SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended October 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)
                    315 W. Forest Hill Avenue
                    Oak Creek, Wisconsin  53154
                    (414) 764-6200

  333-52527         MORRIS MATERIAL HANDLING, INC.              39-1716155
                    (a Delaware Corporation)
                    315 W. Forest Hill Avenue
                    Oak Creek, Wisconsin  53154
                    (414) 764-6200



           Securities Registered Pursuant to Section 12(b) of the Act

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act

                                      None

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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of  registrants'  knowledge in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [x]

As of February 10, 2000, 10,169 shares of MMH Holdings, Inc. Voting Common Stock
were outstanding, none of which were held by non-affiliates.  In addition, 4,350
shares of MMH Holdings,  Inc.  Nonvoting Common Stock were  outstanding,  720 of
which were held by  non-affiliates.  There is no established  trading market for
MMH Holdings, Inc.'s Nonvoting Common Stock.

As of February 10, 2000, 100 shares of Morris  Material  Handling,  Inc.  Common
Stock were outstanding, all of which were held by MMH Holdings, Inc.

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Item 14 of Part IV are  incorporated  by reference to: MMH Holdings,
Inc.'s  Registration  Statement  No.  333-52529,  filed on May 13, 1998;  Morris
Material Handling, Inc.'s Registration Statement No. 333-52527, filed on May 13,
1998;  Amendment  No.  2 to MMH  Holdings,  Inc.'s  Registration  Statement  No.
333-52529,  filed on July 22, 1998; Amendment No. 2 to Morris Material Handling,
Inc.'s  Registration  Statement  No.  333-52527,  filed  on July 22,  1998;  MMH
Holdings, Inc.'s and Morris Material Handling, Inc.'s Annual Report on Form 10-K
for the fiscal year ended  October 31,  1998;  MMH  Holdings,  Inc.'s and Morris
Material  Handling,  Inc.'s  Quarterly Report on Form 10-Q for the quarter ended
April 30, 1999; and MMH Holdings,  Inc.'s and Morris Material  Handling,  Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 31, 1999.

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

Certain  sections  of this Form 10-K,  including  "Business"  and  "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  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.  Factors  that
might cause such a difference  include,  without  limitation,  general  economic
conditions and competition in the markets in which the  Registrants'  operations
are located and are detailed herein under "Management's  Discussion and Analysis
of  Financial   Condition  and  Results  of   Operations--Cautionary   Factors."
Consequently,  all forward-looking statements made herein are qualified by these
cautionary statements. There can be no assurance that the actual results, events
or developments referenced herein will occur or be realized.

<PAGE>

                               MMH HOLDINGS, INC.
                         MORRIS MATERIAL HANDLING, INC.

                                    INDEX TO
                           ANNUAL REPORT ON FORM 10-K
                       For the Year Ended October 31, 1999

                                                                           Page


Part I
    Item 1.   Business                                                         1
    Item 2.   Properties                                                      12
    Item 3.   Legal Proceedings                                               13
    Item 4.   Submission of Matters to a Vote
              of Security Holders                                             14

Part II
    Item 5.   Market for the Registrants' Common Stock
              and Related Stockholder Matters                                 15
    Item 6.   Selected Financial Data
                  MMH Holdings, Inc.                                          16
                  Morris Material Handling, Inc.                              17
    Item 7.   Management's Discussion and Analysis
              of Financial Condition and
              Results of Operations                                           18
    Item 7A.  Quantitative and Qualitative
              Disclosures about Market Risk                                   28
    Item 8.   Financial Statements and
              Supplementary Data                                              30
    Item 9.   Changes in and Disagreements with
              Accountants on Accounting and
              Financial Disclosure                                            76

Part III
    Item 10.  Directors and Executive Officers
              of the Registrants                                              77
    Item 11.  Executive Compensation                                          80
    Item 12.  Security Ownership of Certain
              Beneficial Owners and Management                                86
    Item 13.  Certain Relationships and Related Transactions                  88

Part IV
    Item 14.  Exhibits, Financial Statement
              Schedules and Reports on Form 8-K                               93

Signatures                                                                   100

<PAGE>

                                     PART I

Item 1.  Business

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-K 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.  The
Company's original  equipment  operations design and manufacture a comprehensive
line of industrial cranes, hoists and other component products, sold principally
under the P&H and Morris brand names.  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 an international  full service
provider with a significant emphasis on the high margin aftermarket business.

Background:  Recapitalization

Historically,  the Company  conducted  its business as one of several  operating
units of Harnischfeger  Industries,  Inc. ("HII").  Until October 1997, the core
United States  operations of the Company were  conducted  directly by HarnCo,  a
wholly-owned  subsidiary of HII, while the remainder of the Company's operations
(including the Company's operations in the United Kingdom and South Africa since
their  acquisition in 1994) were conducted  through a number of entities  owned,
directly  or  indirectly,  by HII  and  its  affiliates.  In  October  1997,  in
connection  with the  anticipated  sale of the Company,  HarnCo  transferred the
assets of its Material Handling  Equipment Division ("MHE Division") to Material
Handling, LLC ("MHLLC"), a newly-created wholly-owned subsidiary of the Company.
All non-cash assets held by HarnCo and used exclusively by the MHE Division were
transferred or, in the case of leased personal  property,  subleased to MHLLC or
to one of its  affiliates.  In return,  MHLLC assumed  substantially  all of the
liabilities  of HarnCo and certain  affiliates  of HarnCo not engaged in the MHE
Business (the "Non-MHE HarnCo Affiliates") relating to the MHE Business.

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 various 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' 12% 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 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  initially  provided  the  Company  with up to $70.0
million of available  borrowings  for working  capital,  acquisitions  and other
corporate  purposes,   subject  to  compliance  with  certain  conditions.   The
Acquisition  Facility  initially  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 Company did not meet certain of the financial  covenants
under the New Credit  Facility for the periods  ended January 31, 1999 and April
30,  1999,  and the New  Credit  Facility  was  amended  on August 2,  1999.  In
addition,  the  Company  anticipates  that it will  not meet  certain  financial
covenants contained in the New Credit Facility for the quarter ended January 31,
2000  and  the  foreseeable  future  thereafter.  The  Company  entered  into an

                                       1
<PAGE>


Amendment  and Waiver  under the New Credit  Facility,  dated as of January  31,
2000, whereby, among other matters, the lenders waived compliance by the Company
with such financial  covenants,  for the period from January 31, 2000 until 5:00
p.m.  March 29, 2000 (the  "January  Waiver").  The January  Waiver  permits the
Company, subject to certain conditions,  to make additional borrowings under the
Revolving Credit Facility and issue additional  letters of credit,  above levels
in existence on January 31, 2000, in an aggregate amount of up to $12.0 million,
during the waiver period.

Currently,  the Company is not generating  sufficient  funds from  operations to
satisfy working capital and debt service requirements, and as a result must rely
on  Revolving  Credit  Facility  borrowings  to continue  to operate.  While the
Company  anticipates  that cash generated from  operations and Revolving  Credit
Facility  borrowings  will be  sufficient  to enable it to satisfy its cash flow
needs  until  March  29,  2000,  there  can be no  assurance  that it will  have
sufficient  cash  flow  and  borrowings  available  to  enable  it to  meet  its
obligations  until such date. Upon the expiration of the January Waiver on March
29, 2000,  the Company  will not have  sufficient  cash to continue  operations,
unless  arrangements  can be entered into to provide  liquidity for the Company.
See "Recent  Developments--New  Credit Facility Amendment;"  "Liquidity Status",
and "Liquidity and Capital Resources."

At the  Recapitalization  Closing, (i) MHE Investments paid HarnCo $54.0 million
for 72.6% of the common stock of Holdings (the  "Holdings  Common Stock") (after
giving effect to the Transactions) and approximately  $28.9 million  liquidation
preference of the 12 1/2% Series C Junior Voting Exchangeable Preferred Stock of
Holdings (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 the 12 1/4%  Series  B  Junior  Exchangeable  Preferred  Stock of
Holdings (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).

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 pre-Recapitalization 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  continued 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 maintains in place the credit support  obligations in existence at the
Recapitalization  Closing but has 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).  See  "Certain  Relationships  and
Related   Transactions--Relationship   with  Harnischfeger."  Under  the  Credit
Indemnification Agreement, MMH is required to pay HII, an annual fee equal to 1%
of the  amounts  outstanding  under each  letter of credit and bond  provided by
HarnCo and its affiliates  (approximately $27.7 million as of October 31, 1999).
MMH accrued a fee of $223,000 for calendar year 1999.  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")  with a third  party at the  Recapitalization  Closing  to provide
credit support for its post-Recapitalization Closing operations.

In  connection  with the  Recapitalization,  the  Company  also  entered  into a
trademark  license  agreement  (the  "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

                                       2
<PAGE>

the MHE  Business for the ten year period which  commenced  March 30, 1999.  The
Company accrued $1,353,000 of expenses for royalty fees in the period from March
30,  1999 to October 31,  1999.  The Company has elected to defer the payment of
the royalty fee for the period ended  October 31,  1999,  which would be payable
January 30, 2000, pursuant to the terms of the Trademark License Agreement.  The
Trademark License Agreement provides that the annual royalty fee may be deferred
for up to two years if the Company does not meet certain financial criteria. The
Company can only defer up to two payments  during the term of the agreement.  In
addition, interest accrues at 12% per year on the deferred fee payments.

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

For income tax  purposes,  Holdings and MMH were deemed to acquire the assets of
the MHE Business  pursuant to Code Section  338(h)(10)  in  connection  with the
Transactions.  Accordingly,  the  Recapitalization  increased  the tax  basis of
certain assets and created tax-deductible goodwill.  Realization of deferred tax
assets is dependent on generating  sufficient taxable income prior to expiration
of net operating loss carryforwards.  During 1999, the Company  re-estimated its
future  operating  results  and  determined  its  deferred  tax asset  valuation
allowance  required an increase of $80.4 million which was  recognized as income
tax  expense.  Management  believes  it is more  likely  than  not  that the net
deferred tax assets recorded will not be realized.

Recent Developments

New Credit Facility Amendment; Liquidity Status

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  waivers of such  financial  covenants  through
August 2, 1999.  The waivers  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 had repaid  subsequent to March 2,
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
financial   covenants  until  April  2001.  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 January 31, 2000, the Company had
$25.2 million of outstanding Revolving Credit Facility borrowings.  In addition,
the Amendment  permitted the Company to obtain letters of credit,  bid bonds and
performance  bonds in an amount not to exceed $10.0  million in the aggregate of
which $5.2 million have been issued.  After giving effect to the Amendment,  the
Acquisition  Facility  provided for $12.1 million of borrowings ($7.1 million of
which was  previously  funded by the lenders  under the New Credit  Facility and
$5.0 million of which was funded on August 2, 1999 by indirect equity holders in
Holdings,  as described below).  No additional  borrowings under the Acquisition
Facility are available from the lenders under the New Credit Facility.

The  Amendment  also  permitted the Company to apply half of the proceeds of the
sale  of its  industrial  brake  business  (the  "Brake  Business"),  which  was
consummated  on December  16, 1999,  to general  corporate  purposes,  which the
Company would otherwise have been required to use to prepay  indebtedness  under
the New Credit Facility. After consummation of the sale, the Company repaid $3.1
million of the outstanding  term loans ($2.4 million of which was applied to the
final scheduled  principal  payment  obligation with respect to such term loans)
and repaid $0.3 million on the Acquisition Facility.

In  connection  with,  and as a condition  to, the lenders  under the New Credit
Facility  entering into the Amendment,  certain of the current  indirect  equity
holders in Holdings purchased,  through Martin Crane L.L.C.  ("Martin Crane"), a
newly formed limited liability company, a $5.0 million  participation in the New
Credit  Facility and  received  shares of  non-voting  common stock of Holdings,
representing  25% of the  outstanding  Holdings  Common Stock.  As a result,  at
January 31,  2000,  MHE  Investments  owns  approximately  54.5% of the Holdings
Common  Stock,  HarnCo owns  approximately  15.6% of the Holdings  Common Stock,
institutional  investors own approximately 4.9% of the Holdings Common Stock and
Martin Crane owns approximately 25.0% of the Holdings Common Stock.

The Company also anticipates that it will not meet certain  financial  covenants
contained in the New Credit  Facility for the quarter ended January 31, 2000 and

                                       3
<PAGE>

the  foreseeable  future  thereafter.  The Company entered into an Amendment and
Waiver under the New Credit  Facility,  dated as of January 31,  2000,  whereby,
among other  matters,  the lenders  waived  compliance  by the Company with such
financial covenants,  for the period from January 31, 2000 until 5:00 p.m. March
29, 2000. The January Waiver permits the Company, subject to certain conditions,
to make  additional  borrowings  under the Revolving  Credit  Facility and issue
additional letters of credit,  above levels in existence on January 31, 2000, in
an aggregate amount of up to $12.0 million, during the waiver period.

Currently,  the Company is not generating  sufficient  funds from  operations to
satisfy working capital and debt service requirements, and as a result must rely
on  Revolving  Credit  Facility  borrowings  to continue  to operate.  While the
Company  anticipates  that cash generated from  operations and Revolving  Credit
Facility  borrowings  will be  sufficient  to enable it to satisfy its cash flow
needs  until  March  29,  2000,  there  can be no  assurance  that it will  have
sufficient  cash  flow  and  borrowings  available  to  enable  it to  meet  its
obligations  until such date. Upon the expiration of the January Waiver on March
29, 2000,  the Company  will not have  sufficient  cash to continue  operations,
unless  arrangements  can be entered into to provide  liquidity for the Company.
See "Liquidity and Capital Resources."

HII Bankruptcy

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 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  that  may  be  affected  by  the  HII
Bankruptcy.

Hiring of New Chief Executive Officer

On March 2, 1999,  Jack  Stinnett  was hired as  President  and Chief  Executive
Officer of the Company.  Prior to joining the Company,  Mr.  Stinnett  served as
Vice President and General  Manager of Engine  Components  World Wide for TRW, a
global automotive parts business.  See "Directors and Executive  Officers of the
Registrants." Mr. Stinnett entered into an employment agreement with the Company
on January 27,  1999.  See  "Executive  Compensation--Employment  Agreement  and
Severance Agreements."

Company and Industry Overview

Industrial  cranes and hoists are critical to the operations of most  businesses
that require the movement of large or heavy objects. The steel, aluminum,  paper
and forest  products,  aerospace,  foundry,  and  automotive  industries,  among
others, rely on "through-the-air"  material handling equipment as a flexible and
efficient  method of transporting  materials within a plant while maximizing the
use of available space.  Through-the-air  material handling  equipment  provides
more  efficient  space  and  capacity   utilization  than  fixed  conveyors  and
traditional  forklifts.  The industrial  crane and hoist industry remains highly
fragmented,  with four global  participants  and a large  number of regional and
local players.

The  industry  is  comprised  of  original  equipment  cranes  and  hoists,  and
aftermarket  parts,  service and  modernizations.  The United  States market for
industrial  overhead cranes and hoist products is estimated to be  approximately
$400  million  per year and the  potential  aftermarket  for  such  products  is
estimated to be approximately $1.2 billion per year.  Management  estimates that
the global market is several times larger. In mature  industrialized  economies,
original  equipment sales is driven by the need for upgrades and replacements as
well as capacity  expansion.  Technological  innovations  such as more  compact,
space efficient cranes, built in diagnostic systems and sophisticated motors and
transmissions,  improve  operating  efficiency and fuel the  replacement/upgrade
market. In emerging economies,  however,  the market for overhead cranes is tied
principally  to  industrial  development.  Demand for  aftermarket  products and
services is driven by general  wear and tear of  equipment  and  increases  as a
result of growth in the installed base of cranes and hoists.  Industrial cranes,
which typically last 20 to 50 years, require significant  aftermarket support in

                                       4
<PAGE>

the form of replacement parts, machine modernizations and upgrades,  repairs and
inspection and maintenance services.  Management believes the market for service
and parts will continue at  approximately  current levels,  however,  management
expects the current down-turn in the crane equipment market to continue.

Products and Services

The following  presents the  Company's  business and  operations.  The Company's
business and operations, however, may be significantly adversely affected by its
liquidity  situation.  See "Liquidity and Capital Resources." The Company's core
business  was  founded  in 1884 and  material  handling  machinery  and  related
equipment  have been sold under the  well-recognized  P&H and Morris brand names
since the 1890s.  Management  believes  that the  Company is one of the  leading
suppliers of industrial  overhead  cranes in North America,  the United Kingdom,
Australia and South Africa.  Management also believes that the Company is one of
the  largest  global  providers  of  aftermarket  products  and  services to the
industrial crane industry.  Sales outside of North America  accounted for 24% of
fiscal 1999 net sales, with Western Europe  representing 16% and the Pacific Rim
representing 4% of net sales. For additional geographical  information,  see the
Financial Statements and notes thereto appearing elsewhere herein.

The Company operates through two distinct but interrelated  business groups: (i)
original equipment and (ii) aftermarket products and services.

Original Equipment

The Company's original equipment operations design, manufacture and distribute a
broad range of standard and engineered  overhead and gantry  cranes,  hoists and
related products.  The Company's  original  equipment products have a reputation
for quality, durability and technological innovation.

         Engineered  Cranes  - The  Company's  engineered  cranes  are  used  by
         customers with unique performance  requirements that cannot be achieved
         with a standard  overhead crane.  The Company's  engineered  cranes are
         individually  designed for specific  applications  in a wide variety of
         demanding  environments  and typically have a high load capacity.  Each
         unit is highly  engineered,  incurring  between  300 and 4,500 hours of
         engineering, and is generally priced between $60,000 and $6.0 million.
         The Company  markets  engineered  cranes under the P&H and Morris brand
         names.

         Within  the  engineered  crane  market,  performance  is often the most
         critical purchase criterion for a customer. Given the premium placed on
         technological   sophistication   and  specific   product   performance,
         customers purchasing highly engineered cranes tend to be less sensitive
         to the length of time  between  order and delivery  than most  standard
         overhead  crane  customers.  Overall lead times for  engineered  cranes
         typically range between 20 and 40 weeks and include on-site  inspection
         of customer needs, in-house engineering and development, manufacturing,
         product testing and  installation.  Many engineered  crane projects are
         completed  pursuant to contracts on which the Company receives progress
         payments and for which the Company  occasionally  must post performance
         bonds.

         Engineered   cranes   provide    particularly    valuable   aftermarket
         opportunities  since  they  often  operate  in harsh  environments  and
         require  frequent  replacement  parts  and a  high  degree  of  ongoing
         inspection and maintenance services.

         Due to the advanced design of an engineered  crane,  these products are
         generally  manufactured at one of the Company's  facilities  located in
         Oak Creek,  Wisconsin,  Loughborough,  England or  Johannesburg,  South
         Africa.  Each of  these  facilities  maintains  flexible  manufacturing
         capabilities,  sophisticated engineering skills, project management and
         inspection capabilities.

         Standard  Cranes  -  The  Company's  standard  cranes,   which  utilize
         pre-engineered  components,  are  adaptable  to a wide variety of uses.
         While the  cranes are  configured  to meet each  customer's  particular
         needs, the degree of specific  engineering is typically limited to less
         than 100 hours and most often  falls  within  the 20 to 60 hour  range.
         These cranes  typically  range in price from  $10,000 to $200,000.  The
         Company markets  various  standard  cranes under the P&H,  Morris,  and
         various other brand names throughout the world.

                                       5
<PAGE>

         While  engineered   cranes  have  typically  been  produced  by  larger
         manufacturers,   local  crane  builders  have   historically   supplied
         significant numbers of standard cranes. Delivery time and price are key
         purchase  criteria.  The Company has grown its  standard  crane  market
         share by expanding local assembly  operations to shorten delivery times
         and reduce costs.

         Hoists - The Company manufactures  electric wire rope and chain hoists,
         manual chain hoists and ratchet  lever  hoists.  The  Company's  hoists
         range in capacity from 1/8 of a ton to 60 tons and feature a variety of
         electrical  control  technologies.  Customers select a specific type of
         hoist  based on the  number  of lifts to be  performed  per day and the
         average  load  capacity.  Hoist  product  prices  range  from  $100  to
         $150,000,  with most sold in the $1,000 to $8,000  range.  The  Company
         markets  its  industrial  hoists  under the P&H brand name in North and
         South  America and under the Morris  brand name in the United  Kingdom,
         South Africa, South America and Southeast Asia. Through the acquisition
         of Morris Mechanical  Handling Ltd. in 1994, the Company  significantly
         strengthened its position in the hoist marketplace.  In 1994, a portion
         of the Company's  Loughborough,  England  facility used to  manufacture
         electric  hoists was destroyed by a fire. The Company rebuilt the hoist
         manufacturing  bay  into  a  more  efficient  hoist  manufacturing  and
         assembly facility.

Aftermarket Products and Services

The Company's  aftermarket  business  consists of  replacement  parts,  repairs,
inspection  and   maintenance   services,   and   modernizations   for  products
manufactured by both the Company and its competitors.  The Company's  network of
Company-owned   distribution   and  service  centers  ("DSCs")  and  independent
distributors  located  around  the  world  is the  platform  for  the  Company's
aftermarket sales activities,  serving as distribution  centers for its original
equipment  and  replacement  parts  as  well  as the  focal  point  for  service
activities.

         Parts  and  Components  - The  Company  manufactures  a wide  range  of
         replacement  parts and  components  necessary  to  maintain  cranes and
         hoists  manufactured  by both the  Company and its  competitors.  These
         parts are sold  through  both  DSCs and  independent  distributors  and
         agents.

         Given the long useful life of an overhead  crane,  which ranges from 20
         to 50 years,  the  Company's  installed  base of  equipment  provides a
         foundation  for the  Company's  aftermarket  business.  Parts sales are
         generated by customer  requests and through  service  personnel  during
         scheduled inspections, appraisals and service calls.

         The Company markets both proprietary and  commercially  available parts
         for its  equipment.  Proprietary  parts command  premium prices because
         they either have unique design  attributes  that make them difficult to
         reverse  engineer or are critical parts where an inadequate  substitute
         could have serious safety and operational consequences.

         Service - The Company  provides  installation,  repair,  inspection and
         maintenance  services,  primarily through its DSC network.  The Company
         provides these services under  recognized  trade names  including Crane
         Aid (South Africa) and UK Crane Service (United Kingdom).

         The Company has expanded its service offerings as a strategic  response
         to  customers'  interest  in  outsourcing  the repair,  inspection  and
         maintenance  of  overhead  cranes  and  hoists.  Currently,  management
         estimates  that  more  than  30%  of the  Company's  total  repair  and
         maintenance  net sales are from  services  performed  upon  cranes  and
         hoists manufactured by its competitors.  Management believes that there
         is an opportunity to leverage its growing service operations to provide
         similar  services on more of the cranes and hoists  manufactured by its
         competitors.

         In addition to responding  to service  calls from clients,  the Company
         has  expanded  its  portfolio  of services to include  inspections  for
         regulatory  compliance purposes (such as OSHA) as well as an innovative
         Crane  Appraisal/Repair  Evaluation  (CARE)  program.  The CARE program
         thoroughly  assesses  the  condition  and  performance  of a crane  and
         provides a concise  reference  document for  restoring the equipment to
         optimal operating performance.  Each of these inspection programs sends
         a  highly-trained  service  technician  into  customers'  factories  to
         evaluate the overall  condition  of the crane or hoist,  and allows the
         technician  to  recommend   preventive   maintenance   and  replacement
         components. See "Sales, Marketing and Distribution."

                                       6
<PAGE>

         Modernizations  - Crane  modernizations  provide an opportunity for the
         Company to  generate  additional  revenue  from its  installed  base of
         equipment.  By  upgrading  the  electrical  and  mechanical  systems on
         existing  cranes,  the Company can help its customers to optimize crane
         performance   and  improve  the  capacity  and   efficiency   of  their
         operations.  The cost of  modernizing an older crane  typically  ranges
         between 10% and 60% of the cost of a new product.

Management  of the  Company  has further  defined  the  organization  around the
following  operating segments  consistent with the way that management  assesses
operating performance. The Company's primary operating segments are as follows:

         Equipment and  Aftermarket          - Americas
         Equipment and  Aftermarket          - Other
         Distribution and Service            - North America
         Engineered Products and  Automation -  Europe
         Equipment  and  Aftermarket         -  Europe
         Equipment and  Aftermarket          - Asia Pacific
         Equipment and Aftermarket           - South Africa

Each segment has a manager who is directly  accountable to and maintains regular
contact with the Chief Executive Officer.  The Company evaluates  performance of
its segments based on operating  income,  determined on a basis  consistent with
amounts reported in the consolidated financial statements.

The Equipment and  Aftermarket - Americas  segment  designs and  manufactures  a
comprehensive line of engineered and standard overhead cranes,  hoists and other
component  products and repair parts at the Company's  facilities located in Oak
Creek and Windsor, Wisconsin. This segment also modernizes products manufactured
by both the Company and its competitors.  This segment is the main  manufacturer
of the replacement  parts sold by the Company's  Distribution and  Service-North
America segment as well as the  manufacturer of component  products used in that
segment's standard cranes.  Repair parts and component products are purchased by
the Distribution and Service - North America segment at list price less standard
intercompany discounts.

The  Equipment  and   Aftermarket  -  Other  segment  is  the  Company's   brake
manufacturing operation in Canada. Approximately 35% of this segment's sales are
to other Company segments. The Company sold this operation in December 1999.

The  Distribution  and  Service  -  North  America  segment  is the  network  of
Company-owned  locations in key industrial markets in North America. The network
is the platform for the  Company's  sales  activities,  serving as  distribution
centers for its original  equipment and  replacement  parts as well as the focal
point for service  activities.  Some of the distribution  centers also fabricate
and assemble standard cranes using components  manufactured by the Equipment and
Aftermarket - Americas and the Equipment and Aftermarket - Europe segments.

The  Engineered  Products  and  Automation  -  Europe  segment  focuses  on  the
manufacture  of highly  engineered  ship-to-shore  and gantry  cranes for use in
container  handling and  automated  warehouse  units at the  Company's  facility
located  in  Loughborough,  England,  and  provides  software  support  for  the
automated warehouse units installed at customer locations.

The  Equipment and  Aftermarket-Europe  segment  consists of standard  crane and
hoist manufacturing in the Loughborough, England facility as well as the network
of Company-owned  distribution  centers in key industrial  markets in the United
Kingdom. The Equipment and Aftermarket -Europe segment provides services for the
Engineered  Products  and  Automation  segment at prices  consistent  with those
charged to external  customers.  In addition,  this segment  distributes  hoists
through Distribution and Service - North America and Equipment and Aftermarket -
Asia  Pacific  and South  Africa at prices  consistent  with  those  charged  to
external customers.

The Equipment and Aftermarket - Asia Pacific and South Africa  segments  operate
in a manner similar to the Distribution  and Service North America segment.  The
Asia Pacific segment includes operations in Australia,  Singapore,  Thailand and
Saudi Arabia.

Sales, Marketing and Distribution

                                       7
<PAGE>

Due to the  diverse  nature of its  product  lines and  customer  requests,  the
Company uses multiple sales approaches to serve its customer base. However,  the
majority of sales are generated by Company employees.  In addition,  the Company
utilizes a number of independent  agents and  distributors  in certain  overseas
markets. In many markets, the members of the Company's sales staff specialize in
either original equipment or aftermarket products and services.  These employees
have the ability to effectively  identify and service the original equipment and
aftermarket needs of the customer,  thereby  positioning the Company as a single
source provider.

With the exception of sophisticated  original equipment projects,  the Company's
selling  efforts  occur  primarily  at the  regional  level.  For  sophisticated
original   equipment,   the  Company  uses  worldwide   product  or  engineering
specialists  to "team sell" the  products.  In this  process,  the team provides
written specifications, design concept consulting, project scope development and
project financial planning.

In order to develop stronger and more knowledgeable customer relationships,  the
Company has developed a DSC network,  bringing the  Company's  parts and service
operations  closer to the customer.  The Company's  DSC network  provides  three
distinct yet integrated functions:  (i) a distribution network for parts; (ii) a
sales organization for original  equipment;  and (iii) an installation,  repair,
inspection  and  maintenance  service  operation.  The Company has  continued to
expand its DSC network in recent years through both  acquisitions  of previously
independent distributors as well as the start-up of new DSCs.

In 1999, the Company  reorganized its  Distribution  and Service - North America
segment  along  geographic  lines to form eight  North  American  regions.  They
include  five  in the  United  States,  two in  Canada  and one in  Mexico.  The
reorganization  has allowed  the Company to  strengthen  its  customer  focus by
providing capable crane  engineering,  sales,  service,  manufacturing and parts
support on a local basis. By centralizing  engineering,  manufacturing and parts
at each  regional  headquarters,  the Company  has been able to reduce  selling,
general and administrative expenses.

A similar approach has been adopted in the Company's  international  operations.
The United  Kingdom  Material  Handling  Centre has the capability of full crane
design and manufacture as well as service and parts.  Crane design and component
manufacture  in the  other  international  operations  in  Thailand,  Singapore,
Australia  and South  Africa  are under the  control  of the U.K.  operation  to
minimize selling, general and administrative expenses and control product cost.

                                        Number of                Number of
                                        Branch                   Service
Region             Headquarters         Locations  Manufacturer  Technicians
-------------      ------------------   ---------  -----------   -----------
Northeast          Philadelphia, PA         4       Yes               28
Southeast          Birmingham, AL           8       Yes               44
Western            Dallas, TX              10       No                70
Great Lakes        Franklin, OH             8       Yes               40
Midwest            Waukesha, WI             4       No                27
Eastern Canada     Hamilton, Ontario        3       Yes               31

                                       8
<PAGE>

Western Canada     Edmonton, Alberta        6       Yes               28
Mexico             Mexico City              2       Yes               12
United Kingdom     Loughborough            12       Yes               60
South Africa       Johannesburg             9       Yes               35
Australia          Sydney                   3       Yes               18
Singapore          Tuas                     1       Yes                4
Thailand           Bangkok                  2       Yes                6
                                           --       ---              ---
                                           72                        403

In 1999 the Company acquired a distributor and regional crane builder located in
Philadelphia,  Pennsylvania  and a service  business  in North  Carolina.  These
acquisitions  together  with  ongoing  growth added four branch  locations,  and
approximately  50 service  technicians.  In 2000 the Company is not planning any
acquisitions.

Manufacturing

The Company employs  manufacturing at its core facilities.  The Company utilizes
specialized  manufacturing  facilities in combination with regional  assembly to
balance  the  different  operational   requirements  faced  by  a  full  service
participant in the overhead crane and hoist industry.

The specialized  manufacturing  facilities build highly engineered cranes. These
facilities  support the  regional  DSC crane  assembly  operations  by providing
high-quality,  standardized  components which are  manufactured  using processes
which are not economical for smaller,  regional facilities.  For example, due to
the specialized nature of the machining and assembly  processes  associated with
hoists,  a focused  manufacturing  facility  located in  Loughborough is used to
produce the  majority of these  components  for  distribution  to the  Company's
facilities  throughout the world. This centralization allows the Company to take
advantage  of  economies  of  scale  and  focused  engineering  resources  while
supporting  the  Company's  objective  of  standardizing  component  design  and
manufacturing.

By providing light  manufacturing  and assembly of  standardized  overhead crane
products on a regional basis, the Company  addresses  customers' demand for cost
effective products and shorter lead-times.  This regional manufacturing strategy
also benefits the Company's new product  development  efforts since the regional
DSC manufacturers have a better understanding of end-users' performance needs.

Raw Materials

The Company maintains close  relationships with a large number of suppliers both
domestically and abroad. Typically, the Company will source raw materials from a
local supplier in the region of the manufacturing facility,  often entering into
a blanket  purchase order or an equivalent  arrangement  to reduce costs.  Under
certain  circumstances,  however,  the Company will establish a long-term supply
arrangement,  either in an  attempt  to secure  product  consistency  or to take
advantage of volume discounts.  Some of the materials most frequently  purchased
by the Company include steel, electric motors, castings and forgings, electrical
controls  and  components,   and  power  transmission  and  related  components.
Substantially all of the materials purchased by the Company are available from a
variety of sources within the country of manufacture.

Backlog

The  Company's  backlog of orders at October  31, 1999 was  approximately  $77.4
million  compared to approximately  $97.3 million at October 31, 1998.  Bookings
for the year ended  October 31,  1999 were $274.3  million as compared to $317.5
million  for the year ended  October 31,  1998.  The change in backlog is due to
lower  bookings and  completion  of several large  projects in fiscal 1999.  The
decrease in  bookings  was  primarily  due to lower  orders for  modernizations,
standard  cranes,  hoists and components  bookings,  especially in international
markets.  Fourth quarter 1998 bookings also included a $21 million order with no
comparably sized order in 1999. The Company's orders for standard hoist products
are usually  shipped within 3 to 12 weeks.  Overall lead times for products that
are manufactured to customer's  specifications typically range between 12 and 40
weeks. The entire backlog of orders is anticipated to be shipped in fiscal 2000.

                                       9
<PAGE>

Warranties

The Company generally  provides a warranty on its products for periods of one to
two  years.  At  October  31,  1999,  the  Company  had  accrued  warranties  of
approximately $1.8 million.

Trademarks and Brand Names

The Company offers its equipment and services primarily under the P&H and Morris
brand names. The P&H and Morris  trademarks,  which have been  consistently used
for over 100 years, are recognized in important markets around the world. P&H is
currently used on above-ground mining equipment  manufactured by HarnCo,  mobile
construction  cranes  manufactured  by Terex (the successor to the former mobile
construction  crane  division  of  HarnCo),  as well as on the  crane  and hoist
products  manufactured  by the  Company  and  related  services  offered  by the
Company.  HarnCo has licensed to the Company the sole and exclusive right to use
the P&H  trademark on a worldwide  basis in  connection  with  "through-the-air"
material  handling  original  equipment  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 in connection
with 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  $1,353,000 of expenses for
royalty fees in the period from March 30, 1999 to October 31, 1999.  The Company
has elected to defer the payment of the royalty for the period ended October 31,
1999, which would otherwise be payable on January 30, 2000 pursuant to the terms
of Trademark License  Agreement.  The Trademark License Agreement  provides that
the annual  royalty fee may be deferred  for up to two years if the Company does
not meet  certain  financial  criteria.  The  Company  can only  defer up to two
payments during the term of the agreement. In addition,  interest accrues at 12%
per year on the deferred fee payments.  See "Certain  Relationships  and Related
Transactions."

The Company also sells  products  under the Kaverit  trademark in Canada and the
Powerlec and JDN  Monocrane  trademarks in  Australia.  It provides  aftermarket
service under the UK Crane Service trademark in the United Kingdom and the Crane
Aid trademark in South Africa. The Company also uses a variety of other marks in
different  countries.  There are no known  conflicts or third party rights which
would  materially  impact the  Company's  limited  use of the P&H  trademark  in
connection  with the Company's  business  activities for the life of the license
agreement or use of its other trademarks.

Patents

The Company owns 55 United States patents and pending patent applications and 56
foreign  patents and pending patent  applications,  primarily in Canada,  Japan,
Mexico and the United Kingdom.  The Company has acquired  patents  pertaining to
improvements in stacker cranes,  portal cranes,  anti-sway cable reeving systems
for cranes,  automation and controls, and crane wheel and rail configurations to
prevent skewing of rail-mounted cranes. Most of the products manufactured by the
Company are proprietary in design and the Company is not aware of any subsisting
patents held by others which would be infringed by the  manufacture  and sale of
the Company's  current lines of crane and hoist products.  Patents are important
to the Company because,  among other things, they prevent competitors from using
the Company's  proprietary  inventions  and designs.  The Company  believes this
provides a  competitive  advantage in the  marketplace.  However,  the Company's
overall  competitive  position is not dependent  upon a particular  patent,  nor
would  the  loss of any  particular  patent  have a  material  impact  upon  the
Company's competitive or financial position. Nonetheless, the Company expects to
continue to protect its proprietary  technology  through patents and other forms
of intellectual  property.  The Company has aggressively pursued infringement of
its  proprietary  rights and intends to continue to do so should the need arise.
The Company's patents have a duration ranging from approximately one to eighteen
years, depending on the filing dates of the patent applications.

Competition

The industrial crane and hoist industry is highly  fragmented,  with four global
participants  and many  regional and local  players.  Therefore,  the markets in
which the  Company  operates  are  highly  competitive,  and the  Company  faces
competition  from a number of  different  manufacturers  in each of its  product
areas and geographic markets,  both domestic and foreign.  The current depressed
level of new equipment orders has increased the intensity of competition and has
reduced  selling  prices and margins on new equipment  bookings.  Globally,  the
Company  believes  it is one of the four  largest  manufacturers  of  industrial
overhead cranes and one of the largest providers of related aftermarket products
and  services.  Other  global  competitors  include  Mannesmann  Dematic  AG,  a
subsidiary  of  Mannesmann  AG;  Columbus  McKinnon  Corp.;  and KCI  Konecranes

                                       10
<PAGE>

International Corp. Within specific  geographic and product markets,  the market
share of the top participants often varies.

Governmental Regulation

         Environmental Regulation

         The  Company's  operations  and  properties  worldwide  are  subject to
         extensive and changing legal requirements and regulations pertaining to
         environmental  matters.  In 1999,  expenditures  in connection with the
         Company's   compliance   with   federal,   state,   local  and  foreign
         environmental  laws and  regulations  did not have a  material  adverse
         effect on the Company's earnings or competitive position.

         The principal environmental  compliance issues that arise in connection
         with the Company's  manufacturing  facilities are hazardous/solid waste
         disposal  and  air  emissions  (primarily  painting  operations).   The
         Company's DSCs do not create  environmental  conditions that materially
         affect the Company's operations.

         The  Resource  Conservation  and  Recovery  Act  ("RCRA")  requires the
         Company to manage and  recycle  or  dispose  properly  of the wastes it
         generates from its manufacturing operations.  Similar foreign hazardous
         waste laws and regulations  apply to the Company's  facilities  outside
         the  United  States.  RCRA and these  other  hazardous  waste  laws and
         regulations include storage, management and manifest provisions,  among
         others.  The Company has  agreements  worldwide  with  hazardous  waste
         management firms to recycle or dispose properly of generated  hazardous
         wastes.  Many of the  Company's  regional  distribution  centers have a
         "parts washer sink"  on-site,  and the spent  solvents  generated  from
         these minor  cleaning  activities  are managed,  collected and recycled
         under contracts with waste  management  firms. The Company is not aware
         of any material non-compliance with applicable hazardous waste laws and
         regulations at its facilities or operations.

         Under the Clean Air Act,  the States  have  adopted an array of control
         measures and programs to minimize certain  hazardous air pollutants and
         particulate  matter. The Company has obtained necessary permits for any
         affected  facilities.  Foreign clean air laws and  regulations  address
         many  of  the  same  pollutants  and  issues.  Considerable  regulatory
         activity is expected in the next ten years with the  implementation  of
         1997 changes to the national  ambient air quality  standards  for ozone
         and particulate  matter,  although that rulemaking is currently subject
         to litigation and thus may be delayed. The Company has made a number of
         select investments in equipment at its primary  manufacturing  sites in
         anticipation of these changes. The adoption of some of these additional
         clean air regulations might require the Company to make further capital
         expenditures not currently anticipated and that may be material.

