<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER: 1-10863
YORK INTERNATIONAL CORPORATION
(EXACT NAME OF THE 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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
COMMON STOCK, $.005 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether 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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO _____
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[_]
As of March 14, 1997, there were 43,475,318 shares of the registrant's Common
Stock outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was $1,967,258,139 based on the closing price of the Common Stock
on the New York Stock Exchange Composite Transactions of such date. (Only
officers and directors of the registrant are assumed to be affiliates for
purposes of this calculation.)
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Annual Report to Stockholders for the year ended December 31,
1996 and the Notice of Annual Meeting of Stockholders and Proxy Statement
pertaining to the Annual Meeting are incorporated herein by reference into Parts
II, III and IV.
Exhibit Index is located on pages 21 and 22.
<PAGE>
YORK INTERNATIONAL CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 1996
INDEX
PART 1
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
- ------ ----
<S> <C>
1. Business 1
2. Properties 15
3. Legal Proceedings 15
4. Submission of Matters to a Vote of Security Holders 16
PART II
5. Market for Registrant's Common Equity 16
and Related Stockholder Matters
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants on Accounting 16
and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant 17
11. Executive Compensation 17
12. Security Ownership of Certain Beneficial Owners and Management 17
13. Certain Relationships and Related Transactions 17
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
- -------
The Company is a full-line, global manufacturer of heating, ventilating, air
conditioning and refrigeration ("HVAC&R") products. The Company believes it is
the third largest manufacturer and marketer of such products in the United
States and one of the leading companies in the HVAC&R industry internationally.
The Company's air conditioning systems range from a one ton* unit for a small
residence to the 59,000 ton system installed in the New York World Trade Center.
In 1996 the Company's products were sold in over 100 countries through over 750
sales and distribution facilities and are in use in such diverse locations as
the Kuala Lumpur City Centre in Malaysia, the British Houses of Parliament, the
Tokyo World Trade Center, the Pentagon, NASA's Vehicle Assembly Building at Cape
Canaveral, NASA's Johnson Space Center, the Los Angeles International Airport,
the Jeddah Airport, the Overseas Union Bank Centre in Singapore, the Sydney
Opera House, the National Library Complex in Beijing, the Atlantic City
Convention Center, the English Channel Eurotunnel, the Hong Kong Exposition
Centre and the Lantau Airport Railway System in Hong Kong.
The Company was founded in 1874 in York, Pennsylvania. From 1956 until 1986 the
Company was a part of Borg-Warner Corporation ("Borg-Warner"). In 1986 it was
spun off to Borg-Warner shareholders and became an independent, publicly held
company. In 1988 the Company was purchased in a leveraged buyout by a
corporation organized by affiliates of Citicorp Investments Inc. ("CII") and two
investors (the "Acquisition"). In October 1991, the Company completed an initial
public offering of its Common Stock and in 1992 CII and the other non-management
investors in the Acquisition sold their remaining shares in a public offering.
Headquartered in York, Pennsylvania, the Company has manufacturing facilities in
12 states and 11 foreign countries. As of December 31, 1996, the Company
employed approximately 20,100 people worldwide.
Unless the context otherwise requires, the terms "Company" and "York" refer to
the Company and its consolidated subsidiaries. The Company's principal executive
offices are located at 631 South Richland Avenue, York, Pennsylvania 17403, and
its telephone number is (717) 771-7890.
PRODUCTS AND MARKETS
- --------------------
All of the Company's products are in the heating, ventilating, air conditioning
and refrigeration (HVAC&R) industry and the Company operates solely in this
industry. Within HVAC&R, the Company's products fall into three general
categories. The first is commercial products, consisting of heating, air
conditioning and thermal storage equipment designed for commercial applications
in retail stores, office buildings, shopping malls, manufacturing facilities,
hospitals, universities, airports and marine vessels. Commercial products
include both engineered products, which vary in design and function according to
the customer's needs and applications, and large capacity residential products.
The second is residential products, consisting of air conditioning and furnace
units and hermetic and scroll compressors designed for use in residential
applications. Residential air conditioners and furnaces are often described as
unitary products because all of their components are housed as units in one or
two cabinets. The third is refrigeration products including commercial and
industrial refrigeration and gas compression equipment designed for the food,
beverage, chemical and petrochemical processing industries. Like engineered
products, the Company's refrigeration and gas compression equipment is designed
specifically for the customer's needs and applications.
________________
* The cooling capacity of air conditioning units is measured in tons. One ton
of cooling capacity is equivalent to 12,000 BTUs and is generally adequate to
air condition approximately 500 square feet of residential space.
1
<PAGE>
The following table sets forth revenue by product and geographic market:
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Commercial products $1,478,133 $1,342,355 $1,157,071
Residential products 1,031,798 953,554 795,357
Refrigeration products 708,603 634,039 469,436
---------- ---------- ----------
Total revenue $3,218,534 $2,929,948 $2,421,864
========== ========== ==========
U.S. 54% 55% 56%
International 46% 45% 44%
---------- ---------- ----------
100% 100% 100%
========== ========== ==========
</TABLE>
COMMERCIAL PRODUCTS. The Company's commercial products consist of heating and
- -------------------
air conditioning and thermal storage equipment for commercial and other
buildings ranging from fast food restaurants to large industrial complexes.
Commercial air conditioning products include air-cooled and water-cooled
chillers, central air-handling units, variable air volume units and control
equipment to monitor and control the entire system. Commercial buildings such as
retail stores, shopping malls and light industrial manufacturing facilities use
split unit or roof-top units manufactured by the Residential Products Group.
These units employ hermetic compressors manufactured by the Company's Bristol
Compressor Subsidiary or other vendors. Larger units for facilities such as
hospitals, office towers, hotels, airports and manufacturing operations are
custom designed and manufactured by the Company's Applied Systems Division. The
Applied Systems Division also supplies specially designed chilled water systems
for use on U.S., British, French and other naval vessels. The Company is
currently the major supplier of water chillers to the U.S. Navy for both surface
vessels and submarines.
The Company markets its commercial products under the "YORK", "MILLER-PICKING",
"TEMPMASTER", "SEVESO", "BRISTOL", and "IMECO" brands. In the United States and
Canada, distribution of commercial equipment is coordinated by 9 regional
offices and approximately 56 district offices. These district offices market
products directly to end users and contractors. The Company has approximately
120 direct sales representatives and 40 independent sales agents in the North
American market. In addition, certain light commercial equipment is sold
through the residential distribution network.
In addition to revenues from new construction sales, the Company derives
substantial revenues by selling replacement equipment and parts, and by
providing routine maintenance and emergency service for products manufactured by
the Company and its competitors through annual service contracts. The Company
has a national account sales program to service customers with multiple
locations throughout the world.
The Company has introduced a new line of standard indoor air handling equipment
incorporating the latest technologies for indoor air quality. The Company
markets a line of customized indoor and outdoor air handling products as a
result of the September 1992 acquisition of the Miller-Picking Company. York
manufactures the broadest line of air handling equipment of any manufacturer in
the industry.
RESIDENTIAL PRODUCTS. The Company's primary residential products are one to
- --------------------
five ton split unit central air conditioning and heating systems manufactured
and sold by the Company's Residential Products Group ("UPG") and one to five ton
hermetic compressors manufactured and sold by Bristol. Revenues from Bristol
compressors were approximately $368 million, $381 million and $448 million
during 1994, 1995 and 1996, respectively, and for split unit systems were
approximately $311 million, $374 million and $485 million during 1994, 1995 and
1996, respectively. No other residential product accounted for 10% or more of
the Company's revenues for the periods presented.
A split unit system consists of an outdoor unit containing a compressor and
condenser, and a connected indoor unit containing a heat exchanger, an electric,
gas or oil heating section, an indoor blower system and associated controls. A
hermetic compressor is an integral part of the residential air conditioning
system. The Company's products use compressors manufactured by Bristol as well
as those purchased from other vendors. In 1994, approximately 84% and in 1995,
approximately 83%, and in 1996, approximately 82% of Bristol's revenues were
attributable to sales of products to other air conditioning equipment
manufacturers. During 1995, Bristol entered
2
<PAGE>
into a joint venture, Scroll Technologies, to design and manufacture scroll
compressors. This allows Bristol to expand its product offering to include
scroll compressor capabilities.
The Company's 1995 acquisition of Evcon Holdings expands UPG's capabilities and
distribution network in the domestic residential market. Evcon's distribution
process is similar to UPG's and allows both organizations to expand product
offerings. Evcon sells residential systems under the "COLEMAN EVCON", "RED T",
"GUARDIAN" and "AIRPRO" brands. The Company also markets its residential
systems under the "YORK", "LUXAIRE", "FRASER-JOHNSTON", "MONCRIEF", "HOMEAIR"
and "SEVESO" brands. "YORK" is the Company's premium brand, which is sold
through 11 Company-owned distribution centers and 40 exclusive independent
distributors. The "YORK" brand is sold with a high level of customer service
and sales support. Other brands are sold through more than 200 non-exclusive
distributors primarily for resale to contractors. In 1995 and 1996,
respectively, the Company derived approximately 54% and 50% of its split unit
revenues from sales of "YORK" brand products.
Sales of residential systems and Bristol compressors include both new
installations and replacement systems. The Company believes that two recent
market trends have caused new installation sales to outperform the new home
construction market. The Company believes that the percentage of new homes
installing air conditioning systems has been increasing in recent years as air
conditioning has come to be considered by many to be a standard fixture in the
home. In addition, the trend to use multiple zones for maximum energy
efficiency has led to an increasing number of units per home. The Company
estimates that more than half of its residential revenues are attributable to
the replacement market. The replacement market is not affected by levels of new
home construction and therefore tends to be less cyclical. On the other hand,
the replacement market is significantly affected by temperatures. Hot spring
weather causes existing older units to fail earlier in the season, leading
customers to accelerate replacement of a unit which might otherwise be deferred
in the case of a late season failure.
All outdoor residential split system products have been redesigned to meet the
seasonal energy efficiency requirements (SEER) of the National Appliance Energy
Conservation Act of 1987, as amended, which was implemented on January 1, 1992.
The new products cover a wide range of efficiencies and may be able to qualify
for rebates offered by local utility companies for high efficiency equipment.
These new outdoor products will also operate at low sound levels to meet the
growing demand for quiet operation. Bristol markets an "Inertia" reciprocating
compressor that directly competes against other more expensive technologies in
meeting the energy efficiency requirements that were mandated in January 1992
and continues to upgrade the efficiency of the Inertia compressor. Scroll
Technologies continues to upgrade the scroll compressor technology and
performance.
REFRIGERATION PRODUCTS. Using patented improvements to Frick Division's
- ----------------------
licensed screw compressor technology, the Company has developed a successful
line of industrial and commercial refrigeration products. Screw compressors
enable the Company to produce a highly reliable, ammonia refrigeration system
required for commercial and industrial applications in the food, beverage,
chemical and petrochemical industries. The Company believes that screw
compressors are the most reliable and energy efficient compressors available for
ammonia refrigeration systems. Food processing equipment produced by the
Company includes spiral and tunnel freezers for York Food Systems' and
Northfield Freezing Systems' applications in the poultry, frozen vegetable and
prepared food businesses. In addition, the Company manufactures packaged
refrigeration systems to cool chemical and petrochemical products during their
production processes. The 1995 acquisition of Gram Refrigeration and Gram
Contractors provides similar capabilities in manufacturing in Europe and
increases distribution and the availability of advanced technology. The Gram
acquisition also makes available the reciprocating compressor for refrigeration
applications. The Company's refrigeration and gas compression equipment is
engineered and manufactured to customer specifications. The Company's revenues
from sales of refrigeration and gas compression products were $708.6 million and
$634 million in 1996 and 1995, respectively.
The Company markets its refrigeration and gas compression equipment under the
"YORK", "YORK FOOD SYSTEMS", "FRICK", "FRIGID COIL", "IMECO", "RECO", "RITE
COIL", "RECOLD", "NORTHFIELD", "ACUAIRE" and "GRAM REFRIGERATION" brands. The
products are sold by the Company's sales engineers located in 14 offices and a
national network of more than 40 independent agents in the United States and
nine offices and 20 independent distributors and two licensees elsewhere in the
world. In addition, the Company believes that developing third world countries
offer opportunities for increasing sales of refrigeration equipment.
