<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-Q
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1995
----------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
---------------- ----------------
Commission file number 0-72
--------
York Research Corporation
- ------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED)
Delaware 06-0608633
- ------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
280 Park Avenue, Suite 2700 West, New York, New York 10017
- ------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 557-6200
---------------
- -----------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report
12,942,666.
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, February 28,
1995 1995
------------- -------------
(Unaudited) *
<S> <C> <C>
ASSETS
Current Assets:
Cash $1,822,586 $1,767,495
Service and other receivables - WCTP 724,933 15,202
Engineering and other service receivables - BNYLP 2,691,244 132,253
Other receivables-NAEC 300,000 --
Due from AWH 118,333 568,333
Other current assets (including advances to employees and
directors of $192,500 and $203,118, respectively) 372,800 504,318
------------- -------------
Total current assets 6,029,896 2,987,601
Property, plant and equipment, net 383,713 336,871
Construction in progress - WCTP 24,588,239 21,741,740
Long-term note receivable - WCTP 20,682,000 20,682,000
Other long-term receivables - WCTP 1,529,978 1,529,978
Advances to minority partner 2,000,000 2,000,000
Payment in lieu of performance bond - WCTP 500,000 500,000
Other assets (including advances to an employee and a director
of $342,767 and $338,267, respectively) 702,784 489,688
Excess of investment over net assets acquired, net 387,155 416,684
------------- -------------
Total assets $56,803,765 $50,684,562
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts and notes payable $1,220,946 $1,286,877
Accrued expenses 1,798,686 2,274,135
Accrued income taxes 241,999 262,493
Current portion of deferred revenue and other credits -- 374,592
------------- -------------
Total current liabilities 3,261,631 4,198,097
Due to SBCC 20,232,000 20,482,000
Other long-term liabilities 622,434 637,969
Deferred revenue and other credits 3,460,000 3,478,041
------------- -------------
Total liabilities 27,576,065 28,796,107
Commitments and contingencies
Minority interest in partnership 2,943 2,943
Stockholders' equity
Common stock, Class A, $.01 par value; authorized 10,000,000
shares; none issued --
Common stock, $.01 par value; authorized 50,000,000 shares; issued
12,989,790 and 12,610,594 shares, respectively 129,898 126,106
Additional paid-in capital 51,367,035 49,619,995
Accumulated (deficit) (13,309,003) (16,305,289)
------------- -------------
38,187,930 33,440,812
Less:
Treasury stock, at cost (47,124 shares) (706,401) (706,401)
Notes receivable - sale of common stock (7,689,788) (7,393,408)
Deferred compensation - ESOP (566,984) (3,455,491)
------------- -------------
Total stockholders' equity 29,224,757 21,885,512
------------- -------------
Total liabilities and stockholders' equity $56,803,765 $50,684,562
------------- -------------
------------- -------------
</TABLE>
* Derived from audited financial statements as of February 28, 1995
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
For the Nine For the Three
Months Ended November 30, Months Ended November 30,
-------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Services - WCTP $2,720,539 $1,161,877 $1,026,146 $1,039,687
Engineering and other services - BNYLP 3,076,924 430,034 2,656,384 92,190
Development fees - BNYLP 3,266,688 2,850,048 -- 950,016
Power brokerage fees - NAEC 675,000 250,000 -- 250,000
------------ ------------ ------------ -------------
Total revenues 9,739,151 4,691,959 3,682,530 2,331,893
------------ ------------ ------------ -------------
COSTS AND EXPENSES:
Cost of services to WCTP 2,691,936 1,139,435 1,027,158 1,038,300
Cost of engineering and other services - BNYLP 576,924 430,034 156,384 92,190
Selling, general and administrative 4,599,640 4,135,271 1,403,792 1,398,697
Interest and other (income) expense (1,800,635) (977,164) (589,769) (708,608)
Minority interest in consolidated partnership 500,000 -- -- --
------------ ------------ ------------ -------------
Total costs and expenses 6,567,865 4,727,576 1,997,565 1,820,579
------------ ------------ ------------ -------------
INCOME (LOSS) BEFORE INCOME TAXES 3,171,286 (35,617) 1,684,965 511,314
Provision for income taxes 175,000 164,000 75,000 100,000
------------ ------------ ------------ -------------
NET INCOME (LOSS) $2,996,286 ($199,617) $1,609,965 $411,314
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Net income (loss) per common share: $0.24 ($0.02) $0.12 $0.04
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Weighted average number of common shares and
common share equivalents: 15,842,686 10,617,273 16,190,220 10,770,209
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30,
<TABLE>
<CAPTION>
1995 1994
--------------- --------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) from operations $2,996,286 ($199,617)
Adjustments to reconcile net income (loss) from operations to
net cash generated by (used in) operating activities:
Depreciation and amortization 126,926 103,763
Amortization of deferred credits (392,633) (680,978)
