<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 August 31, 1997
-----------------------------------
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
14,759,166.
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, February 28,
1997 1997
------------ ------------
(Unaudited) *
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,388,474 $11,513,026
Accounts receivable 36,321,174 7,900,114
Other receivables - related parties 6,728,516 8,298,806
Inventory 1,260,510 1,312,086
Deferred tax asset 752,000 661,000
Other current assets (including advances to employees
of $143,900 and $146,300, respectively) 906,212 311,356
------------ ------------
Total current assets 55,356,886 29,996,388
Property, plant and equipment, net 651,930 602,428
Long-term note receivable - WCTP 49,490,535 49,490,535
Advances to minority partner -- 2,000,000
Other assets (including advances to an employee and a former
director of $537,917 and $608,267, respectively) 1,609,639 2,402,082
Excess of investment over net assets acquired, net 318,254 337,940
------------ ------------
Total assets $107,427,244 $84,829,373
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $39,310,587 $10,765,462
Accrued expenses 2,000,578 1,659,085
Accrued income taxes 7,063 765,498
------------ ------------
Total current liabilities 41,318,228 13,190,045
Due to SBCC -- 19,982,000
Other long-term liabilities 867,883 884,949
Deferred tax liability 4,447,937 --
Deferred revenue and other credits 4,254,708 3,460,000
------------ ------------
Total liabilities 50,888,756 37,516,994
Minority interest in partnership 1,633,514 321,942
Commitments and contingencies -- --
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 14,882,290 and 14,256,304 shares, respectively 148,823 142,563
Additional paid-in capital 64,063,405 60,350,127
Accumulated deficit (439,173) (4,083,050)
------------ ------------
63,773,055 56,409,640
Less:
Treasury stock, at cost (123,124 and 47,124 shares) (1,409,401) (706,401)
Notes receivable - sale of common stock (6,832,938) (7,960,313)
Deferred compensation - ESOP (625,742) (752,489)
Total stockholders' equity 54,904,974 46,990,437
Total liabilities and stockholders' equity $107,427,244 $84,829,373
============ ============
</TABLE>
* Derived from audited financial statements as of February 28, 1997
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 Six For the Three
Months Ended August 31, Months Ended August 31,
-------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Energy sales $140,608,777 -- $ 94,846,083 --
Services 3,985,414 $9,221,081 2,322,756 $5,196,315
------------ ------------ ------------ ------------
Total revenues 144,594,191 9,221,081 97,168,839 5,196,315
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Cost of energy 139,978,674 -- 94,002,425 --
Cost of services 3,965,202 3,006,090 2,299,282 1,509,341
Selling, general and administrative 5,164,517 3,246,799 2,542,226 1,681,545
Interest and other (income) expense (3,117,530) (1,595,337) (1,462,648) (838,078)
Minority interest in partnership 285,817 -- 143,106 --
------------ ------------ ------------ ------------
Total costs and expenses 146,276,680 4,657,552 97,524,391 2,352,808
------------ ------------ ------------ ------------
INCOME (loss) BEFORE INCOME TAXES (1,682,489) 4,563,529 (355,552) 2,843,507
Provision for income taxes 110,000 1,020,000 110,000 660,000
------------ ------------ ------------ ------------
INCOME (loss) BEFORE EXTRAORDINARY GAIN (1,792,489) 3,543,529 (465,552) 2,183,507
Extraordinary gain, net of tax and
allocation to minority interest 5,436,367 -- -- --
------------ ------------ ------------ ------------
NET INCOME (loss) $ 3,643,878 $ 3,543,529 ($465,552) $ 2,183,507
============ ============ ============ ============
Earnings (loss) per share - Primary:
Per common share before extraordinary gain ($0.11) $0.24 ($0.03) $0.14
Extraordinary gain 0.35 -- -- --
------------ ------------ ------------ ------------
Per common share $0.24 $0.24 ($0.03) $0.14
============ ============ ============ ============
Earnings (loss) per share - Fully Diluted:
Per common share before extraordinary gain ($0.12) $0.24 ($0.03) $0.14
Extraordinary gain 0.35 -- -- --
------------ ------------ ------------ ------------
Per common share $0.23 $0.24 ($0.03) $0.14
============ ============ ============ ============
Weighted average number of common shares and
common share equivalents: 15,382,390 15,431,067 13,992,231 15,451,851
============ ============ ============ ============
</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 SIX MONTHS ENDED AUGUST 31,
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,643,878 $ 3,543,529
Adjustments to reconcile net income to net cash generated
by (used in) operating activities:
Extraordinary gain (5,436,367) --
Depreciation and amortization 140,149 64,022
Amortization of deferred credits (537,772) --
ESOP contribution 292,386 220,326
Deferred tax asset (91,000) --
Changes in operating assets and liabilities:
Increase in accounts and other receivables (26,981,336) (7,269,122)
Increase in construction in progress -- (2,052,443)
Net decrease in notes receivable, inventory, other current
assets, and other assets 66,104 209,508
