<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 1-10863
YORK INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3473472
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
631 SOUTH RICHLAND AVENUE, YORK, PA 17403
(717) 771-7890
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant (1) has 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 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 latest practicable date.
Class Outstanding at August 6, 1997
----- -----------------------------
Common Stock, par value $.005 42,674,879 shares
<PAGE>
-2-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Form 10-Q
For the quarterly period ended June 30, 1997
INDEX
-----
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Operations (Unaudited) -
Six Months and Three Months Ended June 30, 1997 and 1996 3
Consolidated Condensed Balance Sheets -
June 30, 1997 (Unaudited) and December 31, 1996 4
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 1997 and 1996 5
Supplemental Notes to Consolidated Condensed
Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
-3-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Item 1
FINANCIAL STATEMENTS
Consolidated Condensed Statements of Operations (Unaudited)
- -----------------------------------------------------------
(thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $1,685,164 $1,589,827 $884,397 $861,662
Cost of goods sold 1,332,031 1,242,208 695,000 667,265
--------- --------- ------- -------
Gross profit 353,133 347,619 189,397 194,397
Selling, general and administrative expenses 243,965 218,632 114,593 114,242
------- ------- ------- -------
Income from operations before purchase
accounting amortization 109,168 128,987 74,804 80,155
Purchase accounting amortization 5,084 4,856 2,542 2,542
----- ----- ----- -----
Income from operations 104,084 124,131 72,262 77,613
Interest expense, net 20,416 17,536 10,981 8,971
Equity in (earnings) losses of affiliates (868) 811 (1,109) (831)
------ ------ ------ -----
Income before income taxes 84,536 105,784 62,390 69,473
Provision for income taxes 27,474 35,966 20,188 23,620
------ ------ ------ ------
Net income $ 57,062 $ 69,818 $ 42,202 $ 45,853
====== ====== ====== ======
Earnings per share of common stock $ 1.31 $ 1.60 $ .97 $ 1.05
===== ===== ===== =====
Cash dividends per share $ 0.24 $ 0.18 $ 0.12 $ 0.09
===== ===== ===== =====
Weighted average common shares and
common equivalents outstanding 43,717 43,683 43,489 43,792
</TABLE>
See accompanying supplemental notes to consolidated condensed financial
statements.
<PAGE>
-4-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
- -------------------------------------
(thousands of dollars)
<TABLE>
<CAPTION>
ASSETS
June 30, 1997 December 31,
Current Assets: (Unaudited) 1996
-------------- ------------
<S> <C> <C>
Cash and cash equivalents $ 13,220 $ 11,470
Receivables 652,095 563,099
Inventories:
Raw materials 176,511 178,771
Work in process 121,325 118,847
Finished goods 325,264 311,724
---------- ----------
Total inventories 623,100 609,342
---------- ----------
Prepayments and other current assets 97,663 107,344
---------- ----------
Total current assets 1,386,078 1,291,255
Deferred income taxes 16,678 19,265
Unallocated excess of cost
over net assets acquired 347,584 350,370
Investments in affiliates 21,185 22,205
Property, plant and equipment, net 367,573 360,432
Deferred charges and other assets 24,118 31,244
---------- ----------
Total assets $2,163,216 $2,074,771
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion
of long-term debt $ 71,247 $ 128,461
Accounts payable and accrued expenses 571,416 602,359
Income taxes 34,396 36,292
---------- ----------
Total current liabilities 677,059 767,112
Warranties 37,100 33,135
Long-term debt 498,655 313,641
Postretirement benefit liabilities 129,523 128,411
Other long-term liabilities 46,730 52,095
---------- ----------
Total liabilities 1,389,067 1,294,394
Stockholders' equity 774,149 780,377
---------- ----------
Total liabilities and stockholders' equity $2,163,216 $2,074,771
---------- ----------
</TABLE>
See accompanying supplemental notes to consolidated condensed financial
statements.
