<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, 1996
-----------------------------------
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
14,083,578.
- ----------
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, February 28,
1996 1996
(Unaudited) *
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $12,391,255 $5,530,190
Receivables (Note 7) 9,051,644 2434498
Deferred tax asset 684,000 684,000
Inventory 755,982 --
Other current assets (including advances to employees and
directors of $148,100 and $32,775, respectively) 351,664 204,728
----------- -----------
Total current assets 23,234,545 8,853,416
Property, plant and equipment, net 418,298 353,755
Construction in progress - WCTP (Note 4) -- 24,726,114
Long-term note receivable - WCTP (Note 4) 49,490,535 22,711,978
Advances to minority partner 2,000,000 2,000,000
Other assets (including advances to an employee and a director
of $606,267 and $627,267, respectively) 1,862,750 979,094
Excess of investment over net assets acquired, net 347,783 377,312
----------- -----------
Total assets $77,353,911 $60,001,669
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts and notes payable $7,782,208 $1,209,978
Accrued expenses 1,190,980 1,443,149
Accrued income taxes 2,025,024 144,342
----------- -----------
Total current liabilities 10,998,212 2,797,469
Due to SBCC 19,982,000 20,232,000
Other long-term liabilities 674,855 684,833
Deferred revenue and other credits 3,460,000 3,460,000
----------- -----------
Total liabilities 35,115,067 27,174,302
Commitments and contingencies
Minority interest in partnership 185,726 --
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
14,130,702 and 13,329,778 shares, respectively 141,307 133,298
Additional paid-in capital 57,560,778 54,230,850
Accumulated (deficit) (6,186,077) (11,905,661)
----------- -----------
51,516,008 42,458,487
Less:
Treasury stock, at cost (47,124 shares) (706,401) (706,401)
Notes receivable - sale of common stock (7,960,312) (7,539,787)
Deferred compensation - ESOP (796,177) (1,384,932)
----------- -----------
Total stockholders' equity 42,053,118 32,827,367
Total liabilities and stockholders' equity $77,353,911 $60,001,669
=========== ===========
</TABLE>
* Derived from audited financial statements as of February 28, 1996
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 November30, Months Ended November 30,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
Revenues:
<S> <C> <C> <C> <C>
Services (Note 5) $14,554,965 $5,797,463 $5,333,884 $3,682,530
Energy sales 5,223,483 -- 5,223,483 --
Development and other fees -- 3,941,688 -- --
------------ ------------ ------------ ------------
Total revenues 19,778,448 9,739,151 10,557,367 3,682,530
------------ ------------ ------------ ------------
Costs and expenses:
Cost of services 4,449,000 3,268,860 1,442,910 1,183,542
Cost of energy 5,019,961 -- 5,019,961 --
Selling, general and administrative 5,079,499 4,599,640 1,832,704 1,403,792
Interest and other (income) expense (2,737,322) (1,800,635) (1,141,987) (589,769)
Minority interest in consolidated partnership 185,726 500,000 185,726 --
------------ ------------ ------------ ------------
Total costs and expenses 11,996,864 6,567,865 7,339,314 1,997,565
------------ ------------ ------------ ------------
Income before income taxes 7781584 3171286 3218053 1684965
Provision for income taxes 2,062,000 175,000 1,042,000 75,000
------------ ------------ ------------ ------------
Net income $5,719,584 $2,996,286 $2,176,053 $1,609,965
============ =========== ============ ============
Net income per common share - primary: $0.38 $0.24 $0.14 $0.12
============ =========== ============ ============
Net income per common share - fully diluted: $0.37 $0.24 $0.14 $0.12
============ =========== ============ ============
Weighted average number of common shares and
common share equivalents: 15,470,050 15,842,686 15,559,756 16,190,220
============ =========== ============ ============
</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>
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income from operations $5,719,584 $2,996,286
Adjustments to reconcile net income from operations to
net cash generated by (used in) operating activities:
Depreciation and amortization 108,542 126,926
Amortization of deferred credits -- (392,633)
ESOP contribution 393,876 302,350
Changes in operating assets and liabilities:
Increase in receivables (6,617,146) (3,268,722)
Increase in construction in progress (2,052,443) (2,846,499)
Net (increase) decrease in notes receivable, other current
assets, and other assets (1,786,574) 68,422
Net increase (decrease) in accounts payable, accrued
expenses and long-term liabilities 6,256,896 (793,909)
Increase (decrease) in accrued taxes 1,880,682 (20,494)
----------- -----------
NET CASH GENERATED BY (USED IN) OPERATING ACTIVITIES 3,903,417 (3,828,273)
----------- -----------
INVESTING ACTIVITIES:
Purchase of machinery and equipment (143,556) (144,239)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (143,556) (144,239)
----------- -----------
FINANCING ACTIVITIES:
Amounts received from ESOP 450,000 2949000
Payments on capital leases (11,086) -13005
Proceeds from exercise of stock options and warrants 2,662,290 1,091,608
----------- -----------
NET CASH GENERATED BY FINANCING ACTIVITIES 3,101,204 4,027,603
----------- -----------
INCREASE IN CASH 6,861,065 55,091
CASH AT BEGINNING OF PERIOD 5,530,190 1,767,495
----------- -----------
CASH AT END OF PERIOD $12,391,255 $1,822,586
=========== ===========
</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, 1996 and results of operations for the
nine and three months ended November 30, 1996 and 1995, and cash flows for the
nine months ended November 30, 1996 and 1995.