ESOP contribution 302,350 267,315
Gain on disposition of machinery and equipment -- 3,413
Changes in operating assets and liabilities:
Increase in service receivables (3,268,722) (102,723)
Increase in construction in progress (2,846,499) (877,498)
Net decrease in notes receivable, other current
assets, and other assets 68,422 165,224
Net decrease in due to bank and equipment vendor -- (571,644)
Net decrease in accounts payable, accrued
expenses and long-term liabilities (793,909) (268,434)
Increase (decrease) in accrued taxes (20,494) 133,623
--------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (3,828,273) (2,027,556)
--------------- --------------
INVESTING ACTIVITIES:
Purchase of machinery and equipment (144,239) (158,665)
--------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (144,239) (158,665)
--------------- --------------
FINANCING ACTIVITIES:
Amounts received from ESOP 2,949,000 1,401,000
Payments on capital leases (13,005) (14,182)
Proceeds from exercise of stock options and warrants 1,091,608 --
--------------- --------------
NET CASH GENERATED BY FINANCING ACTIVITIES 4,027,603 1,386,818
--------------- --------------
INCREASE (DECREASE) IN CASH 55,091 (799,403)
CASH AT BEGINNING OF PERIOD 1,767,495 2,390,069
--------------- --------------
CASH AT END OF PERIOD $1,822,586 $1,590,666
--------------- --------------
--------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
In the opinion of management, the accompanying consolidated, unaudited
financial statements contain all adjustments necessary to present fairly York
Research Corporation and Subsidiaries' ("York" or the "Company") consolidated
financial position as at November 30, 1995 and results of operations for the
nine and three months ended November 30, 1995 and 1994, and cash flows for the
nine months ended November 30, 1995 and 1994.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting principles,
but which is not required for interim reporting purposes, has been condensed or
omitted. The accompanying financial statements need to be read in conjunction
with the financial statements and notes thereto included in the Registrant's
Form 10-K.
Any adjustments that have been made to the financial statements are of a
normal recurring nature.
(2) PER SHARE DATA
Per share data for the nine and three months ended November 30, 1995 and
1994 is based upon the weighted average number of common shares outstanding.
Unreleased Employee Stock Ownership Plan shares are not considered outstanding
for earnings per share calculations. The per share data for the nine and three
months ended November 30, 1995 also includes common equivalent shares, which are
warrants and stock options; per share data for these periods are calculated
using the modified treasury stock method. There is no significant difference
between primary and fully diluted earnings per share.
(3) CERTAIN WARRANTS
The Company, while denying any liability, and in the opinion of management,
in order to avoid a protracted and costly litigation, settled in May 1993 a
class action lawsuit which shareholders brought against the Company and certain
directors and officers of York. Pursuant to the terms of the settlement, the
Company issued to the members of the class warrants to purchase 600,000 shares
of its common stock at $8.00 ("Class A Warrants") per share and warrants to
purchase 180,000 shares of its common stock at $6.15 ("Class B Warrants") per
share (collectively the "Warrants"). Through November 30, 1995, 7,511 Class B
Warrants have been exercised. Under the terms of the settlement other principal
provisions of the unexercised Class B Warrants include the following:
(i) The Company has the right to redeem the Class B Warrants in whole or in
part for $11.50 per warrant.
-5-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ii) The Company has the right to reduce the Class B Warrant exercise price, in
its discretion (the "adjusted exercise price").
(iii) The Class A Warrants expired on November 1, 1995 (the "Expiration Date").
The Expiration Date of the Class B Warrants has been extended.
(iv) Unless the Class B Warrants have previously been redeemed or accelerated
the warrants may be exchanged by the holders thereof on the Expiration Date for
$11.50 in cash per warrant (the "Surrender Price").
(v) All unexpired Class B Warrants may no longer be exchanged for the Surrender
Price if the closing price of the Company's stock on NASDAQ shall have equaled
or exceeded the exercise price or adjusted exercise price of the warrants plus
$11.50 on at least seventy-five of ninety consecutive trading days at any time
prior to the Expiration Date.
(vi) The Surrender Price of the Class B Warrants is collateralized by a 35%
limited partnership interest in Brooklyn Navy Yard Cogeneration Partners, L.P.
("BNYLP") held by B-41 Associates, L.P. This limited partnership interest will
be released when it is replaced by a letter of credit or if the event described
in (v) above occurs.
On November 1, 1995, when the Class A Warrants expired, the holders of such
warrants became entitled to and did surrender them for $6.9 million drawn under
a letter of credit which had been posted on February 16, 1995 by Mission Energy
Company. York Research Corporation has no liability for the money drawn under
this letter of credit.