<PAGE>
-5-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Condensed Statements of Cash Flows (Unaudited)
- -----------------------------------------------------------
(thousands of dollars)
Six Months Ended June 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 57,062 $ 69,818
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 25,801 23,639
Amortization of deferred charges 8,609 8,157
Provision for doubtful accounts receivable 3,350 3,504
Other 3,135 5,550
Change in assets and liabilities net of
effects from purchase of other companies:
Receivables (92,709) (55,664)
Inventories (6,929) (45,961)
Prepayments and other current assets 10,181 11,765
Deferred income taxes 2,649 1,343
Other assets 3,982 (1,830)
Accounts payable and accrued expenses (34,828) (32,322)
Income taxes (1,947) 4,290
Warranties 4,072 4,147
Post-retirement benefit liabilities 1,112 1,608
Other long-term liabilities (4,446) (2,039)
--------- ---------
Net cash used by operating activities (20,906) (3,995)
--------- ---------
Cash flows from investing activities:
Payment for purchases of and investments in
other companies (net of cash acquired) (14,957) -
Capital expenditures (32,924) (36,043)
Other 1,981 163
--------- ---------
Net cash used by investing activities (45,900) (35,880)
--------- ---------
Cash flows from financing activities:
Common stock issued 2,958 8,005
Treasury stock issued (purchased) (51,820) 25
Proceeds from issuance of bank loans 156,641 -
Long-term debt payments (104,598) (90)
Net payments on short term debt (57,214) (31,095)
Net proceeds from issuance of commercial paper 132,971 66,933
Dividends paid (10,334) (7,790)
--------- ---------
Net cash provided by financing activities 68,604 35,988
--------- ---------
Effect of exchange rate changes on cash (48) 3
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,750 (3,884)
Cash and cash equivalents at beginning of period 11,470 8,838
--------- ---------
Cash and cash equivalents at end of period $ 13,220 $ 4,954
========= =========
</TABLE>
See accompanying supplemental notes to consolidated condensed financial
statements.
<PAGE>
-6-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Supplemental Notes To Consolidated Condensed Financial Statements (Unaudited)
- -----------------------------------------------------------------------------
(1) The consolidated condensed financial statements included herein have been
prepared by the Registrant pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to applicable rules and regulations, although
the Registrant believes that the disclosures herein are adequate to make
the information presented not misleading. In the opinion of the Company,
the accompanying consolidated condensed financial statements contain all
adjustments (consisting of only normally recurring accruals) necessary to
present fairly the financial position as of June 30, 1997 and December 31,
1996, the results of operations for the three and six month periods ended
June 30, 1997 and 1996, and the cash flows for the six months ended June
30, 1997 and 1996.
(2) The results of operations for interim periods are not necessarily
indicative of the results expected for the full year.
(3) The following tables summarize the capitalization of the Company at June
30, 1997 and at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
Current Long Term Current Long Term
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Indebtedness:
Bank loans $ 65,566 $ 156,641 $ 122,059 $ -
Commercial paper - 218,007 - 85,036
Term loans - 8,590 - 109,723
Senior notes - 100,000 - 100,000
Other 5,681 15,417 6,402 18,882
------- ------- ------- -------
Total notes payable and
long-term debt $ 71,247 $ 498,655 $ 128,461 $ 313,641
====== ======= ======= =======
<CAPTION> ------- ------- ------- -------
June 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Stockholders' equity:
Common Stock $.005 par value; 200,000 shares
authorized; issued 43,870 shares at June 30, 1997
and 43,720 shares at December 31, 1996 $ 219 $ 219
Additional paid in capital 670,847 667,775
Retained earnings 193,059 146,331
Currency translation adjustment (29,942) (23,478)
Treasury stock, 1,194 shares at June 30, 1997
and 98 shares at December 31, 1996, at cost (55,452) (3,875)
Unearned compensation (4,582) (6,595)
------- -------
Total stockholders' equity $ 774,149 $ 780,377
======= =======
</TABLE>
(continued)
<PAGE>
-7-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Supplemental Notes To Consolidated Condensed Financial Statements (Unaudited)
- -----------------------------------------------------------------------------
During May 1997, the Company increased the borrowing capacity and term of
its Amended and Restated Credit Agreement (the Agreement) from $350 million
to $500 million. The Agreement expires on July 31, 2002. At June 30, 1997
and December 31, 1996, no amounts were outstanding under the facility. The
Amended Agreement provides for borrowings under the facility at LIBOR plus
.16% or at bid rates as specified in the Agreement. At June 30, 1997 and
December 31, 1996 the LIBOR rate was 5.72% and 5.56%, respectively. A fee
of .09% is paid on the facility. The Agreement, as amended, contains
financial covenants requiring the Company to maintain certain financial
ratios and restricting its ability to incur indebtedness, make investments
and create or permit to exist certain liens.
The Company's non-U.S. subsidiaries maintain bank credit facilities in
various currencies that provided for borrowings of $243.2 million and
$252.5 million at June 30, 1997 and December 31, 1996, respectively, of
which $167.2 million and $121.1 million, respectively, were unused. In some
instances, borrowings against these credit facilities have been guaranteed
by the Company to assure availability of funds at favorable rates.
The Company established commercial paper facilities in November, 1995.
Commercial paper borrowings are expected to be reborrowed in the ordinary
course of business. The average interest rate on the commercial paper was
5.77% and 5.43% as of June 30, 1997 and December 31, 1996, respectively.