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. Certain amounts in the February 28, 1996 balance sheet
were reclassified to conform with the November 30, 1996 presentation.
(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 nine
months and the quarter, calculated using the modified treasury stock method.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
------------------------- -------------------------
November 30, November 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of
shares outstanding 13,617,366 12,791,346 13,883,078 12,895,203
Average of unreleased
ESOP shares (939,094) (881,271) (889,904) (862,896)
Dilution (warrants
and options) 2,791,778 3,932,611 2,566,582 4,157,913
---------- ---------- ---------- ----------
Weighted average number of common
share and common share
equivalents 15,470,050 15,842,686 15,559,756 16,190,220
========== ========== ========== ==========
</TABLE>
(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, 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
-5-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
"Warrants"). The Class A Warrants expired 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 Edison Mission Energy, which is recourse only to
future distributions from BNYLP, if any. The Class B Warrants remain
outstanding except that at November 30, 1996, 8,264 Class B Warrants had been
exercised. Under the terms of the settlement other principal provisions of the
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 $1,984,000) to
secure the Surrender Price of the remaining Class B Warrants. Court approval
of the agreement was given on June 4, 1996. A further extension of time is
presently under negotiation. 119,500 and 60,000 new warrants were issued on
September 27, 1996 and October 4, 1996, respectively, and the shares issuable
upon exercise of such warrants have been registered. The new warrants will
have a term of two years, an exercise price of $6.50 per share and will not
have any provisions for surrender or collateral.
-6-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(4) COMPLETION OF WARBASSE FACILITY
On August 1, 1996, the Warbasse Facility was transferred by Cogeneration
Technologies, Inc. ("CTI") to Warbasse-Cogeneration Technologies Partnership,
Inc. ("WCTP"), in exchange for a Note Receivable of $28,808,535. The Note
Receivable represents the total construction cost of the facility plus (1) the
unpaid balance of approximately $1,530,000 in Other long-term receivables-WCTP,
which relate to operation and maintenance services performed for WCTP in prior
periods and (2) a $500,000 payment made to WCTP in lieu of a performance bond
and (3) an accrual for the remaining construction tasks which generally relate
to improving efficiency. Therefore, the caption Long-term note receivable-WCTP
on the balance sheet consists of:
B-41LP note $20,682,000
CTI note 28,808,535
-----------
$49,490,535
===========
(5) SERVICES AGREEMENT
In the nine and three months November 30, 1996, the Company recorded
$7,500,000 and $3,850,000, respectively, of fees for services rendered through
November 30, 1996 to WCTP and RV Associates L.P. ("RVA"), two partnerships of
which RRR'S Ventures Ltd., a company controlled by the Company's chairman, is
the general partner. This amount was included in service revenues. These fees
were recorded pursuant to a services agreement between WCTP, RVA, CTI and York.
The services include ongoing negotiations of consolidation agreements with Con
Edison and Edison Mission Energy, aiding in resolving various contract issues
concerning WCTP's and RVA's power purchase agreements with Con Edison, and
various issues related to the progress of the Brooklyn Navy Yard Project. The
$7,500,000 recorded in the nine months ended November 30, 1996 was received
during the quarter ended November 30, 1996.
The agreement further contains a provision for services to be rendered and
a fee to be earned in the quarter ended February 28, 1997 based on the level of
various activities.
(6) ACQUISITION OF NAEC
As of November 1, 1996, the Company acquired 85% of the shares of North
American Energy Conservation, Inc. ("NAEC") for $1 from NAEC. Prior to the
acquisition, all of the stock was owned by the Company's chairman. The
acquisition has been accounted for as a purchase.
