   $   4,285  $  (4,285)  $   4,285
                                        ===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
                                                        FOR THE THREE MONTHS ENDED JULY 31, 1998
                                         -------------------------------------------------------------------------------------------
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                          ------------------------------------------------------------------------------------------
Revenues
<S>                                    <C>         <C>          <C>        <C>         <C>           <C>      <C>         <C>
   Net Sales                           $  70,422   $   5,135    $   --     $  (1,131)  $  74,426     $  --    $    --     $  74,426
   Other Income - net                        391        --          --          --           391        --         --           391
                                        -------------------------------------------------------------------------------------------
                                          70,813       5,135        --        (1,131)     74,817        --         --        74,817
Cost of Sales                             49,252       4,031        --        (1,131)     52,152        --         --        52,152
Selling, General and
   Administrative Expenses                13,400         932         250        --        14,582        --         --        14,582
HII Management Fee                          --          --          --          --          --          --         --          --
Non-Recurring Employee
 Benefit Costs                              --          --          --          --          --          --         --          --
                                        -------------------------------------------------------------------------------------------
Operating Income (Loss)                    8,161         172        (250)       --         8,083        --         --         8,083
Interest (Expense) Income-net
   Affiliates                             (1,651)        (37)      1,688        --          --          --         --          --
   Third Party                                (6)       (119)     (6,888)       --        (7,013)       --         --        (7,013)
                                        -------------------------------------------------------------------------------------------
Income (Loss) Before Income
  Taxes, Equity in Earnings (Loss)
  of Subsidiaries and Minority Interest    6,504          16      (5,450)       --         1,070        --         --         1,070
Benefit (Provision) for
 Income Taxes                               (450)       --          --          --          (450)       --         --          (450)
Equity in Earnings(Loss)of Subsidiaries       12        --         6,066      (6,078)       --           616       (616)       --
Minority Interest                           --          --          --            (4)         (4)       --         --            (4)
                                        -------------------------------------------------------------------------------------------
Net Income (Loss)                      $   6,066   $      16   $     616   $  (6,082)  $     616   $     616  $    (616)  $     616
                                        ==========================================================================================
</TABLE>
                                       20
<PAGE>
<TABLE>
                                          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF
                                                             CASH FLOWS
                                               FOR THE NINE MONTHS ENDED JULY 31, 1999
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)
<CAPTION>
                                         -------------------------------------------------------------------------------------------
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                          ------------------------------------------------------------------------------------------
Operating Activities
<S>                                      <C>         <C>         <C>         <C>         <C>         <C>         <C>       <C>
 Net income (loss)                       $ (3,756)   $   (496)   $(21,326)   $  4,252    $(21,326)   $(21,326)   $ 21,326  $(21,326)
 Add (deduct) - items not
 affecting cash used
 for operating activities:
 Depreciation and amortization              5,837         220        --          --         6,057        --          --        6,057
 Amortization of debt financing costs        --          --         1,603        --         1,603        --          --        1,603
 Equity in (earnings) loss of subsidiaries    456        --         3,756      (4,212)       --        21,326     (21,326)       --
 Deferred income taxes - net                 --          --            41        --            41        --          --           41
 Other                                       --          --          --           (40)        (40)       --          --         (40)
 Changes in working capital,
 excluding the effects of acquisition opening
 balance sheets:
   Accounts receivable                     17,410         802        --          --        18,212        --          --       18,212
   Inventories                                404        (370)       --          --            34        --          --           34
   Other current assets                    (5,528)       (367)      2,133        --        (3,762)       --          --      (3,762)
   Trade accounts payable and
   bank overdrafts                        (10,075)       (437)       --          --       (10,512)       --          --     (10,512)
   Accrued interest                          --          --         4,243        --         4,243        --          --        4,243
   Other current liabilities              (10,358)        302       3,319        --        (6,737)       --          --      (6,737)
                                          ------------------------------------------------------------------------------------------
 Net cash provided by (used for)
 operating activities                      (5,610)       (346)     (6,231)       --       (12,187)       --          --     (12,187)
                                          ------------------------------------------------------------------------------------------
 Investment and Other Transactions
  Capital expenditures - net               (6,117)        (91)       --          --        (6,208)       --          --      (6,208)
  Acquisition of businesses -
  net of cash acquired                     (5,070)       --          --          --        (5,070)       --          --      (5,070)
  Net issuance of loans to
  senior management                          --          --           (80)       --           (80)       --          --         (80)
  Other - net                                (841)        271        --          --          (570)       --          --        (570)
                                          ------------------------------------------------------------------------------------------
  Net cash used for investment
  and other transactions                  (12,028)        180         (80)       --       (11,928)       --          --     (11,928)
                                          ------------------------------------------------------------------------------------------
Financing Activities
   Changes in short-term debt, notes payable
   and Revolving Credit Facility borrowings 7,149         (31)     16,798        --        23,916        --          --      23,916
   Proceeds from Acquisition
   Facility Line borrowings                  --          --         1,235        --         1,235        --          --       1,235
   Distribution from parent                10,334        --       (10,334)       --          --          --          --          --
   Repayments of long-term obligations       --          --        (1,388)       --        (1,388)       --          --      (1,388)
                                          ------------------------------------------------------------------------------------------
   Net cash provided by (used for)
   financing activities                    17,483         (31)      6,311        --        23,763        --          --       23,763
                                          ------------------------------------------------------------------------------------------
Effect of Exchange Rate
  Changes on Cash and Cash Equivalents       (13)         (16)       --          --           (29)       --          --         (29)
                                          ------------------------------------------------------------------------------------------
  Decrease in Cash and Cash Equivalents     (168)        (213)       --          --          (381)       --          --       (381)
 Cash and Cash Equivalents
 Beginning of Period                        2,214         320        --          --         2,534        --          --        2,534
                                          ------------------------------------------------------------------------------------------
 End of Period                           $  2,046    $    107    $   --      $   --      $  2,153    $   --      $   --     $  2,153
                                          ==========================================================================================
</TABLE>
                                       21
<PAGE>
<TABLE>
                                           SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT
                                                            OF CASH FLOWS
                                               FOR THE NINE MONTHS ENDED JULY 31, 1998
                                                             (UNAUDITED)
                                                       (Dollars in Thousands)
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                                                          Consolidated
                                                                   Morris                 Morris                       Consolidated
                                                      Non          Material               Material   MMH                        MMH
                                          Guarantor   Guarantor    Handling               Handling   Holdings              Holdings
                                        Subsidiares   Subsidiares  Inc.     Eliminations  Inc.       Inc.      Eliminations    Inc.
                                          ------------------------------------------------------------------------------------------
Operating Activities
<S>                                      <C>        <C>         <C>          <C>          <C>        <C>       <C>          <C>
 Net income (loss)                       $  12,543  $     (235) $    4,285   $ (12,308)   $  4,285   $   4,285 $    (4,285) $  4,285
 Add (deduct) - items not
 affecting cash used for
 operating activities:
   Depreciation and amortization             4,857         339        --          --         5,196        --          --       5,196
   Amortization of debt financing costs       --          --           655        --           655        --          --         655
   Equity in (earnings) loss of subsidiaries   201        --       (12,543)     12,342        --        (4,285)      4,285       --
   Deferred income taxes-net                   411        --          --          --           411        --          --         411
   Divestiture bonus                          --          --         1,216        --         1,216        --          --       1,216
   Other                                      --          --          --           (34)        (34)       --          --        (34)
 Changes in working  capital, excluding the
 effects of acquisition  opening balance sheets:
   Accounts receivable                       2,771       1,475        --          --         4,246        --          --       4,246
   Inventories                              (7,011)      1,448        --          --        (5,563)       --          --     (5,563)
   Other current assets                       (639)     (1,090)       (737)       --        (2,466)       --          --     (2,466)
   Trade accounts payable and
   bank overdrafts                         (11,446)     (2,658)       --          --       (14,104)       --          --    (14,104)
   Accrued interest                           --          --         6,884        --         6,884        --          --       6,884
   Other current liabilities                (2,262)      1,400        --          --          (862)       --          --       (862)
   Activity with parent and
   other affiliates-net                      4,745        (595)     (2,402)       --         1,748        --          --       1,748
                                          ------------------------------------------------------------------------------------------
 Net cash provided by (used for)
 operating activities                        4,170          84      (2,642)       --         1,612        --          --       1,612
                                          ------------------------------------------------------------------------------------------
Investment and Other Transactions
  Capital expenditures - net                (3,450)       (106)       --          --        (3,556)       --          --     (3,556)
  Acquisition of businesses -
   net of cash acquired                     (3,203)       --          --          --        (3,203)       --          --     (3,203)
  Net issuance of loans to
   senior management                          --          --          (900)       --          (900)       --          --       (900)
  Other - net                               (1,147)        206        --          --          (941)       --          --       (941)
                                          ------------------------------------------------------------------------------------------
  Net cash provided by (used for)
  investment and other transactions         (7,800)        100        (900)       --        (8,600)       --          --     (8,600)
                                          ------------------------------------------------------------------------------------------
Financing Activities
Changes in short-term debt,
 notes payable and Revolving
  Credit Facility borrowings                 6,361         (37)       --          --         6,324        --          --       6,324
  Proceeds from Senior Note Offering          --          --       200,000        --       200,000        --          --     200,000
  Proceeds from New Credit Facility           --          --        55,000        --        55,000        --          --      55,000
  Redemption of shares held by Holdings       --          --      (233,087)       --      (233,087)    233,087        --         --
  Redemption of common stock and
   preferred stock                            --          --          --          --          --      (287,000)       --   (287,000)
  Net proceeds from issuance of
   Series A preferred stock and
   related common shares                      --          --          --          --          --        57,094        --      57,094
  Stock redemption transactions costs         --          --          --          --          --        (3,181)       --     (3,181)
  Debt financing costs                        --          --       (18,889)       --       (18,889)       --          --    (18,889)
  Distribution from parent                    (856)       --           856        --          --          --          --         --
  Repayments of long-term obligations         --          --          (338)       --          (338)       --          --       (338)
                                          ------------------------------------------------------------------------------------------
 Net cash provided by (used for)
   financing activities                      5,505         (37)      3,542        --         9,010        --          --       9,010
                                          ------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash
 and Cash Equivalents                           38         (10)       --          --            28        --          --          28
                                          ------------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents        1,913         137        --          --         2,050        --          --       2,050
Cash and Cash Equivalents
     Beginning of Period                     1,393         139        --          --         1,532        --          --       1,532
                                          ------------------------------------------------------------------------------------------
     End of Period                       $   3,306   $     276   $    --     $    --    $    3,582    $   --      $   --   $   3,582
                                          ==========================================================================================
</TABLE>
                                       22
<PAGE>
                               MMH HOLDINGS, INC.
                         MORRIS MATERIAL HANDLING, INC.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