Approximately 62% of the Company's annual production of these products are sold
in foreign markets.
3
<PAGE>
The Company's Food Systems Group develops commercial food freezing and
processing machinery in the domestic and international markets. Customers of
this group include Tyson Foods, H. J. Heinz, Cargill, Unilever and Nestle.
Installations have been completed in Russia, Poland, China, Western Europe,
North America, Australia, India, New Zealand and Africa. The Food Systems Group
pulls through sales of refrigeration products from the refrigeration products
group.
The Company's new products in this area include smaller capacity packaged
commercial freezing machines down-sized to meet the needs of the developing new
markets, and a growing capability to design and deliver turn-key food processing
lines which include a broad spectrum of York products.
AFTERMARKET The Company believes its reputation for service and repair is
- -----------
excellent. The Company's more than 3500 service technicians in offices
throughout the world generate substantial revenues through the sale of
replacement parts and by providing routine and emergency service for air
conditioning and refrigeration systems manufactured by the Company and its
competitors. In 1996 on a worldwide basis, the higher margin service, repair
and replacement business accounted for an estimated 49% of the Company's total
sales. The Company believes that its emphasis on service and repair, combined
with the growth in and aging of the installed base of air conditioning and
refrigeration equipment, have been key factors in increasing the percentage of
the Company's revenues derived from the service, repair and replacement market.
INTERNATIONAL. The Company's International operations manufacture and market
-------------
a complete line of residential and commercial air conditioning equipment,
refrigeration equipment and compressors. The Company exports products
manufactured in the U.S. and manufactures products in the United Kingdom, Italy,
Australia, Denmark, France, Germany, Uruguay, and Mexico and through joint
ventures located in Colombia, Egypt, Thailand, Spain, China, and Malaysia.
The Company manufactures commercial air conditioning equipment in England.
These products are marketed primarily in Europe, the Middle East, and the Asia
Pacific Region. York fabricates refrigeration equipment in France, Germany, and
Denmark. Equipment manufactured in France and Germany is sold primarily in
Europe, whereas the Denmark facility produces products sold throughout the
world. York also designs and sells snow making systems worldwide through York
Neige based in France. York Neige has installed snow making equipment on the
sites of the 1992 Winter Olympics in France and the 1994 Winter Olympics in
Norway, as well as in over 100 ski resorts throughout Europe and North America.
York produces residential and commercial air conditioning equipment near Milan,
Italy, for distribution within Italy and through York sales offices worldwide.
Additional sales and service companies are located in Austria, Switzerland,
Bulgaria, Russia, other former CIS countries, the Czech Republic, Hungary,
Poland, Slovakia and Romania. The Company's European operations have supplied
equipment for such locations as the Kremlin, Pompidou Center in Paris, La Scala
Opera House in Milan, English Channel Eurotunnel and Frankfurt Airport.
The Company markets its equipment and service in the Middle East and India
through offices in Dubai, Abu Dhabi, Kuwait, Istanbul, New Delhi, Mumbai, Cairo,
Karachi, and through numerous distributors throughout the region. The Company
has sales and service joint ventures throughout the Kingdom of Saudi Arabia.
The Company's ability to manufacture large tonnage air-cooled air conditioning
equipment capable of operating under extreme conditions has resulted in winning
a substantial number of large contracts in the water short Middle East. The
Company has installed systems throughout the region, including equipment in the
Jeddah Airport, Prophet's Mosque in Medina, U.S. Embassy in New Delhi, Cairo
Airport, Abu Dhabi National Oil Company, stock exchanges in Kuwait and Istanbul,
and numerous office and hotel installations.
The Company markets and services its products in the Pacific Rim region through
offices in Hong Kong, China (7 offices), Singapore, Korea, Australia, Indonesia,
and Thailand, joint ventures in Taiwan and Malaysia, and various distributors
throughout the region. The Company manufactures products through joint ventures
in China, Thailand, and Malaysia, and wholly owned facilities in Australia. The
Company has installed systems throughout the region, including equipment in the
Shanghai Opera House, Shenzhen Railway Station, Hong Kong Exposition Centre,
Overseas Union Bank Centre in Singapore, Grand Hotel in Taipei, Sydney Opera
House, and the Kuala Lumpur City Centre in Malaysia, the world's tallest
building.
Sales through Latin America are handled through offices in Mexico, Argentina,
Brazil, Chile, Colombia, Miami, (USA), Puerto Rico, Argentina and Venezuela,
sales representatives and independent distributors located throughout Latin
America. In Brazil, products are marketed through a recently formed joint
venture. The
4
<PAGE>
Company has two manufacturing facilities in Mexico producing both residential
and commercial air conditioning equipment for domestic sale and export. A
manufacturing facility in Uruguay provides the Company with commercial air
conditioning and refrigeration products to support sales in the Mercosur trading
countries. The Company also operates a small manufacturing facility in Bogota,
Colombia that produces unitary products and fan coil units. Installations
include World Trade Centers in Mexico, Colombia, and Chile, Sao Market Place in
Brazil, Mexican Stock Exchange, and Hotel Intercontinental in Argentina.
STRATEGY
- --------
The Company's strategy is to continue to focus on the global air conditioning
equipment and worldwide service, repair and replacement markets and increase its
presence in the worldwide refrigeration and gas compression market,
complementing its sales in the domestic residential and commercial new
construction markets. The Company has grown, and expects to continue to grow,
through expansion of its current product lines, acquisitions of businesses,
establishment of joint ventures and licensing of technology in the HVAC&R
industry.
The Company intends to continue its strategy of increasing its market share by
broadening its product range to offer a complete line of environmentally
acceptable and energy efficient products. The Company seeks to take advantage
of regulatory changes by developing products that comply with tightening
environmental and energy efficiency requirements and regulations before they
become effective. The Company has implemented its environmental strategy by
developing product lines that utilize its screw, centrifugal, reciprocating,
hermetic and inertia compressor technology employing HCFC-123, HCFC-22, R-407C,
R-410A, R-404A, R-507, R-717 (ammonia) and HFC-134a as a refrigerant. The screw
and centrifugal compressor utilize designs which separate the refrigerant from
the motor housing. See "Environmental Matters" below. The Company has
increased the overall efficiency of its product offerings by employing
internally developed advanced heat transfer and compressor technology and
introducing large air conditioning systems that utilize advanced thermal storage
and absorption technologies.
The Company is also seeking to expand into new markets. The Company intends to
expand its sales of residential equipment throughout the international markets
by broadening its product line, expanding its distribution capabilities and
pursuing acquisitions.
The Company also focuses on controlling manufacturing and operating expenses and
thus improving its operating margins by redesigning products, acquiring more
efficient manufacturing equipment and processes and reducing costs not directly
associated with the manufacturing process. In addition, the Company has
implemented a continuous planning process to enable it to carefully monitor the
amount of capital used in its business and to reposition its business units in
light of changing conditions throughout the year. The Company believes that its
management stock ownership plans and management incentive compensation plan,
which rewards the management team of each operating unit for achieving the
planned objectives of that unit, have been key elements in implementing its
strategies and achieving its financial objectives.
ACQUISITIONS
- ------------
On December 31, 1996, the Company acquired 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 the assets of Natkin Service Company
(Natkin) located in Denver, Colorado. Natkin is a 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 all of the outstanding shares of
Northfield Equipment and Manufacturing Company (NEMCO) located in Northfield,
Minnesota. NEMCO designs and manufacturers food processing freezing equipment.
5
<PAGE>
On July 29, 1995, the Company acquired the outstanding shares of Northfield
Freezing Systems, Inc. (NFS), located in Northfield, Minnesota. NFS develops,
designs, sells and services food processing freezing equipment.
On July 5, 1995, the Company and a Thai partner formed a manufacturing joint
venture in Thailand. The Company has a 67% interest in this joint venture which
acquired the operating assets of the partner's existing facility. The venture
produces residential air conditioning products for distribution primarily in
markets outside of North America.
On May 31, 1995, the Company acquired two divisions of Gram A/S, Gram
Refrigeration and Gram Contractors, headquartered in Vojens, Denmark (Gram
Divisions). The Gram divisions develop, manufacture, sell and service
components for industrial refrigeration worldwide. Gram's principal product
offering includes screw and reciprocating compressors, plate freezers, flake ice
machines and refrigerant valves. Gram Contractors installs Gram equipment and
components in Denmark. The addition of these two divisions has expanded the
Company's presence in the global industrial refrigeration market and provides
additional manufacturing capacity and engineering expertise to the Company's
screw compressor and industrial refrigeration product lines.
On May 25, 1995, the Company purchased an additional 20% interest in Taiwan-YORK
Company, Inc. raising the Company's ownership from 40% to 60%. As a result, the
Company has a controlling interest in this joint venture which sells and
services HVAC&R equipment in the Republic of China (Taiwan).
On May 3, 1995, Bristol Compressors, Inc., a subsidiary of York International
Corporation, formed a partnership to operate a new joint venture for the
development and production of scroll compressors. The joint venture, called
Scroll Technologies, owns and operates a scroll compressor plant. The Company
believes that this venture is beneficial to both companies because it combines
scroll technology developed by the partner and the manufacturing expertise of
Bristol. Each Company markets the product produced by the venture through its
own independent distribution channels.
On April 19, 1995, the Company formed a joint venture with a partner in the
People's Republic of China ("P.R.C.") for the manufacture of certain commercial
air conditioning products in the P.R.C.
On March 1, 1995, the Company acquired all of the capital stock of Evcon
Holdings, Inc. (Evcon), a Delaware corporation. In connection with the
transaction, Evcon's outstanding bank indebtness was repaid, and its temporary
capital (comprised of preferred stock and warrants) was repurchased and
cancelled, out of the purchase price. The Company financed the acquisition
through existing credit commitments. Evcon designs, manufactures and supplies
air conditioning, heating and air handling equipment for the residential,
manufactured housing and light commercial markets. Evcon is based in Wichita,
Kansas and maintains manufacturing facilities there. The cost of the
acquisition was allocated on the basis of estimated fair values. This
allocation resulted in approximately $98.7 million of cost in excess of net
assets acquired. Such excess is being amortized on a straight-line basis over
forty years. Evcon's results of operations have been included in the Company's
consolidated results of operations since the acquisition date.
The unaudited consolidated results of operations of the Company for 1995 and
1994 on a pro forma basis assuming Evcon was acquired as of the beginning of the
respective periods are as follows (in thousands, except per share data):
6
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $2,950,249 $2,602,789
Net income (loss) $ (96,315) $ 93,876
Earnings (loss) per share $ (2.37) $ 2.51
</TABLE>
In January 1995, the Company acquired the assets of Mining and Industrial Air
Conditioning (Pty) Ltd. ("MIAC"), based in Johannesburg, South Africa. MIAC is
a design engineering, supplier and service company to the mining and process
refrigeration industries, as well as a supplier to air conditioning contractors.
The Company also acquired a 50% interest in a joint venture with Compania Roca
Radiadores S.A., located in Sabadell, Spain and known as Clima Roca York
("Roca"). Roca manufactures residential and commercial air conditioning
products in Spain and distributes air conditioning products throughout Western
Europe.
During the first quarter of 1994, the Company's wholly-owned Italian subsidiary
acquired certain assets of Seveso Clima SpA (Seveso), an Italian corporation.
Seveso, based in Barlassina, Italy, designs, manufactures and supplies air
conditioning, heating and air-handling equipment to the commercial and
residential markets throughout Europe. Seveso's principal product offerings
include air cooled and water cooled chillers and heat pumps, fan coils, air
handling units, portable air conditioners and commercial and residential split
systems. Also during 1994, the Company acquired a 40,000 square foot
manufacturing facility in Bogota, Colombia, which produces unitary air
conditioners and fan coils. Also acquired during 1994 was a line of energy-
efficient thermal transfer products from Rite Coils, Inc. The manufacturing
line for this product was moved to the manufacturing facility in Polo, Illinois.