-7-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The following table reflects unaudited pro forma combined results of
operations for the Company and NAEC on the basis that the acquisition had taken
place at the beginning of the fiscal year:
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended November 30, Ended November 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $43,499,506 $17,266,249 $17,907,523 $6,371,395
----------- ----------- ----------- ----------
Net Income $5,285,126 $889,280 $1,845,732 $1,056,834
----------- ----------- ----------- ----------
Net Income per Common Share $0.34 $0.11 $0.12 $0.08
----------- ----------- ----------- ----------
Shares Used in Computation 15,470,050 15,842,686 15,559,756 16,190,220
----------- ----------- ----------- ----------
</TABLE>
In managements opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisition been consummated at the beginning of the periods presented or if
future operations of the combined companies under the ownership and management
of the Company.
(7) RECEIVABLES
Receivables consist of the following:
November 30, February 28,
1996 1996
----------- -----------
Accounts receivable - Energy $5,274,286 --
Service and other receivables -
WCTP 3,619,846 $1,696,583
Engineering and other service
receivables - BNYLP 135,401 137,915
Other receivables 22,111 600,000
---------- ----------
$9,051,644 $2,434,498
========== ==========
-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.
The Company and Mission previously estimated the total capital costs of the
Brooklyn Navy Yard ("BNY") Facility, when completed, to be approximately
$420,000,000. Due to an expansion of the construction scope and the resulting
delays, it is likely that this estimate will be exceeded by approximately 10% to
15%, including capitalized interest during construction. 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 through that date in constructing and developing the BNY
Facility. These bonds are recourse to a letter of credit ("LOC") in like
amounts arranged by Mission, which LOC is in turn supported by a Mission
guarantee. BNYLP has agreed to reimburse Mission if the guarantee is called,
out of future cash flow as and if available. The proceeds of this bond sale
were used to reimburse Mission for a portion of its construction loans and to
reimburse the Company for engineering and other costs that had been expensed in
prior periods and for services that have been performed by the Company.
In March, 1996, the project 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 in excess of those funded by the IDA Bonds mentioned
above and may be required to 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 control the day to day
operations of BNYLP. Mission has informed B-41LP that they have incurred gross
costs in excess of $428,000,000 through November 30, 1996 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.
-9-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
----------------------------------------------
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.
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 $1,500,000 during the
next year, on certain remaining items which were accrued at the time of
transfer.
GENERAL
Cash generated by operating activities during the nine months ended
November 30, 1996 was approximately $3,903,000, as compared to approximately
$3,828,000 used during the nine months ended November 30, 1995. During the
current period, net income from operations provided approximately $5,720,000.
Increases in accounts payable, accrued expenses and long-term liabilities of
approximately $6,257,000 and an increase in accrued taxes of approximately
$1,881,000 provided another $8,138,000 of cash in addition to net income but
these amounts were offset by an increase in receivables of approximately
$6,617,000 and an increase in other assets of approximately $1,787,000. During
the nine months ended November 30, 1995, the majority of cash used in operating
activities was due to net income of approximately $3,000,000, offset by
expenditures on construction in progress of approximately $2,800,000, and an
increase in service receivables of approximately $3,300,000.
During the nine months ended November 30, 1996, cash generated by financing
activities was approximately $3,101,000, as compared to approximately $4,028,000
during the nine months ended November 30, 1995. During the current period,
approximately $2,662,000 was generated by the exercise of stock options and
warrants, and $450,000 was received from the York Research Corp. Employee Stock
Ownership Plan ("ESOP") in repayment of demand purchase money loans. During the
nine months ended November 30, 1995, approximately $1,092,000 was provided by
the exercise of stock options and warrants, and $2,949,000 was received from the
ESOP in repayment of demand purchase money loans.
-10-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
----------------------------------------------
The Company had an agreement with North American Energy Conservation, Inc.
("NAEC") which provided for the Company to be reimbursed for all costs
associated with its activities related to NAEC, a company owned by the Company's
Chairman. The Company recognized approximately $924,000 and $304,000 as a
reimbursement of costs during the nine and three months ended November 30, 1996.
On September 16, 1996, NAEC received approval from the Federal Energy Regulatory
Commission for the acquisition by York of 85% of the equity of NAEC. The
acquisition was completed as of November 1, 1996, and from that date forward,
NAEC will be a part of the York consolidated group.
The Company has no significant capital commitments, other than the
remaining items related to the Warbasse facility.