The  following  discussion  should  be read in  conjunction  with the  Financial
Statements and the related notes thereto  included  previously in this document.
The Company's  fiscal year ends October 31.  Consequently,  any reference to any
particular fiscal year means the fiscal year ended October 31 of such year.

General

The Company is a leading  international  provider of "through-the-air"  material
handling  products  and  services  used in most  manufacturing  industries.  The
Company's original  equipment  operations design and manufacture a comprehensive
line  of  industrial  cranes,   hoists  and  component  products.   Through  its
aftermarket  operations,  the Company provides a variety of related products and
services,  including  replacement  parts,  repair and  maintenance  services and
product modernizations. In recent years, the Company has shifted its orientation
from an original  equipment-focused United States manufacturer to a full service
international   provider  with  a  significant   emphasis  on  the  high  margin
aftermarket  business.  The Company's revenues are derived  principally from the
sale of industrial overhead cranes,  component products and aftermarket products
and services.

Recapitalization.  Historically,  the Company  conducted  its business as one of
several  operating units of Harnischfeger  Industries,  Inc.  ("HII").  Prior to
March 30, 1998, the core United States  operations of the Company were conducted
directly by HarnCo, while the remainder of the Company's  operations  throughout
the world  were  conducted  through  a number of  entities  owned,  directly  or
indirectly, by HII and its affiliates.

On January 28, 1998, HII reached an agreement with MHE  Investments,  Inc. ("MHE
Investments"),  a newly formed affiliate of Chartwell  Investments Inc., for the
sale  of an  approximately  80  percent  common  ownership  interest  in the MHE
Business. Pursuant to this agreement, HarnCo and other HII affiliates effected a
number of  transactions  (the  "Transactions"  or the  "Recapitalization")  that
resulted  in  Holdings,  a  preexisting  company  engaged  in the MHE  Business,
acquiring,  through MMH, its newly formed  wholly-owned  subsidiary,  the equity
interests of all of the operating  entities  engaged in the MHE  Business.  As a
result of the  reorganization of the MHE Business' legal entities,  Holdings and
the Company became the successor companies to the MHE Business. The Transactions
are  accounted  for as a  recapitalization  for  financial  reporting  purposes.
Accordingly,  the historical  basis of the Company's  assets and liabilities was
not impacted by the Transactions.