         In connection with the ownership of its properties and operation of its
         business,  the Company may also be subject to liability  under  various
         federal,  state,  local and foreign laws,  regulations  and  ordinances
         relating to clean-up and removal of hazardous  substances  on, under or
         in  such   properties.   Certain  laws,   such  as  the   Comprehensive
         Environmental  Response,  Compensation  and  Liability  Act,  typically
         impose  liability  whether or not the owner or operator knew of, or was
         responsible for, the presence of such hazardous substances. Persons who
         arrange, or are deemed to have arranged,  for the disposal or treatment
         of hazardous substances also may be liable for the costs of removal and
         remediation  of such  substances  at the  treatment  or disposal  site,
         regardless  of whether  such site is owned or operated by such  person.
         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  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.

         The Company has undergone significant expansion in recent years through
         acquisitions,  and  management has decided that it is important for the
         Company's  operations  to  adopt a  "proactive"  compliance  management
         approach  to  environmental  matters.  The  Company  hired a manager of
         safety,  health and environmental  affairs in September 1996 to oversee
         worldwide compliance, and staff have been designated to lead compliance
         activities  at each  facility.  The  Company has  developed  an "Annual
         Compliance  Calendar"  matrix for all required  facility  reports and a
         management  system for all  environmental,  safety and health issues. A

                                       11
<PAGE>

         key component of the Company's  environmental strategic management plan
         is continuous awareness and training for managers and employees.

         It is likely that situations will arise from time to time requiring the
         Company to incur expenditures in order to ensure continuing  regulatory
         compliance.  The Company is not aware of any environmental condition or
         any  operation  at  any  of  its  properties  or   facilities,   either
         individually or in the aggregate,  which would cause  expenditures that
         would result in a material  adverse effect on the Company's  results of
         operations,  financial condition, or competitive position.  There could
         be future,  unknown environmental  regulatory changes that could have a
         material effect.

         In connection  with the  Transactions,  a  comprehensive  environmental
         assessment of certain of the  Company's  properties  and  operations at
         which the  Company may have  potential  environmental  liabilities  was
         conducted.    This   environmental   assessment   indicated   that   no
         environmental  matters  or  compliance  issues  exist that would have a
         material  adverse  effect  on the  Company's  earnings  or  competitive
         position.  The Company has followed up on all priority  recommendations
         made in the environmental assessment with respect to both United States
         and  foreign  operations.  There  can  be  no  assurance  that  unknown
         conditions  at the  Company's  facilities  will not result in potential
         liabilities that may be material.

         The  Loughborough,  England  facility  is subject  to an air  emissions
         permit,  the limits of which  became  enforceable  in April  1998.  The
         Company has retained a consultant who has conducted  tests to determine
         if the facility  complies with such limits.  The test results indicated
         that the  Company  exceeded  emission  limits in one area.  Significant
         operational changes have been implemented.  The Company has submitted a
         proposal  to the  Charnwood  Borough  Counsel and has  received  verbal
         approval,  however a formal response has not yet been received. At this
         time it is not anticipated that material expenditures will be required.

         Other Regulation

         The  Company's  operations  also are  subject  to many  other  laws and
         regulations,  including  those relating to workplace  safety and worker
         health  (principally  OSHA and  regulations  thereunder  in the  United
         States and  similar  laws in most  other  countries).  In fiscal  1999,
         expenditures in connection with the Company's  compliance with federal,
         state,  local and foreign  environmental  laws and  regulations did not
         have a material  adverse effect on the Company's  earnings or financial
         position.   Additionally,  the  Company  believes  it  is  in  material
         compliance  with these laws and  regulations  and does not believe that
         future  compliance with such laws and regulations  will have a material
         adverse  effect on its cash flow,  results of  operations  or financial
         condition.

Employees

At December 31, 1999, the Company  employed  2,151  persons,  of whom 1,054 were
hourly and 1,097 were salaried  personnel.  Approximately 42.8% of the Company's
hourly employees are represented by unions. The Company's unionized employees in
Oak Creek,  Wisconsin are covered by a collective  bargaining agreement with the
United  Steelworkers of America,  Local 1114, which expires August 31, 2002. The
unionized  employees in  Philadelphia,  Pennsylvania are covered by a collective
bargaining agreement with the International  Association of Bridge,  Structural,
Ornamental and Reinforcing Iron Workers, Local 502, which expires July 31, 2000.
In  addition,  the  Company  is  a  party  to  several  agreements  with  unions
representing  certain of its  employees  in Mexico,  South Africa and the United
Kingdom. These agreements all have one year terms. The Company believes that its
relations with its employees are good.

Item 2.  Properties

         The  Company  maintains  its  corporate   headquarters  in  Oak  Creek,
Wisconsin and conducts its principal operations at the following facilities:

                                       12
<PAGE>
<TABLE>
<CAPTION>

                                                                                       Square                         Operating
Location                            Utilization                                        Footage     Owned/Leased     Segment (h)
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                          <C>  <C>
Loughborough, U.K                    Crane/hoist manufacturing                           420,000   Owned              (4), (5)
Oak Creek, WI                        Crane/hoist/winch manufacturing                     277,000   Owned                   (1)
Johannesburg, S.A                    Crane/hoist manufacturing                           124,000   Owned                   (7)
Franklin, OH                         Regional fabrication/remanufacturing                 75,000   Owned                   (3)
Mexico City, Mexico                  Crane/hoist manufacturing/distribution/service       65,000   Owned                   (3)
Edmonton, Canada                     Crane/hoist regional manufacturing/service           58,300   Owned                   (3)
Burlington, Ontario, Canada          Crane manufacturing/distribution/service             20,000   Owned                   (3)
Windsor, WI                          Crane/hoist remanufacturing                          55,000   Leased (a)              (1)
Mauldin/Greenville, SC               Regional crane assembly/service                      40,400   Leased (b)              (3)
Philadelphia, PA                     Regional crane assembly/service                      39,000   Leased (c)              (3)
Birmingham, AL                       Regional crane assembly/service                      36,500   Owned/Leased (d)        (3)
Melbourne, Australia                 Crane/hoist manufacturing/service                    30,000   Leased (e)              (6)
Singapore, Singapore                 Parts warehouse/crane assembly/hoist distribution    21,200   Licensed (f)            (6)
Sydney, Australia                    Material handling equipment distribution/service     14,000   Leased (g)              (6)
</TABLE>


(a)  Lease expires May 31, 2002.
(b)  Lease expires December 31, 2004.
(c)  Lease expires July 31, 2000.
(d)  The Company  owns the  property  with the  exception  of a portion  thereof
     leased (with an option to purchase)  from the  Industrial  Revenue Board of
     Birmingham.
(e) Lease expires August 4, 2003.
(f)  The  property  is held  under a  license  granted  pursuant  to a  building
     agreement  with the  Jurong  Town  Corporation  of  Singapore.  Subject  to
     compliance  with  certain  stipulated  conditions  in such  agreement,  the
     Company  is to be  granted a 30-year  lease of the  property  from April 1,
     1994.
(g)      Lease expires June 30, 2003.
(h)      The operating segments are as follows:

     (1)      Equipment and Aftermarket - Americas
     (2)      Equipment and Aftermarket - Other
     (3)      Distribution and Service - North America
     (4)      Engineered Products and Automation - Europe
     (5)      Equipment and Aftermarket - Europe
     (6)      Equipment and Aftermarket - Asia Pacific
     (7)      Equipment and Aftermarket - South Africa

The  Company  also  leases a number of other  properties  as DSCs in the  United
States, Canada, the United Kingdom, South Africa, Australia, Chile, Thailand and
Mexico.

The Company believes that its properties have been adequately maintained, are in
generally  good  condition,  and are  suitable  for the  Company's  business  as
presently  conducted.  The Company  believes  its  existing  facilities  provide
sufficient  production  capacity for its present  needs and for its  anticipated
needs in the  foreseeable  future.  The  Company  also  believes  that  upon the
expiration of its current leases, it either will be able to secure renewal terms
or enter into leases for alternative locations at market terms.

Item 3.  Legal Proceedings

On October 28, 1996, a strong windstorm caused significant damage to the Belview
container-handling   terminal  at  the  Port  of  Waterford   in  Ireland.   One
container-handling  crane sold by the Company's  United  Kingdom  subsidiary was
destroyed  and another was  seriously  damaged.  The two cranes were sold to the
Waterford  Harbour  Commissioners  in 1992 and  commissioned for use in 1993. On
October 19, 1998, the Waterford Harbour  Commissioners  wrote to the Company and
provided a notice of arbitration,  asserting breach of contract,  negligence and

                                       13
<PAGE>

breach of duty against the  Company's  United  Kingdom  subsidiary in connection
with the  destroyed and damaged  cranes.  The  Waterford  Harbour  Commissioners
claimed direct damages of IR(pound)8.5  million ($11.5 million based on exchange
rates at January  31,  2000) and  unspecified  consequential  damages.  The port
operator,  Bell Lines,  Limited,  filed a similar  claim  against the  Company's
United  Kingdom  subsidiary  in October  1999,  asserting  unspecified  damages.
Management  intends to  vigorously  defend both  matters.  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 claims. The Company is continuing to work with its
insurance broker to determine the availability of additional insurance coverage,
if any.  While the Company  believes that it will obtain a favorable  resolution
(either by successfully  defending the claim or by obtaining  insurance coverage
thereon),  no assurances  can be made as to the final outcome of the claims.  If
the  Company is found  liable  for the claims and is unable to obtain  insurance
coverage  therefor,  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.  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 4.  Submission of Matters to a Vote of Security Holders

On May 28, 1999,  the sole  shareholder  of MMH adopted  resolutions  by written
consent in lieu of a regular  meeting  electing  Todd R.  Berman and  Michael S.
Shein as directors of the Company.

 On July 29, 1999, the sole  shareholder  of MMH adopted  resolutions by written
consent in lieu of a special meeting  electing Jack F. Stinnett as a director of
the Company.

                                       14
<PAGE>

                                     PART II

Item 5.  Market for Registrants' Common Equity and Related Stockholder Matters

There is no established public trading market for Holdings' Voting Common Stock,
par value $.01 per share (the  "Holdings  Voting  Common  Stock"),  or Holdings'
Nonvoting Common Stock, par value $.01 per share (the "Holdings Nonvoting Common
Stock").  As of January 31,  2000,  there were two  holders of  Holdings  Voting
Common Stock and nine holders of Holdings Nonvoting Common Stock.

Holdings has not paid or declared any cash dividends  during the last two fiscal
years and does not  anticipate  paying cash  dividends  on the  Holdings  Voting
Common Stock or Holdings  Nonvoting Common Stock in the foreseeable  future. The
ability of  Holdings  to obtain  cash  resources  to pay cash  dividends  on its
capital  stock is  restricted  by the terms of the New Credit  Facility  and the
indenture   that  governs  the  Senior  Notes  (the  "Note   Indenture")  .  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Liquidity and Capital Resources."

There is no established  public trading market for MMH's Common Stock, par value
$.01 per share (the "MMH  Common  Stock").  Holdings  owns all of the issued and
outstanding MMH Common Stock.

MMH paid an aggregate of $9,000 in dividends to Holdings during fiscal 1999.

On August 27, 1999,  Holdings issued 1,210 shares of its non-voting common stock
to Martin Crane in  consideration  for Martin Crane's  funding of a $5.0 million
participation  interest in the New Credit Facility in connection with the August
2, 1999  amendment  of the New Credit  Facility.  On December 3, 1999,  Holdings
issued  2,420 more  shares of its  non-voting  common  stock to Martin  Crane as
additional  consideration  pursuant  to  the  terms  of  the  Subordination  and
Participation  Agreement. No underwriter was involved in the transaction,  which
was exempt from registration under Section 4(2) of the Securities Act.

Appropriate  legends were affixed to the stock certificates  issued in the above
transactions.

                                       15
<PAGE>

Item 6.  Selected Financial Data

For the purposes of this Form 10-K, it is assumed that Holdings has historically
owned the capital  stock of MMH,  that all 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.

<TABLE>

                                                   MMH Holdings, Inc.
                                                 Selected Financial Data
                                                 (dollars in thousands)
<CAPTION>

                                                               Fiscal Year Ended October 31,
                                   ---------------------------------------------------------------------------------------
                                      1999              1998               1997             1996                1995
                                   ------------     -------------       -----------     -------------       -------------
Income Statement Data:
<S>                                   <C>               <C>               <C>               <C>                 <C>
Net Sales                             $294,195          $317,857          $353,350          $323,735            $243,169
Gross profit                            75,492            90,866            92,556            76,176              56,765
Other income - net                         392             1,331             2,649             1,149               3,766
Selling, general and
  administrative expenses               72,439            63,152            56,806            44,968              36,931
HII Management fee                           -             1,155             2,862             2,341               1,878
Nonrecurring employee
  benefit costs (a)                          -             1,216                 0                 0                   0

                                   ------------     -------------       -----------     -------------       -------------
Operating income                         3,445            26,674            35,537            30,016              21,722

Net income (loss)                     (98,205)             4,291           $20,853           $18,446             $13,476
                                                                        ===========     =============       =============

Dividends on preferred stock          (12,322)           (6,545)

Amortization of preferred
stock discount                           (581)             (338)
                                   ------------     -------------

Net loss attributable
  to Common Stock                   ($111,108)          ($2,592)
                                   ============     =============

                                                                     As of October 31,
                                   --------------------------------------------------------------------------------------
                                       1999             1998               1997             1996                1995
                                   -------------    -------------       -----------     --------------      -------------

Balance sheet data:

Total assets                         $226,836           $310,997          $199,600           $189,058           $151,168

Total debt                            297,114            265,338             6,088              2,044              4,704
Mandatorily redeemable
  preferred stock                     108,245             95,351                 0                  0                  0
</TABLE>


(a)  Represents  incentives to certain members of management.  While the cost of
     the incentive  payments appear on the Company's income statement,  HII, the
     Company's former parent, not the Company,  was responsible for paying these
     incentives.

                                       16
<PAGE>
<TABLE>


                                             Morris Material Handling. Inc.
                                                Selected Financial Data
                                                 (dollars in thousands)

<CAPTION>

                                                               Fiscal Year Ended October 31,
                                   --------------------------------------------------------------------------------------
                                       1999             1998              1997              1996                1995
                                   -------------    -------------     -------------     --------------      -------------

Income Statement Data:
<S>                                    <C>              <C>               <C>                <C>                <C>
Net Sales                              $294,195         $317,857          $353,350           $323,735           $243,169
Gross profit                             75,492           90,866            92,556             76,176             56,765
Other income - net                          392            1,331             2,649              1,149              3,766
Selling, general and
  administrative expenses                72,439           63,152            56,806             44,968             36,931
HII Management fee                            -            1,155             2,862              2,341              1,878
Nonrecurring employee
  benefit costs (a)                           -            1,216                 0                  0                  0

                                   -------------    -------------     -------------     --------------      -------------
Operating income                          3,445           26,674            35,537             30,016             21,722

Net income                            $(98,205)          $ 4,291           $20,853            $18,446           $ 13,476
                                   =============    =============     =============     ==============      =============


                                                                     As of October 31,
                                   --------------------------------------------------------------------------------------
                                       1999             1998              1997              1996                1995
                                   -------------    -------------     -------------     --------------      -------------

Balance sheet data:
Total assets                           $226,836         $310,997          $199,600           $189,058           $151,168

Total debt                              297,114          265,338             6,088              2,044              4,704
</TABLE>

(a)  Represents  incentives to certain members of management.  While the cost of
     the incentive  payments appear on the Company's income statement,  HII, the
     Company's former parent, not the Company,  was responsible for paying these
     incentives.

                                       17
<PAGE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operation

                The following  discussion should be read in conjunction with the
Financial  Statements and the related notes thereto  included  elsewhere 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 an  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  an
international  full service  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 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,  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
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' 12% 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 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  initially  provided  the  Company  with up to $70.0
million of available  borrowings  for working  capital,  acquisitions  and other
corporate  purposes,   subject  to  compliance  with  certain  conditions.   The
Acquisition  Facility  initially  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.  The New Credit
Facility  was amended on August 2, 1999.  See "Recent  Developments--New  Credit
Facility  Amendment;  Liquidity Status";  "Liquidity and Capital  Resources." As
amended,  the  Revolving  Credit  Facility  provided  $50.7 million of available
borrowings  ($10.0  million of which was required to be reserved for issuance of
letters of credit),  and the Acquisition  Facility provided 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.  No
additional  borrowings under the Acquisition Facility are available from lenders
under the New Credit Facility.

The  Company,  however,  anticipates  that it will  not meet  certain  financial
covenants contained in the New Credit Facility for the quarter ended January 31,
2000  and  the  foreseeable  future  thereafter.  The  Company  entered  into an
Amendment  and Waiver  under the New Credit  Facility,  dated as of January  31,
2000, whereby, among other matters, the lenders waived compliance by the Company
with such financial  covenants,  for the period from January 31, 2000 until 5:00
p.m.  March 29, 2000 (the  "January  Waiver").  The January  Waiver  permits the
Company, subject to certain conditions,  to make additional borrowings under the
Revolving Credit Facility and issue additional  letters of credit,  above levels
in existence on January 31, 2000, in an aggregate amount of up to $12.0 million,
during the waiver period.

                                       18
<PAGE>

Currently,  the Company is not generating  sufficient  funds from  operations to
satisfy working capital and debt service requirements, and as a result must rely
on  Revolving  Credit  Facility  borrowings  to continue  to operate.  While the
Company  anticipates  that cash generated from  operations and Revolving  Credit
Facility  borrowings  will be  sufficient  to enable it to satisfy its cash flow
needs  until  March  29,  2000,  there  can be no  assurance  that it will  have
sufficient  cash  flow  and  borrowings  available  to  enable  it to  meet  its
obligations  until such date. Upon the expiration of the January Waiver on March
29, 2000,  the Company  will not have  sufficient  cash to continue  operations,
unless  arrangements  can be entered into to provide  liquidity for the Company.
See "Liquidity and Capital Resources."

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

In  connection  with,  and as a condition  to, the lenders  under the New Credit
Facility  entering into the August 2, 1999 Amendment to the New Credit Facility,
certain of the current  indirect equity holders in Holdings  purchased,  through
Martin  Crane,  a $5.0  million  participation  in the New Credit  Facility  and
received  shares  of  non-voting  common  stock of  Holdings,  in  consideration
therefor.  As a result, at January 31, 2000, MHE Investments owns  approximately
54.5% of the  Holdings  Common  Stock,  HarnCo owns  approximately  15.6% of the
Holdings Common Stock,  institutional  investors own  approximately  4.9% of the
Holdings Common Stock and Martin Crane owns approximately  25.0% 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  continued 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).   See   "Certain
Relationships and Related  Transactions--Relationship with Harnischfeger." Under
the Credit Indemnification  Agreement, MMH is required to pay HII, an annual fee
equal to 1% of the  amounts  outstanding  under  each  letter of credit and bond
provided by HarnCo and its affiliates (approximately $27.7 million as of October
31, 1999). MMH accrued a fee of $223,000 for calendar year 1999. 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")  with a third  party at the  Recapitalization  Closing  to provide
credit support for its post-Recapitalization Closing operations.

In  connection  with the  Recapitalization,  the  Company  also  entered  into a
trademark  license  agreement  (the  "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 $1,353,000 of expenses for royalty fees in the period from March
30,  1999 to October 31,  1999.  The Company has elected to defer the payment of
the royalty fee for the period ended  October 31,  1999,  which would be payable
January 30, 2000, pursuant to the terms of the Trademark License Agreement.  The

                                       19
<PAGE>

Trademark License Agreement provides that the annual royalty fee may be deferred
for up to two years if the Company does not meet certain financial criteria. The
Company can only defer up to two payments  during the term of the agreement.  In
addition, interest accrues at 12% per year on the deferred fee payments.

The  Company  could be  materially  adversely  affected by the fact that HII and
certain of its United States  affiliates  filed for bankruptcy  protection.  See
"Recent Developments--HII Bankruptcy."

For income tax  purposes,  Holdings and MMH were deemed to acquire the assets of
the MHE Business  pursuant to Code Section  338(h)(10)  in  connection  with the
Transactions.  Accordingly,  the  Recapitalization  increased  the tax  basis of
certain assets and created tax-deductible goodwill.

Acquisitions and Divestitures

Acquisitions-During  the year ended October 31, 1999, the Company  completed two
acquisitions  with an  aggregate  purchase  price of $4.1  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
fair value of  specific  assets  acquired  and  liabilities  assumed.  Resultant
goodwill is being  amortized over 10 to 40 years.  One 1999  acquisition and one
1998 acquisition were partially financed by the sellers.  The resulting deferred
purchase price will be paid in 2004 and 2005 for the 1999 acquisition and annual
installments  through  2006  for  the  1998  acquisition.  Future  payments  for
acquisitions partially financed by the sellers are $100,000 in each of the years
2000, 2001, 2002 and 2003; $1,100,000 in 2004; $700,000 in 2005; and $100,000 in
2006. The two 1999 acquisitions added  approximately  $13.7 million in sales and
$1.5 million in operating income to the Company's results in 1999.

During the year ended  October 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 year ended  October 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 year ended  October  31,  1999 and
accordingly, such information is not presented.

Divestitures-On  December 16, 1999, the Company  completed the sale of the Brake
Business located in Mississauga,  Ontario,  Canada, for a net sale price of $6.8
million after deduction of certain  transaction-related  items, including taxes.
During fiscal 1999,  the Brake  Business  contributed  $5.7 million in sales and
$1.4 million in operating income to the Company's results.

In accordance  with the New Credit  Facility,  as amended by the Amendment,  the
Company was permitted to apply half of the net proceeds of the sale of the Brake
Business (which amounted to $3.4 million) to general corporate  purposes,  which
the Company would  otherwise  have been  required to use to prepay  indebtedness
under the New Credit  Facility.  After  consummation  of the sale,  the  Company
repaid $3.1  million of the  outstanding  term loans ($2.4  million of which was
applied to the final scheduled  principal payment obligation with respect to the
term loans) and repaid $0.3 million on the Acquisition Facility.

Results of Operations

Fiscal 1999 as Compared to Fiscal 1998

Net sales in 1999 decreased  $23.7 million or 7.4% to $294.2 million from $317.9
million  in  1998.  The  decrease  in net  sales  was  primarily  caused  by the
following:  (i) a  decrease  of $15.9  million  in hoists  and  component  sales
primarily  resulting  from  continued  softness  in certain  European  and Asian
markets;  (ii) a decrease of $7.1 million in  engineered  crane sales  worldwide
largely due to the fact that 1998 included $8.9 million in container crane sales
in the United Kingdom without any corresponding  sales in 1999; (iii) a decrease
in overall parts sales of $3.6 million caused primarily by the decrease in spare
parts orders  attributable to the lower  engineered crane sales resulting from a
weakened  market;  and (iv) a decrease in  modernization  sales of $1.4 million.
These  decreases were  partially  offset by an increase in service sales of $2.4
million and an increase in standard crane sales of $1.9 million.

                                       20
<PAGE>

Cost of sales  decreased  $8.3  million  or 3.7% to $218.7  million in 1999 from
$227.0 million in 1998 primarily due to the lower sales volumes described above.
However, cost of sales as a percentage of net sales increased from 71.4% in 1998
to 74.3% in 1999 due to the lower  level of volume in  manufacturing  operations
tied to the  decrease  in  engineered  crane  and  hoist  and  component  sales.
Additionally,  the Company  experienced  $2.0 million in special  charges during
1999 related to revised estimates of inventory  obsolescence,  warranty reserves
and contract completion costs.

Selling,  general and administrative expenses increased $9.2 million or 14.7% to
$72.4  million in 1999 from $63.2  million in 1998.  The primary  cause was $4.2
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  1999  and 1998
acquisitions. Selling, general and administrative expenses in 1999 also included
approximately  $1.0 million of management fees compared to $0.6 million in 1998.
Additionally,  selling,  general and  administrative  expenses in 1999  included
approximately  $1.4 million of accrued  royalties owed to HII for use of the P&H
trademark  after March 30, 1999,  the initial date such royalty  payments  began
accruing,   while  1998  expenses  included  severance  costs  of  $1.8  million
associated  with  restructuring  the Company's  United States and United Kingdom
manufacturing operations. These increases were offset by savings associated with
the 1998  restructuring  of the United  Kingdom and United States  manufacturing
operations and other cost-reduction measures.

Parent management fees allocated by HII (prior to the  Recapitalization),  which
represented  an allocation  of HII's  corporate  expenses,  were $1.2 million in
1998.  Additionally,  in 1998, the Company recognized incentive payments of $1.2
million to  certain  members of  management.  While the cost of these  incentive
payments appears on the Company's income  statements,  HII, the Company's former
parent, paid these incentives.

Approximately  $30.0  million in  interest  expense was  recorded  in 1999.  The
components  include $23.6 million  related to the debt issued in connection with
the  Recapitalization  and related  commitment  fees,  $2.6  million  related to
borrowings for working capital and acquisition  funding, a $0.4 million fee paid
in conjunction with the waiver of New Credit Facility debt covenant  violations,
$0.7  million  related to other  borrowings,  $2.5  million in  amortization  of
financing costs recognized in connection with the  Recapitalization  and $0.2 in
amortization  of a credit support fee payable to HII.  Interest  expense in 1998
included $1.5 million  related to borrowings  from HII and affiliates  (prior to
the  Recapitalization),  $14.2 million  related to the debt issued in connection
with the Recapitalization,  $0.8 million on borrowings for working capital, $1.2
million in amortization of financing costs and $0.3 million in amortization of a
credit  support  fee  payable to HII.  The  Company  paid $27.7  million in cash
interest, waiver fees and commitment fees during 1999.

Realization of deferred tax assets is dependent on generating sufficient taxable
income prior to expiration of net operating loss carryforwards. During 1999, the
Company  re-estimated its future  operating  results and determined its deferred
tax asset  valuation  allowance  required an increase of $80.4 million which was
recognized as income tax expense. Management believes it is more likely than not
that the net deferred tax assets recorded will not be realized.

The current income tax expense recorded of $2.1 million resulted  primarily from
profitable operations in Canada and from state income tax liabilities.

The  Company's  backlog of orders at October  31, 1999 was  approximately  $77.4
million compared to approximately $97.3 million at October 31, 1998. Bookings in
1999 were  $274.3  million  compared  to $317.5  million in 1998.  The change in
backlog is due to lower  bookings and  completion of several  large  projects in
fiscal  1999.  The decrease in bookings  was  primarily  due to lower orders for
modernizations,  standard cranes, hoists and components bookings,  especially in
international markets. Fourth quarter 1998 bookings included a $21 million order
with no comparably sized order in 1999.

Fiscal 1998 as Compared to Fiscal 1997

Net sales in 1998 decreased $35.5 million or 10.0% to $317.9 million from $353.4
million  in 1997.  The  decrease  in net sales  was  primarily  the  result of a
decrease in engineered  crane sales worldwide as 1997 included the completion of
several large projects in both the United States and the United Kingdom  without
a corresponding level of projects in 1998. The decline in engineered crane sales
was largely due to a downturn in orders in the United  Kingdom  container  crane
business  and the failure to win certain  large  projects in the United  States.

                                       21
<PAGE>

This decrease was offset,  in part,  by an increase in (i) standard  crane sales
due to a product  mix shift  away from  engineered  cranes,  new  product  sales
(trolleys)  and the  continued  expansion of the  Company's  DSC  network,  (ii)
modernization  sales due to the  completion of several large  projects and (iii)
sales of parts,  service,  hoists and  components  also due to the  expanded DSC
network. These increases also were due, in part, to a full year's operation of a
DSC in Ohio acquired in February 1997 and to sales of the four acquisitions made
during 1998.

Other income - net  decreased  from $2.6 million in 1997 to $1.3 million in 1998
primarily due to the  recognition of a $2.0 million gain in 1997 on an insurance
claim relating to a fire at the Morris Mechanical  Handling Ltd. facility in the
United  Kingdom  in  1995.  Other  income  - net in  1998  includes  a  gain  of
approximately  $0.3  million on the sale of certain  fixed  assets,  including a
building.

Cost of sales  decreased  $33.8 million or 13.0% to $227.0  million in 1998 from
$260.8 million in 1997 primarily due to the lower sales volumes described above.
Cost of sales as a percentage of net sales also decreased, from 73.8% in 1997 to
71.4% in 1998.  This  improvement is a result of a shift in the Company's  sales
mix toward the higher margin standard  cranes and aftermarket  products and away
from engineered cranes.

Selling,  general and administrative expenses increased $6.4 million or 11.2% to
$63.2 million in 1998 from $56.8 million in 1997 due to expenses  related to the
businesses acquired in 1997 and 1998, unabsorbed  engineering costs due to lower
engineered  crane sales,  additional  costs  associated with the separation from
HII,  including the staffing of corporate tax and treasury functions and rent on
new  corporate  headquarters,  management  fees  included  in 1998  for  periods
subsequent  to  the  Recapitalization,  and  severance  costs  of  $1.8  million
associated  with  restructuring  the Company's  United States and United Kingdom
manufacturing operations.

As a result of the  Recapitalization,  the Company recognized incentive payments
of $1.2  million  to  certain  members  of  management.  While the cost of these
incentive  payments  appears  on  the  Company's  income  statements,  HII,  the
Company's former parent, paid these incentives.

Approximately  $16.5  million in third party  interest  expense was  recorded in
1998,  including $14.2 million in interest expense on the Senior Notes and under
the New Credit  Facility and $1.2 million of  amortization  of related  deferred
financing  costs.  The Company also incurred $0.8 million in interest expense on
working  capital  borrowings  outstanding  and $0.3 million in amortization of a
credit support fee payable to HII.

The provision for income taxes was  approximately  50.9% of income before income
taxes and  minority  interest  for 1998 as  compared  to 39.9%  for  1997.  This
increase  is due in large  part to  higher  foreign  effective  tax  rates,  the
nondeductible  divestiture bonus expense charge and the effect of an increase in
the deferred tax valuation allowance.

Net income  decreased  $16.6 million or 79.4% to $4.3 million in 1998 from $20.9
million in 1997.  Net income  represented  1.3% of net sales in 1998 compared to
5.9% of net sales in 1997.

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 flow used for operating activities was $15.2 million in 1999 versus net
cash flow provided by operating  activities of $9.6 million and $12.9 million in
1998 and 1997,  respectively.  The decrease in operating  cash flow from 1998 to
1999 was primarily due to a $33.2 million decrease in net income after adjusting
for the effect of the increase in the deferred tax provision,  offset,  in part,
by a $6.1 million  increase in cash flow  resulting  from net changes in working
capital  and a $2.8  million  increase in  depreciation  and  amortization.  The
decrease in operating  cash flow from 1997 to 1998 was due  primarily to a $16.6
million  decrease in net income for 1998 offset by increases in advance payments
and progress  billings and non-cash  expenses such as  amortization of financing
costs and  divestiture  bonuses  during the year.  Lower  levels of  acquisition
funding provided by HII and its affiliates in 1998,  compared to the acquisition
funding  provided for the  acquisition of a DSC in Ohio in February  1997,  also
contributed to the decrease in cash flow provided by operating activities.

                                       22
<PAGE>

Net cash used for investment and other  transactions for 1999, 1998 and 1997 was
$13.7 million, $16.0 million and $14.9 million, respectively.  During 1999, $5.6
million of cash was used for acquisitions  related to the Company's  aftermarket
business and for payments made with respect to three earlier acquisitions versus
$8.9  million used for 1998  acquisitions.  Additionally,  capital  expenditures
increased  to $7.6  million  in  1999  from  $5.2  million  in  1998.  The  1999
expenditures  included  computers and computer  upgrades,  new operating  system
software,  office and warehouse  consolidations and new manufacturing equipment.
The  increase  from 1997 to 1998 was due mainly to the  receipt of an  insurance
claim in 1997 due to an earlier  fire.  This was offset in part by a lower level
of  acquisition  expenditures  during 1998 than 1997.  The  Company  anticipates
approximately $2.0 million in capital expenditures in fiscal 2000 for computers,
computer upgrades and various furniture,  fixtures, machinery and equipment. The
Company's  ability  to  undertake  those  capital  expenditures  will  likely be
adversely affected by its liquidity  situation,  as discussed below. The Company
did not have any material commitments for capital expenditures as of October 31,
1999 or as of January 31, 2000.

Net cash provided by financing  activities was $30.3 million and $7.5 million in
1999 and 1998, respectively. The increase from 1998 to 1999 was primarily due to
net proceeds  from  borrowings  used to fund  principal  and interest  payments,
working capital needs and  acquisitions.  The increase from 1997 to 1998 was due
to the financing activities associated with the Recapitalization.  Net cash used
for financing activities was $0.3 million in 1997.

As part of the Recapitalization,  MMH offered $200.0 million principal amount of
its 9 1/2% Senior  Notes.  Interest on the Senior Notes began  accruing on March
30, 1998, the date of issuance of the Senior Notes, and is payable semi-annually
on each April 1 and October 1, commencing October 1, 1998. The Senior Notes will
mature on April 1, 2008.

As part of the  Transactions,  the Company  entered into the New Credit Facility
which  included a $20 million term loan ("Term Loan A"), a $35 million term loan
("Term Loan B" and  together  with Term Loan A, the "Term  Loans"),  a revolving
credit facility (the "Revolving  Credit  Facility") and an acquisition  facility
(the "Acquisition  Facility").  The Revolving Credit Facility initially provided
the Company  with up to $70.0  million of available  borrowings  until the fifth
anniversary of the  Recapitalization  Closing for working capital,  acquisitions
and other corporate  purposes,  subject to compliance  with certain  conditions,
including a borrowing base test.

Term Loan A is payable in 20 quarterly installments, which commenced on June 30,
1998 and Term Loan B is payable in 28 quarterly installments, which commenced on
June 30, 1998.

As of January 31, 2000, the aggregate  scheduled yearly loan principal  payments
for all  borrowings  under the New Credit  Facility,  after giving effect to the
changes in repayment  schedules due to the partial  prepayment of the term loans
and Acquisition Facility with proceeds from the December 1999 divestiture of the
Brake Business, are as follows: (i) $6,792,000 in 2000; (ii) $5,119,000 in 2001;
(iii) $6,674,000 in 2002; (iv) $35,720,000 in 2003; (v) $24,090,000 in 2004; and
(vi) $8,011,000 in 2005.

Borrowings under the New Credit Facility bear interest at various interest rates
based on certain  floating  reference rates. To limit the effect of increases in
the interest rates of the New Credit  Facility,  the Company has entered into an
interest rate swap arrangement. The effect of this arrangement, which expires on
March 31, 2001, is to limit the interest  rate exposure on specified  amounts up
to $55.0 million borrowed under the New Credit Facility at a fixed LIBOR rate of
5.875% plus 3.5%.

Borrowings under the New Credit Facility are (i) secured by substantially all of
the present and future assets of the Company and its subsidiaries located in the
United States and the United  Kingdom,  certain of the  Company's  subsidiaries'
present and future assets located in Canada and by a pledge of substantially all
of the issued and  outstanding  shares of capital  stock of the  Company and its
current  and  future   subsidiaries   and  (ii)   guaranteed   by  Holdings  and
substantially all of the Company's subsidiaries.

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  waivers of such  financial  covenants  through
August 2, 1999.  The waivers  permitted  the Company to borrow  certain  amounts
under the Revolving  Credit Facility to meet its working  capital  requirements;

                                       23
<PAGE>

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 had repaid  subsequent to March 2,
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  entered  into the  Amendment  which cured past
financial covenant violations and reset financial covenants under the New Credit
Facility until April 2001. 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 January 31, 2000, the Company had $25.2 million
of outstanding Revolving Credit Facility borrowings.  In addition, the Amendment
permitted  the Company to obtain  letters of credit,  bid bonds and  performance
bonds in an amount not to exceed  $10.0  million in the  aggregate of which $5.2
million have been issued.

In  connection  with,  and as a  condition  to the New Credit  Facility  lenders
entering into, the Amendment,  certain of the current indirect equity holders in
Holdings, through Martin Crane purchased a $5.0 million participation in the New
Credit Facility and received  certain  non-voting  equity interests in Holdings,
consisting of 25% of the then outstanding Holdings Common Stock.

The  Company  anticipates  that it will not  meet  certain  financial  covenants
contained in the New Credit  Facility for the quarter ended January 31, 2000 and
the  foreseeable  future  thereafter.  The Company entered into an Amendment and
Waiver under the New Credit  Facility,  dated as of January 31,  2000,  whereby,
among other  matters,  the lenders  waived  compliance  by the Company with such
financial covenants,  for the period from January 31, 2000 until 5:00 p.m. March
29, 2000. The January Waiver permits the Company, subject to certain conditions,
to make  additional  borrowings  under the Revolving  Credit  Facility and issue
additional letters of credit,  above levels in existence on January 31, 2000, in
an aggregate amount of up to $12.0 million, during the waiver period.

Currently,  the Company is not generating  sufficient  funds from  operations to
satisfy working capital and debt service requirements, and as a result must rely
on  Revolving  Credit  Facility  borrowings  to continue  to operate.  While the
Company  anticipates  that cash generated from  operations and Revolving  Credit
Facility  borrowings  will be  sufficient  to enable it to satisfy its cash flow
needs  until  March  29,  2000,  there  can be no  assurance  that it will  have
sufficient  cash  flow  and  borrowings  available  to  enable  it to  meet  its
obligations until such date.

Until March 29, 2000 and thereafter, the Company may experience severe financial
and  operational  difficulties  resulting from its liquidity  situation that may
prevent it from continuing operations.

In addition,  at the time of expiration of the January Waiver,  the Company will
again  be in  default  under  certain  financial  covenants  of the  New  Credit
Facility.  As a result of these defaults,  the lenders ("Lenders") under the New
Credit  Facility  will be able to declare all amounts of  principal  and accrued
interest  outstanding under the New Credit Facility  immediately due and payable
(an "Acceleration").  If such Lenders so accelerate,  the Company will then also
be in default under the indenture  governing the Senior Notes (the "Indenture").
In such  event,  the  Company  would  not be able to cure such  default  and the
trustee under the Indenture will be able to accelerate the Company's outstanding
indebtedness  (including  accrued  interest)  evidenced by the Senior Notes. The
Company will not have  sufficient  funds to repay the  outstanding  indebtedness
under the New Credit Facility or the Senior Notes if either such indebtedness is
accelerated.  As of  January  31,  2000,  the  Company  had  $298.9  million  of
indebtedness outstanding,  including $86.7 million under the New Credit Facility
(including  accrued  interest) and $206.3 million  evidenced by the Senior Notes
(including accrued interest).

In the event that the Lenders do not cause an Acceleration to occur on March 29,
2000, the Company will  nonetheless be unable to meet certain of its obligations
as they become due after such date,  including a $9.5 million  interest  payment
obligation under the Senior Notes due on April 1, 2000. As a result, the Lenders
and, after the expiration of the applicable grace period,  the trustee under the
Indenture  will  have  the  right  to  accelerate   the  Company's   outstanding
indebtedness. In such event, the Company will not have sufficient funds to repay
New Credit Facility borrowings and the Senior Notes.

The Company is currently seeking, and is engaged in discussions  regarding,  its
strategic alternatives.  The Company has engaged in discussions with the Lenders
and also intends to begin preliminary  discussions with  representatives  of the
holders of Senior Notes  concerning the possible  restructuring of the Company's
capital structure,  including a possible sale of the Company to a third party in
connection therewith. There can be no assurance that the Company will be able to
successfully   pursue  strategic   alternatives  or  that  the  results  of  its
discussions  with its creditors will be successful.  As discussed  above, if the
Company fails in the near future to resolve its critical  liquidity issues,  the
Company may be unable to continue as a going concern.