During the second quarter of 1997, the Company arranged four separate
unsecured bank lines. These bank lines provide for total borrowings of $185
million which are expected to be reborrowed in the ordinary course of
business. At June 30, 1997, the Company had $156.6 million outstanding
under these bank lines. The average interest rate on the bank lines was
5.77% as of June 30, 1997.
During 1995, the Company arranged two term loans denominated in foreign
currencies. The Company borrowed $26.2 million with a final maturity on
November 15, 1998 and an interest rate of 3.98%. The loan is repayable in
four annual installments. On December 21, 1995, the Company borrowed $100
million with an interest rate of 4.87%. This loan was repaid in total in
June 1997 and no related balance was outstanding as of June 30, 1997. The
remaining term loan agreement contains financial covenants that are
equivalent to the covenants of the Company's Amended and Restated Credit
Agreement.
In July 1995, the Company registered $200 million in debt securities with
the Securities and Exchange Commission. Under terms of the registration
statement, the Company may offer and sell up to that amount of such
securities at prices and terms to be determined at or prior to sale. No
amounts of such debt securities are outstanding at June 30, 1997 or
December 31, 1996.
Under a receivables sales agreement entered into in 1992, the Company sold
a fractional ownership interest in a defined pool of trade accounts
receivable for $100 million in 1997 and 1996. The sold accounts receivable
are reflected as a reduction of receivables in the accompanying
consolidated balance sheets. Under an Amended and Restated Receivables
Sales Agreement entered into on March 26, 1997, the maximum amount of the
purchasers' investment is currently $120 million and is subject to decrease
based on the level of eligible accounts receivable and restrictions on
concentrations of receivables. The discount rate on the receivables sold at
June 30, 1997 and December 31, 1996 was approximately 5.64% and 5.40%,
respectively.
During May 1997, the Stockholders approved the amended and restated 1992
Omnibus Stock Plan authorizing the issuance of up to 4,380,000 shares of
the Company's common stock as stock options or restricted share awards. The
exercise price of the stock options granted under this plan are not less
than the fair market value of the shares on the date the option is granted.
The restricted shares will be granted at a price determined by the Board of
Directors. In March, 1997, key employees were awarded options to purchase
737,932 shares at an exercise price of $45.375 per share.
(continued)
<PAGE>
-8-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Supplemental Notes To Consolidated Condensed Financial Statements (Unaudited)
- -----------------------------------------------------------------------------
During May 1997, the Board of Directors authorized the Company to purchase
up to 3.8 million shares of its Common Stock over the next four years to
fund the Company's Employee Stock Purchase Plan and the Amended and
Restated 1992 Omnibus Stock Plan. The purchases are made from time to time
in the open market.
(4) Purchase accounting amortization primarily represents the amortization of
the unallocated excess of cost over net assets acquired, incurred in
connection with the acquisition of the Company in 1988.
(5) The Company's earnings per share are based on the weighted average
outstanding common shares and common share equivalents.
(6) Acquisitions
On May 6, 1997, the Company acquired the assets of the Performance Air
Division of CleanPak International (PACE) located in Portland, Oregon and
Pace Gamewell (Gamewell) located in Salisbury, North Carolina. Pace and
Gamewell develop, manufacture and sell air handling products equipment in
the United States.
On December 31, 1996, the Company acquired certain assets of Snomax located
in Rochester, New York. Snomax develops, manufacturers and sells ice-
nucleating molecules which are catalysts in the snow making process.
On December 30, 1996, the Company formed a joint venture with a partner in
Wuxi of the People's Republic of China (P.R.C.) for the manufacture of
certain commercial air conditioning products in the P.R.C.
On October 31, 1996, the Company acquired certain assets of Natkin Service
Company (NATKIN) located in Denver, Colorado. Natkin is an HVAC service
company which complements the Company's current commercial service business
in the U.S. The addition of Natkin expands the Company's service
capabilities primarily in the Southwestern U.S.
On July 31, 1996, the Company acquired the outstanding shares of Northfield
Equipment and Manufacturing Company (NEMCO), located in Northfield,
Minnesota. NEMCO designs and manufactures food processing freezing
equipment.
(7) Reference is made to the Registrant's 1996 Annual Report on Form 10-K for
more detailed financial statements and footnotes.
<PAGE>
-9-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net sales for the three months ended June 30, 1997 increased 2.6% to $884.4
million as compared to $861.7 million for the three months ended June 30, 1996.