In conjunction  with the  Recapitalization,  which closed on March 30, 1998 (the
"Recapitalization  Closing"),  Holdings  sold  $60.0  million of Series A Units,
consisting of $57.7 million liquidation  preference of Holdings' Series A Senior
Exchangeable  Preferred Stock (the "Holdings Series A Senior  Preferred  Stock")
and 720 shares of  non-voting  common  stock,  to  institutional  investors.  In
addition,  MMH sold  $200.0  million  aggregate  principal  amount of its 9 1/2%
Senior  Notes due 2008 (the "Senior  Notes") and entered  into a senior  secured
credit facility ("the New Credit  Facility").  The New Credit Facility  included
$55.0 million of term loans, a revolving credit facility (the "Revolving  Credit
Facility")  and  an  acquisition  facility  (the  "Acquisition  Facility").  The
Revolving  Credit  Facility  provided  the Company  with up to $70.0  million of
available  borrowings  (of which $15.0  million is required  under the indenture
that governs the Senior Notes (the "Note Indenture") to be reserved for issuance
of letters of credit)  for working  capital,  acquisitions  and other  corporate
purposes,  subject  to  compliance  with  certain  conditions.  The  Acquisition
Facility  permitted  the Company to borrow up to $30.0  million  until the third
anniversary of the Recapitalization Closing to finance acquisitions,  subject to
compliance with certain conditions.  As discussed below, the New Credit Facility
was  amended  on August 2, 1999.  See  "Liquidity  and  Capital  Resources."  As
amended,  the New Credit  Facility  provides  $52.9  million of term loans,  the
Revolving Credit Facility provides $50.7 million of available  borrowings ($10.0
million of which is required to be reserved  for issuance of letters of credit),
and the  Acquisition  Facility  provides for $12.4 million of  borrowings  ($7.4
million  of which was  previously  funded by the  lenders  under the New  Credit
Facility  and $5.0  million of which was funded by  indirect  equity  holders in
Holdings) for acquisitions and general corporate purposes.

At the  Recapitalization  Closing, (i) MHE Investments paid HarnCo $54.0 million
for 72.6% of Holdings'  common stock (the "Holdings Common Stock") (after giving
effect  to  the  Transactions)  and  approximately   $28.9  million  liquidation


                                       23
<PAGE>

preference of Holdings' Series C Junior Voting Exchangeable Preferred Stock (the
"Holdings  Series C Junior Voting  Preferred  Stock"),  (ii)  Holdings  redeemed
certain  shares of Holdings  Common  Stock and Holdings  Series C Junior  Voting
Preferred  Stock from HarnCo for $282.0  million in cash  (subject to  potential
post-Recapitalization  adjustments  as to which an  additional  $5.0 million was
provided to HarnCo) and  approximately  $4.8 million  liquidation  preference of
Holdings' Series B Junior  Exchangeable  Preferred Stock (the "Holdings Series B
Junior Preferred Stock"),  and (iii) HarnCo retained  approximately 20.8% of the
Holdings Common Stock (after giving effect to the Transactions).

On August 27, 1999,  Holdings issued  additional shares of its non-voting common
stock  in  connection  with the  August  2,  1999  amendment  of the New  Credit
Facility.  As a result, at September 8, 1999, MHE Investments owns approximately
65.3% of the  Holdings Common  Stock,  HarnCo owns  approximately  18.7% of the
Holdings Common Stock, institutional  investors own  approximately  6.0% of the
Holdings Common Stock, and certain  indirect equity holders in MHE Investments
own approximately 10.0% of the Holdings Common Stock.

Until  the  Recapitalization  Closing,  HII and  HarnCo  performed  a number  of
functions  necessary to the  operations of the Company in  accordance  with past
practices,  including  manufacturing  certain  products  and  providing  certain
information systems,  administrative services and credit support.  Holdings' and
MMH's  historical  financial  statements  include  charges  allocated to the MHE
Business by HII for these  products and services.  Because the Company  operates
independently of HII since the Recapitalization Closing, however,  Holdings' and
MMH's historical performance may not be indicative of future financial results.

At the  Recapitalization  Closing,  MMH  entered  into a  number  of  agreements
pursuant to which HII and its affiliates  will continue to provide to MMH and to
its  subsidiaries  located in the United  States,  on an interim basis and under
substantially  the same  terms and  conditions  as before the  closing,  certain
products  and  services.  In  addition,  HII  and  MMH  entered  into  a  credit
indemnification  agreement (the "Credit Indemnification  Agreement") pursuant to
which HII will maintain in place the credit support  obligations in existence at
the Recapitalization  Closing but have no further duty to extend, renew or enter
into  any  new  credit  support  obligations  (except  as to  the  MHE  Business
obligations  existing  at  the  Recapitalization   Closing).  Under  the  Credit
Indemnification Agreement, MMH is required to pay HII, in advance, an annual fee
equal to 1% of the  amounts  outstanding  under  each  letter of credit and bond
provided by HII and its affiliates  (approximately  $27.0 million as of July 31,
1999).  MMH  estimates  that the  amount  to be paid for  calendar  year 1999 is
$223,000.  MMH paid a pro-rated fee of $290,000 for calendar  year 1998.  HII is
required to refund the Company on a  quarterly  basis a pro-rata  portion of the
annual fee for any reductions in the outstanding  amount of credit that occurred
during such  quarter.  In addition,  the Company will  reimburse HII for certain
future fees and  expenses.  The Company also  entered into a surety  arrangement
(the   "Surety    Arrangement")    to   provide    credit    support   for   its
post-Recapitalization Closing operations.

In  connection  with the  Recapitalization,  the  Company  also  entered  into a
trademark license  agreement with an affiliate of HarnCo,  pursuant to which the
Company has the right to use the P&H trademark  with respect to all MHE Business
products on a worldwide  exclusive  basis from the date of the  Recapitalization
Closing  until 15 years  after the  earlier to occur of a sale of  Holdings to a
third party or a public offering of the common stock of Holdings, the Company or
their parents or successors  (and for an additional  seven years  thereafter for
aftermarket products and services).  The royalty fee for use of the trademark is
0.75% of the  aggregate  net sales of the MHE  Business  for the ten year period
which  commenced  March 30, 1999. The Company  accrued  $778,000 of expenses for
royalty fees in the period from March 30, 1999 to July 31, 1999.

As discussed below,  however, the Company could be materially adversely affected
by the fact that HII and certain of its United States  affiliates  have recently
filed for bankruptcy protection. See "Recent Developments."

For income tax  purposes,  Holdings and MMH were deemed to acquire the assets of
the MHE Business pursuant to Section  338(h)(10) of the Internal Revenue Code of
1986,  as  amended,  in  connection  with  the  Transactions.  Accordingly,  the
Recapitalization   increased  the  tax  basis  of  certain  assets  and  created
tax-deductible  goodwill,  which will generate significant future tax deductions
to reduce taxable income.

Acquisitions

During  the  nine  months  ended  July  31,  1999,  the  Company  completed  one
acquisition  with an  aggregate  purchase  price  of $3.2  million,  net of cash
acquired.  During  1998,  the  Company  completed  several  acquisitions  for an
aggregate  purchase  price  of  $8.9  million,  net  of  cash  acquired.   These
acquisitions  were  related  to the  Company's  aftermarket  business  and  were
accounted for as purchase transactions with the purchase prices allocated to the


                                       24
<PAGE>
fair value of  specific  assets  acquired  and  liabilities  assumed.  Resultant
goodwill of the  transactions,  $1.9 million for the 1999  transaction  and $8.3
million for the 1998  transactions,  is being amortized over 30 to 40 years. The
1999  acquisition  and one  1998  acquisition  were  partially  financed  by the
sellers,  resulting  in deferred  purchase  price which will be paid in 2004 and
2005 (in the case of the 1999 acquisition) and in installments  through 2006 (in
the case of one 1998 acquisition).