                                       24
<PAGE>

Holdings' current primary cash needs are for administrative expenses and for the
payment  of income  taxes of  Holdings  and its  affiliates  related  to the MHE
Business.  Holdings is a holding  company that  conducts  all of its  operations
through its subsidiaries. Consequently, Holdings' ability to meet its cash needs
depends  entirely upon receiving  dividends,  loans,  advances or other payments
from its  subsidiaries.  If for the reasons  outlined  above or  otherwise,  the
Company is unable to continue as a going concern, Holdings also will not be able
to  continue  to operate as a going  concern.  The New Credit  Facility  and the
Indenture  generally restrict the ability of Holdings'  subsidiaries to transfer
funds to Holdings, other than for administrative fees and expenses (subject to a
general  limit) and other than for the payment of income taxes.  Under the terms
of the Indenture,  the Company is generally  restricted from paying dividends or
making other  restricted  payments to Holdings unless,  among other things,  the
ratio of the Company's  EBITDA to Consolidated  Interest  Expense (as defined in
the Indenture) for the four most recent  consecutive fiscal quarters is at least
2 to 1. Moreover,  the terms of the Holdings Series A Senior Preferred Stock, as
well as the Holdings  Series B Junior  Preferred Stock and the Holdings Series C
Junior  Voting  Preferred  Stock,  restrict  the  ability  of  Holdings  and its
subsidiaries to incur  additional  indebtedness.  There are no current  material
restrictions  on the ability of the Company's  subsidiaries  to pay dividends or
otherwise  make payments to the Company.  In addition,  the Company  anticipates
that there will not be any material economic restrictions or adverse tax effects
with respect to the Company's ability to repatriate foreign assets. There can be
no assurance,  however, that such limitations will not exist in the future. As a
result of these  restrictions  and the  Company's  current  financial  condition
outlined  above,  it  is  unlikely  that  Holdings  will  have  available  to it
sufficient  cash resources to pay cash dividends on the Holdings Series A Senior
Preferred  Stock (or on the  Holdings  Series B Junior  Preferred  Stock and the
Holdings Series C Junior Voting Preferred Stock) commencing  October 1, 2003. In
addition, all issues of Holdings' preferred stock are mandatorily redeemable.

Euro Conversion

On January 1, 1999,  eleven of the  fifteen  member  countries  of the  European
Monetary Union (the  "participating  countries")  began a three-year  transition
from their national currencies to a new common currency,  the "euro". As of that
date, the participating  countries no longer control their own monetary policies
by  directing  independent  interest  rates for  their  national  currency.  The
national  currencies  will  remain  legal  tender and can be used in  commercial
transactions until January 1, 2002. Beginning January 1, 2002, the participating
countries  will issue new euro currency and withdraw their  respective  national
currencies  which will no longer be used as legal  tender.  The  Company's  only
significant operations in member countries of the European Monetary Union are in
the United Kindgom,  which is not a participating  country. As such,  management
does not believe that the euro conversion will have a significant  impact on the
operations,  cash flows or financial  position of the Company,  unless and until
the United Kingdom adopts the euro.

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:

               Liquidity  Status - 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  financial   covenants  until  April  2001.  The  Amendment
               increased  the  cash  availability  under  the  Revolving  Credit
               Facility from $35.7 million under the previous  waiver  agreement
               to $40.7  million.  In  addition,  the  Amendment  permitted  the
               Company to obtain  letters of credit,  bid bonds and  performance
               bonds in an amount not to exceed $10.0  million in the  aggregate
               of which $5.2 million have been issued.

              The Company  anticipates  that it will not meet certain  financial
              covenants  contained  in the New Credit  Facility  for the quarter
              ended January 31, 2000 and the foreseeable future thereafter.  The

                                       25
<PAGE>

              Company  entered into an Amendment and Waiver under the New Credit
              Facility,  dated as of January  31,  2000,  whereby,  among  other
              matters,  the lenders  waived  compliance by the Company with such
              financial  covenants,  for the period from  January 31, 2000 until
              5:00 p.m.  March 29, 2000. The January Waiver permits the Company,
              subject to certain conditions, to make additional borrowings under
              the  Revolving  Credit  Facility and issue  additional  letters of
              credit,  above  levels in  existence  on January 31,  2000,  in an
              aggregate amount of up to $12.0 million, during the waiver period.

              Currently,  the Company is not  generating  sufficient  funds from
              operations   to  satisfy   working   capital   and  debt   service
              requirements,  and as a  result  must  rely  on  Revolving  Credit
              Facility  borrowings  to continue  to  operate.  While the Company
              anticipates  that cash  generated  from  operations  and Revolving
              Credit  Facility  borrowings  will be  sufficient  to enable it to
              satisfy its cash flow needs until March 29, 2000,  there can be so
              assurance  that it will have  sufficient  cash flow and borrowings
              available to enable it to meet its obligations until such date.

              Until March 29, 2000 and  thereafter,  the Company may  experience
              severe financial and operational  difficulties  resulting from its
              liquidity   situation   that  may   prevent  it  from   continuing
              operations.  In addition, at the time of expiration of the January
              Waiver,  the  Company  will  again  be in  default  under  certain
              financial  covenants  of the New Credit  Facility.  As a result of
              these defaults, the Lenders will be able to declare all amounts of
              principal and accrued  interest  outstanding  under the New Credit
              Facility   immediately  due  and  payable.   If  such  Lenders  so
              accelerate,  the  Company  will then also be in default  under the
              Indenture . In such event,  the Company  would not be able to cure
              such default and the trustee under the  Indenture  will be able to
              accelerate  the  Company's  outstanding   indebtedness  (including
              accrued interest)  evidenced by the Senior Notes. The Company will
              not have sufficient  funds to repay the  outstanding  indebtedness
              under the New Credit  Facility or the Senior  Notes if either such
              indebtedness is  accelerated.  As of January 31, 2000, the Company
              had $298.9 million of  indebtedness  outstanding,  including $86.7
              million under the New Credit Facility (including accrued interest)
              and  $206.3  million  evidenced  by the  Senior  Notes  (including
              accrued interest).

              In the event  that the  Lenders  do not cause an  Acceleration  to
              occur on March 29, 2000, the Company will nonetheless be unable to
              meet  certain  of its  obligations  as they  become due after such
              date,  including a $9.5 million interest payment  obligation under
              the Senior  Notes due on April 1, 2000.  As a result,  the Lenders
              and, after expiration of the applicable grace period,  the trustee
              under  the  Indenture  will  have  the  right  to  accelerate  the
              Company's  outstanding  indebtedness.  In such event,  the Company
              will  not have  sufficient  funds to  repay  New  Credit  Facility
              borrowings and the Senior Notes.

              The Company is currently  seeking,  and is engaged in  discussions
              regarding, its strategic alternatives.  The Company has engaged in
              discussions with the Lenders and also intends to begin preliminary
              discussions  with  representatives  of the holders of Senior Notes
              concerning  the possible  restructuring  of the Company's  capital
              structure,  including  a possible  sale of the  Company to a third
              party in connection therewith.  There can be no assurance that the
              Company will be able to successfully pursue strategic alternatives
              or that the results of its discussions  with its creditors will be
              successful.  As discussed  above, if the Company fails in the near
              future to resolve its critical liquidity issues,  both the Company
              and Holdings may be unable to continue as going concerns.

               Potential  Material Adverse Effect of HII Bankruptcy - 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

                                       26
<PAGE>

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

               Risks  Associated  with  Large  Crane  Projects  - 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.
               Finally,  the market for large cranes is down  substantially  and
               the  outlook  is not  expected  to  improve  for the  foreseeable
               future.

               Risks Associated with International  Operations - 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 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,  Singapore,  Thailand,  Australia and the United Kingdom)
               accounted for 36.4%,  36.2% and 41.8% of the Company's  aggregate
               net  sales  in  1999,  1998  and  1997,  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.

               Competition  - 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.   The  current  depressed  level  of  new
               equipment  orders has increased the intensity of competition  and
               has reduced selling prices and margins on new equipment bookings.
               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.  In addition,  the Company's
               ability to compete successfully will likely be adversely affected
               by the Company's liquidity crisis.

               Market Risks - 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 Company did not  experience  any  significant  disruption in operations as a
result of the Year 2000 issue; however,  there remains a potential for Year 2000
problems to occur after January 1, 2000.  Management believes that any potential
problems would not have a significant impact on operations of the Company.

The  potential  Year 2000  problems  existed  as a result of  computer  programs
written and  systems  designed  using two digits  rather than four to define the
applicable  year.  Consequently,  such software had the potential to recognize a
date using  "00" as the year 1900  rather  than the year  2000.  This could have
resulted  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.


                                       27
<PAGE>


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 were implemented worldwide in order
to ensure that all systems were Year 2000 compliant before January 1, 2000.

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

During the third fiscal quarter of 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  represented  to the
Company that the new system is Year 2000  compliant  (which  representation  was
confirmed  by  an  outside   consultant).   The  Company   sought  and  received
representations  from the applicable  vendors that the business  systems used in
the United Kingdom, South Africa, Australia,  Singapore, Canada, and Mexico were
Year  2000  compliant.   The  operating   system  used  in  the  North  American
distribution  and service  business was made compliant  during the second fiscal
quarter of 1999 by applying the vendor supplied upgrade.

The Company  also  assessed  and  addressed  Year 2000  issues with  significant
vendors.  The Company sought  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 were timely  converted  and, if
not  converted,  would  not have an  adverse  effect on the  Company's  business
operations. In the event that the Company's significant vendors or suppliers did
not  complete  their  Year 2000  compliance  efforts,  the  Company  could  have
experienced disruptions in its operations.  Disruptions in the economy generally
resulting  from Year 2000  issues also could have  affected  the  Company.  With
respect to products  sold by the Company,  management  continues to believe that
any liability for Year 2000 compliance will not be material.

The Company used and will  continue to use all necessary  internal  resources to
resolve any Year 2000 issues.  The Company  completed its Year 2000  remediation
before  December 31, 1999.  Total expenses on the project  through  December 31,
1999 were  approximately $1.6 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.  The
Company did not encounter any significant  expenditures subsequent to January 1,
2000 and management does not anticipate any additional significant  expenditures
in the future.

Future Accounting Changes

In June  1998,  the  Financial  Accounting  Standards  Board  (FASB)  has issued
Statement of Accounting  Standards  ("SFAS") No. 133  "Accounting for Derivative
Instruments and Hedging Activities." It requires all derivative  instrumaents to
be recorded in the statements of financial position at fair value. In June 1999,
the statement's effective date was delayed by one year, and it will be effective
for the year ending October 31, 2001.  Interim  reporting for this standard will
be required. 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.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

The Company is potentially  exposed to market risk  asssociated  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.

                                       28
<PAGE>

The Company's products are sold in over 50 countries around the world.  Although
revenues of the Company are generated in foreign  currencies,  the vast majority
of both sales and associated costs are in United States dollars, Pounds Sterling
and Canadian  Dollars.  The Company may, from time to time,  hedge  specifically
identified  committed cash flows in foreign  currencies using forward contracts.
Such foreign currency contract activity  historically has not been material.  At
October 31, 1999, there were no foreign currency forward contracts  outstanding.
There  also  were no  material  non-functional  currency  denominated  financial
instruments,   which  would  expose  the  Company  to  foreign   exchange  risk,
outstanding at October 31, 1999.

As noted above,  the Company is exposed to market risk  associated  with adverse
movements in interest rates. Specifically,  the Company is exposed to changes in
the value of its $200  million  Senior  Notes and to  changes  in  earnings  and
related cash flows on its variable  interest rate debt  obligations  outstanding
under the New  Credit  Facility.  Borrowings  outstanding  under the New  Credit
Facility  totalled  $92.6  million at  October  31,  1999.The  fair value of the
Company's  Senior  Notes was  approximately  $66  million  based upon the quoted
market price of the instrument on October 31, 1999.

The Company entered into an interest rate swap arrangement in order to limit the
effect of  increases in the interest  rates under the New Credit  Facility.  The
effect of this  agreement,  which  expires  on March 31,  2001,  is to limit the
interest rate exposure on specified  amounts up to $55.0 million  borrowed under
the New Credit  Facility to a fixed LIBOR rate of 5.875% (the "Fixed Rate") plus
3.5%, as applicable.  As a result,  the interest rates applicable to Term Loan A
and Term Loan B at October 31, 1999 have been fixed at 9.375%, respectively. The
differential  between the floating rate of the New Credit Facility and the Fixed
Rate is accrued as interest  rates  change and is recorded as an  adjustment  of
interest  expense.  The Company  would have paid  approximately  $0.1 million to
terminate  the interest  rate swap at October 31, 1999.  After  considering  the
related  effects on the Company's  interest  rate swap  discussed  above,  a 10%
increase/decrease  in the average  floating  reference rates in effect under the
New Credit  Facility at October 31, 1999 would not have a material effect on the
Company's earnings or cash flows.

                                       29
<PAGE>

Item 8.  Financial Statements and Supplementary Data

INDEX TO 1999 FINANCIAL STATEMENTS

         Financial Statements:

 MMH HOLDINGS, INC.

    Report of Independent
    Accountants ...........................................................   31
    Balance Sheets at October 31, 1999 and 1998 ...........................   33
    Statements of Income and Comprehensive Income for
     the three years ended October 31, 1999 ...............................   34
    Statements of Cash Flows for the
     three years ended October 31, 1999 ...................................   35
    Statements of Preferred Stock and Shareholders'
     Equity/Parent Investment for the three years
      ended October 31, 1999 ..............................................   36
    Notes to Financial
    Statements ............................................................   41

    Financial Statement Schedules:

        For the three years ended October 31, 1999

        II -  Valuation And Qualifying Accounts

MORRIS MATERIAL HANDLING, INC

    Report of Independent
    Accountants ...........................................................   31
    Balance Sheets at October 31, 1999 and 1998 ...........................   33
    Statements of Income and Comprehensive
     Income for the three years ended October 31, 1999 ....................   34
    Statements of Cash Flows for the
      three years ended October 31, 1999 ..................................   35
    Statements of Preferred Stock and Shareholders'
      Equity/Parent Investment for the three years
      ended October 31, 1999 ..............................................   36
    Notes to Financial
    Statements ............................................................   41

     Financial Statement Schedules:

         For the three years ended October 31, 1999

         II -  Valuation And Qualifying Accounts

All other  schedules are omitted because they are not applicable or the required
information is shown in financial statements or notes thereto.

                                       30
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
  MMH Holdings, Inc.

In our  opinion,  the  financial  statements  listed in the  accompanying  index
present  fairly,  in  all  material  respects,  the  financial  position  of MMH
Holdings,  Inc.  and its  subsidiaries  at October  31,  1999 and 1998,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  October 31, 1999,  in conformity  with  accounting  principles
generally  accepted in the United  States.  In  addition,  in our  opinion,  the
financial  statement  schedules listed in the accompanying index present fairly,
in all  material  respects,  the  information  set  forth  therein  when read in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedules are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and financial  statement schedules based on our audits. We
conducted our audits of these  statements in accordance with auditing  standards
generally accepted in the United States,  which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 4 to the
financial  statements,  the Company suffered a decline in operating  results and
reported  a  substantial  net loss in  fiscal  1999,  and  anticipates  being in
violation of certain of its amended  debt  agreements  during  fiscal 2000 based
upon its current  projection of results of operations.  If further amendments to
the related  agreements  cannot be negotiated or satisfactory  waivers obtained,
substantially  all  of  the  Company's  long-term  debt  obligations  and  other
obligations  under  surety  agreements  would be  subject to  acceleration.  The
Company  would  not have  sufficient  assets  to settle  such  liabilities  then
outstanding.  These  circumstances  raise  substantial doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 4. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 31, 2000

                                       31
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholder of
  Morris Material Handling, Inc.

In our  opinion,  the  financial  statements  listed in the  accompanying  index
present  fairly,  in all material  respects,  the  financial  position of Morris
Material  Handling,  Inc. and its subsidiaries at October 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended October 31, 1999, in conformity with  accounting  principles
generally  accepted in the United  States.  In  addition,  in our  opinion,  the
financial  statement  schedules listed in the accompanying index present fairly,
in all  material  respects,  the  information  set  forth  therein  when read in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedules are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and financial  statement schedules based on our audits. We
conducted our audits of these  statements in accordance with auditing  standards
generally accepted in the United States,  which require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 4 to the
financial  statements,  the Company suffered a decline in operating  results and
reported  a  substantial  net loss in  fiscal  1999,  and  anticipates  being in
violation of certain of its amended  debt  agreements  during  fiscal 2000 based
upon its current  projection of results of operations.  If further amendments to
the related  agreements  cannot be negotiated or satisfactory  waivers obtained,
substantially  all  of  the  Company's  long-term  debt  obligations  and  other
obligations  under  surety  agreements  would be  subject to  acceleration.  The
Company  would  not have  sufficient  assets  to settle  such  liabilities  then
outstanding.  These  circumstances  raise  substantial doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 4. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 31, 2000

                                       32
<PAGE>
<TABLE>

                               MMH HOLDINGS, INC.
                                 BALANCE SHEETS

                                     ASSETS
<CAPTION>

                                                          October 31,
                                               ---------------------------------
                                                   1999                1998
                                               -------------      --------------
                                                         ($ in 000's)
Current Assets
<S>                                                     <C>           <C>
Cash and cash equivalents                               $   3,929     $   2,534
Accounts receivable-net                                    64,481        81,947
Inventories                                                39,994        42,561
Deferred income taxes                                        --           6,277
Other current assets                                        7,842         5,190
                                                        ---------     ---------
                                                          116,246       138,509
                                                        ---------     ---------

Property, Plant and Equipment
Land and improvements                                       3,349         3,481
Buildings                                                  23,235        22,604
Machinery and equipment                                    45,219        41,564
                                                        ---------     ---------
                                                           71,803        67,649
Less accumulated depreciation                             (30,829)      (26,579)
                                                        ---------     ---------
                                                           40,974        41,070
                                                        ---------     ---------
Other Assets
Goodwill                                                   42,844        39,843
Debt financing costs                                       16,398        18,905
Deferred income taxes                                        --          65,979
Other                                                      10,374         6,691
                                                        ---------     ---------
                                                           69,616       131,418
                                                        ---------     ---------
                                                        $ 226,836     $ 310,997
                                                        =========     =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Short-term notes payable and current
portion of long-term obligations (Note 9)               $     383     $   2,262
Revolving Credit Facility borrowings (Note 9)              27,925          --
Term loans (Note 9)                                        52,225          --
Acquisition Facility Line borrowings (Note 9)              12,430          --
Senior Notes (Note 9)                                     200,000          --
Bank overdrafts                                             1,367         1,252
Trade accounts payable                                     26,757        32,893
Employee compensation and benefits                          8,020         8,601
Advance payments and progress billings                      8,336         9,399
Accrued warranties                                          1,821         2,324
Accrued interest                                            1,804         2,201
Income taxes payable                                        2,205         2,307

Other current liabilities                                   9,791        16,714
                                                        ---------     ---------
                                                          353,064        77,953

Revolving Credit Facility Borrowings (Note 9)                --           1,200
Term Loans (Note 9)                                          --          52,225
Acquisition Facility Borrowings (Note 9)                     --           6,194
Senior Notes (Note 9)                                        --         200,000
Other Long-Term Obligations                                 2,784         2,205
Deferred Income Taxes                                        --           2,698
Other Long-Term Liabilities                                 1,307          --

Minority Interest                                             504           364
Commitments and Contingencies (Note 12)
Mandatorily Redeemable Preferred Stock                    108,245        95,351
Shareholders' Equity                                     (239,068)     (127,193)
                                                        ---------     ---------
                                                        $ 226,836     $ 310,997
                                                        =========     =========
</TABLE>

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

                                       33
<PAGE>
<TABLE>

                               MMH HOLDINGS, INC.
              STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
<CAPTION>

                                                                  Year Ended October 31,
                                                    ----------------------------------------------------
                                                        1999                 1998                 1997
                                                    ---------         ------------          -----------
                                                                  ($ in 000's)
Revenues
<S>                                                 <C>                  <C>                  <C>
Equipment and Part Sales                            $ 235,526            $ 261,544            $ 301,995
Service Sales                                          58,669               56,313               51,355
                                                    ---------            ---------            ---------
Net Sales                                             294,195              317,857              353,350
Other Income - Net                                        392                1,331                2,649
                                                    ---------            ---------            ---------

                                                      294,587              319,188              355,999

Cost of Sales                                         218,703              226,991              260,794

Selling, General and Administrative Expenses           72,439               63,152               56,806
HII Management Fee                                       --                  1,155                2,862
Non-Recurring Employee Benefit Costs                     --                  1,216                 --
                                                    ---------            ---------            ---------

Operating Income                                        3,445               26,674               35,537

Interest Expense - Net
HII Affiliates                                           --                 (1,448)                (394)
Third Party                                           (30,027)             (16,527)                (398)
                                                    ---------            ---------            ---------

Income (Loss) Before Income Taxes
and Minority Interest                                 (26,582)               8,699               34,745

Provision for Income Taxes                            (71,680)              (4,435)             (13,874)
Minority Interest                                          57                   27                  (18)
                                                    ---------            ---------            ---------

Net Income (Loss)                                     (98,205)               4,291               20,853

Foreign Currency Translation Adjustments                 (687)              (2,441)                 540
                                                    ---------            ---------            ---------

Comprehensive Income (Loss)                         $ (98,892)           $   1,850            $  21,393
                                                    =========            =========            =========
</TABLE>

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

                                       34
<PAGE>
<TABLE>

                                                          MMH HOLDINGS, INC.
                                                       STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                                   Year Ended October 31,
                                                                                           ----------------------------------------
                                                                                                 1999           1998           1997
                                                                                           ----------      ---------      ---------
Operating Activities                                                                                    ($ in 000's)
<S>                                                                                         <C>            <C>            <C>
Net income                                                                                  $ (98,205)     $   4,291      $  20,853
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization                                                                   8,239          6,823          6,736
Amortization of debt financing costs                                                            2,531          1,169           --
Deferred income taxes - net                                                                    69,614            327             89
Divestiture bonus                                                                                --            1,216           --
Gain on fire insurance claim                                                                     --             --           (2,011)
Other                                                                                             (57)          (908)          (818)
Changes in working capital, excluding the effects of acquisition opening
balance sheets:
Accounts receivable                                                                            17,950          2,223         (3,656)
Inventories                                                                                     4,000         (7,692)         6,044
Other current assets                                                                           (3,385)        (3,317)         2,077
Trade accounts payable and bank overdrafts                                                     (6,810)        (4,292)        (2,852)
Employee compensation and benefits                                                               (975)            75         (1,293)
Advance payments and progress billings                                                         (1,335)         2,258        (16,056)
Accrued warranties                                                                               (489)        (1,689)           178
Accrued interest                                                                                 (397)         2,201           --
Other current liabilities                                                                      (5,856)         3,647         (5,116)
Activity with parent and other affiliates - net                                                  --            3,224          8,724
                                                                                            ---------      ---------      ---------
Net cash provided by (used for) operating activities                                          (15,175)         9,556         12,899
                                                                                            ---------      ---------      ---------

Investment and Other Transactions
Fixed asset additions - net                                                                    (7,594)        (5,208)        (6,498)
Acquisition of businesses - net of cash acquired                                               (5,630)        (8,891)       (11,787)
Fire insurance claim activity - net                                                              --             --            3,441
Issuance of loans to senior management                                                           (150)          (900)          --
Repayment of loans by senior management                                                            70            780           --
Other - net                                                                                      (444)        (1,738)          (103)
                                                                                            ---------      ---------      ---------
Net cash used for investment and other transactions                                           (13,748)       (15,957)       (14,947)
                                                                                            ---------      ---------      ---------

Financing Activities
Net proceeds (repayments) of short-term debt and notes payable                                    463           (694)           (99)
Proceeds from Acquisition Facility borrowings                                                   6,235          6,194           --
Net proceeds from Revolving Credit Facility borrowings                                         26,300          1,200           --
Repayments of long-term debt                                                                   (2,100)          (675)          (155)
Payment of fees for amendment of New Credit Facility                                             (612)          --             --
Proceeds from Senior Note Offering                                                               --          200,000           --
Proceeds from New Credit Facility                                                                --           55,000           --
Net proceeds from issuance of Series A preferred stock
and related common shares                                                                        --           57,094           --
Redemption of common stock and preferred stock                                                   --         (287,000)          --
Stock redemption transaction costs                                                               --           (3,553)          --
Debt financing costs                                                                             --          (20,074)          --
                                                                                            ---------      ---------      ---------
Net cash provided by (used for) financing activities                                           30,286          7,492           (254)
                                                                                            ---------      ---------      ---------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents                                                                          32            (89)            13
                                                                                            ---------      ---------      ---------
Increase (Decrease) in Cash and Cash Equivalents                                                1,395          1,002         (2,289)
Cash and Cash Equivalents
Beginning of Year                                                                               2,534          1,532          3,821
                                                                                            ---------      ---------      ---------
End of Year                                                                                 $   3,929      $   2,534      $   1,532
                                                                                            =========      =========      =========
Supplemental disclosures of cash flow information:
Cash paid during each year for:
Interest                                                                                    $  27,671      $  12,849      $     398
Taxes                                                                                           1,934          1,391            322
Non-cash transactions:
Acquisition purchase price financed by seller                                                   1,600            800           --
Preferred stock dividends in kind                                                              12,322          6,545           --
</TABLE>

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

                                       35
<PAGE>
<TABLE>

                                                          MMH HOLDINGS, INC.
                               STATEMENTS OF PREFERRED STOCK AND SHAREHOLDERS' EQUITY/PARENT INVESTMENT
                                                             ($ in 000's)

<CAPTION>

                                                                          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, 1996                         --     $    --           --     $    --          --      $    --      $    --
Net Income                                          --          --           --          --          --           --           --
Stock issued to HarnCo in exchange for
   certain operating assets and ownership
   interests of the MHE Business                    --          --           --          --          --           --           --
Change in foreign currency translation              --          --           --          --          --           --           --
Activity with HII and other
   Affiliates - net                                 --          --           --          --          --           --           --
                                               ---------   ---------    ---------   ---------   ---------    ---------    ---------

Balance at October 31, 1997                         --          --           --          --          --           --           --
Net income                                          --          --           --          --          --           --           --
Change in foreign currency translation              --          --           --          --          --           --           --
Exchange of 450 common shares
  outstanding for 100,000 shares of
  common stock and 30,000
  shares of Series C preferred stock                --          --           --          --        30,000       30,000       30,000
Issue Series A preferred and common
  shares for $60 million (net of $2,906
  million fees)                                   57,710      54,804         --          --          --           --         54,804
Redemption of shares from Harnco
  and related costs                                 --          --           --          --        (1,145)      (1,145)      (1,145)
Exchange of 1,512 common shares
  for Series B preferred shares                     --          --          4,809       4,809        --           --          4,809
Preferred stock dividends                          3,478       4,075          296         347       1,823        2,123        6,545
Amortization of preferred stock
  discount                                          --           338         --          --          --           --            338
Capital contribution from HII                       --          --           --          --          --           --           --
Issuance of loans to senior management              --          --           --          --          --           --           --
Repayment of loans by senior management             --          --           --          --          --           --           --
Deferred taxes arising from change
  in U.S. federal income tax basis                  --          --           --          --          --           --           --
Activity with HII and other
  affiliates, October 31, 1997 -
  March 30, 1998 - net                              --          --           --          --          --           --           --
                                               ---------   ---------    ---------   ---------   ---------    ---------    ---------

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          --          --           --          --          --           --           --
Issuance of non-voting common shares                --          --           --          --          --           --           --
Cash dividends paid                                 --            (9)        --          --          --           --             (9)
Preferred stock dividends                          7,553       7,654          646         652       3,955        4,016       12,322
Amortization of preferred stock
  discount                                          --           581         --          --          --           --            581
                                               ---------   ---------    ---------   ---------   ---------    ---------    ---------
Balance at October 31, 1999                       68,741   $  67,443        5,750   $   5,808      34,633    $  34,994    $ 108,245
                                               =========   =========    =========   =========   =========    =========    =========
</TABLE>
<TABLE>
<CAPTION>

                                                    Common Stock        Parent           Accumulated                 Total
                                                  -------------------   Investment/      Other                       Shareholders'
                                                  Shares        Par     Additional       Comprehensive  Retained     Equity/Parent
                                                  Outstanding   Value   Paid-in-Capital  Loss           Earnings     Investment
                                                  --------------------- ---------------- -------------- ----------- ---------------
                                                                                                           (A)
<S>                                                     <C>    <C>          <C>          <C>          <C>          <C>
Balance at October 31, 1996                             100    $    --      $  95,041    $    (840)   $    --      $  94,201
Net Income                                             --           --         20,853         --           --         20,853
Stock issued to HarnCo in exchange for
   certain operating assets and ownership
   interests of the MHE Business                        350         --           --           --           --           --
Change in foreign currency translation                 --           --           --            540         --            540
Activity with HII and other
   Affiliates - net                                    --           --          8,724         --           --          8,724
                                                  ---------    ---------    ---------    ---------    ---------    ---------

Balance at October 31, 1997                             450         --        124,618         (300)        --        124,318
Net income                                             --           --           --           --          4,291        4,291
Change in foreign currency translation                 --           --           --         (2,441)        --         (2,441)
Exchange of 450 common shares
  outstanding for 100,000 shares of
  common stock and 30,000
  shares of Series C preferred stock                 99,550            1      (30,001)        --           --        (30,000)
Issue Series A preferred and common
  shares for $60 million (net of $2,906
  million fees)                                         720         --          2,290         --           --          2,290
Redemption of shares from Harnco
  and related costs                                 (88,319)          (1)    (289,407)        --           --       (289,408)
Exchange of 1,512 common shares
  for Series B preferred shares                      (1,512)        --         (4,809)        --           --         (4,809)
Preferred stock dividends                              --           --           --           --         (6,545)      (6,545)
Amortization of preferred stock
  discount                                             --           --           --           --           (338)        (338)
Capital contribution from HII                          --           --          1,216         --           --          1,216
Issuance of loans to senior management                 --           --           (900)        --           --           (900)
Repayment of loans by senior management                --           --            780         --           --            780
Deferred taxes arising from change
  in U.S. federal income tax basis                     --           --         71,129         --           --         71,129
Activity with HII and other
  affiliates, October 31, 1997 -
  March 30, 1998 - net                                 --           --          3,224         --           --          3,224
                                                  ---------    ---------    ---------    ---------    ---------    ---------

Balance at October 31, 1998                          10,889         --       (121,860)      (2,741)      (2,592)    (127,193)
Net loss                                               --           --           --           --        (98,205)     (98,205)
Change in foreign currency translation                 --           --           --           (687)        --           (687)
Net issuance of loans to senior management             --           --           --           --            (80)         (80)
Issuance of non-voting common shares                  1,210         --           --           --           --           --
Cash dividends paid                                    --           --           --           --           --           --
Preferred stock dividends                              --           --           --           --        (12,322)     (12,322)
Amortization of preferred stock
  discount                                             --           --           --           --           (581)        (581)
                                                  ---------    ---------    ---------    ---------    ---------    ---------
Balance at October 31, 1999                          12,099    $    --      $(121,860)   $  (3,428)  $ (113,780)   $(239,068)
                                                  =========    =========    =========    =========    =========    =========
</TABLE>

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

(A) Due to the MHE Business having  historically  been operated as a division of
HII, a historical retained earnings balance cannot be determined.

                                       36
<PAGE>
<TABLE>

                         MORRIS MATERIAL HANDLING, INC.
                                 BALANCE SHEETS


                                     ASSETS
<CAPTION>

                                                          October 31,
                                               ---------------------------------
                                                   1999                1998
                                               -------------      --------------
                                                         ($ in 000's)
Current Assets
<S>                                                     <C>           <C>
Cash and cash equivalents                               $   3,929     $   2,534
Accounts receivable-net                                    64,481        81,947
Inventories                                                39,994        42,561
Deferred income taxes                                        --           6,277
Other current assets                                        7,842         5,190
                                                        ---------     ---------
                                                          116,246       138,509
                                                        ---------     ---------

Property, Plant and Equipment
Land and improvements                                       3,349         3,481
Buildings                                                  23,235        22,604
Machinery and equipment                                    45,219        41,564
                                                        ---------     ---------
                                                           71,803        67,649
Less accumulated depreciation                             (30,829)      (26,579)
                                                        ---------     ---------
                                                           40,974        41,070
                                                        ---------     ---------
Other Assets
Goodwill                                                   42,844        39,843
Debt financing costs                                       16,398        18,905
Deferred income taxes                                        --          65,979
Other                                                      10,374         6,691
                                                        ---------     ---------
                                                           69,616       131,418
                                                        ---------     ---------
                                                        $ 226,836     $ 310,997
                                                        =========     =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Short-term notes payable and current
portion of long-term obligations (Note 9)               $     383     $   2,262
Revolving Credit Facility borrowings (Note 9)              27,925          --
Term loans (Note 9)                                        52,225          --
Acquisition Facility Line borrowings (Note 9)              12,430          --
Senior Notes (Note 9)                                     200,000          --
Bank overdrafts                                             1,367         1,252
Trade accounts payable                                     26,757        32,893
Employee compensation and benefits                          8,020         8,601
Advance payments and progress billings                      8,336         9,399
Accrued warranties                                          1,821         2,324
Accrued interest                                            1,804         2,201
Income taxes payable                                        2,205         2,307
Other current liabilities                                   9,791        16,714
                                                        ---------     ---------
                                                          353,064        77,953

Revolving Credit Facility Borrowings (Note 9)                --           1,200
Term Loans (Note 9)                                          --          52,225
Acquisition Facility Borrowings (Note 9)                     --           6,194
Senior Notes (Note 9)                                        --         200,000
Other Long-Term Obligations                                 2,784         2,205
Deferred Income Taxes                                        --           2,698
Other Long-Term Liabilities                                 1,307          --

Minority Interest                                             504           364
Commitments and Contingencies (Note 12)
Shareholders' Equity                                     (130,823)     ( 31,842)
                                                        ---------     ---------
                                                        $ 226,836     $ 310,997
                                                        =========     =========
</TABLE>

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


                                       37
<PAGE>
<TABLE>

                                                    MORRIS MATERIAL HANDLING, INC.
                                         STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

<CAPTION>

                                                                  Year Ended October 31,
                                                    ----------------------------------------------------
                                                        1999                 1998                 1997
                                                    ---------         ------------          -----------
                                                                  ($ in 000's)
Revenues
<S>                                                 <C>                  <C>                  <C>
Equipment and Part Sales                            $ 235,526            $ 261,544            $ 301,995
Service Sales                                          58,669               56,313               51,355
                                                    ---------            ---------            ---------
Net Sales                                             294,195              317,857              353,350
Other Income - Net                                        392                1,331                2,649
                                                    ---------            ---------            ---------

                                                      294,587              319,188              355,999

Cost of Sales                                         218,703              226,991              260,794

Selling, General and Administrative Expenses           72,439               63,152               56,806
HII Management Fee                                       --                  1,155                2,862
Non-Recurring Employee Benefit Costs                     --                  1,216                 --
                                                    ---------            ---------            ---------

Operating Income                                        3,445               26,674               35,537

Interest Expense - Net
HII Affiliates                                           --                 (1,448)                (394)
Third Party                                           (30,027)             (16,527)                (398)
                                                    ---------            ---------            ---------

Income (Loss) Before Income Taxes
and Minority Interest                                 (26,582)               8,699               34,745

Provision for Income Taxes                            (71,680)              (4,435)             (13,874)
Minority Interest                                          57                   27                  (18)
                                                    ---------            ---------            ---------

Net Income (Loss)                                     (98,205)               4,291               20,853

Foreign Currency Translation Adjustments                 (687)              (2,441)                 540
                                                    ---------            ---------            ---------

Comprehensive Income (Loss)                         $ (98,892)           $   1,850            $  21,393
                                                    =========            =========            =========
</TABLE>

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

                                       38
<PAGE>
<TABLE>


                                                    MORRIS MATERIAL HANDLING, INC.
                                                       STATEMENTS OF CASH FLOWS

<CAPTION>

                                                                                                   Year Ended October 31,
                                                                                           ----------------------------------------
                                                                                                 1999           1998           1997
                                                                                           ----------      ---------      ---------
Operating Activities                                                                                    ($ in 000's)
<S>                                                                                         <C>            <C>            <C>
Net income                                                                                  $ (98,205)     $   4,291      $  20,853
Add (deduct) - items not affecting cash provided by
operating activities:
Depreciation and amortization                                                                   8,239          6,823          6,736
Amortization of debt financing costs                                                            2,531          1,169           --
Deferred income taxes - net                                                                    69,614            327             89
Divestiture bonus                                                                                --            1,216           --
Gain on fire insurance claim                                                                     --             --           (2,011)
Other                                                                                             (57)          (908)          (818)
Changes in working capital, excluding the effects of acquisition opening
balance sheets:
Accounts receivable                                                                            17,950          2,223         (3,656)
Inventories                                                                                     4,000         (7,692)         6,044
Other current assets                                                                           (3,385)        (3,317)         2,077
Trade accounts payable and bank overdrafts                                                     (6,810)        (4,292)        (2,852)
Employee compensation and benefits                                                               (975)            75         (1,293)
Advance payments and progress billings                                                         (1,335)         2,258        (16,056)
Accrued warranties                                                                               (489)        (1,689)           178
Accrued interest                                                                                 (397)         2,201           --
Other current liabilities                                                                      (5,856)         3,647         (5,116)
Activity with parent and other affiliates - net                                                  --            3,224          8,724
                                                                                            ---------      ---------      ---------
Net cash provided by (used for) operating activities                                          (15,175)         9,556         12,899
                                                                                            ---------      ---------      ---------

Investment and Other Transactions
Fixed asset additions - net                                                                    (7,594)        (5,208)        (6,498)
Acquisition of businesses - net of cash acquired                                               (5,630)        (8,891)       (11,787)
Fire insurance claim activity - net                                                              --             --            3,441
Issuance of loans to senior management                                                           (150)          (900)          --
Repayment of loans by senior management                                                            70            780           --
Other - net                                                                                      (444)        (1,738)          (103)
                                                                                            ---------      ---------      ---------
Net cash used for investment and other transactions                                           (13,748)       (15,957)       (14,947)
                                                                                            ---------      ---------      ---------

Financing Activities
Net proceeds (repayments) of short-term debt and notes payable                                    463           (694)           (99)
Proceeds from Acquisition Facility borrowings                                                   6,235          6,194           --
Net proceeds from Revolving Credit Facility borrowings                                         26,300          1,200           --
Repayments of long-term debt                                                                   (2,100)          (675)          (155)
Payment of fees for amendment of New Credit Facility                                             (612)          --             --
Proceeds from Senior Note Offering                                                               --          200,000           --
Proceeds from New Credit Facility                                                                --           55,000           --
Net proceeds from issuance of Series A preferred stock
and related common shares                                                                        --           57,094           --
Redemption of common stock and preferred stock                                                   --         (287,000)          --
Stock redemption transaction costs                                                               --           (3,553)          --
Debt financing costs                                                                             --          (20,074)          --
                                                                                            ---------      ---------      ---------
Net cash provided by (used for) financing activities                                           30,286          7,492           (254)
                                                                                            ---------      ---------      ---------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents                                                                          32            (89)            13
                                                                                            ---------      ---------      ---------
Increase (Decrease) in Cash and Cash Equivalents                                                1,395          1,002         (2,289)
Cash and Cash Equivalents
Beginning of Year                                                                               2,534          1,532          3,821
                                                                                            ---------      ---------      ---------
End of Year                                                                                 $   3,929      $   2,534      $   1,532
                                                                                            =========      =========      =========
Supplemental disclosures of cash flow information:
Cash paid during each year for:
Interest                                                                                    $  27,671      $  12,849      $     398
Taxes                                                                                           1,934          1,391            322
Non-cash transactions:
Acquisition purchase price financed by seller                                                   1,600            800           --
</TABLE>

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

                                       39
<PAGE>

<TABLE>

                                                    MORRIS MATERIAL HANDLING, INC.
                                         STATEMENTS OF SHAREHOLDER'S EQUITY/PARENT INVESTMENT
                                                             ($ in 000's)

<CAPTION>

                                              Common Stock       Parent           Accumulated                       Total
                                           -------------------   Investment/      Other                             Shareholders'
                                           Shares        Par     Additional       Comprehensive      Retained       Equity/Parent
                                           Outstanding   Value   Paid-in-Capital  Loss               Earnings       Investment
                                           --------------------- ---------------- --------------     -----------   ---------------
                                                                                                         (A)
<S>                                          <C>        <C>          <C>               <C>                <C>             <C>
Balance at October 31, 1996                     -    $    -       $   95,041        $    (840)         $     -         $  94,201

Net income                                                            20,853                                              20,853
Change in foreign currency translation                                                    540                                540
Activity with HII and other affiliates                                 8,724                                               8,724
                                           ------    ------       ----------        ---------          -------         ---------

Balance at October 31, 1997                     -         -          124,618             (300)               -           124,318

Net income                                                                                               4,291             4,291
Change in foreign currency translation                                                 (2,441)                            (2,441)
Stock issued to Holdings in exchange for
  certain operating assets and ownership
  interest of the MHE business                200
Dividends to and redemption of
  Shares from Holdings                       (100)                  (233,459)                                           (233,459)
Capital contribution from HII                                          1,216                                               1,216
Issuance of loans to senior management                                  (900)                                               (900)
Repayment of loans by senior management                                  780                                                 780
Deferred taxes arising from change
  in U.S. federal income tax basis                                    71,129                                              71,129
Activity with HII and other affiliates,
  October 31, 1997 - March 30, 1998-net                                3,224                                               3,224
                                           ------    ------       ----------        ---------          -------         ---------

Balance at October 31, 1998                   100         -          (33,392)          (2,741)           4,291           (31,842)

Net loss                                                                                               (98,205)          (98,205)
Change in foreign currency translation                                                   (687)                              (687)
Distribution to Holdings                                                                                    (9)               (9)
Net issuance of loans to senior management                                                                 (80)              (80)
                                           ------    ------       ----------        ---------          --------        ----------

Balance at October 31, 1999                   100    $    -       $  (33,392)       $  (3,428)         $(94,003)       $(130,823)
                                           ======    ======       ===========       ==========         =========       ==========
</TABLE>

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

(A) Due to the MHE Business having  historically  been operated as a division of
HII, a historical retained earnings balance cannot be determined.