Income from operations for the second quarter of 1997 was $72.3 million compared
to $77.6 million for the second quarter of 1996. Net sales for the six months
ended June 30, 1997 increased 6.0% to $1,685.2 million as compared to $1,589.8
million for the six months ended June 30, 1996. Income from operations for the
first six months of 1997 was $104.1 million as compared to $124.1 million for
the first six months of 1996.
For the second quarter, aggregate non-U.S. sales decreased 0.9% from the second
quarter of 1996 to $380.0 million primarily as a result of weak markets in
Europe which were almost entirely offset by favorable conditions in the Asia-
Pacific and Latin America engineered and unitary product markets. Domestic
revenue increased 5.4% primarily as a result of strong engineered and
refrigeration equipment sales and to a lesser extent increased volume in the
service and repair business, partially offset by sales decreases in unitary
products due to unseasonably cool weather in the second quarter.
Order backlog at June 30, 1997 was $806 million which is 4.7% less than year-end
and 14.1% less than one year ago. The domestic backlog was $471.8 million which
represents an increase of 10.2% from year-end and an increase of 1.7% from this
time last year primarily due to strong engineered equipment backlog offset by
the unitary products market. Unitary products backlog is down as dealers and
distributors are reluctant to order forward any extra product based on current
inventory levels. They are, however, placing orders for immediate delivery to
fill in where product is needed due to the recent heat wave, but these orders
are in and out orders and do not show up in the backlog. The international
backlog was $334.0 million which represents a decrease of 19.9% from year-end
and a decrease of 29.6% from last year. The decrease in the international
backlog is primarily attributable to the sale of the commercial refrigeration
contracting business in Germany (approximately $30 million) and overall weak
markets in Europe and the unitary products business worldwide.
The following table sets forth second quarter revenue by product and geographic
market (in thousands):
<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------
1997 1996
------ ------
<S> <C> <C>
Engineered products $364,637 $323,698
Unitary products 399,334 417,144
Refrigeration products 120,426 120,820
-------- --------
Total revenue $884,397 $861,662
======== ========
U.S. 57% 56%
International 43% 44%
-------- --------
Total 100% 100%
======== ========
</TABLE>
Gross profit in the second quarter of 1997 decreased 2.6% to $189.4 million or
21.4% of net sales as compared to $194.4 million or 22.6% of net sales for the
1996 period. Gross profit for the six month period increased 1.6% to $353.1
million or 21.0% of net sales as compared to $347.6 million or 21.9% of net
sales for the same period in 1996. The margin decrease was primarily the result
of reduced production loads in the manufacturing facilities caused by lower than
expected demand particularly in Europe.
Special charges were recorded in the first quarter of 1997 totaling
approximately $13.0 million of which $4 million was recorded as cost of sales
and $9 million was recorded under SG&A. These charges represent the costs to
close the Houston manufacturing facility and to downsize the German operations.
(continued)
<PAGE>
-10-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Selling, general and administrative expenses in the second quarter of 1997 were
$114.6 million, 13.0% of net sales, as compared to $114.2 million, 13.3% of net
sales, in 1996. Selling, general, and administrative expenses for the six
months ended June 30, 1997 were $244.0 million, 14.5% of net sales, as compared
to 13.8% of net sales for the same six month period in 1996. Selling, general
and administrative expenses, for the second quarter, as a percent of sales were
lower than last year even though the Company continued to spend on
infrastructure around the globe to create a sound basis for long-term growth in
areas like Latin America and Asia.
Interest expense during the second quarter increased to $11.0 million in 1997
from $9.0 million in 1996. This was a result of higher average borrowings and a
higher domestic borrowing rate.
The provision for income taxes of $20.2 million in the second quarter of 1997
relates both to U.S. and non-U.S operations. This decrease in the effective tax
rate is primarily the result of the benefit of increased export incentives and
utilization of foreign tax credits. These benefits were partially offset by the
tax impact of nondeductible items, including the amortization of goodwill.
As a result of the above factors, the Company had a net income of $42.2 million
in the second quarter of 1997 as compared to net income of $45.9 million in the
second quarter of 1996, a decrease of 8.0%.
Liquidity and Capital Resources
- -------------------------------
Working capital requirements are generally met through a combination of
internally generated funds, bank lines of credit, commercial paper issuances,
financing of trade receivables and credit terms from suppliers which approximate
receivable terms from the Company's customers. The Company believes that its
bank lines of credit under its 1995 Amended and Restated Credit Agreement will
be sufficient to meet working capital needs through 1997. Additional sources of
working capital include customer deposits and progress payments.
The Company had working capital of $709 million and $524 million as of June 30,
1997 and December 31, 1996, respectively. The current ratio was 2.0 at June 30,
1997 as compared to 1.7 at December 31, 1996.