Except for the acquisition of Holdings, as to which proforma information is set
forth above, the effect on the Company's results of operations and financial
position of the acquisitions and investments described in the preceding
paragraphs is not significant.
MANUFACTURING
- -------------
Residential and light commercial products up to 100 tons, often called unitary
products, are manufactured principally in plants located in Elyria, Ohio;
Norman, Oklahoma; Wichita, Kansas; Barlassina, Italy; Bogota, Colombia;
Monterrey, Mexico; Perth, Australia, Coffs Harbor, Australia; and Bangkok,
Thailand. The Company's manufacturing process relies on the purchase of certain
components (including hermetic compressors, copper tube, fan motors, fan blades
and control elements) from outside suppliers, and in-house fabrication of sheet
metal cabinets and refrigerant coils. The various unitary products are then
assembled and tested before shipment. Bristol compressors are manufactured at
the Company's factories in Bristol, Virginia and Sparta, North Carolina, and by
Scroll Technologies in Arkadelphia, Arkansas. As with other Company products,
Bristol compressors are assembled using purchased parts (including motors,
castings, forgings and electronic components) as well as parts manufactured by
the Company. Bristol built the manufacturing assembly plant in Sparta, North
Carolina during 1994 and started production in the first quarter of 1995. The
Scroll Technologies joint venture was established in 1995.
The Company's commercial products, which range from 50 to 8,500 tons, often
called engineered air conditioning products, are principally manufactured in the
United States in York, Pennsylvania as well as Albany, Missouri; Hattiesburg,
Mississippi; and San Antonio, Texas. Additional manufacturing facilities are
located in the United Kingdom, Italy, France, Germany, Australia, Uruguay, China
and Mexico.
Many of the components of the Company's engineered products, such as motors,
control elements and castings, are purchased from outside suppliers. The other
components are custom manufactured by the Company. Using these components and
custom-designed specifications, the engineered products are machined, assembled,
tested, shipped and installed. Following installation, the Company assists in
the start-up of the system, and supplies ongoing maintenance, service and
replacement parts.
7
<PAGE>
Refrigeration equipment is manufactured at Company-owned facilities in Dixon,
Illinois; Polo, Illinois; Waynesboro, Pennsylvania; Northfield, Minnesota;
Smithville, Ohio; San Antonio, Texas and Denmark, and at a leased facility in
Santa Fe Springs, California, with additional facilities in the Company's plants
in France, Germany and Mexico.
RAW MATERIALS AND PURCHASED COMPONENTS
- --------------------------------------
The Company purchases compressors, steel, copper, aluminum, electric motors,
castings, forgings, stampings, fabricated copper tubes, electronic starters and
controls, aluminum fin, fan blades, capacitors, transformers, refrigerant gases,
valves, fittings and other components from many outside suppliers. Alternate
sources of supply are available for all raw materials and components for which
the Company uses a single supplier. The Company believes that it has adequate
sources of supplies of raw materials and component parts for its manufacturing
requirements. In order to hedge against certain raw material price increases,
from time to time the Company enters into forward contracts for the purchase of
certain raw materials, principally copper and aluminum.
JOINT VENTURES IN FOREIGN MARKETS
- ---------------------------------
In addition to its wholly-owned domestic and European production and
distribution facilities, the Company produces, distributes and services
residential and commercial products in foreign markets through its participation
in several foreign joint ventures, which are described in the following table:
<TABLE>
<CAPTION>
Joint Venture
(Percent Owned by Principal
Principal Location Joint Venture Partner the Company) Products/Services Markets Served
- ------------------ --------------------- ---------------------------- ----------------------- --------------
<S> <C> <C> <C> <C>
Egypt Publicly held Egyptian Miraco (15%) Manufacture residential Egypt
Corporation and light commercial
equipment
Malaysia OYL Industries OYL-Condair Industries Manufacture residential Asia Pacific
BHD. SDN.BHD. (49%) and light commercial Middle East
equipment
Malaysia OYL Industries York (Malaysia) Service Sales and service of air Malaysia
BHD. SDN.BHD. (30%) conditioning equipment
Thailand Individual Thai Aeromaster Industry Manufacture residential Asia Pacific
Shareholders Co. Ltd. (67%) equipment Europe
Peoples Republic Guangzhou Sinro Air York Ghuangzhou Air Manufacture light China
of China Conditioning Mechanical Conditioning and commercial equipment
and Electrical Equipment Refrigeration Co. Ltd.
Company Ltd. (80%)
Republic of China Taipei Engineering York Taiwan Company, Inc. Service and repair of air Taiwan
(Taiwan) Taiwan York Service Co. (60%) conditioning equipment
Spain Compania Roca Clima Roca-York S.L. Manufacture residential Spain
Radiadores S.A. (50%) equipment
Cyprus Sabinco Ltd. KROY Ltd. (50%) Sales of air conditioning Middle East
equipment and parts
Colombia Inversiones Lopez York International S.A. Manufacture light Colombia
Imbett y cias en. cia (Colombia) (67%) commercial equipment
Peoples Republic Wuxi Boiler Group York-Wuxi Air Conditioning Manufacture commercial China
of China and Refrigeration Co. Ltd. equipment
(80%)
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Brazil Mayside Participacues York International Sales of air conditioning Brazil
Administracao e Commercial Ltda. equipment
Comercio Ltda (80%)
Saudi Arabia Al Salem United Al Salem-York Services Service and repair of Saudi Arabia
Contracting Co. Ltd. (49%) air conditioning
equipment
</TABLE>
Dividends received by the Company from foreign joint ventures were $1.0 million
in 1994, $0.6 million in 1995 and $1.5 million in 1996. Total Company
investments in foreign joint ventures were $6.4 million, $16.7 million and $22.2
million at December 31, 1994, 1995 and 1996, respectively. Total sales by the
Company to foreign joint ventures are less than 1% of the Company's total
revenues.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company's ongoing research and development program involves redesigning
existing products to reduce manufacturing costs and to increase product
efficiencies, developing electronic controls for existing products and creating
new products. During the years 1994, 1995 and 1996, the Company spent $22.6
million, $26.9 million and $28.0 million, respectively, for all product
development activities.
Product development activities in 1995 and 1996 encompassed a wide range of
products. The Company's centrifugal chiller line was expanded for use with
HCFC-22, R-407C, R-410A and HFC-134a, all considered environmentally acceptable
replacements for CFC's. The Company also offers screw compressors which use
R-717 (ammonia). The product line now extends from 300 to 2,000 tons for these
refrigerants. The Company also completed development of a new custom air
handling product line in the range of 2,000 to 50,000 cubic feet per minute
(CFM). The new products include the latest technologies to insure indoor air
quality. The combination of air handling product development and existing
product lines gives York the broadest line of air handling products of any
single manufacturer in the industry. The Company announced a new line of
centrifugal chillers ranging from 400 to 2,000 tons, incorporating natural gas
engine drives supplied by Caterpillar Inc. The product line boasts the highest
efficiency of any gas-powered air conditioning system on the market.
Development of a prototype twin-screw chiller for surface vessels continued
under a U.S. Navy contract. This chiller, targeted for introduction in the
fleet in 1997, will employ refrigerant HFC-134a to allow the Navy to begin its
transition away from the use of CFC refrigerants. In 1995 the Company
introduced more efficient centrifugal chillers utilizing HCFC-123, HCFC-22 and
HFC-134a. The efficiency levels of .50 to .52 kw/ton are expected to be one of
the best in the industry. The Company will also introduce a new line of
variable speed drives for centrifugal chillers to 600 tons. This product will
be compact enough to mount directly on the chiller and will be applicable to the
retrofitting of any centrifugal chiller on the market and almost all existing
machines regardless of refrigerant or manufacturer.
In 1994, the Company introduced a natural gas fueled heat pump split system
marketed under the trademark "TRIATHLON". Research and development for this
product was subsidized by the Gas Research Institute which is also cooperating
with the Company in its marketing and sales initiatives. In early 1995, 16 SEER
ultra-efficiency split systems were also introduced.
Bristol developed its 1.5 - 5 ton "Inertia" reciprocating compressor and put it
into production in 1991. Bristol continues to improve on the efficiency level
of the "Inertia" and a higher efficiency version was developed and put into
production during 1994. The "Inertia" compressor is being sold in the
residential equipment market for high energy efficiency air conditioning and
heat pump applications. It is also sold in the light commercial air
conditioning market. Scroll compressor technology and capability are expanding
through the joint venture in 1995.
COMPETITION
- -----------
All of the markets in which the Company does business are extremely competitive.
Participants compete on the basis of service and the price, quality, reliability
and efficiency of products. Several of the Company's competitors have greater
financial resources than the Company.
9
<PAGE>
In the domestic market for commercial air conditioning equipment, the Company
competes primarily with two large United States manufacturers, Carrier
Corporation, a subsidiary of United Technologies Corporation, and Trane Company,
a division of American Standard Inc. Commercial product manufacturers compete
on the basis of product design, reliability and post-installment service.
Architects and engineers play an important part in determining which
manufacturer's products will be used in an application.
In the residential products market, the Company competes with numerous national
and regional manufacturers. In this market, price competition and maximum
market coverage are particularly important, as there is relatively little
perceived differentiation among competing product lines.
In the hermetic compressors market, the Company competes directly with two
United States manufacturers, Copeland Corporation, a subsidiary of Emerson
Electric Inc., and Tecumseh, a division of Tecumseh Corporation. In this
market, the Company competes primarily on the basis of reliability and price as
well as delivery, service and product efficiency.
In the domestic market for engineered refrigeration equipment, the Company
competes primarily with FES, BAC, Evapco and Krack Corp. In international
markets for air conditioning equipment, the Company competes primarily with
Carrier Corporation, Trane Company and several Japanese manufacturers, including
Matsushita, Hitachi, Mitsubishi Electric and Toshiba.
PATENTS AND TRADEMARKS
- ----------------------
The Company holds numerous patents that relate to the design and use of its
products that it considers important, but not essential, to the overall conduct
of its business. It is the Company's policy to obtain patent protection for as
many of its new and developmental products as possible, and to enforce such
patent rights as appropriate. No patents which the Company considers material
will expire within the next five years.
The Company owns several trademarks that it considers important in the marketing
of its products, including "YORK". "LUXAIRE", "FRASER-JOHNSTON", "MONCRIEF",
"HOMEAIR", "RECOLD", "FRICK", "FRIGID COIL", "BRISTOL", "IMECO", "MILLER
PICKING", "RECO", "COLEMAN(R) EVCON", "AIRPRO", "RED-T", "YORK FOOD SYSTEMS",
"RITE COIL", "NORTHFIELD FREEZING SYSTEMS", "SEVESO", "GRAM", "AEROMASTER" and
"TEMPMASTER". The Company believes that its rights in these trademarks are
adequately protected and of unlimited duration.
MAJOR CUSTOMERS
- ---------------
During 1996, no customer, distributor, dealer or licensee accounted for more
than 10% of the Company's revenues. The loss of a few customers, distributors,
dealers or licensees would not have a materially adverse effect on the Company's
business.
BACKLOG
- -------
As of December 31, 1996, the Company's backlog was $845.1 million as compared to
$898.6 million as of December 31, 1995. Substantially all of the orders are
expected to be fulfilled within the next 12 months.
GOVERNMENT CONTRACTS
- --------------------
In 1996, approximately 1% of the Company's sales were related to ongoing United
States Government projects. The Company expects that substantially all work
will be completed during fiscal year 1997 in connection with all of these
contracts. The Company's existing contracts with the United States Government
may be terminated at any time at the option of the Government and are subject to
continued availability of government appropriations. If these contracts were
terminated, the Company would only be entitled to reimbursement of costs
incurred and to payment of a reasonable allowance for profit on work actually
performed.
10
<PAGE>
EMPLOYEES
- ---------
As of December 31, 1996, the Company employed approximately 20,100 persons
worldwide. Approximately 12,600 persons are employed in the United States and
7,500 persons are employed in foreign countries. Approximately 4,700 domestic
employees are covered by collective bargaining agreements which expire between
January 31, 1997 and October 31, 2002. The Company considers its relations with
its employees to be satisfactory.