During the nine months ended July 31, 1999, the Company made final consideration
payments of $1.5  million  related to two 1998  acquisitions.  With respect to a
1995 acquisition,  the Company made a final contingent  consideration payment of
$1.4 million in the nine months ended July 31, 1999. Additionally,  a payment of
$100,000 was made toward the 1998 acquisition that was partially financed by the
seller.  On a pro forma basis, the 1999 and 1998  acquisitions were not material
to results of  operations  reported  for the nine months ended July 31, 1999 and
accordingly, such information is not presented.

Recent Developments
On June 7, 1999 (the  "Petition  Date"),  HII and  certain of its United  States
affiliates (including HarnCo) filed voluntary petitions for relief under Chapter
11 of the United States  Bankruptcy Code (the  "Bankruptcy  Code") in the United
States  Bankruptcy  Court for the District of Delaware  (the "HII  Bankruptcy").
Certain  provisions of the Bankruptcy Code allow a debtor to avoid, delay and/or
reduce its contractual and other  obligations to third parties.  There can be no
assurance  that  HII and  its  affiliates  will  not  attempt  to  utilize  such
provisions to cease  performance  under their  agreements with the Company.  The
inability  of the  Company  to  receive  the  benefits  of one or more of  these
agreements or the  termination of ongoing  arrangements  between the Company and
affiliates of HII could materially adversely affect the Company's operations and
financial performance.  In the event that any of the liabilities retained by HII
and its  affiliates  remain  unsatisfied  as of the Petition Date, the Company's
right to  indemnification  for any such amounts it has paid on behalf of HII and
its affiliates may also be avoided, delayed or reduced.

Each of HII and certain of its  affiliates on the one hand,  and the Company and
certain of its affiliates,  on the other hand, have  receivables and payables to
the other  which may be affected by the HII  Bankruptcy.  The Company  estimates
that a net amount of  approximately  $0.7 million of receivables  due it and its
affiliates may be so affected.

Results of Operations
The following table sets forth certain financial data for the periods indicated.
<TABLE>
<CAPTION>
                                        SUPPLEMENTAL FINANCIAL DATA
                                           (Dollars in Millions)

                           Three Months Ended  Three Months Ended     Nine Months Ended   Nine Months Ended
                              July 31, 1999      July 31, 1998          July 31, 1999         July 31, 1998
                           -------------------  -------------------   -------------------  ------------------
                           -------------------  -------------------   -------------------  ------------------
                                    Percent of           Percent of            Percent of          Percent of
                               $     net sales      $     net sales       $     net sales    $      net sales
                           -------------------  -------------------   -------------------  ------------------
                           -------------------  -------------------   -------------------  ------------------

<S>                            <C>      <C>         <C>      <C>         <C>       <C>         <C>      <C>
Net sales                      72.7     100.0%      74.4     100.0%      212.5     100.0%      231.7    100.0%
Other income - net              0.5       0.7%       0.4       0.5%        0.6       0.3%        1.1      0.5%
Cost of sales                  52.2      71.8%      52.2      70.2%      157.3      74.0%      167.3     72.2%
Selling, general and
  administrative expenses      18.3      25.2%      14.6      19.6%       53.6      25.2%       44.1     19.0%
Other costs                  --           0.0%    --           0.0%     --           0.0%        3.1      1.3%
Operating income                2.7       3.7%       8.1      10.9%        2.2       1.0%       18.3      7.9%
Interest expense               (7.5)    -10.3%      (7.0)     -9.4%      (22.0)    -10.4%      (11.2)    -4.8%
Tax provision                  (0.6)     -0.8%      (0.5)     -0.7%       (1.6)     -0.8%       (2.9)    -1.3%
Net income (loss)              (5.4)     -7.4%       0.6       0.8%      (21.3)    -10.0%        4.3      1.9%
</TABLE>

Nine months ended July 31, 1999 as Compared to Nine months ended July 31, 1998

Net sales for the nine months  ended July 31, 1999  ("First  Nine Months  1999")
decreased  $19.2 million or 8.3% to $212.5  million from $231.7  million for the
nine months ended July 31, 1998 ("First Nine Months 1998").  The decrease in net
sales was primarily  caused by the following:  (i) a decrease of $9.4 million in
engineered crane sales worldwide  largely due to the fact that First Nine Months


                                       25
<PAGE>

1998  included  $8.4  million in  container  crane  sales in the United  Kingdom
without any  corresponding  sales in First Nine Months 1999;  (ii) a decrease of
$9.2 million in hoists and component sales  primarily  resulting from a softness
in certain European and Asian markets; (iii) a $3.1 million decrease in standard
crane sales  primarily  caused by  decreased  sales in Europe and South  Africa,
offset, in part, by increased sales in the United States,  Mexico and Australia;
(iv) a decrease  in overall  parts sales of $2.7  million  caused  primarily  by
delays by certain suppliers;  and (v) a decrease in modernization  sales of $0.9
million.  These decreases were partially  offset by an increase in service sales
of $6.1 million.

Cost of sales  decreased  $10.0 million or 6.0% to $157.3  million in First Nine
Months 1999 from $167.3  million in First Nine Months 1998  primarily due to the
lower sales  volumes  described  above.  However,  cost of sales  increased as a
percentage  of net sales from 72.2% in First Nine  Months 1998 to 74.0% in First
Nine Months 1999 due to the lower  level of volume in  manufacturing  operations
tied to the decrease in machine  sales.  Additionally,  the Company  experienced
$1.6 million in special charges during First Nine Months 1999 related to revised
estimates of inventory  obsolescence,  warranty reserves and contract completion
costs.

Selling,  general and administrative expenses increased $9.5 million or 21.5% to
$53.6  million in First Nine Months 1999 from $44.1 million in First Nine Months
1998.  The  primary  cause  was $3.3  million  of  special  charges  related  to
provisions for certain delinquent  accounts receivable and changes in management
(severance  and  recruiting  costs).  Additional  causes were: (i) the increased
administrative  resources  necessary to replace functions  formerly performed by
HII and their affiliates,  including  information systems and certain accounting
and  human  resource  functions;  (ii)  increased  consulting  costs;  and (iii)
increases  due to the fiscal 1999 and 1998  acquisitions.  Selling,  general and
administrative  expenses in First Nine Months 1999 also  included  approximately
$0.7 million of  management  fees  compared to $0.3 million in First Nine Months
1998.  Additionally,  selling, general and administrative expenses in First Nine
Months 1999 included approximately $0.8 million in royalties owed to HII for use
of the P&H  trademark  after  March 30,  1999.  These  increases  were offset by
savings incurred due to the fiscal 1998  restructuring of the United Kingdom and
United States manufacturing  operations and other cost-reduction  measures.  The
Company also anticipates  incurring $2.0 million of cash expenditures during the
fourth  quarter  of  fiscal  1999  for  severance  and  reorganization   charges
associated with continued restructuring of the Company's operations, in addition
to cash needed for operations and capital expenditures.

Parent management fees allocated by HII (prior to the  Recapitalization),  which
represented  an allocation  of HII's  corporate  expenses,  were $1.2 million in
First Nine Months  1998.  Additionally,  $1.2 million of  incentives  to certain
members of management and $0.7 million of non-recurring  employee benefit costs,
both related to the  Recapitalization  and  restructuring  of the Company,  were
recognized in First Nine Months 1998.