At June 30, 1997, the Company maintained a $500 million Amended and Restated
Credit Agreement (the Agreement) expiring on July 31, 2002. At June 30, 1997
the Company could borrow up to $500 million under the Agreement. The Agreement
provides for borrowings under the facility at LIBOR plus .16% or at bid rates as
specified in the Agreement. At June 30, 1997 the LIBOR rate was 5.72% and a fee
of .09% is paid on the facility. The Agreement, as amended, contains financial
covenants requiring the Company to maintain certain financial ratios and
restricting its ability to incur indebtedness, make investments and create or
permit to exist certain liens.
Commercial paper and bank line borrowings are expected to be reborrowed in the
ordinary course of business. The average interest rate on the commercial paper
was 5.77% as of June 30, 1997.
The Company has one term loan which matures on November 15, 1998 and bears
interest at a rate of 3.98%. The term loan agreement contains financial and
operating covenants that are equivalent to the covenants of the Company's
Amended and Restated Credit Agreement.
The $100 million of Senior Notes bear interest at a 6.75% fixed rate and have a
maturity of ten years from the date of issue.
The Company sold a fractional ownership interest in a defined pool of trade
accounts receivable for $100 million. At June 30, 1997, the discount rate on
the accounts receivable sold was approximately 5.64%.
In July 1995, the Company registered $200 million in debt securities with the
Securities and Exchange Commission. Under terms of the registration statement,
the Company may offer and sell up to that amount of such securities from time to
time at prices and terms to be determined at or prior to sale. No amounts of
such debt securities are outstanding at June 30, 1997.
(continued)
<PAGE>
-11-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Because the Company's obligations under the Amended and Restated Credit
Agreement and Receivables Sales Agreement bear interest at floating rates, the
Company's interest costs are sensitive to changes in prevailing interest rates.
Based on historical cash flows, the Company believes that it will be able to
satisfy its principal and interest payment obligations and its working capital
and capital expenditure requirements from operating cash flows together with
funds available under the revolving credit facility.
In the ordinary course of business the Company enters into various types of
transactions that involve contracts and financial instruments with off-balance-
sheet risk. The Company enters into these financial instruments to manage
financial market risk, including foreign exchange, commodity price and interest
rate risk. The Company enters into these financial instruments utilizing over-
the-counter as opposed to exchange traded instruments. The Company mitigates
the risk that counterparties to these over-the-counter agreements will fail to
perform by only entering into agreements with major international financial
institutions.
Capital expenditures currently anticipated for expanded capacity, cost
reductions and the introduction of new products during the next twelve months
will be in excess of depreciation and amortization. These expenditures will be
funded from a combination of operating cash flows and funds available under the
revolving credit facility or commercial paper.
Cash dividends of $0.12 per share were paid on common stock in the second
quarter of 1997. The declaration and payment of future dividends will be at the
sole discretion of the Board of Directors and will depend upon such factors as
the Company's profitability, financial condition, cash requirements and future
prospects.
New Accounting Standards
- ------------------------
In January 1997, the Securities and Exchange Commission amended regulations and
forms, including Regulation S-X and S-K, to clarify and expand existing
disclosure requirements about accounting policies for certain derivative
instruments, and to add new disclosure requirements about the risk of loss from
changes in market rates or prices which are inherent in derivatives. The
Company's disclosures in its annual report on Form 10-K for 1996 conform to the
disclosure requirements set forth in the amended regulations. Adoption by the
Company of the disclosure requirement relating to risk of loss, which
requirements are effective for fiscal years ending after June 15, 1998, are not
expected to have a material effect on the Company's financial statements.
In February 1997, the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standards No.128 (SFAS128), "Earnings per
share". SFAS128 establishes standards for computing and presenting earnings per
share and will be effective for periods ending after December 15, 1997.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No.129, "Disclosure of Information about Capital Structure" (SFAS129). SFAS129
establishes standards for disclosing information about a Company's capital
structure, including pertinent rights and privileges of various securities
outstanding and is effective for periods ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board (FSAB) issued Statements
of Financial Accounting Standards No.130, "Reporting Comprehensive Income," and
No.131, "Disclosures about Segments of an Enterprise and Related Information."
These statements establish standards for reporting and display of comprehensive
income and its components and for reporting information about business segments
and products in financial statements, and are effective for years beginning
after December 15, 1997
Adoption of these statements is not expected to have a material effect on the
Company's financial statements.
Forward-Looking Information - Risk Factors
- ------------------------------------------
To the extent the Registrant has made "forward-looking statements,"
certain risk factors could cause actual results to differ materially from those
anticipated in such forward-looking statements.