ENVIRONMENTAL MATTERS
- ---------------------
Environmental laws that affect or could affect the Company's domestic operations
include, among others, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Occupational Safety and Health Act, the
National Environmental Policy Act, the Toxic Substances Control Act, any
regulations promulgated under these acts, and various other Federal, state and
local laws and regulations governing environmental matters. The Company
believes it is in substantial compliance with such existing environmental laws
and regulations.
The Company's foreign operations are also subject to various environmental
statutes and regulations. Generally, these requirements tend to be no more
restrictive than those in effect in the United States. The Company believes it
is in substantial compliance with such existing environmental statutes and
regulations. In 1993, the Council of European Communities agreed on EC
regulation number 1836/93 which recommended that each company voluntarily
complete an ECO-Audit. The Company has completed these audits at several of its
European facilities.
In September 1987, the United States became a signatory to an international
agreement titled the Montreal Protocol on Substances that Deplete the Ozone
Layer (the "Montreal Protocol"). The Montreal Protocol requires its signatories
to reduce production and consumption of CFCs and Halons, some of which are
utilized in air conditioning and refrigeration equipment. In 1988, the EPA
issued regulations under the Clean Air Act implementing the Montreal Protocol in
the United States. Many other countries have also become signatories to the
Montreal Protocol. The manner in which these countries implement the Montreal
Protocol and regulate CFCs could differ from the approach taken in the United
States.
The 1990 Clean Air Act amendments implement the Montreal Protocol by
establishing a program for limiting the production, importation and use of
certain ozone depleting chemicals (including those governed by the Montreal
Protocol) some of which are refrigerants currently used by the Company. Under
the Act, the production and consumption of the refrigerants designated as "Class
I substances" including all CFCs must be phased out beginning in 1991 and are to
be banned completely by 2000. Certain other refrigerants, including all HCFCs,
are designated as "Class II substances", and must be phased out between 2015 and
2030.
The Clean Air Act allows the EPA to accelerate the statutory phase-out schedule
for any Class I or Class II substance. In November 1992, the parties to the
Montreal Protocol agreed to amend the Protocol to require the complete phase-out
of CFC production by the beginning of 1996. Further, the parties agreed to a
1996 production cap on HCFCs and a complete phase-out of HCFC production by
2030. The EPA has published a final rule requiring accelerated phase-out of all
CFCs by 1996 and of all HCFCs by 2030.
None of the Company's manufactured products uses Class I substances. Class I
substances previously used by the Company have been substituted for by Class II
substances or substances that are currently unregulated. The Company does,
however, believe that revenues from servicing and repairing existing equipment
that uses Class I substances are and will be significant. These activities are
regulated by the EPA which imposes guidelines affecting service and maintenance
of equipment that uses Class I and Class II substances. The Company trains its
service technicians in service and maintenance procedures that comply with the
new regulations. Therefore, the Company believes that the new regulations will
not have a material adverse effect on its operations. The phase-out of Class I
substances will require modifications to existing air conditioning equipment as
availability of recycled Class I substances decreases. Since the Company's
technology enables it to modify existing equipment for use with Class II
substances, it believes that this will continue to generate additional service
revenues. While the Company expects to derive substantial revenue from the sale
of products utilizing Class II substances, it is not expected that any phase-out
will have a significant impact on the sales of such products prior to the end of
the
11
<PAGE>
decade. Nonetheless, as the supply of virgin and recycled Class II substances
falls, it will be necessary to address the need to substitute permitted
substances for Class II substances.
The Company, in conjunction with major chemical manufacturers, is continually in
the process of reviewing and addressing the impact of refrigerant regulations on
its products. The Company believes that the combination of those products which
presently utilize Class II substances and those products in the field which can
be retrofitted to such refrigerants provides a complete line of commercial and
industrial products. Therefore, the Company does not foresee any material
adverse impact on its business or competitive position as a result of the
Montreal Protocol, the 1990 Clean Air Act amendments or their implementing
regulations. However, the Company believes that the implementation of severe
restrictions on the production, importation or use of refrigerants employed in
larger quantities by the Company could have such an impact. The Company believes
that the commercial products that it has produced will be well positioned to
utilize the next generation of refrigerants without substantial modification.
If the next generation of refrigerants is incompatible with the hermetic
compressors used by the Company and all of its competitors for residential and
light commercial products, design modifications would be required.
GOVERNMENTAL REGULATIONS
- ------------------------
The Company is subject to regulations promulgated under the National Appliance
Energy Conservation Act of 1987, as amended, and various state regulations
concerning the energy efficiency of its products. The Company has developed and
is developing products which will comply with these regulations, and does not
believe that such regulations will have a material adverse effect on its
business.
12
<PAGE>
EXECUTIVE OFFICERS
- ------------------
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Robert N. Pokelwaldt 60 Chairman of the Board of Directors,
President and Chief Executive Officer
Scott J. Boxer 46 Vice President, and President of Unitary
Products Group
Joseph D. Smith 43 Vice President, and President of Airside
Products Group
Peter J. Spellar 52 Vice President, and President of Applied
Systems
Thomas D. Washburne, Jr. 42 Vice President, and President of
International Business Group
Michael R. Young 52 Vice President, and President of Bristol
Compressors
Jane G. Davis 47 Vice President, Secretary and General
Counsel
Dean T. DuCray 56 Vice President and Chief Financial Officer
Wayne J. Kennedy 54 Vice President, Human Resources
Victor R. McCloskey 54 Vice President, Corporate Development
James P. Corcoran 51 Treasurer
C. David Myers 33 Controller
Mr. Pokelwaldt has been Chairman of the Company since January 1993. Prior
thereto he was President, Chief Executive Officer and Director of the Company
since June 1991, President and Chief Operating Officer from January 1990 to June
1991, Vice President of the Company and President of Applied Systems Worldwide
from September 1988 to January 1990 and Chairman and Chief Executive Officer of
Frick Company from June 1983 to September 1988.
Mr. Boxer has been Vice President of the Company and President of Unitary
Products Group since September 1992. Prior thereto he was Managing Director of
York International, Ltd. from March 1984 to September 1992. Mr. Boxer joined
the Company in 1972 and previously has held various senior manufacturing
positions with the Company.
Mr. Smith has been Vice President of the Company and General Manager of Airside
Products Group since October 1994. Prior thereto he was Vice President of
Special Projects of the Company from May 1994 to October 1994. Prior to joining
the Company, Mr. Smith was Vice President and General Manager of Spherical
Roller Bearing Division of SKF USA, Inc. since May 1992. Previous to this, Mr.
Smith held various positions with Harley Davidson and General Motors.
13
<PAGE>
Mr. Spellar has been Vice President of the Company and President, Applied
Systems Worldwide since November 1995. Prior thereto, he was Vice President of
the Company and Vice President, European Operations from August 1992 to November
1995, President, Frick Division from May 1987 to August 1992 and President of
the Frick Company from May 1979 to May 1987.
Mr. Washburne has been Vice President of the Company and President of the
International Business Group since April 1994. Prior thereto, he was Vice
President of the Company and General Counsel of the Company from August 1992 to
April 1994. From January 1989 until joining the Company in 1992, Mr. Washburne
was a partner in the law firm of Venable, Baetjer and Howard and an associate at
such firm from 1984 until 1989.
Mr. Young has been Vice President of the Company, and Chief Executive Officer
and President of Bristol Compressors since October 1996. Prior thereto, he was
President, Chairman and Chief Executive Officer of Evcon Industries, Inc. from
1991-1995, President and Chief Operating Officer of York International Inc. from
1988-1989, and Chairman, President and Chief Executive Officer of Bristol
Compressors from 1983 to 1987.
Ms. Davis has been Vice President, Secretary and General Counsel of the Company
since March 1995. Prior thereto, she was Vice President, General Counsel and
Secretary of Joy Technologies Inc. from September 1988 to February 1995.
Mr. DuCray has been Vice President and Chief Financial Officer of the Company
since January 1987. Prior to joining the Company he was President and Chief
Executive Officer of Technical Oil Tool Corporation, a wholly-owned subsidiary
of Baker International Corporation, from July 1976 to January 1987.
Mr. Kennedy has been Vice President, Human Resources, of the Company since May
1993. Prior thereto he was the Vice President of Human Resources for the
Millipore Corporation from 1985 to 1993. Prior to that he was an independent
consultant focusing upon Executive Development and Labor Relations.
Mr. McCloskey has been Vice President, Corporate Development Worldwide since
November 1995. Prior thereto, he was Vice President of the Company and General
Manager of Applied Systems Division since February 1993. Prior thereto, he was
Vice President Sales and Marketing of Applied Systems North America from April
1984 to January 1993. Mr. McCloskey joined the Company in 1966 and has held
various sales and marketing positions with the Company.
Mr. Corcoran has been Treasurer of the Company since July 1992. Prior thereto
he was Treasurer of Griffith Laboratories from August 1990 to May 1992,
Treasurer of AM International from March 1987 to August 1990 and Director,
Treasury Operations of Borg-Warner Corporation from February 1977 to March 1987.
Mr. Myers has been Controller since July 1995. Prior thereto, he was Director
of Financial Planning and Controls from March 1994 to December 1994 and Director
of Finance, Airside Products Group to July 1995. Prior to joining the Company
in 1994, he was a Senior Manager and on the professional staff with the
accounting firm of KPMG Peat Marwick LLP from August 1986 to March 1994.
14
<PAGE>
ITEM 2. PROPERTIES
The Company's principal offices are located in York, Pennsylvania on an
approximately 71 acre site owned by the Company. The following table lists the
principal manufacturing facilities owned by the Company:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRIMARY PRODUCTS ENCLOSED AREA (SQ. FT.)
- -------- ---------------- -----------------------
<S> <C> <C>
York, PA Engineered products 1,500,000
Wichita, KS Unitary products 835,000
Elyria, OH Unitary products 636,000
Norman, OK Unitary products 549,000
Bristol, VA Hermetic compressors 520,000
Waynesboro, PA Industrial refrigeration products and compressors 400,000
Basildon, England Air and water cooled chillers for engineered products 370,000
Sparta, NC Hermetic compressors 180,000
San Antonio, TX Industrial refrigeration and engineered products 136,000
Durango, Mexico Engineered products 116,000
Vojens, Denmark Industrial refrigeration products and compressors 111,000
Sydney, Australia Engineered products 102,000
Monterrey, Mexico Engineered products, Unitary products 102,000
Bangkok, Thailand Unitary products 94,000
Carquefou, France Heat exchangers and compressors 92,000
Polo, IL Evaporative cooling products 78,000
Roanoke, VA Screw compressors 72,000
Dixon, IL Evaporative cooling products 62,000
Smithville, OH Freezer systems 44,000
Northfield, MN Freezer systems 44,000
Bogota, Colombia Unitary products and fan coils 40,000
Montevideo, Uruguay Air handling equipment 22,000
</TABLE>
At the York, Pennsylvania location, approximately 220,000 square feet of
facilities are leased to tenants and approximately 100,000 square feet are
neither currently used by the Company nor leased to third parties. The Company
also leases for its own use a 163,000 square foot facility in Albany, Missouri ,
a 230,000 square foot manufacturing facility in Barlassina, Italy, a 60,000
square foot manufacturing facility in Mannheim, Germany, a 126,000 square foot
manufacturing facility in Perth, Australia, a 189,000 square foot manufacturing
facility in Houston, Texas, an 82,000 square foot facility in Santa Fe Springs,
California and an 84,000 square foot manufacturing facility in Hattiesburg,
Mississippi.
In addition to the properties described above, the Company leases approximately
95 facilities in the United States and over 40 additional facilities worldwide
for use as sales and service offices and regional warehouses. The Company
believes that its properties are in good condition and adequate for its
requirements. The Company believes that its principal plants are generally
adequate to meet its production plans pursuant to its long-term sales goals.