                                       40
<PAGE>

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

(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 3, 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.

Note 2 - Description of Business and Significant Accounting Policies

Description  of  Business - MMH  Holdings,  Inc. is a holding  company,  with no
material operations,  that conducts its business operations through its directly
wholly-owned subsidiary Morris Material Handling, Inc.

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 other  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.  The Company's revenues are derived principally from the
sale of industrial overhead cranes,  component products and aftermarket products
and services.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amounts of assets and liabilities at
the date of the financial  statements,  and the reported amounts of revenues and
expenses  during  the  reporting  period.  Ultimate  realization  of assets  and
settlement of liabilities in the future could differ from those estimates.

Inventories - Inventories are stated at the lower of cost or market value.  Cost
is  determined  by the last-in,  first-out  (LIFO)  method for certain  domestic
inventories and by the first-in,  first-out  (FIFO) method for certain  domestic
inventories and inventories of foreign subsidiaries.

                                       41
<PAGE>

Revenue  Recognition  - The  majority  of the  Company's  sales of  products  or
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.  Losses,  if any,  are  recognized  in full as soon as  identified.  The
Company's  products are generally under warranty against defects in material and
workmanship  for a period of 1 to 2 years.  The Company  generally  provides for
future  warranty costs based upon the  relationship of sales in prior periods to
actual warranty costs.

Property,  Plant and  Equipment -  Property,  plant and  equipment  is stated at
historical   cost.   Expenditures   for  major  renewals  and  improvements  are
capitalized,  while maintenance and repairs which do not  significantly  improve
the related  asset or extend its useful life are charged to expense as incurred.
For financial reporting purposes,  plant and equipment is depreciated  primarily
by the  straight-line  method  over the  estimated  useful  lives of the assets.
Depreciation claimed for income tax purposes is computed by accelerated methods.

Cash Equivalents - The Company considers all highly liquid debt instruments with
an initial  maturity of three  months or less at the date of purchase to be cash
equivalents.

Interest  Rate Swaps - To limit the effect of increases in interest  rates,  the
Company has entered into an interest  rate swap  arrangement.  The  differential
between  the  contract  floating  and fixed  rates is  accrued  each  period and
recorded as an adjustment of interest expense.

Foreign  Currency  Translation  - The assets and  liabilities  of the  Company's
international  operations are translated at year-end exchange rates;  income and
expenses are translated at average  exchange rates  prevailing  during the year.
For operations  whose  functional  currency is the local  currency,  translation
adjustments  are  accumulated  within  shareholders'  equity.  For  subsidiaries
operating in highly inflationary economies,  financial statements are remeasured
into the United States dollar with adjustments resulting from the translation of
monetary assets and liabilities reflected in results of operations.  Transaction
gains and losses  are  reflected  in  income.  Pre-tax  foreign  exchange  gains
(losses)  included in operating income were $557,  $(118) and $110 in 1999, 1998
and 1997, respectively.

Goodwill and Intangible Assets - Goodwill  represents the excess of the purchase
price over the fair value of identifiable  net assets of acquired  companies and
is amortized on a straight-line  basis over periods ranging from 10 to 40 years.
The Company  assesses the carrying value of goodwill at each balance sheet date.
Consistent with Statement of Financial  Accounting  Standards  ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," such assessments  include, as appropriate,  a comparison of (a)
the estimated future nondiscounted cash flows,  excluding interest,  anticipated
to be generated during the remaining  amortization period of the goodwill to (b)
the net carrying value of goodwill.  The Company recognizes  diminution in value
of  goodwill,  if  any,  on a  current  basis.  Impairment  assessments  made in
accordance  with SFAS No. 121 are made in connection with an analysis of related
long-lived assets acquired in the respective purchase business combination.

Debt financing costs - In conjunction  with the  Recapitalization  (see Note 3),
the Company  recorded  $20.1 million of debt  financing  costs.  These costs are
being  amortized  over  periods   ranging  from  5  to  10  years.   Accumulated
amortization was $3,682 and $1,169 at October 31, 1999 and 1998, respectively.

Income Taxes - For periods prior to the Recapitalization, the Company's domestic
income tax provision  reflects an intercompany  tax allocation  arrangement with
its parent such that the domestic  income  taxes  payable was recorded as if the
Company filed  separate  income tax returns.  The Company  recorded its domestic
income taxes payable as an intercompany payable within shareholder's investment.
Subsequent  to  the  Recapitalization,   Holdings,   its  subsidiaries  and  MHE
Investments  have  entered  into  a tax  sharing  agreement  (the  "Tax  Sharing
Agreement")  which provides for, among other things,  the allocation of federal,
state and local tax  liabilities  between  Holdings,  its  subsidiaries  and MHE
Investments.  In general,  under the Tax  Sharing  Agreement,  Holdings  and its
subsidiaries  will be responsible for paying their allocable  share,  based upon
amounts  calculated as if separate  income tax returns were filed, of all income
taxes shown to be due on the  consolidated  federal (and any comparable state or
local) income tax return filed by MHE Investments.  The Company's foreign income
tax  provision  and related  income taxes  payable are  recorded  based upon the
income  tax  returns  as filed by its  foreign  affiliates  in their  respective
jurisdictions.

Domestic  and  foreign   deferred  income  taxes  are  recognized  for  the  tax
consequences of temporary  differences by applying  enacted  statutory tax rates
applicable  to future  years to  differences  between  the  financial  statement
carrying amounts and the tax bases of existing assets and  liabilities,  and for
tax basis  carryforwards.  A valuation  allowance  is provided  for deferred tax
assets  where it is  considered  more  likely  than not that the benefit of such
assets will not be realized.

                                       42
<PAGE>

Fair  Value of  Financial  Instruments  - Cash and  cash  equivalents,  accounts
receivable and accounts payable recorded in the balance sheets  approximate fair
value  based on the short  maturity  of these  instruments.  The fair  values of
long-term debt obligations are estimated based on market conditions and interest
rates available to the Company for similar financial instruments and in the case
of the Company's senior notes,  based on quoted market prices. The fair value of
the Company's  interest  rate swap was obtained  from a dealer  quote.  The fair
value of the Company's Senior Notes was approximately $66 million based upon the
quoted market price of the instrument on October 31, 1999.

Research and Development  Expenses - Research and development costs are expensed
as  incurred.  Such  costs  incurred  in  the  development  of new  products  or
significant  improvements  to existing  products  amounted  to $930,  $1,308 and
$1,369 in 1999, 1998 and 1997, respectively.

Computer  Software  - Costs of  computer  software  developed  or  obtained  for
internal use are  capitalized  and amortized on a  straight-line  basis over the
estimated useful life of the software (generally three to five years).

Segment  Information  - The Company  adopted  SFAS No. 131,  "Disclosures  about
Segments of an  Enterprise  and Related  Information"  for the fiscal year ended
October 31, 1999. SFAS No. 131 supersedes SFAS No. 14, "Financial  Reporting for
Segments of a Business  Enterprise"  and requires the Company to report  certain
financial information about operating segments. The method specified in SFAS No.
131 for determining what information to report is referred to as the "management
approach".  The  management  approach  is based  upon  the way  that  management
organizes the segments within the enterprise for making operating  decisions and
assessing performance. SFAS No. 131 also requires disclosures about products and
services,  geographic  areas, and major customers.  The adoption of SFAS No. 131
did not affect  results of operations  or financial  position but did affect the
disclosure of segment information (see Note 15 - Segment Information).

Future  Accounting  Changes - In June 1998, the Financial  Accounting  Standards
Board  (FASB)  issued  Statement  of  Accounting   Standards  ("SFAS")  No.  133
"Accounting for Derivative  Instruments and Hedging Activities." It requires all
derivative  instrumaents to be recorded in the statements of financial  position
at fair value. In June 1999, the  statement's  effective date was delayed by one
year,  and it will be effective  for the year ending  October 31, 2001.  Interim
reporting  for this  standard  will be required.  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.

Note 3 - 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
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 $200 million of aggregate principal amount of its 9 1/2%
Senior Notes due 2008 (the "Note  Offering")  and entered into a senior  secured
credit  facility  (the "New Credit  Facility")  (See Notes 9 and 10). 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

                                       43
<PAGE>

senior management to acquire indirect equity interests in Holdings, (ii) to fund
certain transaction fees and expenses and (iii) for general corporate purposes.

Note 4 - Liquidity and Capital Resources

The  Company  anticipates  that it will not  meet  certain  financial  covenants
contained in the New Credit  Facility for the quarter ended January 31, 2000 and
the  foreseeable  future  thereafter.  The Company entered into an Amendment and
Waiver under the New Credit  Facility,  dated as of January 31,  2000,  whereby,
among other  matters,  the lenders  waived  compliance  by the Company with such
financial covenants,  for the period from January 31, 2000 until 5:00 p.m. March
29, 2000 (the "January Waiver"). The January Waiver permits the Company, subject
to certain conditions,  to make additional borrowings under the Revolving Credit
Facility and issue  additional  letters of credit,  above levels in existence on
January 31, 2000,  in an  aggregate  amount of up to $12.0  million,  during the
waiver period.

Currently,  the Company is not generating  sufficient  funds from  operations to
satisfy working capital and debt service requirements, and as a result must rely
on  Revolving  Credit  Facility  borrowings  to continue  to operate.  While the
Company  anticipates  that cash generated from  operations and Revolving  Credit
Facility  borrowings  will be  sufficient  to enable it to satisfy its cash flow
needs  until the March 29,  2000,  there can be no  assurance  that it will have
sufficient  cash  flow  and  borrowings  available  to  enable  it to  meet  its
obligations until such date.

Until March 29, 2000 and thereafter, the Company may experience severe financial
and  operational  difficulties  resulting from its liquidity  situation that may
prevent it from continuing operations.

In addition,  at the time of expiration of the January Waiver,  the Company will
again  be in  default  under  certain  financial  covenants  of the  New  Credit
Facility.  As a result of these defaults,  the lenders ("Lenders") under the New
Credit  Facility  will be able to declare all amounts of  principal  and accrued
interest  outstanding under the New Credit Facility  immediately due and payable
(an "Acceleration").  If such Lenders so accelerate,  the Company will then also
be in default under the indenture  governing the Senior Notes (the "Indenture").
In such  event,  the  Company  would  not be able to cure such  default  and the
trustee under the Indenture will be able to accelerate the Company's outstanding
indebtedness  (including  accrued  interest)  evidenced by the Senior Notes. The
Company will not have  sufficient  funds to repay the  outstanding  indebtedness
under the New Credit Facility or the Senior Notes if either such indebtedness is
accelerated. At October 31, 1999, the Company had $297.5 million of indebtedness
outstanding,  including $92.8 million under the New Credit  Facility  (including
accrued  interest) and $201.6 million  evidenced by the Senior Notes  (including
accrued interest).

In the event that the Lenders do not cause an Acceleration to occur on March 29,
2000, the Company will  nonetheless be unable to meet certain of its obligations
as they become due after such date,  including a $9.5 million  interest  payment
obligation under the Senior Notes due on April 1, 2000. As a result, the Lenders
and,  after  expiration of the  applicable  grace period,  the trustee under the
Indenture  will  have  the  right  to  accelerate   the  Company's   outstanding
indebtedness. In such event, the Company will not have sufficient funds to repay
New Credit Facility borrowings and the Senior Notes.

The Company is currently seeking, and is engaged in discussions  regarding,  its
strategic alternatives.  The Company has engaged in discussions with the Lenders
and also intends to begin preliminary  discussions with  representatives  of the
holders of Senior Notes  concerning the possible  restructuring of the Company's
capital structure,  including a possible sale of the Company to a third party in
connection therewith. There can be no assurance that the Company will be able to
successfully   pursue  strategic   alternatives  or  that  the  results  of  its
discussions  with its creditors will be successful.  As discussed  above, if the
Company fails in the near future to resolve its critical  liquidity issues,  the
Company may be unable to continue as a going concern.

Note 5- Acquisitions

During the year ended October 31, 1999, the Company  completed two  acquisitions
with an aggregate purchase price of $4.1 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 fair value of specific assets acquired
and liabilities  assumed.  Resultant goodwill of the transactions,  $2.5 million
for the 1999 transactions and $8.3 million for the 1998  transactions,  is being
amortized over 10 to 40 years.  One 1999  acquisition  and one 1998  acquisition
were partially  financed by the sellers.  The resulting  deferred purchase price
will  be  paid in  2004  and  2005  for  the  1999  acquisition,  and in  annual
installments through 2006 for the 1998 acquisition.

                                       44
<PAGE>

During the year ended  October 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 year ended  October 31,  1999.  Additionally,  a payment of
$100,000 was made toward a 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 year ended  October  31,  1999 and
accordingly, such information is not presented.


Note 6 - Accounts Receivable

Accounts receivable at October 31 consisted of the following:
<TABLE>
<CAPTION>

                                                          1999             1998
                                                      --------         --------
<S>                                                   <C>              <C>
Trade receivables                                     $ 59,737         $ 78,142
Unbilled receivables                                     6,469            5,411
Allowance for doubtful accounts                         (1,725)          (1,606)
                                                      --------         --------
                                                      $ 64,481         $ 81,947
                                                      ========         ========
</TABLE>


The amount of accounts receivable due beyond one year is not significant.

Note 7 - Inventories

Inventories at October 31 consisted of the following:
<TABLE>
<CAPTION>

                                                           1999            1998
                                                       --------        --------
<S>                                                    <C>             <C>
Raw material                                           $  8,771        $ 14,517
Work-in-process                                          20,166          20,545
Finished parts                                           18,116          14,910
                                                       --------        --------
                                                         47,053          49,972
Less excess of current cost over
Stated LIFO value                                        (7,059)         (7,411)
                                                       --------        --------
                                                       $ 39,994        $ 42,561
                                                       ========        ========
</TABLE>

Inventories valued using the LIFO method  represented  approximately 33% and 38%
of inventories at October 31, 1999 and 1998, respectively. During 1999 and 1998,
inventory quantities were reduced,  resulting in a liquidation of LIFO inventory
quantities carried at lower costs prevailing in prior years as compared with the
cost of 1999 and 1998 purchases. The effect of these liquidations decreased cost
of sales by $171, $2,079 and $1,998 in 1999, 1998 and 1997, respectively.

Note 8 - Goodwill

Net goodwill at October 31 consisted of the following:
<TABLE>
<CAPTION>

                                                         1999              1998
                                                     --------          --------

<S>                                                  <C>               <C>
Goodwill                                             $ 47,686          $ 42,997
Accumulated amortization                               (4,842)           (3,154)
                                                     --------          --------
                                                     $ 42,844          $ 39,843
                                                     ========          ========
</TABLE>

During the fourth  quarter of fiscal  1999,  the Company  reduced the  remaining
estimated useful life of goodwill related to its non-North  American  operations
to ten years.  This  change in  estimate  resulted  in  additional  amortization
expense of $340. Net goodwill at October 31, 1999 related to such operations was
$14.6 million.  Management  believes there is no impairment of recorded goodwill
at October 31, 1999.

                                       45
<PAGE>

Note 9 - Indebtedness

On March 30, 1998, MMH issued $200 million  aggregate  principal  amount of 9.5%
Senior  Notes due April 1, 2008 (the  "Senior  Notes")  in  connection  with the
Recapitalization as discussed in Note 3. Interest on the Senior Notes is payable
semi-annually  on each April 1 and October 1,  commencing  October 1, 1998.  The
Senior Notes will be  redeemable  at the option of MMH, in whole or in part,  at
any time on or after April 1, 2003, at the appropriate  redemption  price,  plus
accrued and unpaid interest thereon to the redemption date. In addition, MMH may
redeem in the aggregate up to 35% of the original principal amount of the Senior
Notes at any time and from time to time  prior to April 1, 2001 at a  redemption
price equal to 109.5% of the aggregate  principal  amount thereof,  plus accrued
and  unpaid  interest  thereon  to  the  redemption  date,  subject  to  certain
provisions.   The  Senior  Notes  are  senior  unsecured   obligations  and  are
unconditionally  guaranteed,  jointly and severally, on a senior unsecured basis
by substantially all of MMH's subsidiaries. See further discussion in Note 20.

At the Recapitalization  Closing, MMH entered into the New Credit Facility which
consists of a $70 million  revolving  credit  facility  (the  "Revolving  Credit
Facility"),  a $30 million acquisition facility (the "Acquisition  Facility"), a
$20 million  term loan  ("Term Loan A") and a $35 million  term loan ("Term Loan
B").

The Revolving Credit Facility  initially  permitted,  subject to compliance with
certain conditions,  MMH to borrow,  repay and reborrow up to $70 million at any
time until the fifth anniversary of the  Recapitalization  Closing, the proceeds
of which may be used for  working  capital  and  other  corporate  purposes.  At
October 31, 1999 and 1998,  the  Company had $27.5  million and $1.2  million of
borrowings  outstanding  under the Revolving  Credit  Facility.  The Acquisition
Facility,  the  proceeds  of  which  may  be  used  for  acquisitions,  initally
permitted,  subject to compliance with certain  conditions,  MMH to borrow up to
$30  million at any time  until the third  anniversary  of the  Recapitalization
Closing,  and to repay  the  same in  installments  on or  prior to the  seventh
anniversary  of the  Recapitalization  Closing.  Term Loan A and Term Loan B are
repayable in 20 and 28 quarterly installments,  respectively, which commenced in
June 1998.  The  Company is  required to make  mandatory  prepayments  to reduce
outstanding loans or commitments, as applicable,  under the New Credit Facility,
equal to 75% of the Company's  excess cash flow, as defined;  provided that such
amount shall be 50% in fiscal 1999 and may be reduced further in fiscal 1999 and
future  periods  under certain  circumstances  set forth in the  agreement.  The
commitment of the  participating  lending  institutions to make additional loans
under the  Revolving  Credit  Facility  and  Acquisition  Facility is subject to
certain  conditions,  including that nothing shall have occurred or become known
which the  participating  lending  institutions  shall have determined  could be
reasonably  expected  to have a material  adverse  effect,  as  defined,  on the
Company.

The New Credit  Facility  provides  that the Company is to pay certain  fees and
commissions to the agents and lenders, including an annual administrative fee, a
Revolving  Credit  Facility and Acquisition  Facility  unused  commitment fee of
0.75% and a letter of credit fee of 3.625% of the  average  outstanding  amounts
under letters of credit.

Borrowings under the New Credit Facility are secured by certain of MMH's and its
subsidiaries' assets, including substantially all of their assets located in the
United  States  and the United  Kingdom,  and are  guaranteed  by  Holdings  and
substantially all of MMH's subsidiaries.

Borrowings under the New Credit Facility bear interest at various interest rates
based on certain floating  reference rates (the "Floating  Rate").  To limit the
effect of  increases in the interest  rates under the New Credit  Facility,  the
Company has entered into an interest rate swap  arrangement.  The effect of this
agreement,  which  expires  on March 31,  2001,  is to limit the  interest  rate
exposure on specified  amounts up to the $55.0  million  borrowed  under the New
Credit Facility to a fixed LIBOR rate of 5.875% (the "Fixed Rate") plus 3.5%. As
a  result,  the  interest  rates  applicable  to Term  Loan A and Term Loan B at
October  31,  1999 have been  fixed at  9.375%.  The  differential  between  the
Floating  Rate and the Fixed  Rate is accrued as  interest  rates  change and is
recorded as an  adjustment of interest  expense.  The fair value of the interest
rate swap is the amount which the Company  would receive or pay to terminate the
instrument at the reporting date. The Company would have paid approximately $0.1
million to terminate the swap at October 31, 1999.

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,

                                       46
<PAGE>

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. 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  Credit  Facility from $35.7 million under the
previous  waiver  agreement  to $40.7  million.  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 25% of
the then outstanding common stock of Holdings.

As  discussed  in Note 4, the  Company  anticipates  being in  violation  of its
amended  financial  covenants  under the New Credit  Facility  as of January 31,
2000,  and  at  subsequent  quarterly  measurement  dates  during  fiscal  2000.
Accordingly,  amounts outstanding at October 31, 1999 of $88.6 million under the
New Credit  Facility and $200 million of Senior  Notes have been  classified  as
current liabilities in the accompanying balance sheets.

Long-term obligations at October 31 consisted of the following:
<TABLE>
<CAPTION>

                                                                                1999               1998
                                                                          ----------------- -----------------
<S>                                                                          <C>                <C>
     Senior notes, at 9.5% due April 1, 2008                                 $ 200,000          $200,000
     Bank term loan (Term Loan A), at LIBOR plus 3.5% (8.90875% at
       October 31, 1999) due in quarterly installments through March
       2003                                                                     17,750            19,500
     Bank term loan (Term Loan B), at LIBOR plus 3.55% (8.90875% at
       October 31, 1999) due in quarterly installments through March
       2005                                                                     34,475            34,825
     Bank Acquisition loan (combined draws), at LIBOR plus 3.5%
       (8.9925% at October 31, 1999) due in eight quarterly
       installments beginning June 2003 through March 2005                       7,430             6,194
     Acquisition Term Loan (Sponsor Loan), at Eurodollar plus 6.0%
       (11.4925% at October 31, 1999) due in eight quarterly
       installments beginning June 2003 through March 2005                       5,000                 -
     Bank revolving credit loan, at LIBOR plus 3.5% ($17.0 million at
       8.9925% and $10.5 million at 8.90875% at October 31, 1999) due
       March 2003                                                               27,500             1,200
     U.S. Swingline borrowings at Prime less 0.5% (7.75% at October 31,
       1999)                                                                       425                 -
     Deferred payments for purchases of companies, due in annual
       installments through 2006                                                 1,993             1,123
     Long-term capital leases with various expiration dates                        218               198
     Bank debt, at 6.5% due in annual installments through March 2010
                                                                                   636               696
     Industrial revenue bonds, at 6.0% due in annual installments
       through June 2007                                                           320               350
                                                                          ----------------- -----------------
                                                                               295,747           264,086
     Less current portion                                                      292,963             2,262
                                                                          ----------------- -----------------
                                                                               $ 2,784          $261,824
                                                                          ================= =================
</TABLE>

                                       47
<PAGE>

At October 31, 1999,  installments  payable  related to the Company's  long-term
obligations are as follows:
<TABLE>
<CAPTION>

                  MMH          Subsidiaries         Total
                --------          --------          --------
<S>             <C>               <C>               <C>
  2000          $292,155          $    808          $292,963
  2001              --                 348               348
  2002              --                 288               288
  2003              --                 198               198
  2004              --               1,212             1,212
 Thereafter         --                 738               738
                --------          --------          --------
                $292,155          $  3,592          $295,747
                ========          ========          ========
</TABLE>

At October  31, 1999 and 1998,  there were no  short-term  bank credit  lines of
foreign subsidiaries.

                                       48
<PAGE>

Note 10 - Mandatorily Redeemable Preferred Stock and  Shareholders' Equity

Mandatorily  redeemable  preferred  stock at October 31, 1999  consisted  of the
following:

                                                                  Carrying Value

12% Series A senior  exchangeable  preferred  stock,  stated
value  $1,000 per share,  par value $.01 per share,  120,000
shares  authorized,  68,741 shares issued and  outstanding              $67,443

12 1/4% Series B junior exchangeable preferred stock, stated
value  $1,000  per share,  par value $.01 per share,  10,000
shares authorized, 5,750 shares issued and outstanding                    5,808


12 1/2% Series C junior voting exchangeable preferred stock,
stated  value  $1,000 per  share,  par value $.01 per share,
60,000   shares   authorized,   34,633   shares  issued  and
outstanding                                                              34,994
                                                                     -----------
                                                                     $   108,245
                                                                     ===========

Series A Senior Preferred Stock

The Series A Senior Preferred Stock is nonvoting and ranks senior to all classes
of common stock and to each other series of preferred stock. The Series A Senior
Preferred Stock shareholders are entitled to receive cumulative  dividends at an
annual rate of 12% of the liquidation preference value, payable semi-annually in
arrears.  Dividends may be paid, at Holdings' option, on any dividend date prior
to April  1,  2003,  either  in cash or  additional  shares  of  Series A Senior
Preferred Stock. Cash will be paid in lieu of fractional shares.  After April 1,
2003, dividends will be payable in cash.

On or after April 1, 2003, the Series A Senior  Preferred Stock may be redeemed,
in whole or in part,  at the  option of  Holdings  at the  following  redemption
prices, plus an amount in cash equal to all accumulated and unpaid dividends:

Year Beginning April 1,             Percentage

2003                                 106.000%
2004                                 104.000%
2005                                 102.000%
2006 and thereafter                  100.000%

Notwithstanding the foregoing, Holdings may redeem in the aggregate all, but not
less than all, of the Series A Senior Preferred Stock then  outstanding,  at any
time prior to April 1, 2001, at a redemption price equal to 112.000% of the then
effective  liquidation  preference thereof,  plus an amount in cash equal to all
accumulated and unpaid dividends out of the net proceeds of a public offering of
shares of common stock, provided that redemption occurs within 90 days following
the closing of any such public  offering.  On April 1, 2009, the Series A Senior
Preferred Stock will be subject to mandatory redemption at a price equal to 100%
of the liquidation preference thereof, plus all accumulated and unpaid dividends
to the date of  redemption,  payable in cash.  Dividends  in kind  declared  and
accumulated were $7,553 and $7,654, respectively, at October 31, 1999.

Subject  to certain  conditions,  the  Series A Senior  Preferred  Stock will be
exchangeable,  in whole  but not in part,  at the  option  of  Holdings,  on any
dividend  payment  date,  for Holdings'  12% Exchange  Debentures  due 2009 (the

                                       49
<PAGE>

"Exchange Debentures"). Interest on the Exchange Debentures will be payable at a
rate of 12% per  annum  and  will  accrue  from the  date of  issuance  thereof.
Interest on the Exchange Debentures will be payable semi-annually in cash or, at
the option of Holdings,  on or prior to April 1, 2003,  in  additional  Exchange
Debentures,  in arrears on each April 1 and October 1,  commencing  on the first
such date after the exchange of the Series A Senior Preferred Stock for Exchange
Debentures.  The  Exchange  Debentures  mature on April 1,  2009.  The  Exchange
Debentures will be redeemable,  at the option of Holdings,  in whole or in part,
on or after April 1, 2003, at  applicable  redemption  prices,  plus accrued and
unpaid interest to the date of redemption.

Series B Junior Preferred Stock

The Series B Junior  Preferred Stock was issued to HarnCo in connection with the
Recapitalization. The Series B Junior Preferred Stock is generally nonvoting and
ranks junior to the Series A Senior  Preferred  Stock and senior to the Series C
Junior Voting  Preferred  Stock  discussed  below as well as any class of common
stock.  Dividends on the Series B Junior  Preferred  Stock are  cumulative  from
March  30,  1998,  at an annual  rate of 12 1/4%,  to be paid  semi-annually  in
arrears on each  April 1 and  October 1,  commencing  October 1, 1998.  Prior to
April 1, 2003, dividends are payable, at Holdings' option,  either in cash or in
additional shares of Series B Junior Preferred Stock. After that date, dividends
will be payable in cash.

On or after April 1, 2003, the Series B Junior  Preferred Stock may be redeemed,
in whole or in part,  at the option of  Holdings  at the  applicable  redemption
price  together  with an  amount in cash  equal to all  accumulated  and  unpaid
dividends.  In addition,  Holdings,  at its option, may redeem all, but not less
than all, of the Series B Junior Preferred Stock then  outstanding,  at any time
prior to April 1, 2001,  at a  redemption  price  equal to  112.250% of the then
effective  liquidation  preference thereof,  plus an amount in cash equal to all
accumulated and unpaid dividends out of the net proceeds of a public offering of
shares of common stock, provided that redemption occurs within 90 days following
the  closing of any such public  offering.  On April 1, 2010,  Holdings  will be
required  to  redeem  in  cash  all of  the  Series  B  Junior  Preferred  Stock
outstanding at a redemption  price equal to 100% of the  liquidation  preference
thereof,  plus all accumulated  and unpaid  dividends to the date of redemption.
Dividends in kind declared and accumulated were $645 and $652, respectively,  at
October 31, 1999.

Subject  to  certain  conditions,  the  outstanding  shares  of  Series B Junior
Preferred  Stock are  exchangeable,  in whole but not in part,  at the option of
Holdings,  at any  time on any  dividend  payment  date  for  Holdings'  12 1/4%
Exchange Debentures due 2010.

Series C Junior Voting Preferred Stock

The Series C Junior Voting  Preferred  Stock was acquired by MHE  Investments in
connection  with the  Recapitalization.  Each  share of  Series C Junior  Voting
Preferred Stock has voting rights of 0.314 votes per share.  The Series C Junior
Voting  Preferred Stock ranks junior to the Series A Senior  Preferred Stock and
Series B Junior  Preferred  Stock  and  senior  to any  class of  common  stock.
Dividends on the Series C Junior  Voting  Preferred  Stock are  cumulative  from
March  30,  1998,  at an annual  rate of 12 1/2%,  to be paid  semi-annually  in
arrears on each  April 1 and  October 1,  commencing  October 1, 1998.  Prior to
April 1, 2003, dividends are payable, at Holdings' option,  either in cash or in
additional  shares  of  Series  C Junior  Voting  Preferred  Stock.  Thereafter,
dividends will be payable in cash.

On or after April 1, 2003,  the Series C Junior  Voting  Preferred  Stock may be
redeemed,  in whole or in part,  at the  option of  Holdings  at the  applicable
redemption  price together with an amount in cash equal to all  accumulated  and
unpaid dividends. In addition,  Holdings, at its option, may redeem all, but not
less than all, of the Series C Junior Voting  Preferred Stock then  outstanding,
at any time prior to April 1, 2001,  at a redemption  price equal to 112.500% of
the then effective liquidation  preference thereof, plus an amount in cash equal
to all  accumulated  and unpaid  dividends  out of the net  proceeds of a public
offering of shares of common stock,  provided that  redemption  occurs within 90
days  following  the  closing  of any such  public  offering.  On April 1, 2010,
Holdings  will be required  to redeem in cash all of the Series C Junior  Voting
Preferred  Stock  outstanding  at a  redemption  price  equal  to  100%  of  the
liquidation preference thereof, plus all accumulated and unpaid dividends to the
date of redemption.  Dividends in kind declared and accumulated  were $3,955 and
$4,016, respectively, at October 31, 1999.

Subject to certain conditions,  the outstanding shares of Series C Junior Voting
Preferred  Stock are  exchangeable,  in whole but not in part,  at the option of
Holdings at any time on any dividend payment date for Holdings' 12 1/2% Exchange
Debentures due 2010.

                                       50
<PAGE>

Common Stock

Common stock consisted of the following at October 31, 1999:

                                                                       Par Value
MMH Holdings, Inc.:

Nonvoting common stock, $.01 par
value, 100,000 shares authorized, 1,930
shares issued and outstanding                                              $--

Voting common stock, $.01 par value,
900,000 shares authorized, 10,169 shares
issued and outstanding                                                      --

Morris Material Handling, Inc.

Common stock, $.01 par value, 1,000 shares
authorized, 100 shares issued and outstanding                               --


MMH Holdings,  Inc. holds all of the outstanding common stock of Morris Material
Handling, Inc.

Note 11 - Income Taxes

The components of income(loss) of the Company's  domestic and foreign operations
for the years ended October 31 were as follows:
<TABLE>
<CAPTION>


                                        1999              1998              1997
                                    --------          --------          --------
<S>                                 <C>               <C>               <C>
Domestic                            $(17,419)         $  8,774          $ 28,097
Foreign                               (9,163)              (75)            6,648
                                    --------          --------          --------
                                    $(26,582)         $  8,699          $ 34,745
                                    ========          ========          ========
</TABLE>

The  provision  for  income  taxes  included  in the  Statements  of Income  and
Comprehensive Income for the years ended October 31 consisted of the following:
<TABLE>
<CAPTION>

                                               1999          1998          1997
                                           --------      --------      --------
Current provision
<S>                                        <C>           <C>           <C>
Federal and state                          $    373      $  1,883      $ 11,028
Foreign                                       1,769         2,225         2,757
                                           --------      --------      --------
Total current                                 2,142         4,108        13,785
                                           --------      --------      --------
Deferred provision
Federal and state                            71,455         1,804          (137)
Foreign                                      (1,917)       (1,477)          226
                                           --------      --------      --------
Total deferred                               69,538           327            89
                                           --------      --------      --------
Provision for income taxes                 $ 71,680      $  4,435      $ 13,874
                                           ========      ========      ========
</TABLE>

                                       51
<PAGE>

The difference between the U.S. federal statutory tax rate and the effective tax
rate for the years ended October 31 are as follows:
<TABLE>
<CAPTION>

                                                 1999         1998        1997
                                               ------       ------      ------
<S>                                             <C>          <C>         <C>
Federal statutory rate                          34.0%        34.0%       35.0%
Divestiture bonuses                              --           4.7          --
Foreign taxes, net of federal benefit           (0.3)         3.2         1.9
State taxes, net of federal benefit             (0.1)         1.9         3.0
Valuation allowance adjustment                (302.5)         7.6          --
Other - net                                     (0.7)        (0.5)         --
                                               ------       ------      ------
                                              (269.6)%       50.9%       39.9%
                                               ======       ======      ======
</TABLE>

Foreign income taxes paid were $2,972,  $1,209 and $322 in 1999,  1998 and 1997,
respectively.

Temporary  differences and carryforwards  which gave rise to deferred tax assets
and liabilities at October 31 were as follows:
<TABLE>
<CAPTION>

                                                  1999        1998
                                               ---------   ---------
Deferred tax assets
<S>                                            <C>         <C>
Accrued expenses and reserves                  $   3,578   $   2,164
Inventories                                        4,306       3,980
Fixed assets                                       5,786       6,068
Intangibles                                       70,529      76,828
U.S. federal and state tax loss carryforwards     15,137         756
Other                                              1,914         578
                                               ---------   ---------
                                                 101,250      90,374
Valuation allowance                              (99,336)    (18,919)
                                               ---------   ---------
                                                   1,914      71,455
                                               ---------   ---------
Deferred tax liabilities
Other                                               (744)       (562)
Prepaid pension asset                             (1,170)     (1,335)
                                               ---------   ---------
                                                  (1,914)     (1,897)
                                               ---------   ---------
Net deferred tax asset (liability)             $    --     $  69,558
                                               =========   =========
</TABLE>

The  deferred  income tax accounts  reflect the impact of temporary  differences
between the basis of assets and liabilities for financial reporting purposes and
their  related  basis as  measured  by income  tax  regulations.  For income tax
purposes,  Holdings  and MMH were deemed to have  acquired the assets of the MHE
Business pursuant to Internal Revenue Code Section 338(h)(10). Accordingly, this
transaction increased the tax basis of certain assets and created tax-deductible
goodwill, and resulted in significant book/tax basis differences.  Substantially
all of the  additional  deferred  taxes  recorded  resulted  from this  goodwill
created for tax  purposes.  A valuation  allowance  was  recorded to reflect the
estimated  amount of deferred tax assets which may not be realized due primarily
to the  possible  limitation  on the  future  use of foreign  tax  credits.  The
resulting net adjustment to deferred income taxes of  approximately  $71 million
has been recorded as an adjustment  to  shareholders'  equity for the year ended
October 31, 1998.

As a result of the  Section  338(h)(10)  election  made in  connection  with the
Recapitalization,  all historical earnings and profits were taxed.  Accordingly,
any  dividends  remitted  from  pre-closing  retained  earnings of the Company's
foreign  subsidiaries would be treated as  previously-taxed  and subject only to
local withholding taxes, for which the Company may claim a foreign tax credit.