<PAGE>
-12-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
PART II - Other Information
Item 1 Legal Proceedings
Not Applicable
Item 2 Changes in Securities
Not Applicable
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
(a) The Registrant's Annual Meeting of Stockholders was held on May 1,
1997.
(b) Proxies were solicited for the meeting. All nominees for Director
were elected and items (c) 2, 3, and 4 (see below) were approved.
(c) The following votes were cast at the Annual Meeting for the matters
indicated below:
<TABLE>
<S> <C> <C> <C>
1. Election of Directors Votes For Votes Withheld
--------------------- --------- --------------
Malcolm W. Gambill 35,239,686 287,844
Robert F. B. Logan 35,246,945 280,585
Gerald C. McDonough 35,231,455 296,075
Robert N. Pokelwaldt 35,244,766 282,764
Donald M. Roberts 35,248,689 278,941
James E. Urry 35,239,336 288,194
John E. Welsh 35,248,559 278,971
Walter B. Wriston 35,171,192 356,338
2. Approval of the Amended and Votes For Votes Against
---------- --------------
Restated 1992 Omnibus Stock Plan 26,381,163 9,001,529
3. The appointment of Votes For Votes Against
---------- --------------
KPMG Peat Marwick LLP 35,362,999 100,877
as independent auditors
</TABLE>
Item 5 Other Information
Not Applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 4.5 First Amendment dated as of May 28, 1997 to the Amended
and Restated Credit Agreement among the Registrant, the several
banks and other financial institutions from time to time parties
thereto and Canadian Imperial Bank of Commerce, acting through its
New York Agency, as agent for the Banks along with supporting
Exhibits (filed herewith)
Exhibit 27 Financial Data Schedule (EDGAR only)
(b) None
<PAGE>
-13-
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 unto duly authorized.
YORK INTERNATIONAL CORPORATION
------------------------------
Registrant
Date August 6, 1997 /S/ Dean T. DuCray
------------------ ------------------------------------------
Vice President and Chief Financial Officer
<PAGE>
-14-
EXHIBIT INDEX
- -------------
Exhibit No. Description
- ----------- --------------------------------------------------------------
4.5 First Amendment dated as of May 28, 1997 to the Amended and
Restated Credit Agreement among the Registrant, the several
banks and other financial institutions from time to time
parties thereto and Canadian Imperial Bank of Commerce, acting
through its New York Agency, as agent for the Banks along with
supporting Exhibits (filed herewith)
27 Financial Data Schedule (EDGAR only)
<PAGE>
EXECUTION COPY EXHIBIT 4.5
FIRST AMENDMENT, dated as of May 28, 1997 (this "Amendment"), to the
---------
Amended and Restated Credit Agreement dated as of July 21, 1995 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among YORK INTERNATIONAL CORPORATION, a Delaware corporation (the "Company"),
-------
the several banks and other financial institutions from time to time parties
thereto (collectively, the "Banks"; individually a "Bank") and CANADIAN IMPERIAL
----- ----
BANK OF COMMERCE, acting through its New York Agency ("CIBC-NYA"), as agent for
--------
the Banks thereunder (in such capacity, the "Agent").
-----
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, the Banks and the Agent are parties to the
Credit Agreement;
WHEREAS, the Company has requested that the Banks amend the Credit
Agreement in the manner provided for herein;
WHEREAS, the Agent and the Banks are willing to agree to the requested
amendments, but only upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Credit Agreement and used herein as defined terms are so used as
so defined. Unless otherwise indicated, all Section, subsection and Schedule
references are to the Credit Agreement.
2. Amendment to Schedule I. Schedule I to the Credit Agreement is
-----------------------
hereby amended by deleting such Schedule in its entirety and substituting in
lieu thereof a new Schedule to read in its entirety as set forth on Schedule I
attached hereto.
3. Amendment to Subsection 1.1. Subsection 1.1 of the Credit
---------------------------
Agreement is hereby amended by deleting the definition of "Termination Date"
contained therein in its entirety and inserting in lieu thereof the following
definition:
"'Termination Date': July 31, 2002."
4. Amendment to Subsection 4.6. Subsection 4.6 of the Credit
---------------------------
Agreement is hereby amended by deleting the amount "$5,000,000" contained in
clause (b)(i) of such subsection and substituting in lieu thereof the amount
"$10,000,000."
5. Amendment to Subsection 7.1(a). Subsection 7.1(a) of the Credit
------------------------------
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the
<PAGE>
2
following new subsection:
(a) Interest Coverage. Permit the ratio of (i) Consolidated EBIT to
-----------------
(ii) Consolidated Interest Expense for any period of four consecutive
fiscal quarters ending on the last day of any fiscal quarter ending on or
after December 31, 1993 to be less than 2.50:1.