In the ordinary course of its business, the Company monitors the condition of
its facilities to ensure that they remain adequate to meet its long-term sales
goals and production plans. The Company makes capital expenditures intended to
upgrade existing facilities and equipment to increase production efficiency and,
when appropriate, to adapt them to the requirements of manufacturing new product
lines.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to lawsuits arising from time to time in the ordinary
course of business. The Company believes that no pending lawsuit will result in
any material adverse effect to the Company.
15
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's security holders during the
fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the New York Stock Exchange under the
symbol "YRK". On March 14, 1997, the Company had 4,657 holders of record of its
common stock.
TRADING AND DIVIDEND INFORMATION
- --------------------------------
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
---- --- --------
<S> <C> <C> <C>
1996
----
Fourth quarter $56 1/4 $47 3/8 $.09
Third quarter 51 7/8 44 3/4 .09
Second quarter 53 5/8 46 3/4 .09
First quarter 49 44 .09
1995
----
Fourth quarter $47 1/8 $40 1/8 $.06
Third quarter 48 1/2 41 3/8 .06
Second quarter 45 1/4 38 1/8 .06
First quarter 39 3/4 34 1/8 .06
</TABLE>
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 and
limitations imposed by the 1995 Amended and Restated Credit Agreement.
ITEM 6. SELECTED FINANCIAL DATA
Information contained under the caption "Five Year Summary of Selected Financial
Data" on page 5 of the Annual Financial Statements and Review of Operations is
incorporated herein by reference in response to this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information contained under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 6 to 11 of the Annual
Financial Statements and Review of Operations is incorporated herein by
reference in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements for York International Corporation and Subsidiaries are
contained on pages 12 to 28 of the Annual Financial Statements and Review of
Operations and the Summary of Quarterly Results (unaudited) are contained on
page 29 of the Annual Financial Statements and Review of Operations and are
incorporated herein by reference in response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
16
<PAGE>
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Election of Directors" in the
Registrant's definitive 1997 Proxy Statement is incorporated herein by reference
in response to this item. See Item 1 above for information concerning executive
officers.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive Compensation" in the
Registrant's definitive 1997 Proxy Statement is incorporated herein by reference
in response to this item, other than the information under the subcaptions
"Report of the Compensation Committee" and "Stock Performance Graph" which are
not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained under the captions "Election of Directors" and "Ownership
of Common Stock" in the Registrant's definitive 1997 Proxy Statement is
incorporated herein by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements of York International Corporation
and subsidiaries are incorporated herein by reference to pages 12 to
28 of the Annual Financial Statements and Review of Operations:
Consolidated Balance Sheets - as of December 31, 1996 and 1995
Consolidated Statements of Operations - years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Cash Flows - years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Stockholders' Equity - years ended December
31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) The following financial statement schedule for York International
Corporation and subsidiaries is included herein:
VIII Valuation and Qualifying Accounts - years ended December 31,
1996, 1995 and 1994; (Page 22 of Form 10-K)
All other schedules are omitted as they are not applicable.
Independent Auditors' Report Covering Financial Statement Schedule;
(Page 21 of Form 10-K)
(3) The exhibits filed in response to Item 601 of Regulation S-K are as
follows:
17
<PAGE>
EXHIBIT
NUMBER
-------
3.1 Amended and Restated Certificate of Incorporation of Registrant
(Incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-3, File No. 33-91292, filed on June
7, 1995)
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation dated May 3, 1996 (filed herewith)
3.3 By-Laws of Registrant, restated as of December 17, 1996 (filed
herewith)
4.1 Receivables Sale Agreement dated as of June 30, 1992, among
Registrant, as seller and collection agent, Asset Securitization
Cooperative Corporation, as purchaser, and Canadian Imperial Bank of
Commerce, as servicing agent for the purchaser (Incorporated by
reference to Exhibit 4.4 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992, File No. 1-10863)
4.2 Indenture dated as of March 1, 1993 between the Registrant and Morgan
Guaranty Trust Company of New York, as Trustee (Incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement
filed on Form S-3, File No. 33-57178, filed on January 19, 1993)
4.3 Share Transfer Agreement dated as of June 19, 1995 between the
Registrant and National Westminster Bank PLC (Incorporated by
reference to Exhibit 4.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-10863)
4.4 Dividend Rights Agreement dated as of June 19, 1995 between the
Registrant and National Westminster Bank PLC (Incorporated by
reference to Exhibit 4.4 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-10863)
4.5 Amended and Restated Credit Agreement, dated as of July 21, 1995 among
the Registrant, the several banks and the other financial institutions
from time to time parties to the Agreement and Canadian Imperial Bank
of Commerce, acting through its New York Agency, as Agent
(Incorporated by reference to Exhibit 10.17 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995, File No.
1-10863)
4.6 Warrant Transfer Agreement dated as of December 21, 1995 between
Registrant and National Westminster Bank PLC (Incorporated by
reference to Exhibit 4.6 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-10863)
4.7 Second Amendment to Receivables Sale Agreement, dated as of August 30,
1994 (Incorporated by reference to Exhibit 10.9 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995, File No. 1-
10863)
4.8 Third Amendment to Receivables Sale Agreement, dated as of March 28,
1995 (Incorporated by reference to Exhibit 10.10 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995, File
No. 1-10863)
4.9 Amendment to Share Transfer Agreement between Registrant and National
Westminster Bank PLC, dated December 10, 1996 (filed herewith)
4.10 Amendment to Dividend Rights Agreement between Registrant and National
Westminster Bank PLC, dated December 10, 1996 (filed herewith)
*10.1 Registrant's 1989 Employee Stock Option Plan (Incorporated by
reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989, File No. 33-25440)
*10.2 Registrant's Amended and Restated 1992 Omnibus Stock Plan
(Incorporated by reference to Exhibit 10.16 to Registrant's Annual
Report on Form 10-Q for the quarter ended June 30, 1995, File No. 1-
10863)
18
<PAGE>
*10.3 Registrant's 1996 Incentive Compensation Plan (filed herewith)
*10.4 Bristol Compressors, Inc. Officers Retirement/Salary Continuation Plan
(Incorporated by reference to Exhibit 10.4 to York International
Corporation's Registration Statement on Form S-1, File No. 33-30713,
filed on August 25, 1989)
*10.5 York International Corporation Supplemental Executive Retirement Plan
(Incorporated by reference to Exhibit 10.12 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993, File No. 1-
10863)
*10.6 York International Corporation Executive Deferred Compensation Plan
(Incorporated by reference to Exhibit 10.3 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993, File No. 1-
10863)
*10.7 Form of Restricted Stock Agreement by and between Registrant and
certain of its employees (Incorporated by reference to Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, File No. 1-10863)
*10.8 First Amendment to the York International Corporation Executive
Deferred Compensation Plan, dated as of December 2, 1994 (Incorporated
by reference to Exhibit 10.8 to Registrant's Annual Report on Form 10-
K for the year ended December 31, 1995, File No. 1-10863)
10.10 Second Amendment to the York International Corporation Executive
Deferred Compensation Plan, dated as of December 17, 1996 (filed
herewith)
11 Statement re: Computation of Per Share Earnings (filed herewith)
12 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed
herewith)
13 Annual Financial Statements and Review of Operations with Accountants'
Certificate (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
23 Accountants' Consent (filed herewith)
27 Financial Data Schedule (filed herewith)
* Required to be Filed as management contracts, compensatory plans or
arrangements required to be identified pursuant to Item 14(c) of the
registrant's report on Form 10-K.
(b) No reports on Form 8-K have been filed during the last quarter of fiscal
1996.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
YORK INTERNATIONAL CORPORATION
/s/ Robert N. Pokelwaldt
---------------------------------------
ROBERT N. POKELWALDT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: MARCH 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 21st day of March 1997.
SIGNATURE TITLE
--------- -----
/s/ Robert N. Pokelwaldt President and Chief Executive Officer
- ------------------------------
ROBERT N. POKELWALDT (Principal Executive Officer)
/s/ Dean T. DuCray Vice President and Chief Financial Officer
- ------------------------------
DEAN T. DUCRAY (Principal Financial Officer)
/s/ C. David Myers Controller
- ------------------------------
C. DAVID MYERS (Principal Accounting Officer)
DIRECTORS
---------
/s/ Robert N. Pokelwaldt
- ------------------------------
ROBERT N. POKELWALDT
/s/ Malcolm W. Gambill
- ------------------------------
MALCOLM W. GAMBILL
/s/ Robert F. B. Logan
- ------------------------------
ROBERT F. B. LOGAN
/s/ Gerald C. McDonough
- ------------------------------
GERALD C. MCDONOUGH
/s/ Donald M. Roberts
- ------------------------------
DONALD M. ROBERTS
/s/ John C. Welsh
- ------------------------------
JOHN E. WELSH III
/s/ James A. Urry
- ------------------------------
JAMES A. URRY
/s/ Walter B. Wriston
- ------------------------------
WALTER B. WRISTON
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
York International Corporation:
Under date of February 11, 1997, we reported on the consolidated balance sheets
of York International Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the years in the three-year period ended
December 31, 1996, as contained in the 1996 annual report to stockholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1996. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
As discussed in Note 17 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" effective October 1, 1995.
KPMG PEAT MARWICK LLP
/s/ KPMG PEAT MARWICK LLP
Harrisburg, Pennsylvania
February 11, 1997
21
<PAGE>
SCHEDULE VIII
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
(thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column C Column D Column E
-------- -------- -------- -------- -------- --------
Balance at Additions Additions Balance at
Beginning Costs and Other Close of
Description of Period Expenses Accounts(a) Deductions Period
----------- --------- -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
1996
Allowance Doubtful Accounts $ 17,229 $ 5,718 $ 425 $ 2,635 $ 20,737
Warrantie $ 27,943 $15,649 $ - $10,457 $ 33,135
Other Liabilities $173,551 $13,673 $ 396 $ 7,114 $180,506
1995
Allowance Doubtful Accounts $ 13,461 $ 5,774 $1,201 $ 3,207 $ 17,229
Warrantie $ 21,535 $10,610 $2,875 $ 7,077 $ 27,943
Other Liabilities $144,822 $29,228 $1,932 $ 2,431 $173,551
1994
Allowance Doubtful Accounts $ 9,076 $ 4,034 $3,799 $ 3,448 $ 13,461
Warrantie $ 18,899 $ 9,588 $ (298) $ 6,654 $ 21,535
Other Liabilities $133,511 $15,512 $ - $ 4,201 $144,822
</TABLE>
___________
(a) Additions Charged to Other Accounts include liabilities of businesses
acquired in , 1995 and 1994.
22
<PAGE>
EXHIBIT 3.2
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "YORK INTERNATIONAL CORPORATION", FILED IN THIS OFFICE ON THE THIRD DAY OF
MAY, A.D. 1996, AT 3 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/S/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2164946 8100 7935386
DATE:
960129900D 05-07-96
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
YORK INTERNATIONAL CORPORATION
YORK INTERNATIONAL CORPORATION, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth a proposed amendment to the Amended and Restated
Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable and directing that it be submitted to the annual meeting of the
stockholders of the Corporation for consideration thereof. The amendment is as
follows:
SECOND: That the Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by striking out Section A of ARTICLE FIVE and
inserting in lieu thereof the following:
ARTICLE FIVE
A. AUTHORIZED SHARES
-----------------
Subject to the provisions of ARTICLE FIVE and ARTICLE TEN, the total number
of shares of capital stock which the Corporation has authority to issue is
210,000,000 shares, consisting of (a) 200,000,000 shares of common stock,
par value $.005 per share ("Common Stock"), and (b) 10,000,000 shares of
preferred stock, par value $.005 per share ("Preferred Stock").
-2-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate of
amendment to be signed by Robert N. Pokelwaldt, its Chairman, and attested by
Jane G. Davis, its Secretary, as of the 3rd day of May, 1996.
YORK INTERNATIONAL CORPORATION
By: /s/ Robert N. Pokelwaldt
------------------------
Robert N. Pokelwaldt
Chairman
Attest:
/S/ Jane G. Davis
- -----------------
Jane G. Davis
Secretary
22612
-3-
<PAGE>
EXHIBIT 3.3
BY-LAWS
-------
OF
--
YORK INTERNATIONAL CORPORATION
------------------------------
A Delaware Corporation
(Restated as of December 17, 1996)
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The corporation shall maintain a registered
--------- -----------------
office in the State of Delaware. The registered office and/or registered agent
of the corporation may be changed from time to time.