Net increase in accounts payable, accrued expenses and
long-term liabilities 30,194,425 1,196,803
Increase (decrease) in accrued taxes (758,435) 676,592
----------- -----------
NET CASH GENERATED BY (USED IN) OPERATING ACTIVITIES 532,032 (3,410,785)
----------- -----------
INVESTING ACTIVITIES:
Purchase of machinery and equipment (169,965) (107,718)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (169,965) (107,718)
----------- -----------
FINANCING ACTIVITIES:
Amounts received from ESOP -- 400,000
Settlement of obligation (2,750,000) --
Payments on capital leases (3,517) (3,847)
Proceeds from exercise of stock options and warrants 266,898 870,526
----------- -----------
NET CASH GENERATED BY (USED IN) FINANCING ACTIVITIES (2,486,619) 1,266,679
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (2,124,552) (2,251,824)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,513,026 5,530,190
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,388,474 $ 3,278,366
=========== ===========
</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 August 31, 1997 and results of operations and cash
flows for the six and three months ended August 31, 1997 and 1996.
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 is based on the weighted average number of common shares and
common share equivalents (warrants and options) outstanding during the quarter,
calculated using the modified treasury stock method.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
August 31, August 31,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of shares
outstanding 14,748,527 13,425,010 14,754,033 13,671,170
Average of unreleased ESOP shares (790,839) (898,318) (761,802) (941,899)
Dilution (warrants and options) 1,424,702 2,904,375 -0- 2,722,580
---------- ---------- ---------- ----------
Weighted average number of common
share and common share equivalents 15,382,390 15,431,067 13,992,231 15,451,851
========== ========== ========== ==========
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share, which is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. Early adoption of the new standard is not permitted.
The new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. Basic earnings per share
excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for the period.
Diluted earnings per share reflects the weighted average common shares
outstanding plus the potential dilutive effect of securities or contracts which
are convertible to common shares, such as options, warrants, and convertible
preferred stock unless
-5-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
antidilutive based upon income before extraordinary gain. The pro forma effect
of adopting the new standard would be:
Six Months Ended Three Months Ended
August 31, August 31,
---------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----
Earnings loss per share - Basic:
Per common share before ($.13) $.28 ($.03) $.17
extraordinary gain
Extraordinary gain .39 -- -- --
----- ----- ----- -----
Per common share $.26 $.28 ($.03) $.17
===== ===== ===== =====
Earnings loss per share - Diluted:
Per common share before
extraordinary gain ($.13) $.23 ($.03) $.14
Extraordinary gain .39 -- -- --
----- ----- ----- -----
Per common share $.26 $.23 ($.03) $.14
===== ===== ===== =====
(3) SETTLEMENT OF OBLIGATION
In March 1997, B-41 Associates L.P. ("B-41LP") settled all its obligations
to Sanwa Business Credit Corp. ("SBCC") for a cash payment of $2,750,000. SBCC,
in exchange for this cash payment gave up all its interest in the future cash
flow from the Brooklyn Navy Yard Project and has no continuing interest in any
of the Company's projects or assets. In settling this obligation, B-41LP caused
RV Associates L.P. ("RVA") and its partners to lose tax benefits that they would
have been able to utilize. Therefore, the Company compensated RVA for its lost
tax benefits in the total amount of $4 million. The form of this non-cash
transaction with RVA and its partners was the exercise of 500,000 pre-existing
warrants at $6 per share for a total of $3,000,000, and the transfer of
$1,000,000 of the Company's note receivable from the Chairman to a
nonconsolidated affiliate. This extinguishment of the SBCC liability resulted
in an extraordinary gain of approximately $5.4 million net of taxes of
approximately $4.4 million and an allocation to the minority interest of
approximately $3.3 million. The $2 million distribution that RVA received from
B-41LP in Fiscal 1993 was charged against the capital of B-41LP concurrent with
the allocation of the gain to the minority interest.
(4) SETTLEMENT OF CLASS ACTION LITIGATION
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, in
March 1995, 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"). The Class A Warrants
expired on November 1, 1995. When the
-6-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 Edison Mission Energy, which is recourse
only to future distributions from BNYLP, if any. The Class B Warrants remain
outstanding except that at August 31, 1997, 41,091 Class B Warrants had been
exercised. Under the terms of the settlement other principal provisions of the
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.