Approximately  $22.0  million in  interest  expense  was  recorded in First Nine
Months 1999. The components  include $17.7 million related to the debt issued in
connection with the  Recapitalization  and related commitment fees, $1.8 million
related to  borrowings  for working  capital  and  acquisition  funding,  a $0.4
million fee paid in conjunction with the waiver of the debt covenant violations,
$0.4  million  related to other  borrowings,  $1.6  million in  amortization  of
financing costs recognized during the  Recapitalization and $0.1 in amortization
of a credit support fee payable to HII.  Interest  expense for First Nine Months
1998 included $1.5 million related to borrowings from HII and affiliates  (prior
to the Recapitalization),  $8.2 million related to the debt issued in connection
with the Recapitalization,  $0.6 million on borrowings for working capital, $0.7
million in amortization of financing costs and $0.2 million in amortization of a
credit  support fee payable to HII. The Company paid $16.0  million in interest,
waiver fees and commitment fees during First Nine Months 1999.

Realization of deferred tax assets is dependent on generating sufficient taxable
income prior to  expiration of net operating  loss  carryforwards.  During First
Nine Months 1999,  the Company  re-estimated  its future  operating  results and
determined its deferred tax asset  valuation  allowance  required an increase of
$7.8 million which was recognized as income tax expense. Although realization is
not  assured,  management  believes  it is more  likely  than  not  that the net
deferred tax assets recorded will be realized. The amount of deferred tax assets
not  considered  realizable,  however,  could be  increased  in the near term if
estimates of future taxable income are reduced.

The tax expense  recorded of $1.6 million  resulted  primarily  from  profitable
operations in Canada and from state income tax liabilities.

The Company's backlog of orders at July 31, 1999 was approximately $94.2 million
compared to approximately $83.3 million at July 31, 1998. Bookings in First Nine
Months 1999 were $209.3 million  compared to $217.3 million in First Nine Months
1998.

                                       26
<PAGE>

Three Months Ended July 31, 1999 as Compared to Three Months Ended July 31, 1998

Net sales for the three  months  ended  July 31,  1999  ("Third  Quarter  1999")
decreased $1.7 million or 2.3% to $72.7 million from $74.4 million for the three
months ended July 31, 1998 ("Third Quarter 1998"). The decrease in net sales was
primarily caused by the following:  (i) a decrease of $2.2 million in hoists and
component sales primarily resulting from a softness in particular Asian markets;
(ii) a $1.7 million  decrease in  modernization  sales;  and (iii) a decrease of
$1.1 million in engineered  crane sales  worldwide due to decreases in container
crane sales in the United  Kingdom.  These  decreases were  partially  offset by
increases  in  standard  cranes  ($1.3  million),  overall  service  sales ($1.1
million) and overall parts sales ($0.9 million).

Cost of sales  remained  consistent  at $52.2  million  in  Third  Quarter  1999
compared to Third Quarter 1998 despite the lower sales volumes  described above.
Cost of sales increased as a percentage of net sales from 70.2% in Third Quarter
1998 to  71.8% in  Third  Quarter  1999 due to the  lower  level  of  volume  in
manufacturing  operations  tied to the decrease in machine sales.  Additionally,
the Company  experienced  $0.2  million in special  charges  related to contract
completion costs.

Selling,  general and administrative expenses increased $3.7 million or 25.3% to
$18.3  million in Third  Quarter 1999 from $14.6  million in Third Quarter 1998.
The primary  causes were the  increased  administrative  resources  necessary to
replace  functions,  formerly  performed by HII and their affiliates,  including
information  systems and certain  accounting  and human  resource  functions and
increases due to the fiscal 1999 and 1998 acquisitions.  Also, selling,  general
and  administrative  expenses in Third Quarter 1999 included  approximately $0.6
million in royalties  owed to HII for use of the P&H  trademark and $0.4 million
in special severance charges related to continued company  restructuring.  These
increases were offset by savings  incurred due to the fiscal 1998  restructuring
of the United  Kingdom  and United  States  manufacturing  operations  and other
cost-reduction measures.

Approximately  $7.5 million in interest  expense was  recorded in Third  Quarter
1999.  The  components  included  $5.9  million  related  to the debt  issued in
connection with the  Recapitalization  and related commitment fees, $0.8 million
related to borrowings for working capital and acquisition funding,  $0.1 million
related to other  borrowings,  $0.6 million in  amortization  of financing costs
recognized  during the  Recapitalization  and $0.1 in  amortization  of a credit
support fee payable to HII. Interest expense for Third Quarter 1998 consisted of
$6.1 million related to the debt issued in connection with the Recapitalization,
$0.1  million for working  capital,  $0.6 million in  amortization  of financing
costs and $0.2 in  amortization  of a credit  support  fee  payable to HII.  The
Company paid $2.2 million in interest,  waiver fees and  commitment  fees during
Third Quarter 1999.

The tax  expense  recorded  of $0.6  million  in  Third  Quarter  1999  resulted
primarily  from  profitable  operations  in Canada  and from  state  income  tax
liabilities.

The Company's backlog of orders at July 31, 1999 was approximately $94.2 million
compared to  approximately  $83.3  million at July 31,  1998.  Bookings in Third
Quarter 1999 were $69.7 million compared to $54.2 million in Third Quarter 1998.
The  change in  bookings  was  primarily  due to several  large  orders in Third
Quarter 1999 which did not occur in Third Quarter 1998.

Liquidity and Capital Resources

The  majority of the  Company's  sales of products  and services are recorded as
products  are shipped or services  are  rendered.  Revenue on certain  long-term
contracts is recorded using the  percentage-of-completion  method. Net cash flow
from  operations is affected by the volume of, and the timing of payments under,
percentage-of-completion long-term contracts.

Net cash used for  operating  activities  was $12.2 million in First Nine Months
1999 compared to net cash flow provided by operating  activities of $1.6 million
in First Nine Months 1998. The $13.8 million decrease in operating cash flow was
due  primarily  to a $25.6  million  decrease in net income,  offset by an $11.6
million  increase in cash flow resulting from a net decrease in working  capital
and a $1.8 million increase in depreciation and amortization.

Net cash used for investment and other  transactions  for First Nine Months 1999
and First Nine Months 1998 was $11.9  million  and $8.6  million,  respectively.
During  the  First  Nine  Months  1999,  $5.1  million  of cash  was used for an
acquisition related to the Company's  aftermarket business and for payments made
with  respect to three  earlier  acquisitions  versus $3.2 million used for 1998
acquisitions.  Additionally,  capital expenditures  increased to $6.2 million in
First Nine Months 1999 from $3.6  million in First Nine Months  1998.  The First
Nine Months 1999  expenditures  included  computers and upgrades,  new operating
system  software,   office  and  warehouse   consolidations   and  manufacturing
equipment.