Section 2. Other Offices. The corporation may also have offices at such
--------- -------------
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
--------- --------------------------
stockholders shall be held each year within one hundred eighty (180) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
--------- ----------------
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors or by the holders of fifteen (15) percent of the
outstanding shares of the corporation entitled to vote generally in the election
of directors.
Section 3. Place of Meetings. The board of directors may designate any
--------- -----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
<PAGE>
Section 4. Notice. Whenever stockholders are required or permitted to
--------- ------
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the president or the secretary, and if mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the stockholder at his, her or its address as the
same appears on the records of the corporation.
Section 5. Stockholders List. The officer having charge of the stock
--------- -----------------
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of the outstanding shares of capital stock
--------- ------
representing a majority of the voting power of the corporation, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by law or by the certificate of
incorporation. If a quorum is not present, the holders of the shares
representing a majority of the voting power present in person or represented by
proxy at the meeting, and entitled to vote at the meeting, may adjourn the
meeting to another time and/or place. When a specified item of business
requires a vote by a class or series (if the corporation shall then have
outstanding shares of more than one class or series) voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum (as to such class or series) for the transaction of such item of
business. When a quorum is once present to commence a meeting of stockholders,
it is not broken by the subsequent withdrawal of any stockholder or their
proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
--------- ------------------
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
--------- -------------
of the holders of the shares representing a majority of the voting power present
in person or represented by
-2-
<PAGE>
proxy at the meeting and entitled to vote on the subject matter shall be the act
of the stockholders, unless the question is one upon which by express provisions
of an applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Where a separate vote by class may be required, the
affirmative vote of the majority of shares of such class present in person or
represented by proxy at the meeting shall be the act of such class.
Section 9. Voting Rights. Except as otherwise provided by the General
--------- -------------
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of common stock held
by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
---------- -------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 11. Action by Written Consent. Unless otherwise provided in the
---------- -------------------------
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail return receipt requested. All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered to the
corporation as required by this section, written consents signed by the holders
of a sufficient number of shares to take such corporate action are so recorded.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing. Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by
the stockholders at a meeting thereof.
Section 12. Nominations and Proposals. (a) The board of directors may
---------- -------------------------
nominate candidates for election as directors of the corporation and may propose
such other matters for approval of the stockholders as the board deems necessary
or appropriate.
-3-
<PAGE>
(b) Any stockholder entitled to vote for directors may nominate candidates
for election as directors of the corporation, provided, however, that so long as
the corporation has more than one stockholder, no nominations for director of
the corporation by any person other than the board of directors shall be
presented to any meeting of the stockholders unless the person making the
nomination is a record stockholder and shall have delivered a written notice to
the Secretary of the corporation not earlier than 90 days nor later than 60 days
in advance of the anniversary of the date of the immediately preceding annual
meeting or if the date of the annual meeting occurs more than 30 days before or
60 days after the anniversary of such immediately preceding annual meeting, not
later than the close of business on the later of (i) the sixtieth day prior to
such annual meeting and (ii) the tenth day following the date on which public
announcement of the date of such meeting is first made. Such notice shall (A)
set forth the name and address of the person advancing such nomination and the
nominee, together with such information concerning the person making the
nomination and the nominee as would be required by the appropriate rules and
regulations of the Securities and Exchange Commission to be included in a proxy
statement soliciting proxies for the election of such nominee, and (B) shall
include the duly executed written consent of such nominee to serve as director
if elected.
(c) No proposal by any person other than the board of directors shall be
submitted for the approval of the stockholders at any regular or special meeting
of the stockholders of the corporation unless the person advancing such proposal
shall have delivered a written notice to the Secretary of the corporation not
earlier than 90 days nor later than 60 days in advance of the anniversary of the
date of the immediately preceding annual meeting or if the date of the annual
meeting occurs more than 30 days before or 60 days after the anniversary of such
immediately preceding annual meeting, not later than the close of business on
the later of (i) the sixtieth day prior to such annual meeting and (ii) the
tenth day following the date on which public announcement of the date of such
meeting is first made. Such notice shall set forth the name and address of the
person advancing the proposal, any material interest of such person in the
proposal, and such other information concerning the person making such proposal
and the proposal itself as would be required by the appropriate rules and
regulations of the Securities and Exchange Commission to be included in a proxy
statement soliciting proxies for the proposal.
(d) For purposes hereof, "public announcement" shall mean disclosure in a
press release reported by the Dow Jones News Service, Associated Press or a
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Securities Exchange Act of 1934.
ARTICLE III
-----------
DIRECTORS
---------
Section l. General Powers. The business and affairs of the corporation
--------- --------------
shall be managed by or under the direction of the board of directors.
-4-
<PAGE>
Section 2. Number, Election and Term of Office. The number of directors
--------- -----------------------------------
which shall constitute the first board shall be one (1). Thereafter, the number
of directors shall be established from time to time by resolution of the board.
The directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote in the
election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
--------- -----------------------
directors may be removed at any time, with or without cause, by the holders of
the shares representing a majority of the voting power of the corporation then
entitled to vote at an election of directors. Whenever the holders of any class
or series are entitled to elect one or more directors by the provisions of the
corporation's certificate of incorporation, the provisions of this section shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole. Any director
may resign at any time upon written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
--------- ---------
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
--------- ---------------
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
--------- -------------------------
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by the board of
directors. Special meetings of the board of directors may be called by or at
the request of the president or any director on at least 24 hours notice to
each director, either personally, by telephone, by facsimile, by mail or by
telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
--------- -------------------------------------
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
--------- ----------
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws
-5-
<PAGE>
shall have and may exercise the powers of the board of directors in the
management and affairs of the corporation except as otherwise limited by law.
The board of directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
--------- ---------------
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
---------- ------------------------
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
---------- ------------------------------------------
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
---------- -------------------------
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
-6-
<PAGE>
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
--------- ------
the board of directors and shall consist of a president, one or more vice
presidents, a secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of president and secretary shall be filled as
expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
--------- ---------------------------
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. Vacancies may be filled or new offices created and filled at any
meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
--------- -------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
--------- ---------
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
--------- ------------
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President. The president shall be the chief executive
--------- -------------
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he or she is present; subject to the powers of
the board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.
-7-
<PAGE>
Section 7. Vice-presidents. The vice-president, or if there shall be more
--------- ---------------
than one, the vice-presidents in the order determined by the board of directors
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president. The vice-presidents
shall also perform such other duties and have such other powers as the board of
directors, the president or these by-laws may, from time to time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary shall
--------- ---------------------------------------
attend meetings of the board of directors, meetings of the committees thereof
and meetings of the stockholders and record the proceedings of the meetings in a
book or books to be kept for that purpose. Under the president's supervision,
the secretary shall give, or cause to be given, all notices required to be given
by these by-laws or by-law; shall have such powers and perform such duties as
the board of directors, the president or these by-laws may, from time to time,
prescribe; and shall have custody of the corporate seal of the corporation. The
secretary, or an assistant secretary, shall have authority to affix the
corporate seal to any instrument requiring it; and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries or such other person as may be designated by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall
--------- -------------------------------------
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six years) in such sums and with such surety or sureties
as shall be satisfactory to the board of directors for the faithful performance
of the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the president or
treasurer may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such
-8-
<PAGE>
authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors
or by the appropriate officers of the corporation.
Section 11. Absence or Disability of Officers. In the case of the absence
---------- ---------------------------------
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party
--------- -------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment) against all expense, liability and loss (including attorneys'
fees) actually and reasonably incurred by such person in connection with such
proceeding and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation.
The right to indemnification conferred in this Article V shall be a contract
right and, subject to Sections 2 and 5 hereof, shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition. The corporation may, by action of its
board of directors, provide indemnification to employees and agents of the
corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
--------- -------------------------------------------------------
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within 30 days, upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the corporation fails to respond within sixty days to a written request for
indemnity, the corporation shall be deemed to have approved the request. If the
corporation denies a written request for
-9-
<PAGE>
indemnification or advancing of expenses, in whole or in part, or if payment in
full pursuant to such request is not made within 30 days, the right to
indemnification or advances as granted by this Article V shall be enforceable by
the director or officer in any court of competent jurisdiction. Such person's
costs and expenses incurred in connection with successfully establishing his or
her right to indemnification, in whole or in part, in any such action shall also
be indemnified by the corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for the corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
corporation. Neither the failure of the corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation Law of the
State of Delaware, nor an actual determination by the corporation (including its
board of directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
--------- ---------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
--------- ---------
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
--------- --------
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
--------- --------------------
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another
-10-
<PAGE>
corporation, partnership, joint venture, trust or other enterprise, may be
indemnified to the extent authorized at any time or from time to time by the
board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
--------- ---------------
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
--------- -----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
--------- ----
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by such holder in the
corporation. If such a certificate is countersigned (1) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (2) by
a registrar, other than the corporation or its employee, the signature of any
such president, vice-president, secretary, or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or
-11-
<PAGE>
certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer, authorization,
and other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The corporation may direct a new
--------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
--------- ---------------------------------------------
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board
of directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be the close of business on the
day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
--------- --------------------------------------------------
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
-12-
<PAGE>
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
--------- ---------------------------------------
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
--------- -----------------------
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
--------- -----------------------
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
--------- ---------
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing
-13-
<PAGE>
or maintaining any property of the corporation, or any other purpose and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
--------- ------------------------
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
--------- ---------
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
--------- -----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. No loans shall be made or contracted on behalf
of the corporation, and no evidences of indebtedness shall be issued in its name
unless authorized by resolution of the board of directors. Such authority may
be general or confined to specific instances.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
--------- -----------
by resolution of the board of directors.
Section 6. Voting Securities Owned By Corporation. Voting securities in
--------- --------------------------------------
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 7. Inspection of Books and Records. Any stockholder of record, in
--------- -------------------------------
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of
-14-
<PAGE>
the stockholder. The demand under oath shall be directed to the corporation at
its registered office in the State of Delaware or at its principal place of
business.
Section 8. Section Headings. Section headings in these by-laws are for
--------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 9. Inconsistent Provisions. In the event that any provision of
--------- -----------------------
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
24917 (12/17/96)
-15-
<PAGE>
EXHIBIT 4.9
CONFORMED COPY
AMENDMENT AGREEMENT
DECEMBER 10, 1996
RELATING TO A
SHARE TRANSFER AGREEMENT
DATED 7 JUNE 1995
BETWEEN
YORK INTERNATIONAL CORPORATION
AND
NATIONAL WESTMINSTER BANK PLC
Clifford Chance
London
<PAGE>
THIS AMENDMENT AGREEMENT is made the 10th day of December 1996.
BETWEEN:
(1) YORK INTERNATIONAL CORPORATION ("YIC", which expression shall include its
successors and assigns permitted under the Share Transfer Agreement (as
defined below)), a corporation organised under the laws of Delaware, USA
whose principal office and effective seat of management is at 631, South
Richland Avenue, York, PA 17403, USA; and
(2) NATIONAL WESTMINSTER BANK PLC ("NWB" which expression shall include its
successors and assigns permitted under the Share Transfer Agreement (as
defined below)), a public limited company duly organised under the laws of
England whose registered office is at 41 Lothbury, London EC2P 2BP.
WHEREAS
(A) York International Holding GmbH (registered number HRB 5518 Mannheim), a
German limited company with its registered office at Gottlieb-Daimler-
Strasse 6, 68165 Mannheim, Germany ("YIH GMBH") is a subsidiary of YIC with
an issued share capital comprising the Ordinary Share, the Class A
Preference Share and the Class B Preference Share;
(B) YIC is the registered owner of the Ordinary Share and the Class A
Preference Share following the conversion of part of the Ordinary Share
into the Class A Preference Share;
(C) By a share transfer agreement dated 7 June 1995 and made between YIC and
NWB (the "SHARE TRANSFER AGREEMENT") YIC transferred to NWB the Class B
Preference Share; and
(D) It has been agreed that the Share Transfer Agreement shall be amended on
the terms and subject to the conditions hereof.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 Terms defined in the Share Transfer Agreement shall, unless otherwise
defined herein, or unless the context otherwise requires, bear the same
meaning when used in this Agreement.