(ii) The Company has the right to reduce the Class B Warrant exercise price in
its discretion (the "adjusted exercise price").
(iii) 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").
(iv) 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.
(v) The Surrender Price of the Class B Warrants was 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 (iv) above occurs. When the new warrants referred to in (vi) below were
issued, the collateral was reduced to a 17 1/2% limited partnership interest.
(vi) On March 18, 1996, the Company agreed with counsel for the Class Action
litigants to issue up to 180,000 new Warrants to holders of Class B Warrants as
consideration for an extension until December 31, 1996 of the obligation of
B-41LP to provide a letter of credit (in an amount up to approximately
$1,648,000) to secure the Surrender Price of the remaining Class B Warrants.
Court approval of the agreement was given on June 4, 1996. Thereafter, 179,500
new Class C Warrants were issued, the shares issuable upon exercise thereof
having been registered. B-41LP did not provide the letter of credit by December
31, 1996, and accordingly, the Class B Warrant expiration date extends day for
day and a further extension is presently under negotiation. The new Class C
Warrants expire between September 27, 1998 and October 4, 1998, are exercisable
at $6.50 per share and do not have any provisions for surrender or collateral.
As of August 31, 1997, 87,373 Class C Warrants had been exercised.
-7-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board also released Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130), governing the reporting and display of comprehensive income and its
components, and Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information" (SFAS No.
131), requiring that all public businesses report financial and descriptive
information about their reportable operating segments. The Company will
implement SFAS 130 and SFAS 131 as required in Fiscal 1999. The impact of
adopting SFAS No. 130 is not expected to be material to the consolidated
financial statements or notes to consolidated financial statements. Management
is currently evaluating the effect of SFAS No. 131 on consolidated financial
statement disclosures.
-8-
<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 Edison Mission Energy ("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.
In March, 1996, the Brooklyn Navy Yard ("BNY") Facility delivered initial
test quantities of power to Con Edison, equivalent to existing contract
capacity. Construction was substantially completed, and on November 1, 1996,
the facility commenced operations in accordance with its contract. Mission has
funded all construction costs incurred to date, and may be required to provide
additional funding or guarantees to secure project financing. The New York City
Industrial Development Agency ("NYCIDA") issued $253,925,700 of Industrial
Development Revenue Bonds in December 1995, recourse to a Mission guarantee, to
finance certain costs incurred through that date. 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. BNYLP is in the process of arranging
non-recourse financing for the BNY Facility. This non-recourse financing, which
is currently scheduled to be completed later this year, will refinance the
outstanding NYCIDA bonds and finance a portion of the development, construction
and other costs and fees associated with the project. There can be no assurance
that this new financing will be completed.
Pursuant to the provisions of the partnership agreement, Mission retains
the right to take all the votes on the Management Committee that controls the
day to day operations of BNYLP. 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.
In March 1997, the Company settled all of its obligations related to this
project with a financing entity for $2,750,000, plus other consideration (see
Note 3).
Like other large projects of this nature, the BNY cogeneration project is
subject to various risks. There can be no assurance that the facility, although
completed, will operate at sufficient levels to cover all operation and
maintenance expenses and debt service. The Company has no liability for any
such shortfalls.
-9-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
WARBASSE PROJECT
In September 1994, the Company resumed full operations of the Warbasse
facility, and since that date has supplied, on a continuous basis, all the
electric and thermal needs of the host, Amalgamated Warbasse Houses, Inc.
("AWH"), and is supplying up to the full capacity requirements of its electric
power contract with Consolidated Edison Company of New York, Inc., when
dispatched.
The Company has substantially completed the Warbasse project, and
transferred the facility to Warbasse-Cogeneration Technologies Partnership L.P.
on August 1, 1996. The Company expects to spend up to $1,400,000 during the
next year, on certain remaining items which were accrued at the time of
transfer, or enhancements to improve efficiency of operations.
GENERAL
Cash generated by operating activities during the six months ended August
31, 1997 was approximately $532,000, as compared to approximately $3,411,000
used during the six months ended August 31, 1996. During the current period,
net income of approximately $3,644,000 included a non-cash extraordinary gain of
approximately $5,436,000 which was offset by a net increase of certain operating
liabilities over operating assets of approximately $2,521,000. During the six
months ended August 31, 1996, net income provided approximately $3,544,000,
which was offset by an increase in receivables of approximately $7,269,000.