During the fourth quarter of fiscal 1999, the Company increased its deferred tax
valuation  allowance to reduce its net deferred tax assets to zero.  This change
in estimate reflects  primarily the significant  shortfall in actual fiscal 1999
operating  results  compared  with  estimates   developed  during  the  year  in

                                       52
<PAGE>

connection  with the  negotiation  of its New Credit  Facility  amendment and an
increase in the estimated pretax loss for fiscal 2000. In addition,  the Company
has reported cumulative pretax losses since the March 30, 1998 recapitalization.
Accordingly,  based  upon  this  negative  evidence  as  of  October  31,  1999,
management  concluded that the realization of recorded U.S.  deferred tax assets
could not be supported as more likely than not of occurrence in accordance  with
SFAS 109. At October 31, 1999, the Company has approximately $41 million and $24
million of federal and state net  operating  loss  carryforwards,  respectively,
which expire at various future dates.

At October 31, 1999,  the Company's  Mexican  affiliate has a net operating loss
carryforward  approximating  $2.0  million  which  expires  in 2004 and 2005.  A
valuation  allowance  has been  recorded  against  this  carryforward  for which
utilization is uncertain. The amount of the valuation allowance recorded against
such net operating loss  carryforwards  which if subsequently  recognized  would
reduce long-lived assets of the acquired entity is not material.


This net deferred  tax asset  (liability)  is included in the balance  sheets at
October 31 in the following captions:
<TABLE>
<CAPTION>

                         1999          1998
                        -----      --------
<S>                     <C>        <C>
Other current assets    $--        $  6,277
Other assets             --          65,979
Noncurrent liabilities   --         (2,698)
                        -----      --------
                        $--        $ 69,588
                        =====      ========
</TABLE>

Note 12 - Commitments and Contingencies

To secure the performance of sales contracts related to MMH operations,  MMH was
contingently  liable to financial  institutions  and others for the following at
October 31, 1999: (i) $4.8 million of  outstanding  letters of credit and surety
bonds  under  the  New  Credit  Facility,  (ii)  $2.8  million  under  a  surety
arrangement for outstanding  surety bonds and (iii) $6.1 million of surety bonds
with other  institutions.  Prior to the  Recapitalization  Closing,  HII and its
affiliates ("HII Group")  provided credit support for the MHE 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 October
31, 1999,  approximately $27.7 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  to 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  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

                                       53
<PAGE>

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.

On October 28, 1996, a strong windstorm caused significant damage to the Belview
container-handling   terminal  at  the  Port  of  Waterford   in  Ireland.   One
container-handling  crane sold by the Company's  United  Kingdom  subsidiary was
destroyed  and another was  seriously  damaged.  The two cranes were sold to the
Waterford  Harbour  Commissioners  in 1992 and  commissioned for use in 1993. On
October 19, 1998, the Waterford Harbour  Commissioners  wrote to the Company and
provided a notice of arbitration,  asserting breach of contract,  negligence and
breach of duty against the  Company's  United  Kingdom  subsidiary in connection
with the  destroyed and damaged  cranes.  The  Waterford  Harbour  Commissioners
claimed direct damages of IR(pound)8.5  million ($11.5 million based on exchange
rates at January  31,  2000) and  unspecified  consequential  damages.  The port
operator,  Bell Lines,  Limited,  filed a similar  claim  against the  Company's
United  Kingdom  subsidiary  in October  1999,  asserting  unspecified  damages.
Management  intends to  vigorously  defend both  matters.  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 claims. The Company is continuing to work with its
insurance broker to determine the availability of additional insurance coverage,
if any.  While the Company  believes that it will obtain a favorable  resolution
(either by successfully  defending the claim or by obtaining  insurance coverage
thereon),  no assurances  can be made as to the final outcome of the claims.  If
the  Company is found  liable  for the claims and is unable to obtain  insurance
coverage  therefor,  there could be a material  adverse  effect on the Company's
operations  and  financial  performance.  Based upon the current  status of this
matter, no related liability has been accrued at October 31, 1999.

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 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 13 - Employee Benefit Plans

The Company  adopted SFAS No. 132,  "Employer's  Disclosures  about Pensions and
Other  Postretirement  Benefits,"  in 1999.  SFAS  No.  132  revises  disclosure
requirements for pension and othere  postretirement  benefit plans for all years
presented but does not change the measurement or recognition of those plans.

HII Plans

Prior  to the  Recapitalization,  the  Company  was a  participant  in  HII  and
affiliates'  domestic  defined benefit pension plans.  Benefits from these plans
were based on factors which included various  combinations of service,  employee
compensation  during the last years of  employment  and the  recipient's  social
security benefit.  Pension expense was allocated  annually based upon headcount.
The Company's  pension expense for these domestic  defined benefit plans was $0,
$584 and $1,275 in 1999, 1998 and 1997, respectively.

The Company was also a participant in HII's qualified  profit sharing plan which
covered  substantially  all  domestic  employees,  except  employees  covered by

                                       54
<PAGE>

collective  bargaining  agreements  and  employees of  affiliates  with separate
defined  contribution  plans.  Contributions  to this  plan  were  based  on the
Company's  "economic  value added"  performance.  The Company's  profit  sharing
expense for this plan and other defined contribution plans was $1,584 in 1997.


MMH Plans

Effective April 1, 1998, the Company established a retirement savings plan under
Section  401(k) of the Internal  Revenue Code (the "Plan").  The Plan covers all
non-bargaining  unit  employees  in the United  States  from their  first day of
service.  Employees can contribute from 1% to 10% of their eligible pre-tax pay.
The Company matches 100% of contributions up to 3% of an employee's eligible pay
and 50% of the next 2% of an  employee's  eligible pay.  Also,  once an employee
turns 35, the Company contributes an additional percentage of the employee's pay
based on his/her age. In addition,  the Company makes a special contribution for
long-service and older employees who were participants in the former HII pension
plan in order to make up for future years of  non-participation in that plan. If
an  employee's  age plus  years of  service  add up to 65 or more,  the  Company
contributes  an additional  percentage of the  employee's  pay to the Plan.  All
Company  contributions  are 100% vested upon  contribution.  An employee must be
active on December  31 of the Plan year in order to qualify  for annual  Company
contributions. The Company recognized expense of $2,331 and $890 during 1999 and
1998, respectively, related to the Plan.

The Company also continued the HII profit sharing plan as a component of its new
retirement  savings  plan.  The profit  sharing  plan covers  substantially  all
domestic employees, except employees covered by collective bargaining agreements
and  employees  of  affiliates  with  separate   defined   contribution   plans.
Contributions  to this plan in 1998 were based on the Company's  "economic value
added"  performance.  Effective  November 1, 1998,  contributions  were based on
earnings of the Company before interest and taxes.  The Company's profit sharing
expense for this plan was $0 and $137 in 1999 and 1998, respectively.

In connection with the  Recapitalization,  the Company  committed to establish a
new equity incentive plan to attract and retain key personnel,  including senior
management,  and to enhance their interest in the Company's  continued  success.
Holdings  reserved  1,186.0849  shares of Holdings  nonvoting  common  stock and
4,328.25 shares of Holdings Series C Junior Voting  Preferred Stock with a value
of $8.1 million on March 30, 1998 for this plan (such  shares to be  denominated
in 8,100 units  consisting of 0.1464 shares of Holdings  nonvoting  common stock
and  0.5344  shares of  Holdings  Series C Junior  Voting  Preferred  Stock (the
"Equity  Units")).  The Company has commited to make an initial  option grant to
each  member of the  Company's  senior  management  on March 30, 1998 under such
executive's employment agreement.  The Company is in the process of establishing
the vesting terms for such Equity Units and none are  outstanding at October 31,
1999.

Pension  expense,  as determined by the  Company's  actuaries,  for its employee
benefit plan in the United Kingdom for the three years ended October 31 included
the  components  shown below.  Pension  expense for the Company's  other foreign
employee benefit plans is not significant.
<TABLE>
<CAPTION>

                                                       1999      1998      1997
                                                    -------   -------   -------
<S>                                                 <C>       <C>       <C>
Service cost - benefits earned during the year      $   914   $   894   $   782
Interest cost on projected benefit obligation         1,634     1,665     1,359
Actual gain on plan assets                           (4,062)   (1,408)   (2,988)
Net amortization and deferral                         2,552      (619)    1,186
                                                    -------   -------   -------
                                                    $ 1,038   $   532   $   339
                                                    =======   =======   =======
</TABLE>

The discount  rate used for this  foreign plan was 6.0%,  6.0% and 7.5% in 1999,
1998 and 1997. The assumed rate of increase in future  compensation of employees
was 4.0%, 4.0% and 4.5% in 1999,  1998 and 1997. The expected  long-term rate of
return on assets was 8.5%, 8.5% and 10.25% in 1999, 1998 and 1997.

                                       55
<PAGE>

The following  table sets forth the funded status of the United  Kingdom plan at
October 31:
<TABLE>
<CAPTION>

                                                               1999        1998
                                                           --------    --------
Change in Plan Assets:
<S>                                                        <C>         <C>
    Fair value of plan assets at beginning of year         $ 23,851    $ 21,100
    Actual return on plan assets                              4,062       1,408
    Employer contributions                                      691         965
    Plan participants' contributions                            195         224
    Currency translation                                       (355)        572
    Benefits paid                                              (495)       (418)
                                                           ========    ========
Fair value of plan assets at end of year                   $ 27,949    $ 23,851
                                                           ========    ========

Change in Benefit Obligation:
    Benefit obligation at beginning of year                $ 27,739    $ 20,665
    Service cost                                                914         894
    Interest cost                                             1,634       1,665
    Plan participants' contributions                            195         224
    Actuarial (gain)/loss                                       (24)      4,121
    Currency translation                                       (403)        588
    Benefits paid                                              (495)       (418)
                                                           ========    ========
Benefit obligation at end of year                          $ 29,560    $ 27,739
                                                           ========    ========

Actuarial present value of:
    Vested benefits                                        $ 25,713    $ 23,606
                                                           --------    --------
                                                           --------    --------
    Accumulated benefits                                     25,713      23,606
                                                           --------    --------
    Projected benefits                                       29,560      27,739
Net assets available for benefits                            27,949      23,851
                                                           --------    --------
Plan assets (less) greater than projected benefits           (1,611)     (3,888)
Unrecognized net loss                                         5,729       8,195
                                                           --------    --------
Prepaid pension asset                                      $  4,118    $  4,307
                                                           ========    ========
</TABLE>

Postretirement Benefits Other Than Pensions

HII generally  provided  certain health care and life  insurance  benefits under
various plans for U.S.  employees who retired after attaining  early  retirement
eligibility,  subject to plan  amendments.  In 1993,  the HII Board of Directors
approved  a  general  approach  that  would  culminate  in  the  elimination  of
contributions towards  postretirement  health care benefits.  Increases in costs
were capped for certain  plans  beginning  in 1994  extending  through  1998 and
contributions  were eliminated on September 1, 1998 for most employee groups. As
such,  negative  plan  amendments  made  subsequent  to  November  1,  1993 were
amortized  from the date of the  amendment to September 1, 1998.  Postretirement
benefit  income was  allocated  each year based upon  headcount.  The  Company's
postretirement  benefit income was $684 for the five months ended March 30, 1998
and $1,658  during  1997.  Following  the  Recapitalization,  the Company has no
liability to previously retired employees for such benefits.

As of October 31, 1998, the Company no longer offered any postretirement  health
care or life insurance benefits.

                                       56
<PAGE>

Note 14 - Operating Leases

The  Company  leases  certain  plant,  office  and  warehouse  space  as well as
machinery,  vehicles,  data  processing  and other  equipment.  Certain of these
leases  have  renewal  options at reduced  rates and  provisions  requiring  the
Company to pay maintenance,  property taxes and insurance. Generally, all rental
payments are fixed.

Total rental expense under operating leases,  excluding  maintenance,  taxes and
insurance, was $4,375, $4,465 and $4,369 in 1999, 1998 and 1997, respectively.

At October 31, 1999, the future payments for all operating leases with remaining
lease  terms in  excess  of one  year,  and  excluding  maintenance,  taxes  and
insurance, were as follows:

        2000                   $4,035
        2001                    2,719
        2002                    1,645
        2003                    1,139
        2004                      746

Note 15 - Segment Information

The Company adopted SFAS No. 131, " Disclosures  about Segments of an Enterprise
and Related  Information"  for fiscal year ended October 31, 1999.  Prior years'
segment   information   has  been  restated  to  conform  to  the  current  year
presentation.  Pursuant  to  SFAS  No.  131,  the  Company  has  identified  its
reportable segments based on the Company's method of internal reporting which is
utilized by its chief operating decision-maker, the Chief Executive Officer. The
reportable operating segments are as follows:

         Equipment and  Aftermarket  - Americas
         Equipment and  Aftermarket  - Other
         Distribution and Service - North America
         Engineered  Products and  Automation  -  Europe
         Equipment  and  Aftermarket  -  Europe
         Equipment and  Aftermarket - Asia Pacific
         Equipment and Aftermarket - South Africa

Each segment has a manager who is directly  accountable to and maintains regular
contact with the Chief Executive Officer.  The Company evaluates  performance of
its segments based on operating  income,  determined on a basis  consistent with
amounts reported in the consolidated financial statements.

The Equipment and  Aftermarket - Americas  segment  designs and  manufactures  a
comprehensive line of engineered and standard overhead cranes,  hoists and other
component  products and repair parts at the Company's  facilities located in Oak
Creek and Windsor, Wisconsin. This segment also modernizes products manufactured
by both the Company and its competitors.  This segment is the main  manufacturer
of the replacement parts sold by the Company's  Distribution and Service - North
America segment as well as the  manufacturer of component  products used in that
segment's standard cranes.  Repair parts and component products are purchased by
the Distribution and Service - North America segment at list price less standard
intercompany discounts.

The  Equipment  and   Aftermarket  -  Other  segment  is  the  Company's   brake
manufacturing operation in Canada. Approximately 35% of this segment's sales are
to other Company segments. The Company sold this operation in December 1999 (See
Note 19 - Subsequent Events).

The  Distribution  and  Service  -  North  America  segment  is the  network  of
Company-owned  locations in key industrial markets in North America. The network
is the platform for the  Company's  sales  activities,  serving as  distribution
centers for its original  equipment and  replacement  parts as well as the focal
point for service  activities.  Some of the distribution  centers also fabricate
and assemble standard cranes using components  manufactured by the Equipment and
Aftermarket - Americas and the Equipment and Aftermarket - Europe segments.

                                       57
<PAGE>

The  Engineered  Products  and  Automation  -  Europe  segment  focuses  on  the
manufacture  of highly  engineered  ship-to-shore  and gantry  cranes for use in
container  handling and  automated  warehouse  units at the  Company's  facility
located  in  Loughborough,  England,  and  provides  software  support  for  the
automated warehouse units installed at customer locations.

The Equipment and  Aftermarket - Europe  segment  consists of standard crane and
hoist manufacturing in the Loughborough, England facility as well as the network
of Company-owned  distribution  centers in key industrial  markets in the United
Kingdom.  The Equipment and Aftermarket - Europe segment  provides  services for
the Engineered  Products and Automation  segment at prices consistent with those
charged to external  customers.  In addition,  this segment  distributes  hoists
through Distribution and Service - North America and Equipment and Aftermarket -
Asia  Pacific  and South  Africa at prices  consistent  with  those  charged  to
external customers.

The Equipment and Aftermarket - Asia Pacific and South Africa  segments  operate
in a manner similar to the Distribution  and Service North America segment.  The
Asia Pacific segment includes operations in Australia,  Singapore,  Thailand and
Saudi Arabia.

Within North America,  certain centrally  incurred costs such as insurance costs
and computer  charges are  allocated to  operating  segments  based upon various
methods of  allocation.  In the United  Kingdom,  utilities,  property taxes and
insurance  costs are  allocated  to the segments  based upon varying  allocation
methods. Domestically, costs related to centralized accounting, marketing, human
resources, and IT functions are not allocated. Internationally, these costs were
allocated  amongst  individual  segments  in fiscal 1997 and 1998,  however,  in
fiscal  1999,  no  allocation  was done.  Assets are not  allocated in assessing
operating  performance by the Chief Executive Officer other than at the level of
the Company's  total  Equipment and  Aftermarket  - Americas,  Distribution  and
Service - North America and total  International  operations.  Long-lived assets
include property, plant and equipment, goodwill and other intangible assets.

Segment operating income for fiscal 1998 and 1997 excludes  management fees paid
by the Company to its former parent, HII.

In fiscal 1997, the Company did not report  information  related to intercompany
sales in a manner consistent with its present reporting structure.  Accordingly,
it is not practicable to present a breakdown of external and intercompany  sales
by segment for 1997.

                                       58
<PAGE>
<TABLE>

                                                                   MMH HOLDINGS, INC.
                                                             MORRIS MATERIAL HANDLING, INC.
                                                                   Operating Segments
                                                           For the Year Ended October 31, 1999
<CAPTION>

                                                  -----------------------------------------
                                                                   SALES
                                                  ------------------------------------- ----------  ------------ -------  ----------
                                                                                         Operating  Depreciation Long-
                                                                                         Income        &         Lived     Capital
                                                   External    Intercompany       Total  (Loss)     Amortization Assets Expenditures
                                                  ----------- ---------------- -------- ----------  ------------ -------  ----------
<S>                                                   <C>        <C>         <C>         <C>         <C>        <C>        <C>
       Equipment & Aftermarket - Americas             $  50,602  $  52,370   $ 102,972   $   7,226   $   3,163  $    --    $    --
          Equipment & Aftermarket - Other                 3,809      1,934       5,743       1,417          67       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
            Total Equipment & Aftermarket                54,411     54,304     108,715       8,643       3,230  $  17,312  $   5,064
   Distribution & Service - North America               166,929      4,130     171,059      10,291       1,940     36,783        990
                     Eliminations & Other                     0    (58,434)    (58,434)         76           0       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
                           Total Americas               221,340          0     221,340      19,010       5,170       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------

Engineered Products & Automation - Europe                11,568        507      12,075      (1,056)        124       --         --
         Equipment & Aftermarket - Europe                35,521      6,446      41,967       1,803       1,137       --         --
                     Eliminations & Other                     0     (1,869)     (1,869)     (4,418)        497       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
                             Total Europe                47,089      5,084      52,173      (3,671)      1,758       --         --
   Equipment & Aftermarket - South Africa                12,794        599      13,393        (913)        152       --         --
   Equipment & Aftermarket - Asia Pacific                12,972          0      12,972        (624)        349       --         --
                     Eliminations & Other                     0     (1,431)     (1,431)       (722)        810       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
                      Total International                72,855      4,252      77,107      (5,930)      3,069     34,971      1,540
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
               Corporate and Eliminations                     0     (4,252)     (4,252)     (9,635)          0       --         --
                                                      =========  =========   =========   =========   =========  =========  =========
                             Consolidated             $ 294,195  $    --     $ 294,195   $   3,445   $   8,239  $  89,066  $   7,594
                                                      =========  =========   =========   =========   =========  =========  =========
</TABLE>

                                       59
<PAGE>
<TABLE>

                                                                   MMH HOLDINGS, INC.
                                                             MORRIS MATERIAL HANDLING, INC.
                                                                   Operating Segments
                                                           For the Year Ended October 31, 1998
<CAPTION>

                                                 --------------------------------------
                                                                   SALES
                                                  ------------------------------------- ----------  ------------ -------  ----------
                                                                                         Operating  Depreciation Long-
                                                                                         Income        &         Lived     Capital
                                                   External    Intercompany       Total  (Loss)     Amortization Assets Expenditures
                                                  ----------- ---------------- -------- ----------  ------------ -------  ----------
<S>                                                   <C>        <C>         <C>         <C>         <C>        <C>        <C>
            Equipment & Aftermarket - Americas        $  72,051  $  52,114   $ 124,165   $  18,886   $   2,598  $    --    $    --
               Equipment & Aftermarket - Other            4,410      1,796       6,206       1,688          57       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
                 Total Equipment & Aftermarket           76,461     53,910     130,371      20,574       2,655  $  15,071  $   3,820
        Distribution & Service - North America          159,187      2,297     161,484      14,160       1,716     32,132        423
                          Eliminations & Other                0    (56,207)    (56,207)       (268)          0       --         --
                                                      --------   ---------   ---------   ---------   ---------  ---------  ---------
                                Total Americas          235,648          0     235,648      34,466       4,371       --         --
                                                      --------   ---------   ---------   ---------   ---------  ---------  ---------
Engineered Products &  Automation -Europe                14,608      3,412      18,020      (2,372)        330       --         --
              Equipment & Aftermarket - Europe           44,195     10,777      54,972       3,216         889       --         --
                          Eliminations & Other                0     (3,491)     (3,491)       (905)        469       --         --
                                                      ---------  ---------   ---------   ---------   ---------  ---------  ---------
                                  Total Europe           58,803     10,698      69,501         (61)      1,688       --         --
        Equipment & Aftermarket - South Africa           16,342        930      17,272         687         182       --         --
        Equipment & Aftermarket - Asia Pacific            7,064          0       7,064        (483)        174       --         --
                          Eliminations & Other                0     (5,687)     (5,687)       (486)        408       --         --
                                                      --------   --------    ---------   ---------   ---------  ---------  ---------
                           Total International           82,209      5,941      88,150        (343)      2,452     35,635        965
                                                     ---------  ----------   ---------   ---------   ---------  ---------  ---------
                    Corporate and Eliminations                0     (5,941)     (5,941)     (6,294)          0       --         --
                                                      =========  =========   =========   =========   =========  =========  =========
                                  Consolidated        $ 317,857  $    --     $ 317,857   $  27,829   $   6,823  $  82,838  $   5,208
                                                      =========  =========   =========   =========   =========  =========  =========
</TABLE>

                                       60
<PAGE>
<TABLE>

                                                       MMH HOLDINGS, INC.
                                                  MORRIS MATERIAL HANDLING, INC.
                                                        Operating Segments
                                               For the Year Ended October 31, 1997


<CAPTION>

                                                                               Operating   Depreciation       Long-
                                                                               Income            &            Lived     Capital
                                                              Total Sales      (Loss)      Amortization       Assets    Expenditures
                                                                ---------     ---------       ---------     ---------     ---------

<S>                                                              <C>            <C>            <C>           <C>           <C>
            Equipment & Aftermarket - Americas                   $ 140,208      $  23,918      $   2,751     $     --      $      --
               Equipment & Aftermarket - Other                       5,919          1,385             74           --             --
                                                                 ---------     ---------       ---------     ---------     ---------
                 Total Equipment & Aftermarket                     146,127         25,303          2,825     $  12,115     $   3,673
        Distribution & Service - North America                     138,275          9,319          1,535        28,639         1,414
                          Eliminations & Other                     (50,402)          (350)             0           --             --
                                                                 ---------     ---------       ---------     ---------     ---------
                                Total Americas                     234,000         34,272          4,360           --             --
                                                                 ---------     ---------       ---------     ---------     ---------

Engineered Products & Automation -Europe                            59,290            942            398           --             --
              Equipment & Aftermarket - Europe                      57,019          3,953            850           --             --
                          Eliminations & Other                     (16,716)         2,246            312           --             --
                                                                  ---------     ---------      ---------     ---------     ---------
                                  Total Europe                      99,593          7,141          1,560           --             --
         Equipment & Aftermarket  South Africa                      18,230           (330)           223           --             --
        Equipment & Aftermarket - Asia Pacific                       5,836            228            113           --             --
                          Eliminations & Other                           0           (480)           480           --             --
                                                                  ---------     ---------      ---------     ---------     ---------
                           Total International                     123,659          6,559          2,376        32,609         1,411
                                                                  ---------     ---------      ---------     ---------     ---------
                    Corporate and Eliminations                      (4,312)        (2,432)             0           --             --
                                                                 =========      =========      =========     =========     =========
                                  Consolidated                   $ 353,347      $  38,399      $   6,736     $  73,363     $   6,498
                                                                 =========      =========      =========     =========     =========
</TABLE>


                                       61
<PAGE>

The following table provides  information related to external customer sales and
long-lived assets by geographic area.  Geographic sales are based on the country
in which the sales originate.

<TABLE>

<CAPTION>
                                                   1999
                                ------------------------------------------------
                                   External Sales            Long-Lived Assets
                                -------------------       ----------------------

<S>                                        <C>                          <C>
  United States                            $187,067                     $ 43,785
         Canada                              28,077                        9,231
 United Kingdom                              47,089                       24,791
   South Africa                              12,794                        1,426
      Australia                              10,292                        4,665
          Other                              8,876                         5,168
                                           --------                     --------
                                           $294,195                     $ 89,066
                                           ========                     ========

                                                   1998
                                ------------------------------------------------
                                   External Sales            Long-Lived Assets
                                -------------------       ----------------------
  United States                            $202,639                     $ 37,360
         Canada                              26,034                        8,828
 United Kingdom                              58,803                       26,516
   South Africa                              16,342                        1,577
      Australia                               2,073                        4,267
          Other                              11,966                        4,290
                                           ========                     ========
                                           $317,857                     $ 82,838
                                           ========                     ========

                                                   1997
                                ------------------------------------------------
                                   External Sales            Long-Lived Assets
                                -------------------       ----------------------

  United States                            $205,815                     $ 34,536
         Canada                              22,104                        5,023
 United Kingdom                              94,926                       27,573
   South Africa                              18,230                        1,846
          Other                              12,275                        4,385
                                           ========                     ========
                                           $353,350                     $ 73,363
                                           ========                     ========
</TABLE>

                                       62
<PAGE>


Information  related to sales of products and services to external  customers is
presented below:

<TABLE>
<CAPTION>

                                      --------         --------         --------
                                          1999             1998             1997
                                      --------         --------         --------

<S>                                    <C>              <C>              <C>
Machines                               157,395          179,825          221,121
   Parts                                78,131           81,719           80,874
 Service                                58,669           56,313           51,355
                                      --------         --------         --------
   Total                              $294,195         $317,857         $353,350
                                      --------         --------         --------
</TABLE>


Note 16 - Related Party Transactions

HII and Affiliates

Previously (and until the Recapitalization Closing), HII and/or HarnCo performed
centrally a number of functions  necessary  for the  operations  of the Company.
Under a management services  arrangement with HII, the Company was provided with
certain  services,  including,  but not limited to, matters of organization  and
administration,  cash management,  labor relations,  employee  benefits,  public
relations,   financial  policies  and  practices,  taxation  and  legal  affairs
(intellectual property,  environmental,  labor, securities and ERISA compliance,
as well as assistance with product liability cases).  The annual fee charged the
Company  for  these  services  was  based  upon a pro rata  share  of  corporate
administration  costs  using an  allocation  methodology  based on  consolidated
worldwide  sales.  Such  fees  totaled  $1,155  and  $2,862  in 1998  and  1997,
respectively.

Interest  income/(expense)  on  receivables/(payables)  with HII  affiliates was
charged  by/(to) the Company  using  interest  rates tied to LIBOR,  the 13-week
treasury bill rate or prime rate.

Throughout 1999 and 1998, the Company sold certain  products and services to HII
affiliates at negotiated rates and performed  certain  administrative  functions
for HarnCo in Mexico.  Sales to HII  affiliates  amounted to $1.0 million,  $3.2
million and $4.9 million in fiscal 1999, 1998 and 1997, respectively.

In a number of instances,  HII and/or HarnCo provided contracting credit support
in connection  with the Company's  business.  Certain  customers for large crane
supply  contracts  require the supplier to provide  contracting  credit  support
and/or  parent  guarantees  of  performance.  See Note 12. At October 31,  1999,
HarnCo  continues  to be  shown  as the  guarantor  on the  Birmingham,  Alabama
facility lease with the Industrial Revenue Board of Birmingham.

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 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  that  may  be  affected  by  the  HII
Bankruptcy.

Transition  Services  Agreement - On March 30, 1998, the Company  entered into a
Transition  Services  Agreement with HarnCo  pursuant to which HarnCo and/or its
affiliates  provide the Company and the  Company's  subsidiaries  located in the
United States certain specified  transition services for a set monthly price per
service, plus cost sharing in certain instances, for periods ranging up to three
years.  These  services had been  provided  historically,  and for all of fiscal
1998,  but  were  not  covered  by a  written  agreement  until  the date of the
Recapitalization.  These services include financial support (including  payroll,

                                       63
<PAGE>

accounts  payable  and  some  accounting),   MIS  support  (including  mainframe
applications, PC support, engineering applications, maintenance, shared products
and telephone system support),  human resources support (including assistance in
union  negotiations,   processing  support  for  workers'  compensation  claims,
screening and hiring of hourly  employees and benefits  administration),  shared
space,  warehouse services for repair parts at one of HarnCo's  facilities until
July  1998,  order  processing,  office  space and lobby  services  at  HarnCo's
offices,  employee communications,  use of corporate aircraft owned by HarnCo or
its  affiliates,  and all traffic  functions  and  transportation  of  materials
between Milwaukee area operations. The Company was charged $2.1 million and $5.0
million  for  such  services  in  fiscal  1999  and  1998,  respectively.  These
arrangements for shared facilities and services, which are consistent with those
which existed prior to the Recapitalization, include the following:

          1.   The Company and an HII affiliate shared a parts warehouse through
               June 1998 for which the Company was  charged  approximately  $976
               and $1,400 in 1998 and 1997,  respectively.

          2.   An HII affiliate  provides support to the Company for accounting,
               credit,   traffic  and  human   resource   services  and  charged
               approximately  $194,  $335 and $756 to the Company in 1999,  1998
               and 1997,  respectively.  In addition,  the Company leased office
               space  from this  affiliate  through  February  1999 at a cost of
               approximately  $41,  $120  and  $120 for  1999,  1998  and  1997,
               respectively.

          3.   HarnCo  provided  certain  products  and  services to the Company
               which  management   estimates  amounted  to  approximately  $14.1
               million, $12.4 million and $10.0 million in fiscal 1999, 1998 and
               1997,   respectively.   HarnCo   manufactured   electric  motors,
               fabricated  larger  steel  girders and did  machining  on certain
               cranes for the Company at cost or at cost plus a  percentage.  In
               addition,   HII   affiliates   have   acted   as   motor   rewind
               subcontractors  for the Company.  It is  contemplated  that these
               transactions,  none of which individually or in the aggregate are
               significant to the Company, will continue in the future.

          4.   An HII affiliate  provides  information  systems  services to the
               Company and charged  approximately  $1,886,  $3,610 and $1,861 to
               the  Company  in 1999,  1998 and 1997,  respectively.  During the
               third  fiscal  quarter of 1999,  the Company  replaced its shared
               business system.

Prior to the  Recapitalization,  the above-noted  charges were negotiated by the
Company on an annual basis with HII or other  affiliates.  The Company considers
such costs, in the aggregate,  to reflect arms-length terms and believes that in
the aggregate  these  products and services can be obtained on comparable  terms
from third parties.

Component and Manufactured  Products Supply Agreement - At the  Recapitalization
Closing,  the Company  entered into a two year agreement with HarnCo pursuant to
which HarnCo is to sell, or have its affiliates  sell, to the Company and to its
subsidiaries  located in the United States, at cost,  certain  products,  repair
parts  and  rebuilds  as have been  previously  manufactured  by HarnCo  for the
Company.  The price for these products is the fully  absorbed  standard cost for
normal production products and repair parts, and the fully absorbed job cost for
rebuilds and repairs.

Trademark  License  Agreement - In  connection  with the  Recapitalization,  MMH
entered into a trademark license agreement (the "Trademark  License  Agreement")
with an affiliate of HarnCo  pursuant to which the Company was granted the right
to use the "P&H" trade name,  trademark and service mark with respect to all MHE
Business  products on a worldwide  exclusive  basis from March 30, 1998 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,  MMH 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 equal to
0.75% of the  aggregate  net sales of the MHE  Business  for the ten year period
which commenced  March 30, 1999.  There will be no royalty fee for the remainder
of the term following such ten year period.  The Company accrued $1.4 million of
expenses for royalty fees in the period from March 30, 1999 to October 31, 1999.
The Company has elected to defer the payment of the royalty  fees for the period
ended  October 31,  1999,  which would  otherwise be payable on January 30, 2000
pursuant to the terms of Trademark  License  Agreement.  The  Trademark  License
Agreement  provides  that the annual  royalty fee may be deferred  for up to two
years if the Company does not meet certain financial  criteria.  The Company can
only defer up to two  payments  during the term of the  agreement.  In addition,
interest accrues at 12% per year on the deferred fee payments.

Health  and  Welfare  Arrangements  - Under  the  terms of the  Recapitalization
Agreement,  the current  United  States  employees  of the Company  continued to
participate,  from the Recapitalization  Closing until December 31, 1998, in the
medical, dental, life and long-term disability insurance benefit plans that were
sponsored   by  HarnCo   for  the   benefit  of  these   employees   as  of  the
Recapitalization  Closing.  The Company  paid to HarnCo the cost of all benefits
provided under these plans. The Company  recognized  approximately  $0.7 million
and $1.1  million of expense  related to these  arrangements  in fiscal 1999 and
1998, respectively.  Beginning on January 1, 1999, the Company sponsored its own
medical, dental, life and long-term disability insurance benefit plans.

Stockholders Agreement - At the Recapitalization  Closing, Holdings entered into
a stockholders'  agreement and registration rights agreement with HarnCo and MHE
Investments  (the  "Stockholders'  Agreement")  pursuant to which HarnCo has the


                                       64
<PAGE>

right to appoint a representative to the board of directors of Holdings, so long
as HarnCo owns at least 5% of the  outstanding  voting common stock of Holdings.
Certain actions by Holdings require HarnCo's  approval,  including  non-pro rata
redemptions,  certain post-closing affiliate and insider transactions,  granting
of conflicting rights or entering into conflicting agreements,  and dividends or
distributions on, or redemptions or purchases of, any junior equity stock at any
time when dividends are in arrears on the Series B Junior  Preferred Stock owned
by HarnCo.  The Stockholders'  Agreement also provides that HarnCo has the right
to purchase  its pro rata share of future  issuances of common stock of Holdings
except for issuances of management stock and options and common stock sold in an
underwritten  public  offering.  HarnCo's shares are subject to a right of first
refusal in favor of Holdings and its designees and certain other rights.

Credit Indemnification  Agreement - 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  $27.7
million as of October 31,  1999).  MMH accrued a pro-rated  fee of $223,000  for
calendar year 1999. 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.

Loans  to  Management  - At  the  Recapitalization  Closing,  the  Company  made
short-term loans in an aggregate  principal amount of $900,000 to members of the
Company's  senior  management to purchase equity  interests in Niles L.L.C.,  an
indirect  minority  shareholder  of Holdings,  in  accordance  with the terms of
certain  promissory  notes.  Interest on each of the notes,  at a rate per annum
equal at all times to the federal  short-term  rate (as  defined) in effect from
time to time,  from the date of issuance  until such note is repaid in full will
be payable in arrears as a lump sum on the date the remaining  unpaid  principal
amount  of such  note is due in  full.  In  conjunction  with  Jack  Stinnett's,
President and Chief Executive Officer, purchase of 80% of the former President's
equity interest in Niles L.L.C.,  the Company made a loan to Mr. Stinnett in the
amount of $150,000.

Chartwell

Chartwell  Financial  Advisory Agreement - The Company entered into an agreement
with Chartwell  providing for the payment of fees and  reimbursement of expenses
to   Chartwell   for  acting  as   financial   advisor   with   respect  to  the
Recapitalization,  including soliciting, structuring and arranging the financing
of the  Recapitalization.  The fees,  totaling $5.0 million,  equal to 1% of the
consolidated  capitalization of Holdings and the reimbursement of expenses, were
paid at the Recapitalization Closing.

Chartwell  Management  Consulting  Agreement - The  Company  has entered  into a
management  consulting  agreement  with  Chartwell  pursuant to which  Chartwell
provides the Company with certain  management,  advisory and consulting services
for a fee of $1.0 million for each fiscal year of the Company during the term of
the  agreement,  plus  reimbursement  of  expenses.  The term of the  management
consulting agreement is 10 years commencing at the Recapitalization  Closing and
is renewable for  additional  one year periods  unless the Board of Directors of
the Company gives prior written notice of non-renewal to Chartwell.  The Company
incurred  expenses  totaling  $1,000 and $583,  excluding  amounts  paid for the
reimbursement of expenses, during fiscal 1999 and 1998, respectively, under this
agreement.

Note 17 - Non-Recurring Employee Benefit Costs

As a result of the  Recapitalization and subsequent  restructuring,  the Company
recognized certain non-recurring employee benefit costs. These costs included:

          1.   Employee  Termination  Costs - During  fiscal 1998 and 1999,  the
               Company  has  incurred  employee   termination  costs  to  reduce
               employee  staffing  levels  associated  with   restructuring  the
               Company's   United   Kingdom  and  United  States   manufacturing
               operations.  During  the 1998  fiscal  year,  72  employees  were


                                       65
<PAGE>

               terminated,  resulting in severance costs of $0.7 million.  Also,
               in October 1998, the Company announced additional terminations of
               64  employees   resulting  in  additional   severance   costs  of
               approximately   $1.1  million  in  fiscal   1998.   The  staffing
               reductions  announced  in October  1998 were  completed  in early
               fiscal 1999. In 1999, the Company initiated and completed further
               staff   reductions  at  its  United  Kingdom  and  United  States
               operations. Approximately 129 employees were terminated at a cost
               of approximately $1.8 million. Severance costs included severance
               pay, outplacement services and insurance coverage.

          2.   Divestiture Bonuses - Incentives were given to certain members of
               management in connection with the sale of the MHE Business by HII
               in fiscal 1998. HII, not the Company,  was responsible for making
               these incentive  payments and  accordingly,  this amount has been
               reported as a capital contribution in the accompanying  financial
               statements.  The incentives paid to management were approximately
               $1.2 million.


Note 18 - Other Income - Net

Other income - net consists of the following for the years ended October 31:

<TABLE>
<CAPTION>

                                                 1999          1998         1997
                                              -------       -------      -------
<S>                                           <C>           <C>          <C>
Gain on fire insurance claim                  $  --         $  --        $ 2,011
Licensee income                                   470           594          524
Other-net                                         (78)          737          114
                                              -------       -------      -------
                                              $   392       $ 1,331      $ 2,649
                                              =======       =======      =======
</TABLE>

During 1995, one of the Company's facilities in the United Kingdom experienced a
fire  which  resulted  in an  insurance  claim for  property  loss and  business
interruption.  A gain on the  property  loss  portion of the claim  amounted  to
$2,343 and was recorded in 1995. The remaining  $2,011 gain was recorded in 1997
upon finalization of the property loss and business interruption claims.

Note 19 - Subsequent Events

Divestiture-On  December 16, 1999,  the Company  completed the sale of the Brake
Business located in Mississauga,  Ontario,  Canada, for a net sale price of $6.8
million after deduction of certain  transaction-related  items, including taxes.
During fiscal 1999,  the Brake  Business  contributed  $5.7 million in sales and
$1.4 million in operating income to the Company's results.

In accordance  with the New Credit  Facility,  as amended by the Amendment,  the
Company was permitted to apply half of the net proceeds of the sale of the Brake
Business (which amounted to $3.4 million) to general corporate  purposes,  which
the Company would  otherwise  have been  required to use to prepay  indebtedness
under the New Credit  Facility.  After  consummation  of the sale,  the  Company
repaid $3.1  million of the  outstanding  term loans ($2.4  million of which was
applied to the final scheduled  principal payment obligation with respect to the
term loans) and repaid $0.3 million on the Acquisition Facility.

Fire - On January 29,  1999,  the  Company's  leased  facility in  Philadelphia,
Pennsylvania  experienced a fire. Total damages were not material to the Company
as a whole  and  will  be  covered  by  insurance.  The  fire  did  not  cause a
significant  disruption in  operations  at this  facility so a material  adverse
impact on the Company's financial statements is not expected.