1.2 In this Agreement, any reference to a "Clause" or "Schedule" shall, subject
to any contrary indication, be construed as a reference to a Clause hereof
or a Schedule hereto.
1.3 Clause and Schedule headings are for ease of reference only.
2. AMENDMENTS TO THE SHARE TRANSFER AGREEMENT
The parties hereto expressly agree that the Share Transfer Agreement shall,
as at the date hereof, be amended so that it shall be read and construed
for all purposes so as to include the amendments set out in the Schedule
hereto and each of the parties hereto shall be bound by the terms and
conditions thereof accordingly.
-1-
<PAGE>
3. CONTINUITY AND FURTHER ASSURANCE
3.1 The provisions of the Share Transfer Agreement shall, save as amended
hereby, continue in full force and effect.
3.2 YIC shall, at its own expense, do all such acts and things and execute all
such documents as shall reasonably be considered necessary or desirable to
give full effect to the amendments effected or to be effected pursuant to
this Agreement.
4. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts each of which, when so
executed and delivered, shall be an original but all the counterparts shall
together constitute but one and the same instrument.
5. LAW
This Agreement shall be governed by and construed in accordance with
English Law.
6. JURISDICTION
Clause 22 of the Share Transfer Agreement shall be imported into this
Agreement save that, when read in the context of this Agreement, all
references to "the Transaction Documents" shall be replaced by "this
Agreement" and read accordingly.
7. WAIVERS OF JURY TRIAL
YIC and NWB hereby irrevocably and unconditionally waive trial by jury in
any legal action or proceeding relating to this Agreement and for any
counterclaim therein.
8. COSTS AND EXPENSES
YIC shall pay NWB on demand for all reasonable expenses incurred by NWB in
connection with the negotiation, preparation, execution and delivery of
this Agreement.
IN WITNESS whereof this Agreement has been entered into the day and year first
above written.
-2-
<PAGE>
SCHEDULE
AMENDMENTS TO THE SHARE TRANSFER AGREEMENT
1. CLAUSE 1.1 OF THE SHARE TRANSFER AGREEMENT (INTERPRETATION)
1.1 The definition of Funded Debt shall be deleted and replaced by the
following:
""FUNDED DEBT" means all Indebtedness of YIC and its Subsidiaries and
all Guarantee Obligations of YIC and its Subsidiaries in respect of
Indebtedness of persons other than YIC and its Subsidiaries Provided
that, for the purposes of Clause 5.3(i)(b) Funded Debt shall not
include letters of credit with a face amount not exceeding $35,000,000
in the aggregate, appropriate reserves for which have been provided in
the books and records of YIC."
1.2 Paragraph (d) of the definition of Indebtedness shall be deleted and
replaced by the following:
"(d) the portion of the cash purchase price related to the purchase of
accounts receivable from such person (including, without
limitation, in the case of YIC, the cash proceeds received from
time to time from the sale of YIC's accounts receivable) that
shall not have been recovered by the purchaser thereof and"
1.3 The definition of "ACCOUNTS RECEIVABLE FINANCING" shall be deleted.
2. CLAUSE 5 OF THE SHARE TRANSFER AGREEMENT (COVENANTS AND UNDERTAKINGS OF
YIC)
2.1 Clause 5.1(iii) shall be deleted and replaced by the following:
"(iii) PAYMENT OF OBLIGATIONS
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all its obligations of
whatever nature, except (a) where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and
reserves in conformity with US GAAP with respect thereto have been
provided on the books of YIC or its Subsidiaries, as the case may be,
or (b) where the failure to do so would not, in the aggregate, have a
Material Adverse Effect."
2.2 In Clause 5.3(ii)(c) the figure of "$50,000,000" shall be deleted and
replaced by "$100,000,000".
2.3 In Clause 5.3(iii) a new paragraph (j) shall be inserted, reading as
follows:
"(j) Encumbrances on not more than 20% of the voting stock of any
Foreign Subsidiaries securing Indebtedness of YIC or any Foreign
Subsidiaries in an aggregate amount at any one time outstanding
for YIC and all Foreign Subsidiaries not to exceed 15% of
Consolidated Net Worth".
-3-
<PAGE>
2.4 In Clause 5.3(iv) the following paragraphs (c) and (d) shall be
added:
"(c) any Subsidiary the then aggregate book value of the assets of
which is less than $25,000,000 may do or undergo any of the
fundamental changes subject to this Clause 5.3(iv); and
(d) any wholly-owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets in connection with
an investment in a joint venture permitted by Clause 5.3(v)(c)."
2.5 Clause 5.3(v)(c) shall be deleted and replaced by:
"(c) acquisitions of any business from any person (whether pursuant to
an acquisition of stock, assets, a business unit or otherwise),
investments in joint ventures to conduct any business and other
equity investments in other persons, Provided that no such
acquisition or investment shall be permitted if such business,
joint venture or other person is engaged in a business other than
a business of the same general type as now conducted by YIC and
its Subsidiaries;
3. SCHEDULE 6 OF THE SHARE TRANSFER AGREEMENT (COMPLIANCE CERTIFICATE)
Schedule 6 shall be deleted and replaced by:
" SCHEDULE 6
COMPLIANCE CERTIFICATE
To: National Westminster Bank Plc
Re: York International Corporation
Share Transfer Agreement dated 7 June 1995
Gentlemen:
This Compliance Certificate is being delivered pursuant to Clause
5.1(ii)(a) and (b) of the Share Transfer Agreement dated 7 June 1995 (the
"AGREEMENT") between York International Corporation ("YIC"), a Delaware
corporation and National Westminster Bank Plc ("NWB") as amended by the
amendment agreement dated [ ] 1996 made between YIC and NWB.
Capitalised terms used herein without definition shall have the meanings
assigned as such terms in Clause 1.1 of the Agreement.
YIC hereby certifies, represents and warrants that as of ________________
(the "COMPUTATION DATE"):
(a) Interest Coverage was __________:1, as computed on Attachment 1
hereto.
The minimum Interest Coverage required pursuant to Clause 5.3(i)(a) of
the Agreement on the Computation Date is 3:1.
-4-
<PAGE>
(b) The Funded Debt to capital was _________:1, as computed on Attachment
2 hereto.
The maximum Funded Debt to Total Capital ratio permitted pursuant to
Clause 5.3(i)(b) of the Agreement is 0.60:1.
(c) The aggregate amount of Indebtedness for borrowed money of
Subsidiaries other than Foreign Subsidiaries was $_______.
The maximum aggregate amount of Indebtedness for borrowed money of
Subsidiaries other than Foreign Subsidiaries permitted pursuant to
Clause 5.3(ii)(c) of the Agreement is $100,000,000.
(d) No Structural Failure or Primary Event has occurred and is continuing.
IN WITNESS WHEREOF, YIC has caused this Certificate to be executed and
delivered by its duly authorised officer of this ______ day of
____________________, 19_____.
YORK INTERNATIONAL CORPORATION
By: ______________
Title: ______________
-5-
<PAGE>
ATTACHMENT 1
INTEREST COVERAGE
<TABLE>
<CAPTION>
=================================================================================================
PREVIOUS
APPLICABLE CURRENT TOTAL
1. CONSOLIDATED EBIT QUARTERS PERIOD QUARTER
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Net Income $_________ $_________ $________
Plus: income taxes $_________ $_________ $________
Plus: consolidated interest expense $________
$_________ $_________
SUBTOTAL: $________
Less: gains from the sale or other $_________ $_________ $________
disposition of assets (other than the
sales of inventory in the ordinary
course of business) and any other $_________ $_________
extraordinary or non-recurring gains
TOTAL: $________
$_________ $_________
- --------------------------------------------------------------------------------------------------
2. CONSOLIDATED INTEREST EXPENSE
- --------------------------------------------------------------------------------------------------
3. Interest Coverage: _______:1 _______:1 _______:1
(item 1 divided by item 2)
- --------------------------------------------------------------------------------------------------
Minimum Interest
Coverage
----------------
3.00
=================================================================================================
</TABLE>
-6-
<PAGE>
ATTACHMENT 2
FUNDED DEBT TO TOTAL CAPITAL
US$
1. FUNDED DEBT
CIBC Agented Revolver (July 21, 1995 Agreement)
All other indebtedness for borrowed money, etc.
Financing Leases
Acceptances
Receivable sales
Liabilities secured by Liens
Guarantee Obligations
TOTAL: ___________
2. CONSOLIDATED NET WORTH
3. TOTAL CAPITAL
(item 1 plus item 2)
4 Funded Debt to Total Capital
(item 1 divided by item 3) ________:1
MAXIMUM RATIO ALLOWABLE PER COVENANT
0.60 to 1.00"
-7-
<PAGE>
SIGNATURE PAGE
December 10, 1996
YORK INTERNATIONAL CORPORATION
By: /S/ JAMES P CORCORAN
TREASURER
NATIONAL WESTMINSTER BANK PLC
By: /S/ TIMOTHY G Y LOY
ASSISTANT DIRECTOR
-8-
<PAGE>
EXHIBIT 4.10
CONFORMED COPY
AMENDMENT AGREEMENT
DECEMBER 10, 1996
RELATING TO A
DIVIDEND RIGHTS AGREEMENT
DATED 19 JUNE 1995
BETWEEN
YORK INTERNATIONAL CORPORATION
AND
NATIONAL WESTMINSTER BANK PLC
Clifford Chance
London
<PAGE>
THIS AMENDMENT AGREEMENT is made the 10th day of December 1996.
BETWEEN:
(1) YORK INTERNATIONAL CORPORATION ("YIC", which expression shall include its
successors and assigns permitted under the Dividend Rights Agreement (as
defined below)), a corporation organised under the laws of Delaware, USA
whose principal office and effective seat of management is at 631, South
Richland Avenue, York, PA 17403, USA; and
(2) NATIONAL WESTMINSTER BANK PLC ("NWB" which expression shall include its
successors and assigns permitted under the Dividend Rights Agreement (as
defined below)), a public limited company duly organised under the laws of
England whose registered office is at 41 Lothbury, London EC2P 2BP.
WHEREAS
(A) York International Holding GmbH (registered number HRB 5518 Mannheim), a
German limited company with its registered office at Gottlieb-Daimler-
Strasse 6, 68165 Mannheim, Germany ("YIH GMBH") is a subsidiary of YIC with
an issued share capital comprising the Ordinary Share, the Class A
Preference Share and the Class B Preference Share;
(B) YIC is the registered owner of the Ordinary Share and the Class A
Preference Share following the conversion of part of the Ordinary Share
into the Class A Preference Share;
(C) By a dividend rights agreement dated 19 June 1995 and made between YIC and
NWB (the "DIVIDEND RIGHTS AGREEMENT") YIC transferred to NWB the dividend
rights with respect to the Class A Preference Share; and
(D) It has been agreed that the Dividend Rights Agreement shall be amended on
the terms and subject to the conditions hereof.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 Terms defined in the Dividend Rights Agreement shall, unless otherwise
defined herein, or unless the context otherwise requires, bear the same
meaning when used in this Agreement.
1.2 In this Agreement, any reference to a "Clause" or "Schedule" shall, subject
to any contrary indication, be construed as a reference to a Clause hereof
or a Schedule hereto.
1.3 Clause and Schedule headings are for ease of reference only.
2. AMENDMENTS TO THE DIVIDEND RIGHTS AGREEMENT
The parties hereto expressly agree that the Dividend Rights Agreement
shall, as at the date hereof, be amended so that it shall be read and
construed for all purposes so as to include the amendments
<PAGE>
set out in the Schedule hereto and each of the parties hereto shall be
bound by the terms and conditions thereof accordingly.