During the six months ended August 31, 1997, cash used in financing
activities was approximately $2,487,000, as compared to approximately $1,267,000
generated during the six months ended August 31, 1996. During the current
period, $2,750,000 was used to settle an obligation with Sanwa Business Credit
Corp., and approximately $267,000 was generated by the exercise of stock options
and warrants. During the six months ended August 31, 1996, approximately
$871,000 was generated by the exercise of stock options and warrants and
$400,000 was received from the York Research Corporation Employee Stock
Ownership Plan in repayment of demand purchase money loans.
The Company has no significant capital commitments, other than certain
remaining items related to increased operating efficiency at the Warbasse
facility.
This report may contain certain forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: the Company's ability to successfully develop and finance
new projects and new products; the impact of competition on the Company's
revenues; changes in law or regulatory requirements that adversely or positively
affect the Company; delays in the
-10-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
Company's development of new projects; and changes in unit prices, and supply
and demand for electricity and natural gas.
RESULTS OF OPERATIONS
Total revenues increased approximately $135,373,000 and $91,973,000 when
comparing the six and three months ended August 31, 1997 to the corresponding
periods in 1996, mainly due to the inclusion of North American Energy
Conservation, Inc. ("NAEC"), acquired on November 1, 1996, which accounted for
approximately $140,609,000 and $94,846,000, respectively, of the increases.
NAEC is a marketer of wholesale electric power and wholesale and retail natural
gas. These increases were offset by decreases in service revenues of
approximately $5,236,000 and $2,874,000, respectively. The decreases in service
revenues for the six and three months ended August 31, 1997 were due to
decreases of $3,650,000 for both periods as a result of the recognition of
revenues during Fiscal 1997 pursuant to a services agreement between WCTP and
RVA and the Company; and a decrease in engineering services during the six month
period of approximately $2,745,000 due mainly to $2,500,000 of reimbursements in
Fiscal 1997 by BNYLP for certain engineering costs a portion of which was
expensed in prior periods. These decreases in revenues were offset by increases
for the six and three months of Fiscal 1998 of approximately $1,159,000 and
$853,000, respectively, in service revenues to WCTP due to higher fuel costs and
an increase in purchases of supplies, spare parts, etc.
Cost of energy increased approximately $139,978,000 and $94,002,000,
respectively, for the six and three months ended August 31, 1997, commensurate
with energy sales. Gross margins on the energy business will be impacted by
changes in unit prices, supply and seasonal factors.
Cost of services, which include fuel and other operations and maintenance
costs, during the six and three months ended August 31, 1997 increased
approximately $959,000 and $790,000, respectively, compared to the six and three
months ended August 31, 1996 commensurate with service revenues from WCTP.
Selling, general and administrative expenses increased approximately
$1,917,000 and $860,000 when comparing the six and three months ended August 31,
1997 to August 31, 1996, due mainly to the inclusion of NAEC, acquired on
November 1, 1996, which accounted for approximately $1,568,000 and $751,000,
respectively, of the increases. The operations of NAEC since acquisition
include payroll and employee benefits, rent and office expenses, consulting
fees, etc. The remainder of the increases were due to increases in certain
general and administrative expenses related to an expansion of the Company's
businesses.
Interest and other income increased approximately $1,522,000 and $625,000,
respectively, when comparing the six and three months ended August 31, 1997 to
the six and three months ended August
-11-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
31, 1996. Increases of approximately $951,000 and $381,000, respectively, were
attributable to interest on the long-term note receivable from WCTP related to
the sale of the Warbasse facility on August 1, 1996. The commencement in
December 1996 of general partner fees received by B-41LP from BNYLP accounted
for increases in other income of approximately $768,000 and $358,000, during the
six and three months respectively.
A current provision for minimum federal and state and local income taxes
has been offset against deferred tax benefits, resulting in a provision for
income taxes for the six and three months ended August 31, 1997 of $110,000.
The prior period provisions of $1,020,000 and $660,000 were based on the annual
effective tax rate applied to the income for the six months and quarter ended
August 31, 1996, respectively.
During the quarter ended May 31, 1997, the Company recorded an
extraordinary gain in connection with the settlement of an obligation
(see Note 3).
-12-
<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
August 31, 1997.
-13-
<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: October 15, 1997 /s/Robert M. Beningson
--------------------------------
Robert M. Beningson
Chairman of the Board and
President
Dated: October 15, 1997 /s/ Michael Trachtenberg
--------------------------------
Michael Trachtenberg
Executive Vice President
and Chief Financial and
Accounting Officer
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The consolidated balance sheets and consolidated statements of operations as of
and for the periods ended August 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 9,388,474
<SECURITIES> 0
<RECEIVABLES> 36,321,174
<ALLOWANCES> 0
<INVENTORY> 1,260,510
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0
0
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