Note 20 - 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


                                       66
<PAGE>

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.

                                       67
<PAGE>
<TABLE>

                               MMH HOLDINGS, INC.
               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                OCTOBER 31, 1999
                                  ($ in 000's)
<CAPTION>

                                                                                       Non           Morris
                                                                     Guarantor        Guarantor      Material
 ASSETS                                                              Subsidiaries     Subsidiaries   Handling, Inc.   Eliminations
                                                                     --------------   -------------   ------------   -------------
Current Assets
<S>                                                                 <C>               <C>               <C>               <C>
   Cash and cash equivalents                                        $   2,325         $     104         $   1,500         $    --
   Accounts receivable - net                                           60,163             4,318              --                --
   Intercompany accounts receivable                                    20,057              --              13,204           (33,261)
   Inventories                                                         37,892             2,102              --                --
   Other current assets                                                 6,509               533               800              --
                                                                    ---------         ---------         ---------         ---------
                                                                      126,946             7,057            15,504           (33,261)
                                                                    ---------         ---------         ---------         ---------
Property, Plant and Equipment                                          38,294             2,680              --                --
                                                                    ---------         ---------         ---------         ---------
Other Assets
   Goodwill                                                            40,010             2,834              --                --
   Debt financing costs                                                  --                --              16,398              --
   Noncurrent intercompany receivable                                   5,161              --              83,891           (89,052)
   Investment in affiliates                                            (1,527)             --              64,899           (63,372)
   Deferred income taxes                                                 --                --                --                --
   Other                                                                9,758              --                 616              --
                                                                    ---------         ---------         ---------         ---------
                                                                       53,402             2,834           165,804          (152,424)
                                                                    ---------         ---------         ---------         ---------
                                                                    $ 218,642         $  12,571         $ 181,308         $(185,685)
                                                                    =========         =========         =========         =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Current portion of long-term obligations                         $     342         $      41         $    --           $    --
   New Credit Facility borrowings                                         425              --              27,500              --
   Term loans                                                            --                --              52,225              --
   Acquisition Facility Line borrowings                                  --                --              12,430              --
   Senior notes                                                          --                --             200,000              --
   Bank overdrafts                                                        139             1,228              --                --
   Trade accounts payable                                              25,562             1,195              --                --
   Intercompany accounts payable                                       13,204             4,153            15,904           (33,261)
   Advance payments and progress billings                               8,336              --                --                --
   Accrued warranties                                                   1,748                73              --                --
   Accrued interest                                                        18              --               1,786              --
   Other current liabilities                                           16,854             1,148             2,014              --
                                                                    ---------         ---------         ---------         ---------
                                                                       66,628             7,838           311,859           (33,261)
                                                                    ---------         ---------         ---------         ---------
Senior Notes                                                             --                --                --                --
Other Long-Term Debt                                                    2,189               595              --                --
Noncurrent intercompany payable                                        83,891             5,161              --             (89,052)
Other Long Term Liabilities                                             1,035              --                 272              --
Minority Interest                                                        --                --                --                 504
Mandatorily Redeemable Preferred Stock                                   --                --                --                --
Stockholders' Equity/Parent Investment                                 64,899            (1,023)         (130,823)          (63,876)
                                                                    ---------         ---------         ---------         ---------
                                                                    $ 218,642         $  12,571         $ 181,308         $(185,685)
                                                                    =========         =========         =========         =========

                                                                   Consolidated                                         Consolidated
                                                                   Morris Material       MMH                              MMH
 ASSETS                                                            Handling, Inc.   Holdings, Inc.  Eliminations      Holdings, Inc.
                                                                   --------------   -------------   ------------       -------------
Current Assets
   Cash and cash equivalents                                         $   3,929         $    --           $    --          $   3,929
   Accounts receivable - net                                            64,481              --                --             64,481
   Intercompany accounts receivable                                       --                --                --               --
   Inventories                                                          39,994              --                --             39,994
   Other current assets                                                  7,842              --                --              7,842
                                                                     ---------         ---------         ---------        ---------
                                                                       116,246              --                --            116,246
                                                                     ---------         ---------         ---------        ---------
Property, Plant and Equipment                                           40,974              --                --             40,974
                                                                     ---------         ---------         ---------        ---------
Other Assets
   Goodwill                                                             42,844              --                --             42,844
   Debt financing costs                                                 16,398              --                --             16,398
   Noncurrent intercompany receivable                                     --                --                --               --
   Investment in affiliates                                               --            (130,823)          130,823             --
   Deferred income taxes                                                  --                --                --               --
   Other                                                                10,374              --                --             10,374
                                                                     ---------         ---------         ---------        ---------
                                                                        69,616          (130,823)          130,823           69,616
                                                                     ---------         ---------         ---------        ---------
                                                                     $ 226,836         $(130,823)        $ 130,823        $ 226,836
                                                                     =========         =========         =========        =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Current portion of long-term obligations                          $     383         $    --           $    --          $     383
   New Credit Facility borrowings                                       27,925              --                --             27,925
   Term loans                                                           52,225              --                --             52,225
   Acquisition Facility Line borrowings                                 12,430              --                --             12,430
   Senior notes                                                        200,000              --                --            200,000
   Bank overdrafts                                                       1,367              --                --              1,367
   Trade accounts payable                                               26,757              --                --             26,757
   Intercompany accounts payable                                          --                --                --               --
   Advance payments and progress billings                                8,336              --                --              8,336
   Accrued warranties                                                    1,821              --                --              1,821
   Accrued interest                                                      1,804              --                --              1,804
   Other current liabilities                                            20,016              --                --             20,016
                                                                     ---------         ---------         ---------        ---------
                                                                       353,064              --                --            353,064
                                                                     ---------         ---------         ---------        ---------
Senior Notes                                                              --                --                --               --
Other Long-Term Debt                                                     2,784              --                --              2,784
Noncurrent intercompany payable                                           --                --                --               --
Other Long Term Liabilities                                              1,307              --                --              1,307
Minority Interest                                                          504              --                --                504
Mandatorily Redeemable Preferred Stock                                    --             108,245              --            108,245
Stockholders' Equity/Parent Investment                                (130,823)         (239,068)          130,823         (239,068)
                                                                     ---------         ---------         ---------        ---------
                                                                     $ 226,836         $(130,823)        $ 130,823        $ 226,836
                                                                     =========         =========         =========        =========
</TABLE>

                                       68
<PAGE>
<TABLE>

                               MMH HOLDINGS, INC.
               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                OCTOBER 31, 1998
                                  ($ in 000's)
<CAPTION>


                                                                                   Non             Morris
                                                                  Guarantor        Guarantor       Material
ASSETS                                                            Subsidiaries     Subsidiaries    Handling, Inc.      Eliminations
                                                                  --------------   -------------   ------------        -------------
Current Assets
<S>                                                                <C>               <C>               <C>                <C>
   Cash and cash equivalents                                       $   2,214         $     320         $    --            $    --
   Accounts receivable - net                                          76,000             5,947              --                 --
   Intercompany accounts receivable                                   20,687              --               6,915            (27,602)
   Inventories                                                        39,749             2,812              --                 --
   Deferred income taxes                                                 801              --               5,476               --
   Other current assets                                                4,417               384               389               --
                                                                   ---------         ---------         ---------          ---------
                                                                     143,868             9,463            12,780            (27,602)
                                                                   ---------         ---------         ---------          ---------
Property, Plant and Equipment                                         38,295             2,775              --                 --
                                                                   ---------         ---------         ---------          ---------

Other Assets
   Goodwill                                                           37,767             2,076              --                 --
   Debt financing costs                                                 --                --              18,905               --
   Noncurrent intercompany receivable                                  3,853              --              83,416            (87,269)
   Investment in affiliates                                              331              --              66,732            (67,063)
   Deferred income taxes                                                --                --              65,979               --
   Other                                                               6,691              --                --                 --
                                                                   ---------         ---------         ---------          ---------
                                                                      48,642             2,076           235,032           (154,332)
                                                                   ---------         ---------         ---------          ---------
                                                                   $ 230,805         $  14,314         $ 247,812          $(181,934)
                                                                   =========         =========         =========          =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Short-term notes payable and current
    portion of long-term obligations                               $     122         $      40         $   2,100          $    --
   Bank overdrafts                                                      --               1,252              --                 --
   Trade accounts payable                                             30,539             2,354              --                 --
   Intercompany accounts payable                                       6,915             4,130            16,557            (27,602)
   Advance payments and progress billings                              9,394                 5              --                 --
   Accrued warranties                                                  2,200               124              --                 --
   Accrued interest                                                     --                --               2,201               --
   Other current liabilities                                          27,563             1,205            (1,146)              --
                                                                   ---------         ---------         ---------          ---------
                                                                      76,733             9,110            19,712            (27,602)
                                                                   ---------         ---------         ---------          ---------
Revolving Credit Facility Borrowings                                    --                --               1,200               --
Term Loans                                                              --                --              52,225               --
Acquisition Facility Borrowings                                         --                --               6,194               --
Senior Notes                                                            --                --             200,000               --
Other Long-Term Debt                                                   1,226               656               323               --
Noncurrent intercompany payable                                       83,416             3,853              --              (87,269)
Deferred Income Taxes                                                  2,698              --                --                 --

Minority Interest                                                       --                --                --                  364
Mandatorily Redeemable Preferred Stock                                  --                --                --                 --
Stockholders' Equity/Parent Investment                                66,732               695           (31,842)           (67,427)
                                                                   ---------         ---------         ---------          ---------
                                                                   $ 230,805         $  14,314         $ 247,812          $(181,934)
                                                                   =========         =========         =========          =========

                                                              Consolidated                                              Consolidated
                                                              Morris Material       MMH                                   MMH
                                                              Handling, Inc.   Holdings, Inc.  Eliminations           Holdings, Inc.
                                                              --------------   -------------   ------------            -------------
ASSETS
Current Assets
   Cash and cash equivalents                                      $   2,534          $    --            $    --           $   2,534
   Accounts receivable - net                                         81,947               --                 --              81,947
   Intercompany accounts receivable                                    --                 --                 --                --
   Inventories                                                       42,561               --                 --              42,561
   Deferred income taxes                                              6,277               --                 --               6,277
   Other current assets                                               5,190               --                 --               5,190
                                                                  ---------          ---------          ---------         ---------
                                                                    138,509               --                 --             138,509
                                                                  ---------          ---------          ---------         ---------
Property, Plant and Equipment                                        41,070               --                 --              41,070
                                                                  ---------          ---------          ---------         ---------

Other Assets
   Goodwill                                                          39,843               --                 --              39,843
   Debt financing costs                                              18,905               --                 --              18,905
   Noncurrent intercompany receivable                                  --                 --                 --                --
   Investment in affiliates                                            --              (31,842)            31,842              --
   Deferred income taxes                                             65,979               --                 --              65,979
   Other                                                              6,691               --                 --               6,691
                                                                  ---------          ---------          ---------         ---------
                                                                    131,418            (31,842)            31,842           131,418
                                                                  ---------          ---------          ---------         ---------
                                                                  $ 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                              $   2,262          $    --            $    --           $   2,262
   Bank overdrafts                                                    1,252               --                 --               1,252
   Trade accounts payable                                            32,893               --                 --              32,893
   Intercompany accounts payable                                       --                 --                 --                --
   Advance payments and progress billings                             9,399               --                 --               9,399
   Accrued warranties                                                 2,324               --                 --               2,324
   Accrued interest                                                   2,201               --                 --               2,201
   Other current liabilities                                         27,622               --                 --              27,622
                                                                  ---------          ---------          ---------         ---------
                                                                     77,953               --                 --              77,953
                                                                  ---------          ---------          ---------         ---------
Revolving Credit Facility Borrowings                                  1,200               --                 --               1,200
Term Loans                                                           52,225               --                 --              52,225
Acquisition Facility Borrowings                                       6,194               --                 --               6,194
Senior Notes                                                        200,000               --                 --             200,000
Other Long-Term Debt                                                  2,205               --                 --               2,205
Noncurrent intercompany payable                                        --                 --                 --                --
Deferred Income Taxes                                                 2,698               --                 --               2,698

Minority Interest                                                       364               --                 --                 364
Mandatorily Redeemable Preferred Stock                                 --               95,351               --              95,351
Stockholders' Equity/Parent Investment                              (31,842)          (127,193)            31,842          (127,193)
                                                                  ---------          ---------          ---------         ---------
                                                                  $ 310,997          $ (31,842)         $  31,842         $ 310,997
                                                                  =========          =========          =========         =========
</TABLE>

                                       69
<PAGE>
<TABLE>


                                                          MMH HOLDINGS, INC.
                                     SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                                  FOR THE YEAR ENDED OCTOBER 31, 1999
                                                             ($ in 000's)
<CAPTION>

                                                                                         Non           Morris
                                                                       Guarantor        Guarantor      Material
                                                                       Subsidiaries     Subsidiaries   Handling, Inc.   Eliminations
                                                                     --------------   -------------   ------------   -------------
Revenues
<S>                                                                       <C>             <C>             <C>             <C>
   Equipment and Parts Sales                                              $ 224,510       $  11,848       $    --         $    (832)
   Service Sales                                                             54,563           4,106            --              --
                                                                          ---------       ---------       ---------       ---------
   Net Sales                                                                279,073          15,954            --              (832)
   Other Income - net                                                           397              (5)           --              --
                                                                          ---------       ---------       ---------       ---------
                                                                            279,470          15,949            --              (832)

Cost of Sales                                                               206,349          13,186            --              (832)
Selling, General and
  Administrative Expenses                                                    66,257           3,833           2,349            --

Operating Income (Loss)                                                       6,864          (1,070)         (2,349)           --

Interest (Expense) Income - net
   Affiliates                                                                (6,070)           (375)          6,445            --
   Third Party                                                                 (675)           (424)        (28,928)           --
                                                                          ---------       ---------       ---------       ---------

Income (Loss) Before Income Taxes, Equity
  in Earnings (Loss) of Subsidiaries and Minority Interest                      119          (1,869)        (24,832)           --
Provision for Income Taxes                                                      (32)           --           (71,648)           --
Equity in Earnings (Loss) of Subsidiaries                                    (1,812)           --            (1,725)          3,537
Minority Interest                                                              --              --              --                57
                                                                          ---------       ---------       ---------       ---------
Net Income (Loss)                                                         $  (1,725)      $  (1,869)      $ (98,205)      $   3,594
                                                                          =========       =========       =========       =========

                                                                      Consolidated                                     Consolidated
                                                                      Morris Material       MMH                           MMH
                                                                      Handling, Inc.   Holdings, Inc.  Eliminations   Holdings, Inc.
                                                                      --------------   -------------   ------------   -------------
Revenues
   Equipment and Parts Sales                                              $ 235,526       $    --         $    --         $ 235,526
   Service Sales                                                             58,669            --              --            58,669
                                                                          ---------       ---------       ---------       ---------
   Net Sales                                                                294,195            --              --           294,195
   Other Income - net                                                           392            --              --               392
                                                                          ---------       ---------       ---------       ---------
                                                                            294,587            --              --           294,587

Cost of Sales                                                               218,703            --              --           218,703
Selling, General and
  Administrative Expenses                                                    72,439            --              --            72,439

Operating Income (Loss)                                                       3,445            --              --             3,445

Interest (Expense) Income - net
   Affiliates                                                                  --              --              --              --
   Third Party                                                              (30,027)           --              --           (30,027)
                                                                          ---------       ---------       ---------       ---------

Income (Loss) Before Income Taxes, Equity
  in Earnings (Loss) of Subsidiaries and Minority Interest                  (26,582)           --              --           (26,582)
Provision for Income Taxes                                                  (71,680)           --              --           (71,680)
Equity in Earnings (Loss) of Subsidiaries                                      --           (98,205)         98,205            --
Minority Interest                                                                57            --              --                57
                                                                          ---------       ---------       ---------       ---------
Net Income (Loss)                                                         $ (98,205)      $ (98,205)      $  98,205       $ (98,205)
                                                                          =========       =========       =========       =========
</TABLE>

                                       70
<PAGE>
<TABLE>

                                                          MMH HOLDINGS, INC.
                                     SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                                  FOR THE YEAR ENDED OCTOBER 31, 1998
                                                             ($ in 000's)
<CAPTION>

                                                                                        Non           Morris
                                                                       Guarantor        Guarantor      Material
                                                                       Subsidiaries     Subsidiaries   Handling, Inc.   Eliminations
                                                                     --------------   -------------   ------------   -------------
Revenues
<S>                                                                    <C>              <C>              <C>              <C>
   Net Sales                                                           $ 298,897        $  22,262        $    --          $  (3,302)
   Other Income - net                                                      1,331             --               --               --
                                                                       ---------        ---------        ---------        ---------
                                                                         300,228           22,262             --             (3,302)

Cost of Sales                                                            212,736           17,557             --             (3,302)
Selling, General and
  Administrative Expenses                                                 56,588            4,184              583             --
HII Management Fee                                                         1,155             --               --               --
Non-Recurring Employee Benefit Costs                                       1,797             --              1,216             --
                                                                       ---------        ---------        ---------        ---------

Operating Income (Loss)                                                   27,952              521           (1,799)            --

Interest (Expense) Income - net
   Affiliates                                                             (5,407)            (167)           4,126             --
   Third Party                                                               (76)            (505)         (15,946)            --
                                                                       ---------        ---------        ---------        ---------

Income (Loss) Before Income Taxes, Equity
  in Earnings of Subsidiaries and Minority Interest                       22,469             (151)         (13,619)            --
(Provision) Benefit for Income Taxes                                      (2,895)             264           (1,804)            --
Equity in Earnings of Subsidiaries                                           140             --             19,714          (19,854)
Minority Interest                                                           --               --                 --               27
                                                                       ---------        ---------        ---------        ---------
Net Income                                                             $  19,714        $     113        $   4,291        $ (19,827)
                                                                       =========        =========        =========        =========

                                                                      Consolidated                                     Consolidated
                                                                      Morris Material       MMH                           MMH
                                                                      Handling, Inc.   Holdings, Inc.  Eliminations   Holdings, Inc.
                                                                      --------------   -------------   ------------   -------------
Revenues
   Net Sales                                                           $ 317,857        $    --          $    --          $ 317,857
   Other Income - net                                                      1,331             --               --              1,331
                                                                       ---------        ---------        ---------        ---------
                                                                         319,188             --               --            319,188

Cost of Sales                                                            226,991             --               --            226,991
Selling, General and
  Administrative Expenses                                                 61,355             --               --             61,355
HII Management Fee                                                         1,155             --               --              1,155
Non-Recurring Employee Benefit Costs                                       3,013             --               --              3,013
                                                                       ---------        ---------        ---------        ---------

Operating Income (Loss)                                                   26,674             --               --             26,674

Interest (Expense) Income - net
   Affiliates                                                             (1,448)            --               --             (1,448)
   Third Party                                                           (16,527)            --               --            (16,527)
                                                                       ---------        ---------        ---------        ---------

Income (Loss) Before Income Taxes, Equity
  in Earnings of Subsidiaries and Minority Interest                        8,699             --               --              8,699
(Provision) Benefit for Income Taxes                                      (4,435)            --               --             (4,435)
Equity in Earnings of Subsidiaries                                          --              4,291           (4,291)            --
Minority Interest                                                             27             --               --                 27
                                                                       ---------        ---------        ---------        ---------
Net Income                                                             $   4,291        $   4,291        $  (4,291)       $   4,291
                                                                       =========        =========        =========        =========
</TABLE>

                                       71
<PAGE>
<TABLE>


                                                          MMH HOLDINGS, INC.
                                       SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
                                                  FOR THE YEAR ENDED OCTOBER 31, 1997
                                                             ($ in 000's)
<CAPTION>

                                                                                      Non
                                                                    Guarantor         Guarantor
                                                                    Subsidiaries      Subsidiaries     Eliminations        Combined
                                                                    -----------       ------------     ------------        ---------

Revenues
<S>                                                                    <C>              <C>                 <C>           <C>
   Net Sales                                                           $ 332,244        $  24,065           (2,959)       $ 353,350
   Other Income - net                                                      2,563               86             --              2,649
                                                                       ---------        ---------        ---------        ---------
                                                                         334,807           24,151           (2,959)         355,999

Cost of Sales                                                            243,776           19,977           (2,959)         260,794
Selling, General and
  Administrative Expenses                                                 52,530            4,276             --             56,806
HII Management Fee                                                         2,862             --               --              2,862
                                                                       ---------        ---------        ---------        ---------

Operating Income (Loss)                                                   35,639             (102)            --             35,537

Interest Expense - net
   HII Affiliates                                                           (198)            (196)            --               (394)
   Third Party                                                                 8             (406)            --               (398)
                                                                       ---------        ---------        ---------        ---------

Income (Loss) Before Income Taxes, Equity in Loss
  of Combined Affiliates and Minority Interest                            35,449             (704)            --             34,745
Provision for Income Taxes                                               (13,838)             (36)            --            (13,874)
Equity in Loss  of Combined Affiliates                                      (758)            --                758             --
Minority Interest                                                           --               --                (18)             (18)
                                                                       ---------        ---------        ---------        ---------
Net Income (Loss)                                                      $  20,853        $    (740)       $     740        $  20,853
                                                                       =========        =========        =========        =========
</TABLE>

                                       72
<PAGE>
<TABLE>

                                                          MMH HOLDINGS, INC.
                                     SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                                  FOR THE YEAR ENDED OCTOBER 31, 1999
                                                             ($ in 000's)
<CAPTION>

                                                                                          Non           Morris
                                                                         Guarantor        Guarantor     Material
                                                                         Subsidiaries     Subsidiaries  Handling, Inc.  Eliminations
                                                                         --------------   ------------- ------------   -------------
Operating Activities
<S>                                                                           <C>            <C>            <C>            <C>
   Net income (loss)                                                          $ (1,725)      $ (1,869)      $(98,205)      $  3,594
   Add (deduct) - items not affecting cash provided
     by operating activities:
       Depreciation and amortization                                             7,939            279             21           --
       Amortization of debt financing costs                                       --             --            2,531           --
       Equity in loss/(earnings) of subsidiaries                                 1,812           --            1,725         (3,537)
       Deferred income taxes - net                                              (1,833)          --           71,447           --
       Other                                                                      --             --             --              (57)
   Changes in working  capital,  excluding  the effects
        of  acquisition  opening
     balance sheets:
       Accounts receivable                                                      16,641          1,309           --             --
       Inventories                                                               3,376            624           --             --
       Other current assets                                                     (2,054)          (928)          (403)          --
       Trade accounts payable and bank overdrafts                               (5,841)          (969)          --             --
       Accrued interest                                                             18           --             (415)          --
       Other current liabilities                                               (11,714)           (43)         3,102           --
                                                                              --------       --------       --------       --------
   Net cash provided by (used for) operating activities                          6,619         (1,597)       (20,197)          --

Investment and Other Transactions
   Fixed asset additions - net                                                  (7,511)           (83)          --             --
   Acquisition of businesses - net of cash acquired                             (5,630)          --             --             --
   Issuance of loans to senior management                                         --             --             (150)          --
   Repayment of loans by senior management                                        --             --               70           --
   Other - net                                                                     162            (19)          (587)          --
                                                                              --------       --------       --------       --------
   Net cash used for investment and other transactions                         (12,979)          (102)          (667)          --
                                                                              --------       --------       --------       --------

Financing Activities
   Net proceeds (repayments) of short-term
     debt and notes payable                                                        505            (42)          --             --
   Proceeds from Acquisition Facility line borrowings                             --             --            6,235           --
   Net proceeds from Revolving Credit Facility borrowings                         --             --           26,300           --
   Payment of fees for amendment of New Credit Facility                           --             --             (612)          --
   Distribution to parent                                                        5,922          1,537         (7,459)          --
   Repayments of long-term debt                                                   --             --           (2,100)          --
                                                                              --------       --------       --------       --------
   Net cash provided by (used for) financing activities                          6,427          1,495         22,364           --

Effect of Exchange Rate Changes on Cash and Cash Equivalents                        44            (12)          --             --

Increase (Decrease) in Cash and Cash Equivalents                                   111           (216)         1,500           --
Cash and Cash Equivalents
   Beginning of Year                                                             2,214            320           --             --
                                                                              --------       --------       --------       --------
   End of Year                                                                $  2,325       $    104       $  1,500       $   --
                                                                              ========       ========       ========       ========

                                                                       Consolidated                                    Consolidated
                                                                       Morris Material       MMH                          MMH
                                                                       Handling, Inc.   Holdings, Inc.  Eliminations  Holdings, Inc.
                                                                       --------------   -------------   ------------  -------------
Operating Activities
   Net income (loss)                                                          $(98,205)      $(98,205)      $ 98,205       $(98,205)
   Add (deduct) - items not affecting cash provided
      by operating activities:
       Depreciation and amortization                                             8,239           --             --            8,239
       Amortization of debt financing costs                                      2,531           --             --            2,531
       Equity in loss/(earnings) of subsidiaries                                  --           98,205        (98,205)          --
       Deferred income taxes - net                                              69,614           --             --           69,614
       Other                                                                       (57)          --             --              (57)
   Changes in working  capital,  excluding  the effects
      of  acquisition  opening
     balance sheets:
       Accounts receivable                                                      17,950           --             --           17,950
       Inventories                                                               4,000           --             --            4,000
       Other current assets                                                     (3,385)          --             --           (3,385)
       Trade accounts payable and bank overdrafts                               (6,810)          --             --           (6,810)
       Accrued interest                                                           (397)          --             --             (397)
       Other current liabilities                                                (8,655)          --             --           (8,655)
                                                                              --------       --------       --------       --------
   Net cash provided by (used for) operating activities                        (15,175)          --             --          (15,175)

Investment and Other Transactions
   Fixed asset additions - net                                                  (7,594)          --             --           (7,594)
   Acquisition of businesses - net of cash acquired                             (5,630)          --             --           (5,630)
   Issuance of loans to senior management                                         (150)          --             --             (150)
   Repayment of loans by senior management                                          70           --             --               70
   Other - net                                                                    (444)          --             --             (444)
                                                                              --------       --------       --------       --------
   Net cash used for investment and other transactions                         (13,748)          --             --          (13,748)
                                                                              --------       --------       --------       --------

Financing Activities
   Net proceeds (repayments) of short-term debt
    and notes payable                                                              463           --             --              463
   Proceeds from Acquisition Facility line borrowings                            6,235           --             --            6,235
   Net proceeds from Revolving Credit Facility borrowings                       26,300           --             --           26,300
   Payment of fees for amendment of New Credit Facility                           (612)          --             --             (612)
   Distribution to parent                                                         --             --             --             --
   Repayments of long-term debt                                                 (2,100)          --             --           (2,100)
                                                                              --------       --------       --------       --------
   Net cash provided by (used for) financing activities                         30,286           --             --           30,286


Effect of Exchange Rate Changes on Cash and Cash Equivalents                        32           --             --               32

Increase (Decrease) in Cash and Cash Equivalents                                 1,395           --             --            1,395
Cash and Cash Equivalents
   Beginning of Year                                                             2,534           --             --            2,534
                                                                              --------       --------       --------       --------
   End of Year                                                                $  3,929       $   --         $   --         $  3,929
                                                                              ========       ========       ========       ========
</TABLE>

                                       73
<PAGE>
<TABLE>

                                                          MMH HOLDINGS, INC.
                                     SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                                  FOR THE YEAR ENDED OCTOBER 31, 1998
                                                             ($ in 000's)
<CAPTION>

                                                                                          Non           Morris
                                                                         Guarantor        Guarantor     Material
                                                                         Subsidiaries     Subsidiaries  Handling, Inc.  Eliminations
                                                                         --------------   ------------- ------------   -------------
Operating Activities
<S>                                                                       <C>             <C>             <C>             <C>
   Net income                                                             $  19,714       $     113       $   4,291       $ (19,827)
   Add (deduct) - items not affecting cash provided
       by operating activities:
       Depreciation and amortization                                          6,371             452            --              --
       Amortization of debt financing costs                                    --              --             1,169            --
       Equity in earnings of subsidiaries                                      (140)           --           (19,714)         19,854
       Deferred income taxes - net                                           (1,477)           --             1,804            --
       Divestiture bonus                                                       --              --             1,216            --
       Other                                                                   (881)           --              --               (27)
   Changes in working  capital,  excluding  the effects
        of  acquisition  opening
     balance sheets:
       Accounts receivable                                                     (247)          2,470            --              --
       Inventories                                                           (9,231)          1,539            --              --
       Other current assets                                                  (2,177)           (751)           (389)           --
       Trade accounts payable and bank overdrafts                            (1,405)         (2,887)           --              --
       Accrued interest                                                        --              --             2,201            --
       Other current liabilities                                              3,644             647            --              --
       Activity with parent and other affiliates - net                       11,038          (1,011)         (6,803)           --
                                                                          ---------       ---------       ---------       ---------
   Net cash provided by (used for) operating activities                      25,209             572         (16,225)           --
                                                                          ---------       ---------       ---------       ---------

Investment and Other Transactions
   Fixed asset additions - net                                               (5,078)           (130)           --              --
   Acquisition of businesses - net of cash acquired                          (8,891)           --              --              --
   Issuance of loans to senior management                                      --              --              (900)           --
   Repayment of loans by senior management                                     --              --               780            --
   Other - net                                                               (1,532)           (206)           --              --
                                                                          ---------       ---------       ---------       ---------
   Net cash used for investment and other transactions                      (15,501)           (336)           (120)           --
                                                                          ---------       ---------       ---------       ---------

Financing Activities
   Repayments of short-term debt and notes payable                             (639)            (55)           --              --
   Proceeds from Senior Note Offering                                          --              --           200,000            --
   Proceeds from New Credit Facility                                           --              --            55,000            --
   Proceeds from Acquisition Facility borrowings                               --              --             6,194            --
   Net proceeds from Revolving Credit Facility borrowings                      --              --             1,200            --
   Net proceeds from issuance of Series A preferred stock
     and related common shares                                                 --              --              --              --
   Redemption of shares held by Holdings                                       --              --          (233,459)           --
   Redemption of common stock and preferred stock                              --              --              --              --
   Stock redemption transaction costs                                          --              --              --              --
   Debt financing costs                                                        --              --           (20,074)           --
   Distribution to parent                                                    (8,159)           --             8,159            --
   Repayments of long-term debt                                                --              --              (675)           --
                                                                          ---------       ---------       ---------       ---------
   Net cash provided by (used for) financing activities                      (8,798)            (55)         16,345            --

Effect of Exchange Rate Changes on Cash and Cash Equivalents                    (89)           --              --              --

Increase (Decrease) in Cash and Cash Equivalents                                821             181            --              --
Cash and Cash Equivalents
   Beginning of Year                                                          1,393             139            --              --
                                                                          ---------       ---------       ---------       ---------
   End of Year                                                            $   2,214       $     320       $    --         $    --
                                                                           ========        ========        ========       ========

                                                                       Consolidated                                    Consolidated
                                                                       Morris Material       MMH                          MMH
                                                                       Handling, Inc.   Holdings, Inc.  Eliminations  Holdings, Inc.
                                                                       --------------   -------------   ------------  -------------
Operating Activities
   Net income                                                             $   4,291       $   4,291       $  (4,291)      $   4,291
   Add (deduct) - items not affecting cash provided
     by operating activities:
       Depreciation and amortization                                          6,823            --              --             6,823
       Amortization of debt financing costs                                   1,169            --              --             1,169
       Equity in earnings of subsidiaries                                      --            (4,291)          4,291            --
       Deferred income taxes - net                                              327            --              --               327
       Divestiture bonus                                                      1,216            --              --             1,216
       Other                                                                   (908)           --              --              (908)
   Changes in working  capital,  excluding  the effects
    of  acquisition  opening
     balance sheets:
       Accounts receivable                                                    2,223            --              --             2,223
       Inventories                                                           (7,692)           --              --            (7,692)
       Other current assets                                                  (3,317)           --              --            (3,317)
       Trade accounts payable and bank overdrafts                            (4,292)           --              --            (4,292)
       Accrued interest                                                       2,201            --              --             2,201
       Other current liabilities                                              4,291            --              --             4,291
       Activity with parent and other affiliates - net                        3,224            --              --             3,224
                                                                          ---------       ---------       ---------       ---------
   Net cash provided by (used for) operating activities                       9,556            --              --             9,556
                                                                          ---------       ---------       ---------       ---------

Investment and Other Transactions
   Fixed asset additions - net                                               (5,208)           --              --            (5,208)
   Acquisition of businesses - net of cash acquired                          (8,891)           --              --            (8,891)
   Issuance of loans to senior management                                      (900)           --              --              (900)
   Repayment of loans by senior management                                      780            --              --               780
   Other - net                                                               (1,738)           --              --            (1,738)
                                                                          ---------       ---------       ---------       ---------
   Net cash used for investment and other transactions                      (15,957)           --              --           (15,957)
                                                                          ---------       ---------       ---------       ---------

Financing Activities
   Repayments of short-term debt and notes payable                             (694)           --              --              (694)
   Proceeds from Senior Note Offering                                       200,000            --              --           200,000
   Proceeds from New Credit Facility                                         55,000            --              --            55,000
   Proceeds from Acquisition Facility borrowings                              6,194            --              --             6,194
   Net proceeds from Revolving Credit Facility borrowings                     1,200            --              --             1,200
   Net proceeds from issuance of Series A preferred stock
     and related common shares                                                 --            57,094            --            57,094
   Redemption of shares held by Holdings                                   (233,459)        233,459            --              --
   Redemption of common stock and preferred stock                              --          (287,000)           --          (287,000)
   Stock redemption transaction costs                                          --            (3,553)           --            (3,553)
   Debt financing costs                                                     (20,074)           --              --           (20,074)
   Distribution to parent                                                      --              --              --              --
   Repayments of long-term debt                                                (675)           --              --              (675)
                                                                          ---------       ---------       ---------       ---------
   Net cash provided by (used for) financing activities                       7,492            --              --             7,492

Effect of Exchange Rate Changes on Cash and Cash Equivalents                    (89)           --              --               (89)

Increase (Decrease) in Cash and Cash Equivalents                              1,002            --              --             1,002
Cash and Cash Equivalents
   Beginning of Year                                                          1,532            --              --             1,532
                                                                          ---------       ---------       ---------       ---------
   End of Year                                                            $   2,534       $    --         $    --         $   2,534
                                                                            ========       ========        ========        ========
</TABLE>

                                       74
<PAGE>

<TABLE>
                                                          MMH HOLDINGS, INC.
                                       SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
                                                  FOR THE YEAR ENDED OCTOBER 31, 1997
                                                             ($ in 000's)
<CAPTION>

                                                                                          Non
                                                                           Guarantor      Guarantor
                                                                           Subsidiaries   Subsidiaries    Eliminations      Combined
                                                                           ------------   ------------    ------------      --------
Operating Activities
<S>                                                                           <C>            <C>            <C>            <C>
   Net income (loss)                                                          $ 20,853       $   (740)      $    740       $ 20,853
   Add (deduct) - items not affecting cash provided
      by operating activities:
       Depreciation and amortization                                             6,400            336           --            6,736
       Equity in loss of combined activities                                       758           --             (758)          --
       Deferred income taxes - net                                                  89           --             --               89
       Gain on fire insurance claim                                             (2,011)          --             --           (2,011)
       Other                                                                      (800)          --              (18)          (818)
   Changes in working  capital,  excluding  the effects
       of  acquisition  opening
     balance sheets:
       Accounts receivable                                                      (2,318)        (1,338)          --           (3,656)
       Inventories                                                               5,984             60           --            6,044
       Other current assets                                                      2,113            (36)          --            2,077
       Trade accounts payable and bank overdrafts                               (3,026)           174           --           (2,852)
       Other current liabilities                                               (22,071)          (252)            36        (22,287)
       Activity with parent and other affiliates - net                           6,552          2,172           --            8,724
                                                                              --------       --------       --------       --------
   Net cash provided by operating activities                                    12,523            376           --           12,899
                                                                              --------       --------       --------       --------

Investment and Other Transactions
   Fixed asset additions - net                                                  (6,117)          (381)          --           (6,498)
   Acquisition of businesses - net of cash acquired                            (11,787)          --             --          (11,787)
   Fire insurance claim activity - net                                           3,441           --             --            3,441
   Other - net                                                                     (70)           (33)          --             (103)
                                                                              --------       --------       --------       --------
   Net cash used for investment and other transactions                         (14,533)          (414)          --          (14,947)
                                                                              --------       --------       --------       --------

Financing Activities
   Repayments of short-term debt and notes payable                                 (99)          --             --              (99)
   Repayments of long-term debt                                                   (101)           (54)          --             (155)
                                                                              --------       --------       --------       --------
   Net cash provided by financing activities                                      (200)           (54)          --             (254)
                                                                              --------       --------       --------       --------

Effect of Exchange Rate Changes on Cash and Cash Equivalents                        21             (8)          --               13
                                                                              --------       --------       --------       --------


Decrease in Cash and Cash Equivalents                                           (2,189)          (100)          --           (2,289)
Cash and Cash Equivalents
   Beginning of Year                                                             3,582            239           --            3,821
                                                                              --------       --------       --------       --------
   End of Year                                                                $  1,393       $    139       $   --         $  1,532
                                                                              ========       ========       ========       ========
</TABLE>

                                       75
<PAGE>

Item  9.  Changes  in and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure

     None.

                                       76
<PAGE>

                                  PART III

Item 10.  Directors and Executive Officers of the Registrants

The following sets forth certain information with respect to the persons who are
members of Holdings' Board of Directors,  MMH's Board of Directors or the senior
management team of MMH and/or Holdings as of February 10, 2000 (1).

Name                 Age       Position

Jack F. Stinnett      54        President, Chief Executive Officer and
                                Chairman of the Board of MMH  and Holdings
David D. Smith        45        Vice President-Finance of MMH and Vice President
                                and Director of Holdings
Peter A. Kerrick      43        Vice President--Engineered Equipment of MMH
Edward J. Doolan      48        Vice President--Distribution & Service of MMH
Michael J. Maddock    56        Vice President--Europe, Pacific Rim &
                                Middle East of MMH
Martin L. Ditkof      42        General Counsel and Secretary of MMH and
                                Secretary of Holdings
Ross C. Smith         43        Vice President--Standard Cranes and
                                Components of MMH
Randall G. Burlison   56        Vice President--Product Support of MMH
Todd R. Berman        41        Director of MMH and Holdings
Jay R. Bloom (2)      43        Director of Holdings
Robert W. Hale (3)    52        Director of Holdings
Michael S. Shein (3)  36        Director of MMH and Vice President and
                                Director of Holdings
Michael R. Young (2)  54        Director of Holdings
Larry Zine (3)        44        Director of Holdings
Eric A. Green         38        Director of Holdings

(1)  Michael S.  Erwin  resigned  as  President,  Chief  Executive  Officer  and
     Director  of MMH and  Holdings  in  March  1999.  Richard  J.  Niespodziani
     resigned as Vice  President--Aftermarket  Products of MMH in June 1999.  K.
     Bruce  Norridge  resigned  as Vice  President--Europe  &  Africa  of MMH in
     October  1999.  J.  Bradley  Wiedmann  resigned  as  Vice  President--Human
     Resources of MMH in December 1999.  Malcolm Lassman  resigned as a director
     of Holdings on December 5, 1999.