6. Amendment to Subsection 7.2(c). Subsection 7.2(c) of the Credit
------------------------------
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following new subsection:
(c) Indebtedness for borrowed money of any Domestic Subsidiary,
provided that the aggregate amount of all such Indebtedness (other than
--------
Indebtedness permitted by clause (a) or (d) of this subsection 7.2) of all
such Domestic Subsidiaries shall not exceed $200,000,000 at any one time
outstanding; and
7. Amendment to Subsection 7.3(j). Subsection 7.3(j) of the Credit
------------------------------
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following new subsection:
(j) Liens on any Capital Stock which is not Voting Stock, and on not
more than 20% of the Voting Stock, of any Foreign Subsidiary securing
Indebtedness of the Company or any Foreign Subsidiary in an aggregate
amount at any one time outstanding for the Company and all Foreign
Subsidiaries not to exceed 35% of Consolidated Net Worth.
8. Amendment to Annex A. Annex A to the Credit Agreement is hereby
--------------------
amended by deleting such Annex in its entirety and substituting in lieu thereof
a new Annex to read in its entirety as set forth on Annex A attached hereto.
9. Representations and Warranties. On and as of the date hereof and
------------------------------
after giving effect to this Amendment and the transactions contemplated hereby,
the Company hereby confirms, reaffirms and restates the representations and
warranties set forth in Section 4 of the Credit Agreement mutatis mutandis,
------- --------
except to the extent that such representations and warranties expressly relate
to a specific earlier date in which case the Company hereby confirms, reaffirms
and restates such representations and warranties as of such earlier date,
provided that the references to the Credit Agreement in such representations and
- --------
warranties shall be deemed to refer to the Credit Agreement as in effect prior
to the date hereof and as amended pursuant to this Amendment.
10. Effectiveness. This Amendment shall become effective upon
-------------
satisfaction of each of the following conditions (the date on which all such
conditions are first satisfied is referred to herein as the "Effective Date"):
--------------
<PAGE>
3
(a) receipt by the Agent of counterparts of this Amendment duly
executed and delivered by the Company and the Banks;
(b) receipt by the Agent, for the account of each Bank, of a Note and
a Bid Loan Note conforming to the requirements of the Credit Agreement (as
amended pursuant to this Amendment) and executed by a duly authorized
officer of the Company;
(c) receipt by the Agent of resolutions, in form and substance
satisfactory to the Agent, of the Board of Directors of the Company, with a
counterpart for each Bank, authorizing (i) the execution and delivery by
the Company of this Amendment, the Notes and the Bid Loan Notes delivered
pursuant to Section 9(b) of this Amendment and subsections 2.2 and 2.4(f)
of the Credit Agreement and the performance by the Company of its
obligations under the Credit Agreement (as amended by this Amendment) and
said Notes and (ii) the borrowings by the Company under the Credit
Agreement (as amended by this Amendment), certified by the Secretary or an
Assistant Secretary of the Company as of the Effective Date, which
certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded and shall be in form and
substance satisfactory to the Agent; and
(d) receipt by the Agent of the executed legal opinions of Venable,
Baetjer and Howard, counsel to the Company, and Jane G. Davis, Esq.,
General Counsel of the Company, with a counterpart for each Bank, each in
form and substance satisfactory to the Agent.
11. Continuing Effect; No Other Amendments. Except as expressly
--------------------------------------
amended hereby, all of the terms and provisions of the Credit Agreement are and
shall remain in full force and effect. The amendments provided for herein are
limited to the specific subsections of the Credit Agreement specified herein and
shall not constitute amendments of, or an indication of the Agent's or the
Banks' willingness to amend, any other provisions of the Credit Agreement or the
same subsections for any other date or time period (whether or not such other
provisions or compliance with such subsections for another date or time period
are affected by the circumstances addressed in this Amendment).
12. Expenses. The Company agrees to pay and reimburse the Agent for
--------
all its reasonable costs and out-of-pocket expenses incurred in connection with
the preparation and delivery of this Amendment, including, without limitation,
the reasonable fees and disbursements of counsel to the Agent.
13. Counterparts. This Amendment may be executed by one or more of
------------
the parties to this Amendment on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all
<PAGE>
4
the parties shall be lodged with the Company and the Agent.
14. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their respective duly authorized officers as of the
date first above written.
YORK INTERNATIONAL CORPORATION
By:
-------------------------------
Title:
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY, as Agent
By:
-------------------------------
Title:
CIBC INC.