                                       27
<PAGE>

Net cash provided by financing activities was $23.8 million in First Nine Months
1999 versus net cash  provided by financing  activities of $9.0 million in First
Nine Months 1998.  Net  borrowings  included  $22.6  million under the Revolving
Credit Facility in the United States, Canada and the United Kingdom. The Company
also borrowed $1.2 million under the Acquisition Credit Facility.

The Company did not meet certain of the financial covenants under the New Credit
Facility for the period ended  January 31, 1999 and did not meet such  financial
covenants and certain additional  financial covenants for the period ended April
30, 1999.  The Company  obtained a waiver of such  financial  covenants  through
August 2, 1999. The waiver permitted the Company to borrow certain amounts under
the Revolving Credit Facility to meet its working capital requirements;  however
the Company  could not,  without  prior lender  consent,  (i) borrow any amounts
under the  Acquisition  Facility,  (ii) borrow any amounts  under the  Revolving
Credit  Facility  in excess of the  aggregate  amount  of the  Revolving  Credit
Facility  borrowings that the Company has repaid subsequent to January 31, 1999,
or (iii)  request the  issuance of letters of credit,  bid bonds or  performance
bonds in an aggregate amount after March 2, 1999 in excess of $5.0 million.

On August 2, 1999, the Company  obtained an amendment to the New Credit Facility
(the "Amendment") which cured past financial  covenant  violations and reset the
financial  covenants  until April 2001.  The Company is in  compliance  with the
financial  covenants under the New Credit  Facility,  as amended.  The Amendment
increased the cash  availability  under the Revolving Credit Facility from $35.7
million under the previous  waiver  agreement to $40.7 million.  At September 8,
1999, after giving effect to the Amendment,  the Company has, subject to certain
conditions,  the ability to borrow up to  approximately  $40.7 million under the
Revolving Credit Facility,  of which $19.1 million is outstanding.  In addition,
the  Company  has the  ability  to  obtain  letters  of  credit,  bid  bonds and
performance  bonds in an amount not to exceed $10.0  million in the aggregate of
which $6.3 million have been issued.

In connection with, and as a condition to, the Amendment, certain of the current
indirect equity holders in Holdings  purchased a $5.0 million  participation  in
the New Credit Facility and received  certain  non-voting  equity  interests in
Holdings,  consisting of 10% of the then outstanding  Holdings Common Stock and,
subject  to  certain  conditions,  the  right to  receive  additional  shares of
non-voting  Common  Stock of  Holdings on December 3, 1999 for a total of 25% of
the outstanding Holdings Common Stock.

The  Company   incurred   significant   indebtedness   in  connection  with  the
Recapitalization.  As of September 8, 1999, the Company had approximately $279.4
million of indebtedness outstanding. The Company also anticipates incurring $2.0
million  of cash  expenditures  during the  fourth  quarter  of fiscal  1999 for
severance and reorganization charges associated with continued  restructuring of
the Company's operations,  in addition to cash needed for operations and capital
expenditures.  Since the Recapitalization,  the Company has been able to satisfy
its cash requirements from cash generated by operations and borrowings under the
Revolving  Credit  Facility.  However,  in order to have sufficient cash flow to
satisfy its future cash needs for operations and debt service, the Company needs
to be able to borrow under the Revolving  Credit Facility in sufficient  amounts
and will have to materially  improve cash generated from  operations in the near
future.  The limitations on the Company's  ability to borrow under the Revolving
Credit  Facility  under the  terms of the  amended  New  Credit  Facility  could
constrain the Company's  growth and result in the Company not having  sufficient
cash flow to satisfy its future cash needs for operations and debt service.

Cautionary Factors

This report contains or may contain  forward looking  statements by or on behalf
of Holdings and the Company. Such statements are based upon management's current
expectations  and are  subject to risks and  uncertainties  that could cause the
Company's  actual results to differ  materially  from those  contemplated in the
statements.  Readers are cautioned not to place undue  reliance on these forward
looking statements. In addition to the assumptions and other factors referred to
specifically  in connection with such  statements,  factors that could cause the
Company's actual results to differ materially from those  contemplated  include,
among others, the following:

o    The Company did not meet certain of the financial covenants under the New
     Credit Facility for the period ended January 31, 1999 and did not meet such
     financial  covenants  and certain  additional  financial  covenants for the
     period  ended  April  30,  1999.  The  Company  obtained  a waiver  of such
     financial  covenants through August 2, 1999. On August 2, 1999, the Company
     obtained an amendment to the New Credit  Facility (the  "Amendment")  which
     cured past financial covenant  violations and reset the financial covenants
     until April 2001. The Amendment  increased the cash availability  under the
     Revolving


                                       28
<PAGE>

     Credit Facility from $35.7 million under the previous  waiver  agreement to
     $40.7 million.  At September 8, 1999, after giving effect to the Amendment,
     the Company has, subject to certain conditions, the ability to borrow up to
     approximately  $40.7 million under the Revolving Credit Facility,  of which
     $19.1 million is outstanding.  In addition,  the Company has the ability to
     obtain letters of credit,  bid bonds and performance bonds in an amount not
     to exceed  $10.0  million in the  aggregate of which $6.3 million have been
     issued. The Company will need to significantly  improve operations in order
     to meet the original financial covenants under the New Credit Facility when
     these take effect again in April 2001. In the event the Company's financial
     results do not improve significantly and the Company is unable to negotiate
     additional  amendments  or obtain  satisfactory  waivers  of the  financial
     covenants  under the New Credit  Facility for periods after April 2001, the
     lenders  under the New Credit  Facility  could elect to declare all amounts
     borrowed  under the New Credit  Facility,  together  with accrued  interest
     thereon,  to be due and payable,  which would result in an event of default
     under the Note Indenture and the Surety Arrangement and permit acceleration
     of the Company's  obligations  thereunder.  In such event,  there can be no
     assurance that the Company would have sufficient assets to pay indebtedness
     then  outstanding  under the New  Credit  Facility,  the  Senior  Notes and
     obligations under the Surety Arrangement. Additionally, such an event could
     have a material  adverse effect on the Company's  ability to obtain certain
     customer orders.

o    The Company  incurred  significant  indebtedness  in connection  with the
     Recapitalization.  As of September 8, 1999,  the Company had  approximately
     $279.4 million of indebtedness  outstanding.  The Company also  anticipates
     incurring  $2.0 million of cash  expenditures  during the fourth quarter of
     fiscal  1999 for  severance  and  reorganization  charges  associated  with
     continued  restructuring of the Company's  operations,  in addition to cash
     needed for operations and capital expenditures. Since the Recapitalization,
     the  Company  has been  able to  satisfy  its cash  requirements  from cash
     generated by operations and borrowings under the Revolving Credit Facility.
     However,  in order to have  sufficient cash flow to satisfy its future cash
     needs for  operations  and debt  service,  the Company  needs to be able to
     borrow under the Revolving  Credit Facility in sufficient  amounts and will
     have to  materially  improve cash  generated  from  operations  in the near
     future.  The  limitations  on the  Company's  ability  to borrow  under the
     Revolving  Credit  Facility  under  the  terms of the  amended  New  Credit
     Facility could constrain the Company's growth and result in the Company not
     having sufficient cash flow to satisfy its future cash needs for operations
     and debt service.