-6-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
BROOKLYN NAVY YARD PROJECT
Brooklyn Navy Yard Cogeneration Partners, L.P. ("BNYLP"), a joint venture,
was formed on October 19, 1992. BNYLP is owned and controlled equally by a
subsidiary of Mission Energy Company ("Mission"), which is a wholly owned
subsidiary of SCE Corp., and a limited partnership, B-41 Associates,
L.P.("B-41LP"), in which the Company is a majority partner.
The Company estimates the total capital costs of the Brooklyn Navy Yard
("BNY") Facility, when completed, to be approximately $410,000,000. On December
22, 1995, the New York City Industrial Development Agency (the "IDA") issued
$253,925,700 of Industrial Development Revenue Bonds for the purpose of
financing certain costs incurred to date in constructing and developing the BNY
Facility. These bonds are non-recourse to BNYLP's assets or revenues and have
recourse only to a letter of credit ("LOC") in like amounts arranged by Mission,
which LOC is in turn supported by a Mission guarantee. The proceeds of this
bond sale are being used to reimburse Mission for a portion of its construction
loans made to date and to reimburse the Company for engineering and other costs
that had been expensed in prior periods and for services that have been and will
be performed by the Company.
Substantial construction is still in progress and it is likely that the
portion of construction not funded by the IDA Bonds will be complete prior to
the receipt of additional third party financing. As a result, Mission is likely
to be required to fund all remaining construction costs, or provide additional
guarantees to secure project financing. The Company has no obligation to fund
the project or provide guarantees and all obligations incurred by BNYLP to date
are non-recourse to the Company.
Pursuant to the provisions of the partnership agreement, Mission retains
the right, because it has spent in excess of $13,258,043 in development costs,
to take all the votes on the Management Committee that controls the day to day
operations of BNYLP. Mission has informed B-41LP that they have incurred costs
in excess of $310,000,000 through November 30, 1995 for this project. If
Mission decides to exercise its right to cast all votes on the BNYLP Management
Committee, B-41LP still remains a 50% general and limited partner in the Navy
Yard project and retains all its other rights, and Mission retains all its
funding and other obligations to the Project and B-41LP.
Like other large projects of this nature, the BNY cogeneration facility is
subject to various risks. There can be no assurance that the facility will be
successfully constructed or, if it is successfully constructed that it will
operate at sufficient levels to cover all
-7-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
operation and maintenance expenses and debt service. The Company has no
liability for any such shortfalls.
WARBASSE PROJECT
In September 1994, the Company resumed full operations of the Warbasse
facility, and since that date has supplied all the electric and thermal needs of
the host, Amalgamated Warbasse Houses, Inc., and is supplying up to the full
capacity requirements of its electric power contract with Consolidated Edison
Company of New York, Inc.
The Company is in the final stages of completing construction of the
Warbasse project. The Company expects that the Warbasse Project requires
approximately $500,000 to complete construction which includes installed
capacity beyond the requirements of the current power purchase agreements which
would be available for an additional potential pending utility contract, and
certain enhancements for increased efficiency.
GENERAL
Cash used in operating activities during the nine months ended November 30,
1995 was approximately $3,828,000, as compared to approximately $2,028,000 used
during the nine months ended November 30, 1994. During the nine months ended
November 30, 1995, a significant portion of cash used in operating activities,
approximately $2,846,000, was spent on construction in progress related to the
Warbasse project as compared to $877,000 spent during the prior corresponding
period. During the current nine month period, approximately $2,996,000 was
generated by net income, however that was offset by an increase in service
receivables of approximately $3,269,000. During the nine months ended November
30, 1994, the remaining balances due to bank and an equipment vendor of $572,000
were satisfied, accounting for most of the cash used.
During the nine months ended November 30, 1995, cash generated by financing
activities was approximately $4,028,000, as compared to approximately $1,387,000
during the nine months ended November 30, 1994. During the nine months ended
November 30, 1995, $2,949,000 was received from the ESOP, and approximately
$1,401,000 was received during the nine months ended November 30, 1994. In
addition, during the nine months ended November 30, 1995, approximately
$1,092,000 was received as a result of the exercise of stock options and
warrants.
The Company expects to continue to finance its selling, general and
administrative expenses and other obligations. Although there can be no
assurance, the Company believes it will be able to meet these obligations from
sources that have been and will be available to the Company over the next year
and on a long-term basis.
-8-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
In the nine and three months ended November 30, 1995, the Company's
Canadian subsidiary, York Research Canada Inc., incurred approximately $584,000
and $116,000, respectively, of selling, general and administrative expenses.
The Company has signed an agreement with NAEC which provides for the
Company to be reimbursed for all costs associated with its activities related to
NAEC, a company owned by the Company's Chairman, and the Company will receive
power brokerage fees to be mutually agreed upon based on level of activity. The
Company recognized $900,000 and $300,000, respectively, as a reimbursement of
costs and $675,000 and $0, respectively, in brokerage fees related to the nine
and three months ended November 30, 1995.