By:
-------------------------------
Title:
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
BANK OF AMERICA ILLINOIS
By:
-------------------------------
Title:
THE CHASE MANHATTAN BANK
By:
-------------------------------
Title:
<PAGE>
5
CITIBANK, N.A.
By:
-------------------------------
Title:
COMMERZBANK AKTIENGESELLSCHAFT, NEW
YORK BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
CORESTATES BANK, N.A.
By:
-------------------------------
Title:
CREDITANSTALT--BANKVEREIN
By:
-------------------------------
Title:
CREDIT SUISSE FIRST BOSTON
(formerly known as Credit Suisse)
By:
-------------------------------
Title:
By:
-------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
-------------------------------
Title:
<PAGE>
6
THE FIRST NATIONAL BANK OF MARYLAND
By:
-------------------------------
Title:
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED
By:
-------------------------------
Title:
LTCB TRUST COMPANY
By:
-------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
-------------------------------
Title:
NATIONAL WESTMINSTER BANK PLC
By:
-------------------------------
Title:
NATIONAL WESTMINSTER BANK PLC
NASSAU BRANCH
By:
-------------------------------
Title:
NATIONSBANK OF NORTH CAROLINA, N.A.
By:
-------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------
Title:
<PAGE>
7
WESTPAC BANKING CORPORATION
By:
-------------------------------
Title:
<PAGE>
Schedule I
BANKS AND COMMITMENTS
<TABLE>
<CAPTION>
Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
CIBC, Inc. $ 50,000,000 10.00000000%
PNC Bank, National Association 50,000,000 10.00000000%
Bank of America Illinois 43,750,000 8.75000000%
The Chase Manhattan Bank 43,750,000 8.75000000%
NationsBank of North Carolina, N.A. 43,750,000 8.75000000%
Citibank, N.A. 37,500,000 7.50000000%
CoreStates Bank, N.A. 31,250,000 6.25000000%
Credit Suisse First Boston 31,250,000 6.25000000%
National Westminster Bank PLC 21,250,000 4.25000000%
The First National Bank of Maryland 20,000,000 4.00000000%
Commerzbank Aktiengesellschaft, New York Branch 18,750,000 3.75000000%
Morgan Guaranty Trust Company of New York 18,750,000 3.75000000%
Banca Commerciale Italiana 15,000,000 3.00000000%
Creditanstalt--Bankverein 15,000,000 3.00000000%
The First National Bank of Boston 15,000,000 3.00000000%
The HongKong and Shanghai Banking Corporation
Limited 15,000,000 3.00000000%
LTCB Trust Company 15,000,000 3.00000000%
Westpac Banking Corporation 15,000,000 3.000000000%
------------ -------------
TOTAL $500,000,000 100.00000000%
============ =============
</TABLE>
<PAGE>
Annex A
Pricing Grid for York International Corporation
-----------------------------------------------
(basis points per annum)
<TABLE>
<CAPTION>
================================================================================
Level I Level II Level III Level IV
- --------------------------------------------------------------------------------
Basis for Pricing If the If the If the If the
Company's Company's Company's Company's
Senior Debt Senior Senior Senior
Rating is Debt Debt Debt
equal to or Rating is Rating is Rating is
better than equal to equal to equal to
A-, then BBB+, then BBB, then BBB-, then
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Facility Fee 7.50 9.00 12.50 15.00
- --------------------------------------------------------------------------------
Eurodollar Loan 15.00 16.00 20.00 25.00
- --------------------------------------------------------------------------------
Alternate Base Rate Loan 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------
Letter of Credit Risk 22.50 25.00 32.50 40.00
Participation Fee
================================================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Statements of Operations for the Six Months Ended June
30, 1997 (Unaudited), the Consolidated Condensed Balance Sheets at June 30, 1997
(Unaudited), and the Consolidated Condensed Statements of Cash Flows for the Six
Months Ended June 30, 1997 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,220
<SECURITIES> 0
<RECEIVABLES> 608,652
<ALLOWANCES> 21,761
<INVENTORY> 623,100
<CURRENT-ASSETS> 1,386,078
<PP&E> 660,223
<DEPRECIATION> 292,650
<TOTAL-ASSETS> 2,163,216
<CURRENT-LIABILITIES> 677,059
<BONDS> 498,655
0
0
<COMMON> 219
<OTHER-SE> 773,930
<TOTAL-LIABILITY-AND-EQUITY> 2,163,216
<SALES> 1,685,164
<TOTAL-REVENUES> 1,685,164
<CGS> 1,332,031
<TOTAL-COSTS> 1,332,031
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,350
<INTEREST-EXPENSE> 20,416
<INCOME-PRETAX> 84,536
<INCOME-TAX> 27,474
<INCOME-CONTINUING> 57,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,062
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