(2) Member of the Compensation Committee. (3) Member of the Audit Committee.


Jack F. Stinnett--Jack Stinnett joined the Company as President, Chief Executive
Officer and as a director of both  Holdings and MMH in March 1999.  He serves as
Chairman  of the Board of each of  Holdings  and MMH  since  February  2,  2000.
Previously, he served as Vice President and General Manager of Engine Components
World  Wide for TRW,  a global  automotive  parts  business.  Before  that,  Mr.
Stinnett was employed by Babcock & Wilcox in various  management  and  materials
positions.  Mr.  Stinnett  graduated from the United States Naval Academy with a
Bachelor  of  Science  degree in Marine  Engineering  and  obtained  as MBA from
Lynchburg College/Tulane University.

David D. Smith--David Smith has been serving as Vice  President--Finance  of the
Company  since March 30, 1998 and as a director  and Vice  President of Holdings
since  1997.  Previously,  he served as Vice  President  and  Controller  of the
Company since 1993. Mr. Smith joined the Company in 1988 as a Senior  Operations
Auditor.  Mr. Smith received his Bachelor of Science in Business  Administration
from Bucknell  University and his M.B.A. from the University of Pittsburgh.  Mr.
Smith is a Certified Public Accountant.

Peter  A.   Kerrick--Peter   Kerrick  assumed  his  current   position  as  Vice
President--Engineered  Equipment  of the  Company  in 1995.  Since  joining  the
Company in 1978 as a Design & Project  Engineer,  Mr.  Kerrick has held numerous
positions  with the  Company,  primarily  in the  sales  capacity.  Mr.  Kerrick
obtained a Bachelor  of Science  degree in  Mechanical  Engineering  from Purdue
University.

                                       77
<PAGE>

Edward J. Doolan--Edward Doolan serves as Vice President--Distribution & Service
of the Company.  Prior to being  promoted to his current  position in 1994,  Mr.
Doolan served in a variety of positions in the aftermarket  products and service
groups. He joined the Harnischfeger  team in 1979 and became Director of Product
Support  for the  Company  in 1985.  Mr.  Doolan  has a  Bachelor  of Science in
Industrial   Engineering  from  Georgia  Tech  and  an  M.B.A.   from  Marquette
University.

Michael  J.  Maddock--Michael  Maddock  has been Vice  President--Pacific  Rim &
Middle East of the Company since September 1997. Mr. Maddock's  responsibilities
were expanded to include  Europe in March 1999.  Previously,  Mr. Maddock held a
number of  positions  at Morris Ltd.,  including  Director and General  Manager,
Hoist Division,  and Managing Director,  Standard Products  Division.  He joined
Morris Ltd. in 1989.  Mr.  Maddock  received his M.I. in Mechanical  Engineering
from the Institute of Mechanical Engineers,  a Bachelor of Science in Metallurgy
from  the  University  of  Surrey,  a  Higher  National  Diploma  in  Mechanical
Engineering  and a Higher  National  Certificate in Production  Engineering.  He
received his Membership from the Institute of Mechanical Engineers.

Martin  L.  Ditkof--Martin  Ditkof  currently  serves  as  General  Counsel  and
Secretary  of  the  Company  and  as  Secretary  of  Holdings.   He  joined  the
Harnischfeger  team as a  Corporate  Attorney  in 1988 and  assumed  his current
position at the Company in November 1995. Mr. Ditkof received a Bachelors degree
in  Business  Administration  from the  University  of  Michigan  and his  Juris
Doctorate from Cornell Law School.

Ross   C.   Smith--Ross   Smith   assumed   his   current   position   as   Vice
President--Standard  Cranes and  Components in March 1999.  Mr. Smith joined the
Company in July 1998 as the Vice President of Business Development and Strategic
Planning. Previously, Mr. Smith held a position in strategic planning and market
development at Siebe plc., a global supplier of intelligent automation, controls
and  industrial   equipment  since  1989.  Mr.  Smith  received  his  B.A.  from
Northwestern  University  and an  M.B.A.  from the  Owen  School  at  Vanderbilt
University.

Randall  G.  Burlison--Randy  Burlison  assumed  his  current  position  as Vice
President--Product  Support in 1999.  Since  joining  the  Company in 1978,  Mr.
Burlison  has held a variety  of  positions  including  General  Manager,  Crane
Division,  and Operations Manager, Oak Creek. Mr. Burlison received his Bachelor
of Science degree in Industrial Engineering from the University of Illinois.

Todd R.  Berman--Todd  Berman has been a director of Holdings  and a director of
the Company  since March 30, 1998.  Mr.  Berman is the founder and  President of
Chartwell  Investments  Inc.  He served  as  Chairman  of the Board of  Griffith
Consumers  Company,  one of the nation's  largest  independent  distributors  of
heating oil and other  petroleum  products,  from December  1994 until  February
1999; as Chairman of Carl King,  Inc., the leading  operator of gas stations and
convenience stores in the Delmarva  peninsula  (Delaware,  Maryland,  Virginia),
from  December 1994 until  February  1999;  and as a director of Petro  Stopping
Centers,  L.P., a leading  operator of large,  full-service  truck  stops,  from
January 1997 until July 1999.  Mr.  Berman has been with  Chartwell  Investments
Inc. or its predecessor  since 1992. He received his A.B. from Brown  University
and an M.B.A. from Columbia University Graduate School of Business.

Jay R.  Bloom--Jay  Bloom has been a director of Holdings  since March 30, 1998.
Mr. Bloom is a Managing  Director and co-head of High Yield Investment  Banking,
Sales,  Trading  and  Research at CIBC World  Markets.  In  addition,  he is the
co-head of CIBC High Yield Merchant Banking Funds. At CIBC World Markets, he has
been responsible for overall portfolio strategy,  numerous high yield financings
and investments in numerous  companies through the merchant banking funds. Prior
to joining  CIBC World  Markets in 1995,  Mr.  Bloom was a founder and  managing
director  of The  Argosy  Group L.P.  Before  Argosy,  Mr.  Bloom was a managing
director  in the  Mergers  and  Acquisitions  Group of  Drexel  Burnham  Lambert
Incorporated. Mr. Bloom serves on the board of directors of GT Crossing Limited,
Global Telesystems Limited,  Heating Oil Partners,  L.P.,  Consolidated Advisers
Limited,  L.L.C.,  and Riverside  Millwork Company,  Inc. and is on the Board of
Advisors of Oak Hill  Securities  Fund,  L.P.  Mr.  Bloom  received his B.S. and
M.B.A.  degrees from Cornell  University,  graduating  summa cum laude,  and his
Juris Doctorate from Columbia University School of Law.

Robert W. Hale--Robert Hale was appointed as the representative of HarnCo to the
board of  directors  of  Holdings  (pursuant  to the terms of the  Stockholders'
Agreement (as defined herein)) on March 30, 1998 and has served as a director of
Holdings  since that date.  Mr. Hale is President of HII's P&H Mining  Equipment
division,  a  position  he has held since  1994.  Previously,  Mr.  Hale ran the
Company,  serving as Senior  Vice  President  and  General  Manager of HII's P&H
Material  Handling  division from 1988 to 1994.  Mr. Hale received a Bachelor of
Science in civil  engineering  from  Marshall  University  and is a graduate  of
Harvard's AMD Program.

                                       78
<PAGE>

Michael  S.  Shein--Michael  Shein has been a  director  and  Vice-President  of
Holdings  and a director of the Company  since March 30,  1998.  Mr.  Shein is a
Managing Director and co-founder of Chartwell Investments Inc. and has been with
Chartwell  Investments Inc. or its predecessor since 1992. Mr. Shein served as a
director of Griffith Consumers Company,  one of the nation's largest independent
distributors  of heating oil and other  petroleum  products,  from December 1994
until February 1999; a director of Carl King,  Inc., the leading operator of gas
stations and convenience stores in the Delmarva peninsula  (Delaware,  Maryland,
Virginia),  from  December  1994 until  February  1999;  and a director of Petro
Stopping Centers,  L.P., a leading operator of large,  full-service truck stops,
from January 1997 until July 1999.  Mr.  Shein  received a B.S.  summa cum laude
from The Wharton School at the University of Pennsylvania.

Michael R. Young--Michael Young has served as a director of Holdings since March
30, 1998.  Mr. Young has served as the  Chairman,  Chief  Executive  Officer and
President of Bristol Compressors from 1983 to 1987 and since 1996. Mr. Young was
the Chairman and Chief Executive  Officer of Evcon  Industries from 1991 to 1995
and was integrally  involved in selling the company to York  International.  Mr.
Young was the President and Chief Operating Officer of York  International  from
1988 to 1989.  He is  currently a director of York  International.  From 1976 to
1983, Mr. Young was Director of Product Development for Rockwell International's
Automotive   Operations   and  prior  to  that  was  Chief   Engineer  of  Eaton
Corporation's  Engineering & Research Center.  Mr. Young received B.S., M.S. and
Doctorate degrees from the University of Detroit.

Larry  Zine--Larry  Zine has served as a director  of  Holdings  since March 30,
1998.  Mr. Zine is Chief  Financial  Officer and  Executive  Vice  President  of
Blockbuster and was the Executive Vice President and Chief Financial  Officer of
Petro Stopping  Centers,  L.P., a leading operator of large  full-service  truck
stops,  from  September  1996 until 1999.  Prior to that, Mr. Zine served as the
Executive  Vice  President  and  Chief  Financial   Officer  for  The  Circle  K
Corporation,  the  second  largest  chain of  convenience  stores in the  United
States,  from 1988 to 1996.  Mr. Zine was  educated at the  University  of North
Dakota and holds an M.S. degree in accounting and a B.S.B.A. in marketing.

Eric A. Green--Eric  Green has served as a director of Holdings since August 21,
1999.  Mr.  Green is a partner in Chase  Capital  Partners  and is a director of
Interdent.  Before joining Chase Capital,  Mr. Green was a Managing  Director in
the Merchant Banking Group at Banque Paribas.  Mr. Green also was employed by GE
Capital and the  General  Electric  Company.  Mr.  Green  received a Bachelor of
Administration from Wabash College and an M.B.A. from New York University.

Director Compensation

Holdings pays directors fees to certain of its directors. Larry Zine and Michael
Young each receive $3,000 per meeting. In addition, the Company has committed to
grant 50 options to purchase shares of Holdings Series A Senior  Preferred Stock
at an  exercise  price  of  $1,000.  Holdings  and MMH  reimburse  all of  their
directors for  reasonable  out-of-pocket  expenses  incurred in connection  with
attending Board meetings.

                                       79
<PAGE>

Item 11.  Executive Compensation

                                                      Summary Compensation Table

The  following  table  presents  information  concerning  compensation  paid for
services to the individuals who served as Chief Executive Officer of the Company
during  fiscal year 1999,  the four other most highly  paid  executive  officers
employed by the Company at the end of fiscal year 1999, and two  individuals who
would have been among the four most highly paid  executive  officers if they had
been employed by the Company at the end of the fiscal year 1999, for each of the
fiscal years ended October 31, 1999 and 1998,  respectively  (collectively,  the
"Named Executive Officers").
<TABLE>
<CAPTION>

                                                                    Annual Compensation
                                                           -------------------------------------
                                                                                    Other                                   All
                                                                                    Annual                    LTIP         Other
Name and                                                   Salary      Bonus        Compensation   Bonus     Payouts    Compensation
Principal Position                                          ($)         ($)            ($)        ($) (a)    ($) (b)       ($) (c)
                                                          ------------- ------------ ----------- --------- -----------   -----------

<S>                                               <C>      <C>         <C>              <C>         <C>         <C>         <C>
Jack F. Stinnet                                   1999     265,389     100,000          4,800        --          --         5,787(d)
  President and Chief Executive
Officer                                           1998         N/A         N/A           N/A         N/A         N/A         N/A

Michael S. Erwin                                  1999      68,991        --             --          --          --       312,012(d)
  Former President and Chief
Executive Officer                                 1998     176,670      11,484           --        17,736       7,010     384,789(d)

Edward J. Doolan                                  1999     140,040       7,352           --          --          --        12,341(d)
  Vice President - Distribution
& Service                                         1998     114,040      24,376              0       7,323       2,659     134,087(d)

Michael J. Maddock                                1999     133,485        --       20,483 (e)        --          --        99,842(f)
  Vice President - Europe
Pacific Rim & Middle East                         1998     133,485           0     19,465 (e)           0           0     219,388(f)

David D.Smith                                     1999     144,000      14,493           --          --          --         6,959(d)
  Vice President and Chief
Financial Officer                                 1998     115,830       4,517           --        11,216       4,386     129,594(d)

Randall G. Burlison                               1999     109,020       6,271           --          --          --        12,923(d)
 Vice President - Product
     Support                                      1998     108,220      15,367           --        12,512        --        10,556(d)

Richard J. Niespodziani                           1999      78,750        --             --          --          --       194,473(d)
 Former Vice President -
Aftermarket                                       1998     112,005      23,941           --        16,991       2,210     134,631(d)

K. Bruce Norridge                                 1999     125,342        --       50,342 (e)        --          --       356,582(f)
   Former Vice President -
Europe                                            1998     130,350        --       75,926 (e)        --          --       219,388(f)
</TABLE>


(a)      Represents  the cash portion of the bonus earned in 1998 that  resulted
         from bonuses that were  "banked" in prior years under the HII EVA Bonus
         Program,  for  which  Messrs.   Erwin,  Doolan,   Smith,  Burlison  and
         Niespodziani were eligible until the Recapitalization Closing.
(b)      Represents  HII  common  stock  purchased  through  conversion  of each
         executive's  banked bonus at a 25%  discount on the  purchase  price of
         $46.04 in accordance with the provisions of the HII Executive Incentive
         Plan. Mr. Erwin and Mr.  Niespodziani  had elected to defer 25% and 10%
         of their respective prior year cash bonuses into HII common stock under
         the HII Executive Incentive Plan in which Messrs. Erwin, Doolan, Smith,
         Burlison  and  Niespodziani  participated  until  the  Recapitalization
         Closing.

                                       80
<PAGE>

     (c)  Fiscal year 1998 includes  divestiture bonuses of $375,000,  $125,000,
          $125,000,  $125,000,  $125,000 and $125,000 for Messrs. Erwin, Doolan,
          Smith,  Maddock,   Niespodziani,   and  Norridge,   respectively.  See
          "--Divestiture  Bonus Agreements."  Fiscal year 1999 includes lump sum
          payments of $300,000, $178,500, and $256,740, respectively, to Messrs.
          Erwin,  Niespodziani  and Norridge  pursuant to  severance  agreements
          entered into with the Company.

     (d)  Includes  $689,  $445,  $477,  $425 and $437  paid to  Messrs.  Erwin,
          Doolan, Smith, Burlison and Niespodziani,  respectively, under the HII
          profit   sharing   plan,   in  which  they   participated   until  the
          Recapitalization  Closing,  and the profit  sharing  component  of the
          Company's  Retirement Plan (as defined  herein),  which was adopted on
          April 1, 1998, and which permits the employee to elect to receive half
          of  the  payment  in  cash,  rather  than  as a  contribution  to  the
          Retirement  Plan. No amounts were earned in fiscal year 1999 under the
          profit  sharing  component  of the  Company's  Retirement  Plan.  Also
          includes employer matching,  transition and age-based contributions of
          $7,200,  $7,643,  3,501, $10,131 and $8,549 for Messrs. Erwin, Doolan,
          Smith, Burlison and Niespodziani,  respectively,  for fiscal year 1998
          and the  following  amounts paid by HII and the Company  during fiscal
          1998 for group term life  insurance  premiums  for the  benefit of the
          executives:  Mr. Erwin, $1,900; Mr. Doolan, $999; Mr. Smith, $616; Mr.
          Burlison,  $2,367;  and Mr.  Niespodziani,  $1,082.  Fiscal  year 1999
          amounts   include   employer   matching,   transition   and  age-based
          contributions of $4,800, $11,315,  $12,000, $6,600, $11,975 and $8,664
          for Messrs. Stinnett, Erwin, Doolan, Smith, Burlison and Niespodziani,
          respectively,  and the following amounts paid by the Company for group
          term life insurance  premiums for the benefit of the  executives:  Mr.
          Stinnett,  $987; Mr. Erwin,  $697; Mr. Doolan,  $341; Mr. Smith, $359;
          Mr. Burlison,  $857; and Mr. Niespodziani,  $388.

     (e)  Fiscal year 1998 includes $14,641 and $14,469 in car allowance for Mr.
          Norridge  and Mr.  Maddock,  respectively,  as well as $56,549  for an
          expatriate  allowance paid to Mr. Norridge by the Company  pursuant to
          the terms of his  employment  agreement.  Fiscal  year  1999  includes
          $18,480 and $20,483 in car allowance for Mr. Norridge and Mr. Maddock,
          respectively,  as well as  $50,342  in  expatriate  allowance  for Mr.
          Norridge.  Also  includes  taxable  benefits  such as  private  health
          insurance,  fuel allowance and telephone allowance.

     (f)  Represents  an annual  earn-out  paid to Messrs.  Maddock and Norridge
          pursuant to the terms of their employment agreements.

Arrangements Prior to Consummation of the Transactions

The following describes certain compensation and benefit arrangements applicable
to members of the senior  management  team of the Company  for periods  prior to
March 30, 1998. Such employees' participation in such plans and programs, except
as otherwise noted,  terminated on March 30, 1998, except with respect to vested
benefits.


Until March 30, 1998,  executive  officers of the Company  located in the United
States  participated  in HII's defined benefit pension plan. The following table
sets forth the  estimated  annual  benefits  payable upon  retirement  at normal
retirement  age for the years of service  indicated  under the plan (and  excess
benefit arrangements defined below) at the indicated remuneration levels.

                                       Years of Service
              ------------------------------------------------------------------
Remuneration       5          10         15         20        25         30
------------  --------     --------  --------   --------   ---------   ---------
$140,000       $ 10,500   $ 21,000   $ 31,500   $ 42,000   $ 52,500   $ 63,000
 180,000         13,500     27,000     40,500     54,000     67,500     81,000
 220,000         16,500     33,000     49,500     66,000     82,500     99,000
 260,000         19,500     39,000     58,500     78,000     97,500    117,000
 300,000         22,500     45,000     67,500     90,000    112,500    135,000
 340,000         25,500     51,000     76,500    102,000    127,500    153,000
 380,000         28,500     57,000     85,500    114,000    142,500    171,000

                                       81
<PAGE>

Remuneration  covered by the plan includes the following amounts reported in the
1998 Summary  Compensation  Table: salary and bonus (including the cash value of
bonuses  foregone for stock under the HII Executive  Incentive  Plan).  "Banked"
bonuses are not included.

The years of service  credited  for each of the Named  Executive  Officers  are:
Michael Erwin 26 years,  Edward Doolan 20 years,  David Smith 11 years,  Randall
Burlison 21 years and Richard Niespodziani 24 years.

Benefits are based upon years of service and the highest  consecutive  five year
average  annual salary and incentive  compensation  during the last ten calendar
years of service.  Estimated  benefits under the retirement  plan are subject to
the provisions of the Internal Revenue Code of 1986, as amended, which limit the
annual benefits which may be paid from a tax qualified  retirement plan. Amounts
in excess of such  limitations will either be paid from the general funds of HII
or  funded  with HII  common  stock  under  the  terms  of the HII  Supplemental
Retirement and Stock Funding Plan. The estimated  benefits in the table above do
not reflect offsets under the plan of 1.25% per year of service (up to a maximum
of 50%) of the Social Security benefit.

Executive officers of the Company located in the United Kingdom were eligible to
participate  in an executive  section of the  Harnischfeger  Industries  Pension
Scheme  specific  to the  Company  (the "UK  Scheme"),  which  provides  defined
benefits.  Pension income in the UK Scheme at normal  retirement age is based on
the  employee's  years of service and his last twelve months'  taxable  earnings
(excluding certain benefits in kind and fluctuating payments),  or on an average
of those  taxable  earnings  over the last 24 months,  if  greater.  There is no
offset for United Kingdom social security  benefits.  In April 1999, the defined
benefit pension scheme was separated from the Harnischfeger  Industries  Pension
Scheme into the Morris Material Handling Pension Plan.

In addition to United  Kingdom social  security  benefits to which such a person
may be entitled,  the following  table  illustrates the amount of annual pension
benefits (in pounds  sterling)  payable from the UK Scheme to an individual with
the  indicated  earnings  and  years  of  service  at  the  individual's  normal
retirement age of 65.
<TABLE>
<CAPTION>


                                                                 Years of Service
                       --------------------------------------------------------------------------------------------------
Remuneration               10              15               20               25                 30                35
------------           ----------    -------------    -------------     ------------      -------------      ------------

<S>                     <C>              <C>              <C>              <C>              <C>              <C>
(pound)50,000           16,667           25,000           33,333           33,333           33,333           33,333
       75,000           25,000           37,500           50,000           50,000           50,000           50,000
      100,000           33,333           50,000           66,667           66,667           66,667           66,667
      125,000           41,667           62,500           83,333           83,333           83,333           83,333
      150,000           50,000           75,000          100,000          100,000          100,000          100,000
</TABLE>

Mr. Maddock and Mr. Norridge continue to be members of the UK Scheme. At October
31, 1999, Mr. Maddock had 10.75 years of service and Mr. Norridge had 4.34 years
of service for purposes of this plan. Because Mr. Norridge joined the plan after
June 1, 1989, as a matter of United  Kingdom law, his benefits  after 20 or more
years of service would be capped at (pound)56,000. Mr. Norridge's service period
remains fixed at the date of termination.

Divestiture Bonus Agreements

In October 1998, Michael S. Erwin, Edward J. Doolan,  David D. Smith, Michael J.
Maddock,  Richard  J.  Niespodziani,  and K.  Bruce  Norridge  were  each paid a
divestiture  bonus of  $375,000,  $125,000,  $125,000,  $125,000,  $125,000  and
$125,000,  respectively.  These amounts were paid under  agreements  with HarnCo
which  provided  for bonuses to be paid to certain  employees  in the event of a
purchase by a third party not affiliated with HarnCo of substantially all of the
assets  and  liabilities  of the MHE  Business.  Under  these  agreements,  each
employee had agreed to release HarnCo and its affiliates from certain claims and
agreed not to voluntarily  terminate his employment with the MHE Business within
the  first  six  months  following  any  such  divestiture  unless  there  was a
substantial change in the employee's duties,  functions and  responsibilities or
the employee was required to perform the principal portion of his duties outside
his current locale.

                                       82
<PAGE>

Arrangements After Consummation of the Transactions

Employee Retirement Savings Plan

Effective April 1, 1998, the Company established a retirement savings plan under
Section  401(k) of the  Internal  Revenue  Code  (the  "Retirement  Plan").  The
Retirement  Plan covers all  non-bargaining  unit employees in the United States
from their  first day of service.  Employees  can  contribute  from 1% to 10% of
their eligible  pre-tax pay. The company matches 100% of the first 3% and 50% of
the next 2% of each  employee's  contribution  to the Retirement Plan ("matching
contributions").   Once  an  employee  turns  35,  the  Company  contributes  an
additional  percentage of the  employee's  pay based on his/her age  ("age-based
contributions").  In  addition,  the Company  makes a special  contribution  for
long-service and older employees who were participants in the former HII pension
plan in order to make up for future years of  nonparticipation  in that plan. If
an  employee's  age plus  years of  service  add up to 65 or more,  the  Company
contributes  an additional  percentage of the  employee's  pay to the Retirement
Plan  ("transition  contributions").  All  contributions  are 100%  vested  upon
contribution.  An  employee  must be active on  December  31 of the plan year in
order to qualify for annual Company contributions.  During fiscal year 1998, the
Company  contributed  $7,200,  $7,643,  $3,501,  $10,131 and $8,549 in matching,
transition and age-based contributions to the Retirement Plan for Messrs. Erwin,
Doolan, Smith, Burlison and Niespodziani, respectively. Fiscal year 1999 amounts
include  employer  matching,  transition and age-based  contributions of $4,800,
$11,315,  $12,000,  $6,600,  $11,975  and $8,664 for  Messrs.  Stinnett,  Erwin,
Doolan, Smith, Burlison and Niespodziani, respectively.

Profit Sharing Plan

The Company has  continued  the HII profit  sharing  plan as a component  of its
Retirement  Plan.  The profit  sharing  plan covers  substantially  all domestic
employees,   except  those  covered  by  collective  bargaining  agreements  and
employees of affiliates with separate defined  contribution plans. During fiscal
1998,  contributions  to this plan were based on the Company's  "economic  value
added"  performance.  Effective  November  1, 1998,  contributions  are based on
earnings of the Company before interest and taxes.  Employees have the option to
receive half of the payment in cash rather than in the form of a contribution to
the Retirement Plan. Messrs.  Erwin,  Doolan,  Smith,  Burlison and Niespodziani
received cash payments of $689, $445, $477, $425 and $437,  respectively,  under
the profit  sharing plan in fiscal  1998.  No amounts were earned in fiscal year
1999 under the profit sharing component of the Company's Retirement Plan.

Employment Agreements and Severance Arrangements

On March 30, 1998, the Company entered into  employment  agreements with certain
senior  managers of the Company.  The  agreements  with Messrs.  Erwin,  Doolan,
Smith,  and  Niespodziani   provided  for  their  employment  in  their  current
capacities  at that time for three years,  and for  additional  one year periods
thereafter  unless  canceled  by either  party on 60 days  notice  prior to such
renewal date. They provided  Messrs.  Erwin,  Doolan,  Smith, and Niespodziani a
base salary  (subject to annual  review by the Board of  Directors) of $180,000,
$111,540, $111,300 and $109,800,  respectively,  and an annual performance-based
bonus  plan  (based on  Economic  Value  Added for 1998 and on EBITDA  for years
thereafter),  the  terms  of which  are to be  agreed  upon by the  Compensation
Committee of the Board of Directors and the Company's Chief  Executive  Officer.
The  agreements  also provide for the  indemnification  of the  executives,  and
include non-competition and confidentiality provisions. If the executive resigns
for Good  Reason  (as  defined  therein,  which  definition  includes a material
reduction of the executive's duties or substantial change in work conditions,  a
material  decrease in  compensation  or benefits,  and changes in control of the
Company),  the  executive  is entitled to  continuance  of his then current base
salary for 12 months,  continuation of health and life insurance benefits for 24
months, a pro-rated bonus, the continuation of other  perquisites for six months
and payment, if requested, for all equity in Holdings or the Company held by the
executive or his family.  If the executive is terminated by the Company  without
Cause (as defined therein,  which definition includes the willful failure of the
executive to substantially  perform his duties, and the commission of a fraud on
the  Company,  if not  cured  within 30 days'  written  notice  thereof),  he is
entitled to a lump sum payment equal to his then current annual base salary plus
a lump sum payment  equal to the base salary  which  would  otherwise  have been
payable for the balance of the fiscal year in which termination  occurs, and the
same benefits as if he resigned for Good Reason.

The Company also entered into new employment  agreements  with Messrs.  Norridge
and Maddock on March 30, 1998.  These  agreements  generally  continue in effect

                                       83
<PAGE>

until the death of the executive,  the executive's  reaching  normal  retirement
age, termination by the Company for Cause (as defined therein,  which definition
includes the executive being absent from work through sickness or disability for
more than six months in any 12 month  period,  and the  executive  neglecting to
perform his duties in a material  way),  termination  by the  executive for Good
Reason (as defined therein, which definition includes the failure by the Company
to pay the  compensation  and benefits  required by the agreement and a material
diminishment  in the duties of the  executive),  or until  terminated  by either
party upon 12 months  notice.  Messrs.  Maddock  and  Norridge  are  entitled to
(pound)80,900 and  (pound)79,000  base salary,  respectively,  subject to review
annually,  a bonus  calculated and paid in accordance with the provisions of the
management bonus scheme, an additional payment of (pound)56,250 for each of 1998
and 1999, pension benefits at least equal in value to the benefits the executive
would  have been  entitled  to under the  previous  benefit  plan in which  such
executive participated,  and various other benefits. The executive may terminate
the  agreement  at any time for Good  Reason,  in which  case the  executive  is
entitled to receive his annual base salary  immediately prior to termination for
an additional 12 months and a lump sum of (pound)56,250  multiplied by two minus
the  number  of times  the  executive  received  this  additional  payment.  The
executive is also entitled to continue participating in the medical,  dental and
life insurance plans for one year or until he receives  equivalent benefits from
a new employer.

The Company  entered into an employment  agreement with Mr.  Stinnett on January
27, 1999.  The agreement  with Mr.  Stinnett  provides for his employment in his
current capacity for three years, and for additional one-year periods thereafter
unless canceled by either party on 60 days notice prior to such renewal date. It
provides Mr.  Stinnett a base salary  (subject to annual  review by the Board of
Directors)  of  $400,000  and an annual  performance-based  bonus plan (based on
EBITDA),  the terms of which are to be agreed upon by the Board of Directors and
Mr.  Stinnett.  The  agreement  also  provide  for  the  indemnification  of Mr.
Stinnett, and includes  non-competition and confidentiality  provisions.  If Mr.
Stinnett resigns for Good Reason (as defined therein,  which definition includes
a material reduction of his duties or substantial  change in work conditions,  a
material  decrease in  compensation  or benefits,  and changes in control of the
Company),  he is entitled to  continuance of his then current base salary for 12
months,  continuation  of health and life  insurance  benefits for 24 months,  a
pro-rated  bonus,  the  continuation  of other  perquisites  for six  months and
payment,  if  requested,  for all equity in Holdings or the Company  held by Mr.
Stinnett or his family.  If Mr.  Stinnett is terminated  by the Company  without
Cause (as defined therein,  which definition includes the willful failure of the
executive to substantially  perform his duties, and the commission of a fraud on
the  Company,  if not  cured  within 30 days'  written  notice  thereof),  he is
entitled to a lump sum payment  equal to 1.5 times his then current  annual base
salary and the same benefits as if he resigned for Good Reason.

On March 16,  1999,  the Company  entered  into a severance  agreement  with Mr.
Erwin.  The terms of Mr.  Erwin's  severance  agreement  provided for a lump sum
severance  amount of $300,000,  which  represented his base salary for 12 months
plus the amount of his base  salary that  remained  unpaid for fiscal 1999 as of
the date of  termination.  The Company  re-purchased  20% of Mr.  Erwin's equity
interest in Niles L.L.C., a Delaware limited  liability company which indirectly
owns 29.3% of the Holdings  Voting Common Stock and 37.6% of the Holdings Series
C Junior Voting Preferred Stock. Mr. Stinnett purchased the remaining 80% of Mr.
Erwin's equity interest in Niles L.L.C. See "Certain  Relationships  and Related
Transactions--Loans  to Management."  Mr. Erwin also received  reimbursement  of
unpaid customary and reasonable  business  expenses,  continuation of health and
life insurance  benefits at the Company's expense for 24 months from the date of
termination,   continuation  of  all  other  perquisites  for  six  months,  and
reasonable  outplacement  assistance  for  six  months  following  the  date  of
termination  in an amount  not to exceed  $5,000.  In  addition,  the  severance
agreement   provides  for  the   indemnification  of  Mr.  Erwin,  and  includes
confidentiality and non-competition provisions.

 On June 3, 1999,  the  Company  entered  into a  severance  agreement  with Mr.
Niespodziani. The terms of Mr. Niespodziani's severance agreement provided for a
lump sum severance amount of $178,500,  which represented his base salary for 12
months plus the amount of his base salary that  remained  unpaid for fiscal 1999
as of the date of termination.  Mr. Niespodziani also received  reimbursement of
unpaid customary and reasonable  business  expenses,  continuation of health and
life insurance  benefits at the Company's expense for 24 months from the date of
termination,   continuation  of  all  other  perquisites  for  six  months,  and
reasonable  outplacement  assistance  for  six  months  following  the  date  of
termination  in an amount  not to exceed  $5,000.  In  addition,  the  agreement
provides   for   the   indemnification   of  Mr.   Niespodziani   and   includes
confidentiality and non-competition provisions.

On September 22, 1999, the Company entered into a compromise  agreement with Mr.
Norridge.  The  terms of Mr.  Norridge's  compromise  agreement  provided  for a
termination payment of (pound)144,000, payment of any outstanding salary accrued
through  the date of  termination  and  payment  of the agreed  bonus  amount of

                                       84
<PAGE>

(pound)56,250  together with  (pound)4,260  interest on such bonus. Mr. Norridge
also  received  continuation  of medical  insurance  and life  insurance  at the
Company's  expense  for  him and his  spouse  for a  period  of  twelve  months,
continued  eligibility for certain pension plan benefits,  and reimbursement for
legal fees relating to the termination and outplacement  assistance in an amount
not to exceed (pound)5,000.

Equity Incentive Plan

In connection with the  Recapitalization,  the Company  committed to establish a
new equity incentive plan to attract and retain key personnel,  including senior
management,  and to enhance their interest in the Company's  continued  success.
Holdings  reserved  1,186.0849  shares of Holdings  Nonvoting  Common  Stock and
4,328.25 shares of Holdings Series C Junior Voting  Preferred Stock with a value
of $8.1 million on March 30, 1998 for this plan (such  shares to be  denominated
in 8,100 units  consisting of 0.1464 shares of Holdings  Nonvoting  Common Stock
and  0.5344  shares of  Holdings  Series C Junior  Voting  Preferred  Stock (the
"Equity  Units")).  The Company has committed to make an initial option grant to
each  member of the  Company's  senior  management  on March 30, 1998 under such
executive's employment agreement.  Mr. Erwin is to be granted 1,990 Equity Units
(representing 291.3 shares of Holdings Nonvoting Common Stock and 1,063.5 shares
of  Holdings   Series  C  Junior  Voting   Preferred   Stock)  Messrs.   Doolan,
Niespodziani,  Maddock  and  Norridge  each are to be granted  676 Equity  Units
(representing 99.0 shares of Holdings Nonvoting Common Stock and 361.3 shares of
Holdings Series C Junior Voting Preferred Stock).  The initial exercise price of
each Equity  Unit  covered by the  initial  option  grants to the members of the
Company's  senior  management is to be $1,000.  The Company does not  anticipate
making  additional  option grants to these  executives  under the plan, but does
anticipate  making grants to other or to new members of management.  Options not
previously exercised or terminated will expire ten years from the date of grant.
The Company is in the process of establishing  the vesting terms for such Equity
Units.


                                       85
<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The  following  table  sets  forth,  as of  January  31,  2000,  the  number and
percentage of outstanding  shares of voting stock and nonvoting  common stock of
Holdings  beneficially  owned by: (i) each executive officer of Holdings and MMH
and each  director of Holdings and MMH;  (ii) all  directors of Holdings and MMH
and all executive officers of Holdings and MMH as a group; and (iii) each person
known by Holdings to own beneficially  more than five percent of Holdings voting
stock, respectively.  Holdings believes that each individual or entity named has
sole  investment  and  voting  power with  respect to shares of voting  stock of
Holdings indicated as beneficially owned by them, except as otherwise noted.
<TABLE>
<CAPTION>

                                                   Nonvoting       Percent      Voting        Percent       Series C       Percent
Name and Address of Beneficial Owner               Common Stock    Of Class     Common Stock  Of Class   Preferred Stock  of Class
5% Owners:

<S>                                                      <C>            <C>        <C>          <C>           <C>             <C>
Chartwell L.P. (a)                                       3,630          83.4%      7,907        77.8%         34,633          100.0%
    c/o KPMG
    Genesis Building
    448 GT
    Grand Cayman
    Cayman Islands

Harnischfeger Corporation                                 --          --           2,261        22.2%              --             --
    3600 South Lake Drive
    St. Francis, Wisconsin 53235

Named Executive Officers and
Directors:
Todd R. Berman (b)                                       3,630          83.4%      7,907        77.8%         34,633          100.0%
Michael S. Shein (b)                                     3,630          83.4%      7,907        77.8%         34,633          100.0%
Jack F. Stinnett (c) (d)                                  --          --            --            --               --           --
Michael S. Erwin (c)                                      --          --            --            --               --           --
David D. Smith (c) (d)                                    --          --            --            --               --           --
Peter A. Kerrick (c)                                      --          --            --            --               --           --
Richard Niespodziani (c)                                  --          --            --            --               --           --
Edward J. Doolan (c)                                      --          --            --            --               --           --
K. Bruce Norridge (c)                                     --          --            --            --               --           --
Michael J. Maddock (c) (d)                                --          --            --            --               --           --
Martin L. Ditkof (c)                                      --          --            --            --               --           --
Jay R. Bloom (a)                                          --          --            --            --               --           --
Robert W. Hale                                            --          --            --            --               --           --
Michael R. Young                                          --          --            --            --               --           --
Larry Zine                                                --          --            --            --               --           --
Eric Green (a)                                            --          --            --            --               --           --
All  directors and officers as a group                   3,630          83.4%      7,907        77.8%         34,633          100.0%
(14 persons)
</TABLE>

     (a)  Chartwell L.P., a Cayman Islands limited partnership,  is the managing
          member of Frasier L.L.C., a Delaware limited liability company, and of
          Niles L.L.C., a Delaware limited  liability  company,  which own 62.4%
          and  37.6%,  respectively,  of  the  shares  of  common  stock  of MHE
          Investments,  a Delaware corporation.  MHE Investments,  in turn, owns
          77.8% of the shares of Holdings  Voting Common Stock and 100.0% of the
          Holdings  Series C Junior Voting  Preferred  Stock.  Chartwell L.P. is
          also the managing  member of Martin Crane L.L.C.,  a Delaware  limited
          liability  company,  which  owns  83.4%  of  the  shares  of  Holdings
          Nonvoting  Common  Stock.  The general  partner of  Chartwell  L.P. is
          Chartwell G.P. Corp., a Cayman Islands  company.  Chartwell G.P. Corp.
          may be  deemed  to  beneficially  own all of the  shares  of  Holdings
          beneficially  owned by Chartwell L.P. Mr. Donald Gales owns all of the
          issued and  outstanding  capital stock of Chartwell  G.P.  Corp.  and,
          consequently,  may be deemed to beneficially  own all of the shares of
          Holdings beneficially owned by Chartwell G.P. Corp. However,  Holdings
          has been advised by each of Chartwell  L.P.,  Chartwell G.P. Corp. and
          Mr. Gales that each  disclaims  beneficial  ownership of such Holdings
          shares.  Todd R. Berman,  who is Chairman of the Board of Holdings and
          MMH, is a limited  partner of  Chartwell  L.P.  Michael S. Shein,  who
          serves as a director and Vice  President of Holdings and as a director
          of MMH, is also a limited partner of Chartwell L.P. Mr. Berman and Mr.
          Shein are the  managers of Frasier  L.L.C.,  Niles  L.L.C.  and Martin
          Crane  L.L.C.   Concurrent  with  the  Recapitalization   Closing,  an
          affiliate of CIBC World Markets  Corp.,  the initial  purchaser in the
          offering of Series A Units,  acquired an approximately  25.0% interest
          in each of Frasier L.L.C.  and Niles L.L.C. An affiliate of CIBC World
          Markets Corp. also acquired an approximately  25.0% interest in Martin
          Crane L.L.C.  Accordingly,  CIBC World Markets Corp. holds an indirect
          equity interest in 19.4% of the shares of Holdings Voting Common Stock
          and in 20.9% of the shares of Holdings  Nonvoting  Common  Stock,  but
          does not have any beneficial  ownership in such shares.  Jay R. Bloom,
          who is a director of  Holdings,  is a Managing  Director of CIBC World
          Markets  Corp.  Concurrent  with  the  Recapitalization   Closing,  an
          affiliate of Chase Capital Partners  acquired an  approximately  21.7%
          interest in Niles L.L.C.  An affiliate of Chase Capital  Partners also


                                       86
<PAGE>

          acquired an approximately 8.1% interest in Martin Crane.  Accordingly,
          Chase Capital  Partners holds an indirect  equity  interest in 6.3% of
          the shares of Holdings  Voting  Common Stock and in 6.8% of the shares
          of Holdings  Nonvoting  Common Stock, but does not have any beneficial
          ownership in such shares.  Eric Green,  who is a director of Holdings,
          is a Partner of Chase Capital  Partners.