o    On  June 7,  1999,  HII  and  certain  of its  United  States  affiliates
     (including HarnCo) filed voluntary petitions for relief under Chapter 11 of
     the Bankruptcy Code in the United States  Bankruptcy Court for the District
     of Delaware.  Certain  provisions of the Bankruptcy  Code allow a debtor to
     avoid,  delay and/or reduce its contractual and other  obligations to third
     parties.  There can be no assurance  that HII and its  affiliates  will not
     attempt  to  utilize  such  provisions  to cease  performance  under  their
     agreements and arrangements with the Company.  The inability of the Company
     to  receive  the  benefits  of one  or  more  of  these  agreements  or the
     termination of ongoing  arrangements  between the Company and affiliates of
     HII (including those relating to the provision of services and materials by
     HII and its affiliates to the Company) could  materially  adversely  affect
     the Company's operations and financial  performance.  In the event that any
     of the  liabilities  retained by HII and its affiliates in connection  with
     the  Recapitalization  remain  unsatisfied  as of the  Petition  Date,  the
     Company's  right to  indemnification  for any such  amounts  it has paid on
     behalf of HII and its affiliates may also be avoided, delayed or reduced.

     Each of HII and certain of its  affiliates on the one hand, and the Company
     and certain of its  affiliates,  on the other hand,  have  receivables  and
     payables  to the other which may be  affected  by the HII  Bankruptcy.

o    The  Company's  principal  business  includes  designing,  manufacturing,
     marketing and servicing large cranes for the capital goods industries. Long
     periods  of time are  often  necessary  to plan,  design  and  build  these
     machines.  With  respect  to these  machines,  there are risks of  customer
     acceptance and start-up or performance  problems.  Large amounts of capital
     are required to be devoted by some of the  Company's  customers to purchase
     these  machines  and to  finance  the steel  mills,  paper  mills and other
     facilities that use these machines.  The Company's success in obtaining and
     managing   sales   opportunities   can  affect  the   Company's   financial
     performance.  In  addition,  some  projects are located in  undeveloped  or
     developing economies where business conditions are less predictable.

o    The Company has operations and assets located in Canada,  Mexico,  Chile,
     the United Kingdom, South Africa, Thailand,  Australia and Singapore and is
     establishing  joint ventures in Malaysia and Saudi Arabia. The Company also

                                       29
<PAGE>

     sells its products  through  distributors  and agents in over 50 countries,
     some of which are merely ad hoc  arrangements  and may be terminated at any
     time. The Company's  international  operations  (including Canada,  Mexico,
     Chile, South Africa, Australia and the United Kingdom) accounted for 36.2%,
     41.8%  and 36.1% of the  Company's  aggregate  net sales in 1998,  1997 and
     1996, respectively, and 38.4% and 36.6% in First Nine Months 1999 and First
     Nine  Months  1998,  respectively.  Although  historically,  exchange  rate
     fluctuations and other international factors have not had a material impact
     on the Company's  business,  financial  condition or results of operations,
     international operations expose the Company to a number of risks, including
     currency exchange rate  fluctuations,  trade barriers,  exchange  controls,
     risk  of  governmental   expropriation,   political  and  legal  risks  and
     restrictions,  foreign  ownership  restrictions  and risks of  increases in
     taxes.  The inability of the Company,  or  limitations  on its ability,  to
     conduct its foreign  operations or distribute its products  internationally
     could adversely affect the Company's operations and financial performance.

o    The markets in which the Company  operates are highly  competitive.  Both
     domestically  and  internationally,  the Company faces  competition  from a
     number of different  manufacturers  in each of its product  lines,  some of
     which have greater  financial  and other  resources  than the Company.  The
     principal  competitive  factors affecting the Company include  performance,
     functionality,  price,  brand  recognition,  customer  service and support,
     financial strength and stability, and product availability. There can be no
     assurance  that the Company will be able to compete  successfully  with its
     existing   competitors  or  with  new   competitors.   Failure  to  compete
     successfully  could  have  a  material  adverse  effect  on  the  Company's
     financial condition, liquidity and results of operations.

o    The Company's  business is affected by the state of the United States and
     global  economy  in  general,  and by the  varying  economic  cycles of the
     industries in which its products are used.  There can be no assurance  that
     any future  condition of the United States  economy or the economies of the
     other countries in which the Company does business will not have an adverse
     effect on the Company's business, operations or financial performance.


Year 2000 Compliance

The Year 2000 issue arises as a result of computer programs having been written,
and systems  having been  designed,  using two digits rather than four to define
the applicable year. Consequently,  such software has the potential to recognize
a date using "00" as the year 1900 rather than the year 2000.  This could result
in a system  failure  or  miscalculations  causing  disruptions  of  operations,
including,  among other things, a temporary  inability to process  transactions,
send invoices, or engage in similar normal business activities.

Since 1996,  the Company has been  engaged in  resolving  its Year 2000  issues,
first as a subsidiary of HII, and now on its own as an independent entity. After
the  Recapitalization,  the Company  established its own Year 2000 teams.  These
teams  performed  site audits at each of the  Company's  operations  in order to
identify and address all Year 2000 issues related to both information technology
("IT") systems and internally used manufacturing and  administrative  equipment.
Hardware and software technology  guidelines have been implemented  worldwide in
order to ensure that all systems are Year 2000 compliant before January 1, 2000.
In addition,  management  periodically monitors the status of the Company's Year
2000 remediation  plans.  The Company has now completed its internal  assessment
phase and is in the process of carrying out its internal remediation phase.

With  respect  to non-IT  systems,  such as  heating  and  ventilation  systems,
security systems and machine tools, the Company has sought  representations from
the relevant  vendors that the systems are Year 2000 compliant.  The Company has
received such  assurances  from a number of non-IT  system  vendors and does not
expect to encounter any significant  unresolved Year 2000 issues with respect to
such systems. In addition,  in the event that there are any unresolved Year 2000
issues with respect to its non-IT systems,  the Company believes it could obtain
replacement services either internally or from third parties without significant
disruptions to its operations.

During Third Quarter  1999,  the  Company's  operations in Oak Creek,  Wisconsin
replaced  their  existing  business  system,  formerly  shared with HarnCo.  The
decision to replace  the system was based  solely on the need to move off of the
shared  system.  The vendor of the  replacement  system has  represented  to the
Company that the new system is Year 2000  compliant  (which  representation  has
been  confirmed by an outside  consultant).  The Company has sought and received

                                       30
<PAGE>

representations  from the applicable  vendors that the business  systems used in
the United Kingdom, South Africa, Australia,  Singapore,  Canada, and Mexico are
either  already  Year 2000  compliant  or will be before  January 1,  2000.  The
operating  system used in the North American  distribution  and service business
was made  compliant  during the second  fiscal  quarter by  applying  the vendor
supplied upgrade.