RESULTS OF OPERATIONS
Total revenues increased approximately $10,039,000 for the nine months
ended November 30, 1996, compared to the corresponding period in the prior year.
Service revenues increased approximately $9,064,000, mainly due to an increase
of $7,500,000 for services rendered to WCTP and RVA (see Note 5), and increased
billing to WCTP as a result of elevated fuel costs, additional purchases of
supplies, spare parts, etc. and increased overhead. Development and other fees
decreased approximately $3,942,000 which was due to decreases of approximately
$3,000,000 in development fees and $675,000 of power brokerage fees, since none
were earned in the current period. Energy sales increased approximately
$5,223,000 because of the acquisition of NAEC.
When comparing total revenues for the quarter ended November 30, 1996 to
the quarter ended November 30, 1995, the result is an increase of approximately
$6,874,000. Revenues increased approximately $1,651,000 from quarter to
quarter, mainly due to an increase of $3,850,000 for services rendered to WCTP
and RVA during the current period, versus no such services earned in the prior
year, offset by a decrease resulting from the recognition in the quarter ended
November 30, 1995 of an agreement with BNYLP to reimburse B-41LP $2,500,000 for
certain engineering and other costs that had been expensed in prior periods.
Energy sales provided an increase of approximately $5,223,000.
Cost of services, which include fuel and other operations and maintenance
costs, during the nine and three months ended November 30, 1996, increased
approximately $1,180,000 and $259,000, respectively, compared to the nine and
three months ended November 30, 1995, commensurate with services revenues from
WCTP.
Cost of energy increased approximately $5,020,000 for the nine and three
months ended November 30, 1996 as a result of the commencement of energy sales
due to the acquisition of NAEC.
-11-
<PAGE>
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION & RESULTS OF OPERATIONS
----------------------------------------------
Selling, general and administrative expenses increased approximately
$480,000 and $429,000, respectively, when comparing the nine and three months
ended November 30, 1996 to November 30, 1995. Engineering and other costs
allocated to cost of services increased by approximately $399,000 and $120,000,
respectively, for the nine and three month periods based upon service revenues
generated. For the nine and three month periods, these reductions were offset
by an increase in payroll and related expenses of approximately $520,000 and
$158,000, respectively, due to additional personnel and increased salaries, and
additional expense of approximately $313,000 and $193,000, respectively, due to
expenses related to the operations of NAEC.
Interest and other income increased approximately $937,000 and $552,000,
respectively, when comparing the nine and three months ended November 30, 1996
to the same periods in 1995. This was partly due to the receipt of $200,000
during the nine month period from AWH, recognized as other income, in payment of
certain amounts due to Cogeneration Technologies, Inc., which were deferred in
prior years. There was also an increase of approximately $741,000 and $551,000,
respectively, in interest income during the nine and three months ended November
30, 1996, as a result of the note receivable from WCTP related to the sale of
the Warbasse facility.
Income allocated to minority interest decreased approximately $314,000
during the nine month period, since a minority portion of interest income of
approximately $186,000 was recognized in the current nine months, while the
minority portion of development fees of $500,000 was recognized during the nine
months ended November 30, 1995.
-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) On November 20, 1996, the Company filed a report on Form 8-K with
regard to the acquisition of 85% of the outstanding shares of North
American Energy Conservation, Inc.
-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: January 9, 1997 /S/ROBERT M. BENINGSON
------------------------
Robert M. Beningson
Chairman of the Board and
President
Dated: January 9, 1997 /S/ MICHAEL TRACHTENBERG
------------------------
Michael Trachtenberg
Executive Vice President
and Chief Financial and
Accounting Officer
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AS
OF AND FOR THE PERIODS ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 12,391,255
<SECURITIES> 0
<RECEIVABLES> 9,051,644
<ALLOWANCES> 0
<INVENTORY> 755,982
<CURRENT-ASSETS> 23,234,545
<PP&E> 418,298
<DEPRECIATION> (881,794)
<TOTAL-ASSETS> 77,353,911
<CURRENT-LIABILITIES> 10,998,212
<BONDS> 0
0
0
<COMMON> 141,307
<OTHER-SE> 41,911,811
<TOTAL-LIABILITY-AND-EQUITY> 77,353,911
<SALES> 5,223,483
<TOTAL-REVENUES> 19,778,448
<CGS> 5,019,961
<TOTAL-COSTS> 4,449,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,781,584
<INCOME-TAX> 2,062,000
<INCOME-CONTINUING> 5,719,584
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,719,584
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.37
</TABLE>