     (b)  Chartwell L.P., a Cayman Islands limited partnership,  is the managing
          member of Frasier L.L.C., a Delaware limited liability company, and of
          Niles L.L.C., a Delaware limited liability company, which together own
          100.0% of the shares of common  stock of MHE  Investments,  a Delaware
          corporation.  MHE  Investments,  in turn,  owns 77.8% of the shares of
          Holdings  Voting  Common  Stock and  100.0% of the  Holdings  Series C
          Junior Voting  Preferred  Stock.  Chartwell  L.P. is also the managing
          member of Martin Crane L.L.C., a Delaware limited  liability  company,
          which owns 83.4% of the shares of  Holdings  Nonvoting  Common  Stock.
          Todd R. Berman, who is Chairman of the Board of Holdings and MMH, is a
          limited  partner of Chartwell L.P.  Michael S. Shein,  who serves as a
          director  and Vice  President of Holdings and as a director of MMH, is
          also a limited  partner of Chartwell L.P. Mr. Berman and Mr. Shein are
          the managers of Frasier L.L.C.,  Niles L.L.C.  and Martin Crane L.L.C.
          The  address  of each of Mr.  Berman  and Mr.  Shein is c/o  Chartwell
          Investments  Inc.,  717 Fifth Avenue,  23rd Floor,  New York, New York
          10022.

     (c)  Members of the  Company's  senior  management  own  $850,000 of equity
          interests  of Niles  L.L.C.,  constituting  4.2% of the  total  equity
          interest in Niles L.L.C. Accordingly,  members of the Company's senior
          management  collectively  hold an indirect  equity interest in 1.2% of
          the  shares  of  Holdings  Voting  Common  Stock,  but do not have any
          beneficial  ownership interests in such shares.

     (d)  Certain  members of the  Company's  senior  management  own $46,759 of
          equity  interests of Martin Crane  L.L.C.,  constituting  0.93% of the
          total  equity  interest in Martin Crane  L.L.C.  Accordingly,  certain
          members  of the  Company's  senior  management  collectively  hold  an
          indirect equity interest in 0.78% of the shares of Holdings  Nonvoting
          Common Stock,  but do not have any beneficial  ownership  interests in
          such shares.

                                       87
<PAGE>

Item 13.  Certain Relationships and Related Transactions

Relationship with Harnischfeger

Until the  Recapitalization  Closing,  HII and/or HarnCo  performed  centrally a
number  of  functions  necessary  for the  operations  of the  Company.  Under a
management services  arrangement with HII, the Company was provided with certain
services,   including,   but  not  limited  to,  matters  of  organization   and
administration,  cash management,  labor relations,  employee  benefits,  public
relations,   financial  policies  and  practices,  taxation  and  legal  affairs
(intellectual property,  environmental,  labor, securities and ERISA compliance,
as well as assistance with product liability cases).  The annual fee charged the
Company  for  these  services  was  based  upon a pro rata  share  of  corporate
administration  costs  using an  allocation  methodology  based on  consolidated
worldwide sales. Such fees totaled approximately $1.2 million in fiscal 1998.

Prior to the consummation of the Transactions,  the Company also obtained volume
discounts by entering into joint  purchase  agreements in the United States with
HII, HII's mining  equipment  operations  unit  ("Mining")  and paper  equipment
operations   unit  ("Paper")  for  items  such  as  bearings,   motors,   steel,
maintenance,  repair and operational  supplies,  domestic  telephone service and
rates,  and fleet and equipment  leases  (including  master  capital  leases for
vehicles and other equipment).  In the United Kingdom,  the Company,  Mining and
Paper entered into joint purchase  agreements  for energy,  steel and automobile
leases.  The  Company  also  had a joint  banking  program  with the  other  HII
affiliates  and  participated  in a  consolidated  pension  plan  in the  United
Kingdom.  Until August 31, 1998, the Company's  hourly shop employees at its Oak
Creek,  Wisconsin  facility  were covered by a collective  bargaining  agreement
between  HarnCo and the United  Steelworkers  of  America,  Local 1114 that also
covered  certain  employees  of  Mining.  Effective  September  1,  1998,  these
employees were covered by a renegotiated collective bargaining agreement between
the Company and the United Steelworkers of America, Local 1114.

In addition, computer hardware, software licenses and other technology necessary
to operate the Company were owned and/or held by HII and/or HarnCo and were used
by HarnCo.  Virtually  all  information  systems  necessary to the United States
operations  of the Company  were shared with  HarnCo.  Furthermore,  the Company
(including  all of  its  foreign  operations)  was  insured  pursuant  to  HII's
insurance  program until March 30, 1998.  Effective  April 1, 1998,  the Company
obtained its own insurance coverage, with the exception of medical, dental, life
and long-term disability insurance, which the Company obtained effective January
1, 1999. The Company had a number of other  arrangements with HII, HarnCo and/or
their affiliates,  including tax allocation  agreements and inter-company notes,
all of which terminated upon consummation of the Transactions.

Throughout  fiscal 1999 and 1998,  the Company  also sold  certain  products and
services  to  Paper  and  Mining  at  negotiated  rates  and  performed  certain
administrative  functions  for  HarnCo  in  Mexico.  Sales to  Mining  and Paper
amounted  to $1.0  million  and  $3.2  million  during  fiscal  1999  and  1998,
respectively.  In  addition,  Mining and Paper  provided  certain  products  and
services to the Company which  management  estimates  amounted to  approximately
$14.1  million and $12.4 million in fiscal 1999 and 1998,  respectively.  HarnCo
manufactured electric motors,  fabricated larger steel girders and did machining
on certain  cranes for the Company at cost or at cost plus a percentage.  Mining
and Paper also  acted as motor  rewind  subcontractors  for the  Company.  It is
contemplated  that  these  transactions,  none of which  individually  or in the
aggregate are significant to the Company, will continue in the future.

Prior to March 30,  1998,  in a number of  instances,  HII,  HarnCo  and/or  the
Non-MHE HarnCo Affiliates provided contracting credit support in connection with
the  Company's  business.  Certain  customers  for large crane supply  contracts
require  the  supplier  to provide  contracting  credit  support  and/or  parent
guarantees of performance.  This credit support  included HarnCo and the Non-MHE
HarnCo Affiliates:  (i) providing working capital;  (ii) guaranteeing  financial
and performance  obligations  with respect to customer and supply  contracts and
relationships;  (iii)  providing  collateral  and credit support with respect to
letters of credit,  surety bonds or other arrangements of the MHE Business;  and
(iv)  otherwise  being directly and  contingently  liable for the MHE Business's
obligations (collectively,  the "Credit Support Obligations").  In addition, HII
and/or  HarnCo  guaranteed  Company  debt and the  Company's  performance  under
certain real estate,  vehicle and equipment  leases.  At October 31, 1999, there
was  approximately  $27.7  million  outstanding  under the letters of credit and
bonds  provided by HarnCo and Non-MHE  HarnCo  Affiliates.  At October 31, 1999,
HarnCo  continues  to be  shown  as the  guarantor  on the  Birmingham,  Alabama
facility lease with the Industrial Revenue Board of Birmingham.

Management  believes  that in the aggregate  these  products and services can be
obtained on comparable terms from third parties.

                                       88
<PAGE>

Harnischfeger Separation Agreement

The organizational  structure of Holdings and its subsidiaries was substantially
reorganized  in connection  with the  anticipated  sale of the MHE Business.  In
connection  therewith,  in October  1997  HarnCo  transferred  the assets of its
Material  Handling  Equipment  Division to MHLLC, a  newly-created  wholly-owned
subsidiary  of the  Company.  All  non-cash  assets  held  by  HarnCo  and  used
exclusively  by the MHE  Division  were  transferred  or,  in the case of leased
personal  property,  subleased to MHLLC or to one of its affiliates.  In return,
MHLLC assumed  substantially  all of the  liabilities  of HarnCo and the Non-MHE
HarnCo Affiliates relating to the MHE Business (other than as described below).

HarnCo has retained certain income and other tax liabilities relating to the MHE
Business,  all environmental  liabilities relating to the ownership or operation
of  any  shared  facilities  and  of  HarnCo's  Orchard  Street  facility,   any
liabilities  for which HarnCo or its  affiliates  have been named as potentially
responsible  parties with respect to two 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. In addition,  among other matters,  HarnCo and
certain of HarnCo's  affiliates  have  retained  all  liability  for medical and
disability  benefit claims for current United States employees made prior to the
Recapitalization  Closing,  all claims by United  States  employees  who were on
short-term or long-term  disability as of the  Recapitalization  Closing and all
claims with  respect to any of the HII benefit  plans for former  United  States
employees of the Company.

Trademark License Agreement

On March 30, 1998, the Company  entered into the Trademark  Licensing  Agreement
with Harnischfeger Technologies,  Inc. ("HTI"), a subsidiary of HarnCo, pursuant
to which the Company was granted a sole and exclusive  worldwide  license to use
the "P&H" trade name,  trademark and service mark on or in  connection  with the
MHE Business.  The term of the license for original  equipment is 15 years after
the earlier to occur of (i) the sale of Holdings to an unaffiliated  third party
or (ii) the  consummation  of a public offering of the common stock of Holdings,
the  Company  or  their  parents  or  successors.  The term of the  license  for
aftermarket  parts and services is for an  additional  seven years.  The license
agreement provides for a royalty payment to HTI during the ten year period which
commenced  March  30,  1999  equal to 0.75% of the  total  net  sales of the MHE
Business.  There  will be no  royalty  fee for the  remainder  of the term.  The
Company accrued $1,353,000 of expenses for royalty fees in the period from March
30,  1999 to October 31,  1999.  The Company has elected to defer the payment of
the royalty for the period  ended  October 31,  1999,  which would  otherwise be
payable  on  January  30,  2000  pursuant  to the  terms  of  Trademark  License
Agreement.  The Trademark License Agreement provides that the annual royalty fee
may be  deferred  for up to two  years if the  Company  does  not  meet  certain
financial  criteria.  The Company can only defer up to two  payments  during the
term of the  agreement.  In  addition,  interest  accrues at 12% per year on the
deferred fee payments.

Component and Manufactured Products Supply Agreement

At the  Recapitalization  Closing, the Company entered into a two year agreement
with HarnCo pursuant to which HarnCo is to sell, or have its affiliates sell, to
the  Company  and to its  subsidiaries  located in the United  States,  at cost,
certain products, repair parts and rebuilds as have been previously manufactured
by HarnCo for the Company.  The price for these  products is the fully  absorbed
standard cost for normal  production  products and repair  parts,  and the fully
absorbed job cost for rebuilds and repairs.

Transition Services Agreement

On March 30, 1998, the Company entered into a Transition Services Agreement with
HarnCo  pursuant to which HarnCo and/or its  affiliates  provide the Company and
the  Company's  subsidiaries  located in the  United  States  certain  specified
transition  services for a set monthly  price per service,  plus cost sharing in
certain  instances,  for periods  ranging up to three years.  These services had
been provided historically,  and for all of fiscal 1998, but were not covered by
a written agreement until the date of the  Transactions.  These services include
financial support (including payroll, accounts payable and some accounting), MIS
support (including mainframe applications, PC support, engineering applications,
maintenance,  shared  products and telephone  system  support),  human resources
support  (including  assistance in union  negotiations,  processing  support for
workers'  compensation  claims,  screening  and hiring of hourly  employees  and
benefits  administration),  shared space, warehouse services for repair parts at
one of HarnCo's  facilities until July 1998, order processing,  office space and
lobby services at HarnCo's offices,  employee  communications,  use of corporate
aircraft  owned by HarnCo  or its  affiliates,  and all  traffic  functions  and

                                       89
<PAGE>

transportation  of materials  between  Milwaukee area operations until May 1998.
The Company was charged $2.1 million and $5.0 million for such  services  during
fiscal  1999 and 1998,  respectively,  and  estimates  it will be  charged  $0.3
million in fiscal 2000.  The charge will  continue to decrease as certain of the
services provided by HarnCo become no longer necessary.

Health and Welfare Arrangements

Under the terms of the  Recapitalization  Agreement,  the current  United States
employees of the Company  continued to  participate,  from the  Recapitalization
Closing  until  December 31, 1998,  in the medical,  dental,  life and long-term
disability insurance benefit plans that were sponsored by HarnCo for the benefit
of these employees as of the  Recapitalization  Closing. The Company paid HarnCo
the cost of all benefits  provided  under these  plans.  Beginning on January 1,
1999,  the  Company  sponsored  its own  medical,  dental,  life  and  long-term
disability insurance benefit plans.

Stockholders Agreement

At the Recapitalization Closing, Holdings entered into a stockholders' agreement
and  registration   rights  agreement  with  HarnCo  and  MHE  Investments  (the
"Stockholders'  Agreement")  pursuant to which HarnCo has the right to appoint a
representative to the board of directors of Holdings,  so long as HarnCo owns at
least 5% of the  outstanding  Holdings  Voting Common Stock.  Certain actions by
Holdings require HarnCo's approval, including non-pro rata redemptions,  certain
post-closing affiliate and insider transactions,  granting of conflicting rights
or entering into conflicting  agreements,  and dividends or distributions on, or
redemptions  or purchases of, any junior equity stock at any time when dividends
are in arrears on the Holdings Series B Junior  Preferred Stock owned by HarnCo.
The Stockholders'  Agreement also provides that HarnCo has the right to purchase
its pro rata share of future  issuances  of  Holdings  Common  Stock  except for
issuances  of  management  stock  and  options  and  common  stock  sold  in  an
underwritten  public  offering.  HarnCo's shares are subject to a right of first
refusal in favor of Holdings and its designees and certain other rights.

Credit Indemnification Agreement

On March 30, 1998,  HII and the Company  entered  into a Credit  Indemnification
Agreement  pursuant  to which  HII will  maintain  in place the  Credit  Support
Obligations  in  existence on March 30, 1998 but have no further duty to extend,
renew or enter into any new Credit Support Obligations,  other than with respect
to the MHE Business obligations  existing at the  Recapitalization  Closing. The
Company  has agreed to pay in  advance an annual fee equal to 1% of the  amounts
outstanding  under  each  letter of credit and bond  provided  by HarnCo and the
Non-MHE HarnCo Affiliates  (approximately $27.7 million as of October 31, 1999).
MMH  accrued a fee of  $223,000  for  calendar  year 1999.  The  Company  paid a
pro-rated  fee of  $290,106  for  calendar  year  1998  at the  Recapitalization
Closing.  HII refunds 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 pay HII the full amount of
future  fees and other  expenses  that may be paid by HII or its  affiliates  to
third parties in connection with maintaining the Credit Support Obligations. The
Credit  Indemnification  Agreement provides that the Company is to reimburse HII
on demand for any payment made by HII or its affiliates  under any of the Credit
Support Obligations.

Confidentiality and Non-Competition Agreement

At the Recapitalization Closing, Holdings and HII entered into a Confidentiality
and Non-Competition Agreement, pursuant to which HII agreed, on behalf of itself
and of its subsidiaries,  not to, directly or indirectly,  participate or engage
in, or assist any person that is engaged in, any business or enterprise  that is
competitive with the MHE Business as conducted at the Recapitalization  Closing.
In addition,  the agreement  provides for HII and its  affiliates to maintain in
confidence and not use any  confidential  information  of the MHE Business.  The
non-compete covenants,  which apply worldwide, will be in effect until the later
of (i) the fourth anniversary of the Recapitalization  Closing or (ii) the third
anniversary of the date on which a director  designated by HII or its affiliates
ceases to serve on the board of directors of  Holdings.  HII and its  affiliates
also agreed not to induce or  encourage  any current  employee of the Company or
any of its affiliates to leave the Company or its affiliates,  and not to employ
certain specified officers and employees of the MHE Business for 18 months after
the Recapitalization Closing.

                                       90
<PAGE>

Tax Sharing Agreement

Holdings,  its  subsidiaries and MHE Investments have entered into a tax sharing
agreement (the "Tax Sharing  Agreement") which provides for, among other things,
the allocation of federal, state and local tax liabilities between Holdings, its
subsidiaries and MHE Investments.  In general,  under the Tax Sharing Agreement,
Holdings and its  subsidiaries  are responsible for paying their allocable share
of all  income  taxes  shown  to be due on the  consolidated  federal  (and  any
comparable state or local) income tax return filed by MHE Investments.

Loans to Management

At the  Recapitalization  Closing,  the  Company  made  short-term  loans  in an
aggregate  principal  amount of  $900,000  to  members of the  Company's  senior
management to purchase equity  interests in Niles L.L.C.,  an indirect  minority
shareholder  of Holdings,  in  accordance  with the terms of certain  promissory
notes,  with proceeds from the Senior Notes and/or the New Credit Facility.  The
original  principal  amounts  of the loans to  Messrs.  Erwin,  Smith,  Kerrick,
Niespodiziani,  Doolan,  Maddock,  Norridge and Ditkof were $250,000,  $110,000,
$70,000, $70,000, $100,000,  $125,000, $125,000 and $50,000,  respectively,  and
have been  repaid in full.  On June 30,  1999,  the  Company  made a loan in the
amount of $150,000 to Mr.  Stinnett,  who  purchased 80% of Mr.  Erwin's  equity
interest in Niles L.L.C.  At October 31, 1999, the principal  amount of the note
outstanding for Mr.  Stinnett was $150,000.  Interest was charged on each of the
notes at a rate per annum equal at all times to the Federal  Short-Term  Rate in
effect from time to time,  from the date of issuance  until such note was repaid
in full.  The  principal  amount of the loan to Mr.  Stinnett  and the  interest
thereon  will be  payable in full in the event he ceases to be  employed  by the
Company as a result of termination for Cause (as defined therein),  or by reason
of his death or resignation for other than Good Reason (as defined therein),  or
upon an Event of Default (as defined therein). As collateral for the note to Mr.
Stinnett  granted to the Company a security  interest in the equity interests in
Niles L.L.C. he acquired with the proceeds of the loans.

Chartwell Financial Advisory Agreement

The Company entered into an agreement with Chartwell Investments Inc., providing
for the payment of fees and  reimbursement of expenses to Chartwell  Investments
Inc. for acting as financial advisor with respect to the Transactions, including
soliciting,  structuring  and arranging the financing of the  Transactions.  The
fees, totaling $5.0 million,  equal to 1% of the consolidated  capitalization of
Holdings and the  reimbursement of expenses,  were paid at the  Recapitalization
Closing. Mr. Berman and Mr. Shein are, respectively, Chairman of the Board and a
director of each of Holdings  and MMH and both are  officers  and  directors  of
Chartwell Investments Inc.

Chartwell Management Consulting Agreement

The Company has entered into a management  consulting  agreement  with Chartwell
Investments  Inc.  pursuant to which  Chartwell  Investments  Inc.  provides the
Company with certain  management,  advisory and consulting services for a fee of
$1.0  million  for  each  fiscal  year of the  Company  during  the  term of the
agreement, plus reimbursement of expenses. The term of the management consulting
agreement  is 10  years  commencing  at  the  Recapitalization  Closing  and  is
renewable for  additional  one year periods unless the Board of Directors of the
Company gives prior written notice of non-renewal to Chartwell  Investments Inc.
Mr. Berman and Mr. Shein are, respectively, Chairman of the Board and a director
of each of Holdings  and MMH and both are  officers  and  directors of Chartwell
Investments  Inc. The Company paid  Chartwell $1.0 million and $0.6 million plus
expenses during fiscal 1999 and 1998, respectively.

New Credit Facility Participation

On August 2, 1999, the Company  obtained an amendment to the New Credit Facility
that cured past financial covenant  violations and reset the financial covenants
until April 2001.  In  connection  with,  and as a condition  to, the New Credit
Facility  Amendment,  Martin Crane L.L.C., a Delaware limited liability company,
purchased a $5.0 million  participation  in the New Credit Facility and received
certain  non-voting  equity  interests  in  Holdings,  consisting  of 25% of the
outstanding Holdings Common Stock.

Chartwell L.P., a Cayman Islands limited partnership,  is the managing member of
Martin Crane.  Chartwell L.P. is the managing member of Frasier L.L.C. and Niles
L.L.C.,  which  collectively  indirectly own 77.8% of the Holdings Voting Common

                                       91
<PAGE>

Stock and all of the Holdings Series C Junior Voting  Preferred  Stock.  Todd R.
Berman,  who is Chairman of the Board of Holdings and MMH, is a limited  partner
of Chartwell L.P.  Michael S. Shein, who serves as a director and Vice President
of Holdings  and as a director of MMH,  is also a limited  partner of  Chartwell
L.P.  Mr.  Berman and Mr. Shein are,  respectively,  Chairman of the Board and a
director of each of Holdings  and MMH and both are  officers  and  directors  of
Chartwell  Investments  Inc. Mr. Berman and Mr. Shein are the managers of Martin
Crane.

An affiliate of CIBC World Markets Corp. owns an approximately 25.0% interest in
Martin Crane. Jay R. Bloom, who serves as a director of Holdings,  is a Managing
Director of CIBC World Markets Corp. An affiliate of Chase Capital Partners owns
an  approximately  8.1%  interest in Martin  Crane.  Eric  Green,  a director of
Holdings, is a Partner in Chase Capital Partners.

                                       92
<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1.   Financial Statements

         Reference  should be made to the index included in Item 8 of
         this  Form  10-K  for  a  complete  list  of  the  financial
         statements filed as part of this report.

    2.   Financial Statement Schedules Included in Part IV of this Report

         Reference  should be made to the index included in Item 8 of
         this  Form  10-K  for  a  complete  list  of  the  financial
         statements filed as part of this report.

    3.   Exhibits and Exhibit Index

Exhibit Number       Exhibit

          2.1(aa)  Recapitalization  Agreement,  dated  January 28, 1998,  among
     Harnischfeger  Corporation,  the sellers named therein and MHE Investments,
     Inc., as amended.

          3.1(aa) Second Amended and Restated  Certificate of  Incorporation  of
     MMH Holdings, Inc.

          3.2(cc) Certificate of Incorporation of Morris Material Handling, Inc.

          3.3(aa) Bylaws of MMH Holdings, Inc.

          3.4(cc) Bylaws of Morris Material Handling, Inc.

          3.5(aa)  Certificate of  Designations  of the Powers,  Preferences and
     Relative, Participating,  Optional and Other Special Rights of 12% Series A
     Senior Exchangeable  Preferred Stock, and  Qualifications,  Limitations and
     Restrictions Thereof.

          3.6(aa)  Certificate of  Designations  of the Powers,  Preferences and
     Relative,  Participating,  Optional  and  Other  Special  Rights of 12 1/4%
     Series  B  Junior   Exchangeable   Preferred  Stock,  and   Qualifications,
     Limitations and Restrictions Thereof.

          3.7(aa)  Certificate of  Designations  of the Powers,  Preferences and
     Relative,  Participating,  Optional  and  Other  Special  Rights of 12 1/2%
     Series  C Junior  Preferred  Stock,  and  Qualifications,  Limitations  and
     Restrictions Thereof.

          4.1(aa) Preferred Stock  Registration  Rights  Agreement,  dated as of
     March 30, 1998, by and among MMH Holdings, Inc. and CIBC Oppenheimer Corp.

          4.2(cc) Registration Rights Agreement,  dated as of March 30, 1998, by
     and among Morris Material  Handling,  Inc, the Guarantors named therein and
     CIBC Oppenheimer Corp., Goldman, Sachs & Co. and Indosuez Capital.

          4.3(aa) Common Stock Registration  Rights and Stockholders  Agreement,
     dated as of March 30, 1998, among MMH Holdings,  Inc., Chartwell,  L.P. and
     CIBC Oppenheimer Corp.

          4.4(cc) Indenture, dated as of March 30, 1998, between Morris Material
     Handling,  Inc. and United  States Trust  Company of New York,  as Trustee,
     relating to Morris Material Handling, Inc.'s 9 1/2% Senior Notes due 2008.

                                       93
<PAGE>

          4.5(cc) Form of 9 1/2% Senior Note due 2008.

          4.6(bb) Credit  Agreement,  dated March 30, 1998,  among MMH Holdings,
     Inc.,  Morris  Material  Handling,  Inc.,  Material  Handling,  LLC, Morris
     Material  Handling,  Ltd.,  Mondel  ULC,  Kaverit  Steel  and Crane ULC and
     Canadian  Imperial  Bank  of  Commerce,  as  Administrative  Agent,  Credit
     Agricole Indosuez, as Syndication Agent, BankBoston, N.A., as Documentation
     Agent, and the Lending Institutions listed therein.

          4.7(cc) U.S. Security  Agreement,  dated as of March 30, 1998, made by
     Morris Material Handling,  Inc., the Guarantors listed therein, in favor of
     Canadian Imperial Bank of Commerce.

          4.8(aa) Guarantee,  dated as of March 30, 1998, by MMH Holdings, Inc.,
     in favor and for the benefit of Canadian Imperial Bank of Commerce.

          4.9(aa)  Guarantee,  dated  as of  March  30,  1998,  by  each  of the
     subsidiary  Guarantors  named  therein,  in favor  and for the  benefit  of
     Canadian Imperial Bank of Commerce.

          4.10(aa)  Stockholders and Registration Rights Agreement,  dated as of
     March 30, 1998, by and among MMH Holdings, Inc., MHE Investments,  Inc. and
     Harnischfeger Corporation.

          4.11(aa)  Form  of  Indenture  dated  as of  ____________,  among  MMH
     Holdings,  Inc.,  as the Issuer,  and  _______________,  as the Trustee for
     $___________ 12% Exchange Debentures Due 2009.

          4.12(aa) Form of 12% Exchange Debenture Due 2009.

          4.13(dd)  Amendment  No.1  dated as of August  28,  1998 to the Credit
     Agreement,  dated March 30, 1998, among MMH Holdings, Inc., Morris Material
     Handling,  Inc.,  Material Handling,  LLC, Morris Material Handling,  Ltd.,
     Mondel  ULC,  Kaverit  Steel and Crane ULC and  Canadian  Imperial  Bank of
     Commerce, as Administrative Agent, Credit Agricole Indosuez, as Syndication
     Agent,  Bank  Boston,   N.A.,  as  Documentation  Agent,  and  the  Lending
     Institutions listed therein.

          4.14(dd)  Waiver dated as of March 2, 1999 by and among MMH  Holdings,
     Inc., Morris Material Handling, Inc., Morris Material Handling, LLC, Morris
     Material  Handling,  Ltd.,  Mondel ULC,  Kaverit  Steel and Crane ULC,  the
     lending institutions listed on the signature pages thereto, Credit Agricole
     Indosuez, BankBoston, N.A. and Canadian Imperial Bank of Commerce.

          4.15(dd)  Waiver  No.  2 dated as of June 14,  1999 by and  among  MMH
     Holdings,  Inc., its subsidiaries named on the signature pages thereto, and
     the Agents and lending institutions named on the signature pages.

          4.16* Waiver No. 3 dated as of June 30, 1999 among MMH Holdings, Inc.,
     its subsidiaries  named on the signature pages thereto,  and the Agents and
     lending institutions named on the signature pages thereto.

          4.17(ee)  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.

                                       94
<PAGE>

          4.18(ee) 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.

          4.19*  Amendment  No. 3 and Waiver dated as of January 31, 2000 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) Kaverit Steel and
     Crane ULC, (vi) the Banks referred to therein, (vii) the New York branch of
     Credit Agricole Indosuez, as syndication agent, (viii) BankBoston, N.A., as
     documentation  agent  and  (ix)  Canadian  Imperial  Bank of  Commerce,  as
     administrative agent and collateral agent.

          10.1(aa)  Surety  Arrangement,  dated March 30, 1998,  among  Reliance
     Insurance  Companies,  MMH Holdings,  Morris  Material  Handling,  Inc. and
     certain of their subsidiaries.

          10.2(aa)  Credit   Indemnification   Agreement  between  Harnischfeger
     Industries,  Inc. and Morris Material Handling, Inc., dated as of March 30,
     1998.

          10.3(aa) Tax Sharing  Agreement  between MHE  Investments,  Inc.,  MMH
     Holdings,  Inc. and certain of MMH  Holdings,  Inc.'s  subsidiaries,  dated
     March 30, 1998.

          10.4(aa) Component and Manufactured  Products Supply Agreement between
     HarnCo and Morris Material Handling, Inc., dated as of March 30, 1998.

          10.5(aa)  Transition  Services  Agreement  between  HarnCo  and Morris
     Material Handling, Inc., dated as of March 30, 1998.

          10.6(aa)    Trademark   License   Agreement   between    Harnischfeger
     Technologies,  Inc. and Morris Material  Handling,  Inc., dated as of March
     30, 1998.

          10.7(aa)  Management  Consulting  Agreement  between  Morris  Material
     Handling, Inc. and Chartwell Investments Inc., dated March 30, 1998.

          10.8(aa)   Financial   Advisory   Agreement  between  Morris  Material
     Handling, Inc. and Chartwell Investments Inc., dated March 30, 1998.

          10.9(aa)  Separation  Agreement,   dated  October  26,  1997,  between
     Harnischfeger Corporation and Material Handling, LLC.

          10.10(aa)  Share and Asset  Purchase  Agreement  between  PHMH Holding
     Company, James Gann, Sr., James Gann, Jr. and Gail Gann, dated February 14,
     1997.

          10.11(bb) Employment  Agreement,  dated March 30, 1998, between Morris
     Material Handling, Inc. and Michael S. Erwin.

          10.12(bb) Employment  Agreement,  dated March 30, 1998, between Morris
     Material Handling, Inc. and David D. Smith.

          10.13(bb) Employment  Agreement,  dated March 30, 1998, between Morris
     Material Handling, Inc. and Martin L. Ditkof.

                                       95
<PAGE>

          10.14(bb) Employment  Agreement,  dated March 30, 1998, between Morris
     Material Handling, Inc. and Richard J. Niespodziani.

          10.15(bb) Employment  Agreement,  dated March 30, 1998, between Morris
     Material Handling, Inc. and Peter A. Kerrick.

          10.16(bb) Employment  Agreement,  dated March 30, 1998, between Morris
     Material Handling, Inc. and Edward J. Doolan.

          10.17(bb)  Service  Agreement,  dated March 30, 1998,  between  Morris
     Mechanical Handling Limited and M J Maddock.

          10.18(bb)  Service  Agreement,  dated March 30, 1998,  between  Morris
     Mechanical Handling Limited and K B Norridge.

          10.19(bb)  Form of  Promissory  Note,  dated March 30,  1998,  between
     Michael S. Erwin and Morris Material Handling, Inc.

          10.20(bb) Form of Promissory Note, dated March 30, 1998, between David
     D. Smith and Morris Material
                     Handling, Inc.

          10.21(bb)  Form of  Promissory  Note,  dated March 30,  1998,  between
     Martin L. Ditkof and Morris Material Handling, Inc.

          10.22(bb)  Form of  Promissory  Note,  dated March 30,  1998,  between
     Richard J. Niespodziani and Morris Material Handling, Inc.

          10.23(bb) Form of Promissory Note, dated March 30, 1998, between Peter
     A. Kerrick and Morris Material Handling, Inc.

          10.24(bb)  Form of  Promissory  Note,  dated March 30,  1998,  between
     Edward J. Doolan and Morris Material Handling, Inc.

          10.25(bb) Form of Promissory Note,  dated March 30, 1998,  between M J
     Maddock and Morris Material Handling, Inc.

          10.26(bb) Form of Promissory Note,  dated March 30, 1998,  between K B
     Norridge and Morris Material Handling, Inc.

          10.27(ff) Morris Material Handling Employee Retirement Savings Plan.

          10.28*  Employment  Agreement,  dated as of January 27, 1999,  between
     Jack Stinnett and Morris Material Handling, Inc.

          10.29* Promissory Note, dated June 30, 1999, between Jack Stinnett and
     Morris Material Handling, Inc.

          10.30* Share Purchase Agreement, dated as of December 16, 1999, by and
     among 3016117 Nova Scotia ULC, Morris Material Handling,  Inc. and Magnetek
     Mondel Holding ULC.

                                       96
<PAGE>

          10.31* Intellectual Property Transfer Agreement,  dated as of December
     16, 1999, between MHE Technologies, Inc. and Mondel ULC.

          22.* Subsidiaries of MMH Holdings,  Inc. and Morris Material Handling,
     Inc.

          27. Financial Data Schedule.

          (aa) Incorporated by reference to Holdings'  Registration Statement on
     Form S-4  (Registration No. 333-52529) filed with the Commission on May 13,
     1998.

          (bb)  Incorporated  by reference  to  Amendment  No. 2 to the Issuer's
     Registration  Statement on Form S-4 (Registration No. 333-52529) filed with
     the Commission on July 22, 1998.

          (cc)  Incorporated by reference MMH's  Registration  Statement on Form
     S-4 (Registration No. 333-52527) filed with the Commission on May 13, 1998.

          (dd)  Incorporated  by  reference to MMH  Holdings,  Inc.'s and Morris
     Material  Handling,  Inc.'s Quarterly Report on Form 10-Q for the quarterly
     period ended April 30, 1999.

          (ee)  Incorporated  by  reference to MMH  Holdings,  Inc.'s and Morris
     Material  Handling,  Inc.'s Quarterly Report on Form 10-Q for the quarterly
     period ended July 31, 1999.

          (ff)  Incorporated  by  reference to MMH  Holdings,  Inc.'s and Morris
     Material  Handling,  Inc.'s  Annual Report on Form 10-K for the fiscal year
     ended October 31, 1998.

*      Filed herewith.

           (b)  Reports on Form 8-K.

                None.

                                       97
<PAGE>

<TABLE>

                                                          MMH HOLDINGS, INC.
                                                              SCHEDULE II

                                                   VALUATION AND QUALIFYING ACCOUNTS
                                                        (Thousands of dollars)
<CAPTION>


                                                       Balance at   Additions                   Currency                  Balance at
                                                       Beginning    Charged to                  Translation               End of
 Classification                                        of Year      Expense     Deductions (1)  Effects       Other (2)   Year
 --------------                                        -------      -------    --------------   -------       --------    ---------
Allowance Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1999
<S>                                                    <C>           <C>           <C>            <C>            <C>         <C>
   Doubtful accounts                                   $ 1,606       $ 2,407       $(2,396)       $   (28)       $ 136       $ 1,725
                                                       =======       =======       =======        =======        =====       =======

For the year ended October 31, 1998
   Doubtful accounts                                   $ 1,330       $ 1,219       $  (861)       $   (16)       $ (66)      $ 1,606
                                                       =======       =======       =======        =======        =====       =======

For the year ended October 31, 1997
   Doubtful accounts                                   $ 1,408       $   439       $  (537)       $    20         --         $ 1,330
                                                       =======       =======       =======        =======        =====       =======
</TABLE>

(1)  Represents write-off of bad debts, net of recoveries.
(2)  Represents  reclasses to other  reserve  accounts and reserves
     acquired in acquisitions.


                                       98
<PAGE>
<TABLE>

                                                    MORRIS MATERIAL HANDLING, INC.
                                                              SCHEDULE II

                                                   VALUATION AND QUALIFYING ACCOUNTS
                                                        (Thousands of dollars)
<CAPTION>


                                                    Balance at    Additions                    Currency                   Balance at
                                                    Beginning     Charged to                   Translation                  End of
 Classification                                     of Year       Expense      Deductions (1)  Effects        Other (2)     Year
 --------------                                     ---------     -------      --------------   -------       ---------     -------

Allowance Deducted in Balance Sheet
from Accounts Receivable:

For the year ended October 31, 1999
<S>                                                    <C>           <C>           <C>            <C>            <C>         <C>
   Doubtful accounts                                   $ 1,606       $ 2,407       $(2,396)       $   (28)       $ 136       $ 1,725
                                                       =======       =======       =======        =======        =====       =======

For the year ended October 31, 1998
   Doubtful accounts                                   $ 1,330       $ 1,219       $  (861)       $   (16)       $ (66)      $ 1,606
                                                       =======       =======       =======        =======        =====       =======

For the year ended October 31, 1997
   Doubtful accounts                                   $ 1,408       $   439       $  (537)       $    20         --         $ 1,330
                                                       =======       =======       =======        =======        =====       =======
</TABLE>

(1)  Represents write-off of bad debts, net of recoveries.
(2)  Represents  reclasses to other  reserve  accounts and reserves  acquired
     in acquisitions.

                                       99
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
behalf  by the  undersigned,  thereunto  duly  authorized,  on the  14th  day of
February, 2000.


                        MMH HOLDINGS, INC.


                        By:/s/Jack F.Stinnett
                           Jack F. Stinnett
                           Chairman of the Board


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the date indicated.



Signature              Title                                   Date


/s/Jack F. Stinnett    President, Chief Executive Officer      February 14, 2000
(Jack F. Stinnett)     and Chairman of the Board of Directors
                       (Principal Executive Officer)

/s/David D. Smith      Vice President                          February 14, 2000
(David D. Smith)       (Principal Financial and Accounting
                        Officer)

/s/Michael S. Shein    Vice President and Director             February 14, 2000
(Michael S. Shein)


/s/Todd R. Berman      Director                                February 14, 2000
(Todd R. Berman)

/s/Jay R. Bloom        Director                                February 14, 2000
(Jay R. Bloom)

/s/Robert W. Hale      Director                                February 14, 2000
(Robert W. Hale)

/s/Michael R. Young    Director                                February 14, 2000
(Michael R. Young)

/s/Larry Zine          Director                                February 14, 2000
(Larry Zine)

/s/Eric Green          Director                                February 14, 2000
(Eric Green)

                               100
<PAGE>


                                                              SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
behalf  by the  undersigned,  thereunto  duly  authorized,  on the  14th  day of
February, 2000.


                            MORRIS MATERIAL HANDLING, INC.


                            By:/s/Jack F. Stinnett
                              Name: Jack F. Stinnett
                              Chairman of the Board


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the date indicated.

Signature             Title                                   Date

                      President, Chief Executive Officer      February 14, 2000
/s/Jack F. Stinnett   and Chairman of the Board of Director
(Jack F. Stinnett)    (Principal Executive Officer)


/s/David D. Smith     Vice President                          February 14, 2000
(David D. Smith)      (Principal Financial and Accounting
                       Officer)

/s/Todd R. Berman     Director                                February 14, 2000
(Todd R. Berman)

/s/Michael S. Shein   Director                                February 14, 2000
(Michael S. Shein)

                                    101
<PAGE>

                    Supplemental Information to be Furnished
                  With Reports Filed Pursuant to Section 15(d)
                    Of the Act by Registrants Which Have Not
             Registered Securities Pursuant to Section 12 of the Act

No annual report or proxy  material has been sent to security  holders of either
Holdings or MMH.

                                      102
<PAGE>