The Company is also engaged in assessing  and  addressing  Year 2000 issues with
significant vendors.  The Company has sought, and continues to seek,  assurances
from all of its vendors with respect to Year 2000 issues.  The Company does not,
however,  control the systems of other  companies,  and cannot assure that these
systems  will be  timely  converted  and,  if not  converted,  would not have an
adverse  effect on the  Company's  business  operations.  In the event  that the
Company and/or its  significant  vendors or suppliers do not complete their Year
2000  compliance  efforts,  the  Company  could  experience  disruptions  in its
operations. Disruptions in the economy generally resulting from Year 2000 issues
also could  affect the Company.  With  respect to products  sold by the Company,
management  believes  that any liability  for Year 2000  compliance  will not be
material.

The Company has used and will continue to use all necessary  internal  resources
to resolve any Year 2000  issues.  The Company  plans to complete  its Year 2000
remediation by September 30, 1999.  Total  expenses on the project  through July
31, 1999 were  approximately $1.5 million and were primarily related to expenses
for repair or replacement  of software and hardware,  expenses  associated  with
facilities,  products  and  supplier  reviews and project  management  expenses.
Expected incremental costs related to Year 2000 are $0.3 million.

The costs of the project and the date on which the Company plans to complete its
Year 2000  remediation are based on management's  estimates,  which were derived
from utilizing  numerous  assumptions  of future events  including the continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  there  can be no  guarantee  that  these  estimates  will be
achieved  and actual  results  could  differ  significantly  from  those  plans.
Specific  factors  that might  cause  differences  from  management's  estimates
include,  but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct  relevant  computer  codes,  and
similar  uncertainties.  Management  believes  that the Company is devoting  the
necessary  resources to identify and resolve  significant  Year 2000 issues in a
timely manner.

Future Accounting Changes

The  Financial  Accounting  Standards  Board  (FASB)  has  issued  SFAS No.  133
"Accounting  for  Derivative   Instruments  and  Hedging  Activities"  which  is
effective  for  periods  beginning  after June 15,  2000.  Due to the  Company's
current limited use of derivative instruments, the adoption of this statement is
not expected to have a material effect on the Company's  financial  condition or
results  of  operations.  SFAS  No.  131,  "Disclosures  about  Segments  of  an
Enterprise  and  Related  Information,"  was  also  issued  by the  FASB  and is
effective for fiscal years  beginning  after  December 15, 1997.  This statement
establishes  standards for the way that business enterprises report information,
financial  and  descriptive,   about  operating  segments  in  annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas  and  major  customers.  The  Company  is in  the  process  of
evaluating the effect of SFAS No. 131 on its financial  statements.  In February
1998, the FASB issued SFAS No. 132,  "Employers'  Disclosures about Pensions and
Other  Postretirement  Benefits"  which is effective for fiscal years  beginning
after December 31, 1997.  This  standard's  objective is to improve  pension and
other postretirement benefits disclosures.

Quantitative and Qualitative Disclosures about Market Risk

The Company is  potentially  exposed to market risk  associated  with changes in
foreign  exchange and interest  rates.  From time to time the Company will enter
into derivative  financial  instruments to hedge these exposures.  An instrument
will be  treated  as a hedge if it is  effective  in  offsetting  the  impact of
volatility in the Company's  underlying  interest rate and foreign exchange rate
exposures. The Company does not enter into derivatives for speculative purposes.
There have been no material  changes in the Company's  market risk  exposures as
compared to those discussed in the Company's 1998 Annual Report on Form 10-K.

                                       31
<PAGE>

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In October  1998,  the  Company  received a request to  arbitrate a claim from a
former  customer  which  arose  out of an  accident  that  occurred  in  Ireland
involving  two cranes  sold by the  Company in 1992.  The claim  alleges  direct
damages  of  approximately  $12.8  million  plus lost  revenue  due to  business
interruption. In addition, the Company has been notified by the port operator of
its  intention to pursue a claim  against the Company for its damages  (which it
estimates  are  between $4 million and $5 million)  arising  from the  accident.
Management  intends to  vigorously  defend  this  matter.  One of the  Company's
insurance  carriers  has agreed to provide  defense  coverage for one of the two
cranes  involved in the accident and limited  indemnification  if the Company is
unsuccessful in defending the claim.  The Company is continuing to work with its
insurance broker to determine the availability of additional insurance coverage,
if any. The  contract  between the Company and the  claimant  provides  that the
contract is governed  by Irish law and that all  disputes  are to be resolved by
arbitration  in Ireland.  While the Company  believes it will obtain a favorable
resolution,  no assurances can be made as to the final outcome of the claim.  If
the Company were found liable for the full amount of the claim, there could be a
material adverse effect on the Company's operations and financial performance.

The  Company  is also  involved  from  time to time  in  various  other  routine
litigation  incident to its operations,  including  product  liability and other
claims.  Although  the  outcome  of  those  matters  cannot  be  predicted  with
certainty,  management  believes that any such pending or threatened  litigation
will  not  have a  material  adverse  effect  on  its  consolidated  results  of
operations and financial condition.

Item 2. Changes in Securities

        Not applicable.

Item 3. Defaults upon Senior Securities

        Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

        Not applicable.

Item 5. Other Information

        Not applicable.

Item 6. Exhibits and Reports on Form 8-K

        (a)    Exhibits

Exhibit        Exhibit Description
Number


4.17           Amendment  No. 2 dated as of  August  2,  1999 to the  Credit
               Agreement  dated as of March 30, 1998 among (i) MMH Holdings,
               Inc.,  (ii) Morris  Material  Handling,  Inc.,  (iii)  Morris
               Material   Handling,   LLC,  (iv)  Morris  Material  Handling
               Equipment  Limited,  (v) Mondel ULC,  (vi) Kaverit  Steel and
               Crane ULC,  (vii) the Banks  referred to therein,  (viii) the
               New York branch of Credit Agricole  Indosuez,  as syndication
               agent, (ix) BankBoston,  N.A., as documentation agent and (x)
               Canadian Imperial Bank of Commerce,  as administrative  agent
               and collateral agent.

4.18           Subordination and Participation  Agreement dated as of August
               2, 1999 among (i) Canadian  Imperial  Bank of Commerce;  (ii)
               the Selling Banks listed therein;  (iii) Martin Crane L.L.C.;
               (iv) MMH Holdings,  Inc.; (v) Morris Material Handling,  Inc.
               and Morris Material Handling,  LLC; and (vi) the Subsidiaries
               listed therein.

                                       32
<PAGE>


27.1           Financial Data Schedule

27.2           Financial Data Schedule

          (b)  Reports on Form 8-K

               The Registrants filed no reports on Form 8-K during the
               quarter ended July 31, 1999

                                       33
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrants  have duly caused  this  report to be signed on their  behalf by the
undersigned thereunto duly authorized.

                                                 MMH HOLDINGS, INC.


Date:  September 14, 1999                         /s/ David D. Smith
                                                 -------------------
                                                 David D. Smith
                                                 Vice President  - Finance
                                                 (Principal Financial Officer)



                                                 MORRIS MATERIAL HANDLING, INC.


Date:  September 14, 1999                         /s/ David D. Smith
                                                 -------------------
                                                 David D. Smith
                                                 Vice President  - Finance
                                                 (Principal Financial Officer)

                                      34
<PAGE>