The Company has no significant capital commitments, other than the
completion of construction of the Warbasse facility.
RESULTS OF OPERATIONS
Total revenues increased approximately $5,047,000 and $1,351,000,
respectively, when comparing the nine and three months ended November 30, 1995
to the corresponding periods in 1994. Resumption of operations of the Warbasse
project in September, 1994, caused Services-WCTP revenues to increase
approximately $1,559,000 for the nine months ended November 30, 1995 and were
approximately the same when comparing the three month periods. Engineering and
other services-BNYLP increased approximately $2,647,000 and $2,564,000,
respectively, for the nine and three month periods. This was principally due to
a reimbursement by BNYLP of $2,500,000 for certain engineering and other costs
that had been expensed in prior periods. Such reimbursement was recognized in
the quarter ended November 30, 1995, and was collected on December 22, 1995.
Development fees-BNYLP revenues increased $417,000 and decreased $950,000,
respectively, as a result of an additional $3,000,000 development fee paid in
the nine months ended November 30, 1995, by Mission to B-41LP to, among other
things, compensate B-41LP for certain services rendered, offset by a decrease of
$2,250,000 and $750,000, respectively, due to the conclusion of certain monthly
development fees in December, 1994. Additionally, power brokerage fees from
NAEC of $675,000 and $0 were recognized in the current periods, compared to
$250,000 in both of the prior periods.
Cost of services to WCTP, which include fuel and other operations and
maintenance costs, during the nine months ended November 30, 1995, increased
approximately $1,553,000, compared to the nine months ended November 30, 1994,
commensurate with Services - WCTP revenues.
Selling, general and administrative expenses increased approximately
$464,000 and $5,000, respectively, when comparing the nine and three months
-9-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
ended November 30, 1995 to the corresponding periods in 1994. Expenses for the
current periods increased approximately $151,000 and $35,000, respectively, as a
result of increases in public company costs. Expenses for the current periods
increased approximately $303,000 and $116,000, respectively, due to expenditures
for development of new projects. Due to a restructuring of the Corporate
Headquarters lease, which will result ultimately in reduced rent expense, a
prior deferred credit of approximately $72,000 was recognized, causing a
decrease in rent expense for the nine months ended November 30, 1995. Payroll
and related expenses increased approximately $250,000 and $98,000 during the
nine and three months ended November 30, 1995, as a result of salary increases,
additional personnel, and increased health insurance costs over the same periods
in the prior year. Selling, general and administrative expenses decreased
approximately $300,000 and $70,000, respectively, for the nine and three months
ended November 30, 1995, as a result of an increase in expenses allocated to
Cost of Services - WCTP.
Interest and other income increased approximately $823,000 and decreased
approximately $119,000, respectively, for the nine and three months ended
November 30, 1995, as compared to the corresponding periods in 1994. During the
current periods, an increase of $1,080,000 and a decrease of $122,000,
respectively, were due to interest received from WCTP related to the long-term
note receivable acquired by B-41LP in September, 1994. The realization of a
deferred gain of approximately $244,000 which occurred during the quarter ended
August 31, 1994 resulted in a decrease when comparing the nine months ended
November 30 of the current year to the prior year.
Income allocated to minority interest increased $500,000 for the nine
months ended November 30, 1995 compared to the corresponding periods in the
prior year. This was the minority portion of the development fees recognized in
the quarter ended August 31, 1995.
-10-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
PART II
ITEM 1. Legal Proceedings
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) There were no reports on Form 8-K filed during the three months ended
November 30, 1995.
-11-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of The Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 11, 1996 /s/Robert M. Beningson
------------------------
Robert M. Beningson
Chairman of the Board and
President
Dated: January 11, 1996 /s/ Michael Trachtenberg
------------------------
Michael Trachtenberg
Executive Vice President
and Chief Financial and
Accounting Officer
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF OPERATIONS AS OF AND
FOR THE PERIODS ENDED NOVEMBER 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 1,822,586
<SECURITIES> 0
<RECEIVABLES> 3,716,177
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,029,896
<PP&E> 383,713
<DEPRECIATION> (772,365)
<TOTAL-ASSETS> 56,803,765
<CURRENT-LIABILITIES> 3,261,631
<BONDS> 0
0
0
<COMMON> 129,898
<OTHER-SE> 29,094,859
<TOTAL-LIABILITY-AND-EQUITY> 56,803,765
<SALES> 0
<TOTAL-REVENUES> 9,739,151
<CGS> 0
<TOTAL-COSTS> 3,268,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,171,286
<INCOME-TAX> 175,000
<INCOME-CONTINUING> 2,996,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,996,286
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0
</TABLE>