3. CONTINUITY AND FURTHER ASSURANCE
3.1 The provisions of the Dividend Rights Agreement shall, save as amended
hereby, continue in full force and effect.
3.2 YIC shall, at its own expense, do all such acts and things and execute all
such documents as shall reasonably be considered necessary or desirable to
give full effect to the amendments effected or to be effected pursuant to
this Agreement.
4. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts each of which, when so
executed and delivered, shall be an original but all the counterparts shall
together constitute but one and the same instrument.
5. LAW
This Agreement shall be governed by and construed in accordance with
English Law.
6. JURISDICTION
Clause 24 of the Dividend Rights Agreement shall be imported into this
Agreement save that, when read in the context of this Agreement, all
references to "the Transaction Documents" shall be replaced by "this
Agreement" and read accordingly.
7. WAIVERS OF JURY TRIAL
YIC and NWB hereby irrevocably and unconditionally waive trial by jury in
any legal action or proceeding relating to this Agreement and for any
counterclaim therein.
8. COSTS AND EXPENSES
YIC shall pay NWB on demand for all reasonable expenses incurred by NWB in
connection with the negotiation, preparation, execution and delivery of
this Agreement.
IN WITNESS whereof this Agreement has been entered into the day and year first
above written.
-2-
<PAGE>
SCHEDULE
AMENDMENTS TO THE DIVIDEND RIGHTS AGREEMENT
1. CLAUSE 1.1 OF THE DIVIDEND RIGHTS AGREEMENT (INTERPRETATION)
1.1 The definition of Funded Debt shall be deleted and replaced by the
following:
""FUNDED DEBT" means all Indebtedness of YIC and its Subsidiaries and
all Guarantee Obligations of YIC and its Subsidiaries in respect of
Indebtedness of persons other than YIC and its Subsidiaries Provided
that, for the purposes of Clause 5.3(i)(b) Funded Debt shall not
include letters of credit with a face amount not exceeding $35,000,000
in the aggregate, appropriate reserves for which have been provided in
the books and records of YIC."
1.2 Paragraph (d) of the definition of Indebtedness shall be deleted and
replaced by the following:
"(d) the portion of the cash purchase price related to the
purchase of accounts receivable from such person (including,
without limitation, in the case of YIC, the cash proceeds
received from time to time from the sale of YIC's accounts
receivable) that shall not have been recovered by the
purchaser thereof and"
1.3 The definition of "ACCOUNTS RECEIVABLE FINANCING" shall be deleted.
2. CLAUSE 5 OF THE DIVIDEND RIGHTS AGREEMENT (COVENANTS AND UNDERTAKINGS OF
YIC)
2.1 Clause 5.1(iii) shall be deleted and replaced by the following:
"(iii) PAYMENT OF OBLIGATIONS
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all its obligations of
whatever nature, except (a) where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and
reserves in conformity with US GAAP with respect thereto have been
provided on the books of YIC or its Subsidiaries, as the case may be,
or (b) where the failure to do so would not, in the aggregate, have a
Material Adverse Effect."
2.2 In Clause 5.3(ii)(c) the figure of "$50,000,000" shall be deleted and
replaced by "$100,000,000".
2.3 In Clause 5.3(iii) a new paragraph (j) shall be inserted, reading as
follows:
"(j) Encumbrances on not more than 20% of the voting stock of any
Foreign Subsidiaries securing Indebtedness of YIC or any
Foreign Subsidiaries in an aggregate amount at any one time
outstanding for YIC and all Foreign Subsidiaries not to
exceed 15% of Consolidated Net Worth".
-3-
<PAGE>
2.4 In Clause 5.3(iv) the following paragraphs (c) and (d) shall be
added:
"(c) any Subsidiary the then aggregate book value of the assets of
which is less than $25,000,000 may do or undergo any of the
fundamental changes subject to this Clause 5.3(iv); and
(d) any wholly-owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets in connection
with an investment in a joint venture permitted by Clause
5.3(v)(c)."
2.5 Clause 5.3(v)(c) shall be deleted and replaced by:
"(c) acquisitions of any business from any person (whether
pursuant to an acquisition of stock, assets, a business unit
or otherwise), investments in joint ventures to conduct any
business and other equity investments in other persons,
Provided that no such acquisition or investment shall be
permitted if such business, joint venture or other person is
engaged in a business other than a business of the same
general type as now conducted by YIC and its Subsidiaries;
3. SCHEDULE 6 OF THE DIVIDEND RIGHTS AGREEMENT (COMPLIANCE CERTIFICATE)
Schedule 6 shall be deleted and replaced by:
" SCHEDULE 6
COMPLIANCE CERTIFICATE
To: National Westminster Bank Plc
Re: York International Corporation
Dividend Rights Agreement dated 19 June 1995
Gentlemen:
This Compliance Certificate is being delivered pursuant to Clause
5.1(ii)(a) and (b) of the Dividend Rights Agreement dated 19 June 1995 (the
"AGREEMENT") between York International Corporation ("YIC"), a Delaware
corporation and National Westminster Bank Plc ("NWB") as amended by the
amendment agreement dated [ ] 1996 made between YIC and NWB.
Capitalised terms used herein without definition shall have the meanings
assigned as such terms in Clause 1.1 of the Agreement.
-4-
<PAGE>
YIC hereby certifies, represents and warrants that as of__________________
(the "COMPUTATION DATE"):
(a) Interest Coverage was __________:1, as computed on Attachment 1 hereto.
The minimum Interest Coverage required pursuant to Clause 5.3(i)(a) of
the Agreement on the Computation Date is 3:1.
(b) The Funded Debt to capital was _________:1, as computed on Attachment 2
hereto.
The maximum Funded Debt to Total Capital ratio permitted pursuant to
Clause 5.3(i)(b) of the Agreement is 0.60:1.
(c) The aggregate amount of Indebtedness for borrowed money of Subsidiaries
other than Foreign Subsidiaries was $_______.
The maximum aggregate amount of Indebtedness for borrowed money of
Subsidiaries other than Foreign Subsidiaries permitted pursuant to
Clause 5.3(ii)(c) of the Agreement is $100,000,000.
(d) No Structural Failure or Primary Event has occurred and is continuing.
IN WITNESS WHEREOF, YIC has caused this Certificate to be executed and
delivered by its duly authorised officer of this ______ day of ___________,
19_____.
YORK INTERNATIONAL CORPORATION
By: ____________________________
Title: ______________
-5-
<PAGE>
ATTACHMENT 1
INTEREST COVERAGE
<TABLE>
<CAPTION>
=============================================================================================
PREVIOUS
APPLICABLE CURRENT TOTAL
1. CONSOLIDATED EBIT QUARTERS PERIOD QUARTER
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Net Income $_________ $_________ $_________
Plus: income taxes $_________ $_________ $_________
Plus: consolidated interest expense $_________ $_________ $_________
SUBTOTAL: $_________ $_________ $_________
Less: gains from the sale or other $_________ $_________ $________
disposition of assets (other
than the sales of inventory in
the ordinary course of business)
and any other extraordinary or
non-recurring gains
TOTAL:
$_________ $_________
- ---------------------------------------------------------------------------------------------
2. CONSOLIDATED INTEREST EXPENSE
- ---------------------------------------------------------------------------------------------
3. Interest Coverage: _______:1 _______:1 _______:1
(item 1 divided by item 2)
- ---------------------------------------------------------------------------------------------
Minimum Interest
Coverage
----------------
3.00
=============================================================================================
</TABLE>
-6-
<PAGE>
ATTACHMENT 2
FUNDED DEBT TO TOTAL CAPITAL
US$
1. FUNDED DEBT
CIBC Agented Revolver (July 21, 1995 Agreement)
All other indebtedness for borrowed money, etc.
Financing Leases
Acceptances
Receivable sales
Liabilities secured by Liens
Guarantee Obligations
TOTAL: __________
2. CONSOLIDATED NET WORTH
3. TOTAL CAPITAL
(item 1 plus item 2)
4 Funded Debt to Total Capital
(item 1 divided by item 3) ________:1
MAXIMUM RATIO ALLOWABLE PER COVENANT
0.60 to 1.00
-7-
<PAGE>
SIGNATURE PAGE
YORK INTERNATIONAL CORPORATION
December 10, 1996
By: /S/ JAMES P CORCORAN
TREASURER
NATIONAL WESTMINSTER BANK PLC
By: /S/ TIMOTHY G Y LOY
ASSISTANT DIRECTOR
-8-
<PAGE>
EXHIBIT 10.3
YORK INTERNATIONAL CORPORATION
1996 INCENTIVE COMPENSATION PLAN
--------------------------------
INTRODUCTION.
- ------------
The purpose of the York International Corporation 1996 Incentive
Compensation Plan (the "Plan") is to give certain management and key employees
who are in a position to contribute materially to the success and profitability
of York International Corporation (the "Company") an incentive and a reward for
doing so; and to assist the Company in attracting and retaining the highest
caliber of management and key employees. This will be accomplished through
incentive compensation in the form of annual cash awards and mid-term
performance unit allocations.
The Plan is subject to shareholder approval and is the sole mechanism under
which Covered Employees, as hereinafter defined, may receive incentive
compensation.
ARTICLE 1 - DEFINITIONS.
- -----------------------
For purposes of the Plan, the following terms shall have the meaning indicated:
1.1 Annual Cash Award - the annual award granted a Participant under the
-----------------
Annual Program.
1.2 Annual Performance Objectives - the performance objectives set forth
-----------------------------
in Section 3.2 used to determine Annual Cash Awards.
1.3 Annual Program - the annual cash program portion of the Plan set forth
--------------
in Article 3.
1.4 Annual EV Amount - the annual expected value amount under Article 3
----------------
for a Participant for a Fiscal Year.
1.5 Board - The Board of Directors of York International Corporation
-----
1
<PAGE>
1.6 Change of Control - any one or more of the following:
-----------------
(a) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock"); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(iv) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A) and (B) of subsection (c) of this Section 1.6; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person or entity
other than the Board; or
2
<PAGE>
(c) consummation of a reorganization, merger or consolidation
involving the Company or any subsidiary of the Company or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, either (A)(i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively,
the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transactions owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding
Company Common Stock or (ii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or at the time of the action of the
Board, providing for such Business Combination and (B) no Person (excluding
any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 30% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power
3
<PAGE>
of the then outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination; or
(d) a complete liquidation or dissolution of the Company.
1.7 Code - the Internal Revenue Code of 1986, as amended.
----
1.8 Company - York International Corporation and except for purposes of
-------
Sections 1.6 and 1.14, any other company which is a subsidiary within the
meaning of Section 424(f) of the Code with respect to York International
Corporation.
1.9 Compensation Committee - the compensation committee of the Board
----------------------
appointed by the Board that is solely composed of two or more persons who are
"outside directors" in accordance with the meaning of Proposed Treasury
Regulation (S) 1.162-27(e)(3) and "disinterested persons" in accordance with the
meaning set forth in Rule 16b-3 of the Exchange Act.
1.10 Covered Employee - any individual who, on the last day of the
----------------
taxable year is (a) the Chief Executive Officer of the Company, or is acting in
such capacity, or (b) among the four highest compensated officers (other than
the Chief Executive Officer), as determined in accordance with the executive
compensation disclosure rules under the Exchange Act, unless otherwise provide
in Section 162(m) of the Code or the regulations thereunder.
1.11 Disability - an inability to perform the duties assigned by the
----------
Company to the Participant by reason of any medically determined physical or
mental impairment which has lasted for a continuous period of more than six
months.
1.12 Effective Date -January 1, 1996.
--------------
1.13 Exchange Act - Securities Exchange Act of 1934, as amended.
------------
1.14 Fiscal Year - the fiscal year of the Company.
-----------
4
<PAGE>
1.15 Measurement Period - three consecutive Fiscal Years or such other
------------------
period selected and established by the Compensation Committee with respect to
any Mid-Term Program.
1.16 Mid-Term EV Amount - the mid-term expected value amount under
------------------
Article 4 for a Participant for a Measurement Period expressed in Performance
Units.
1.17 Mid-Term Incentive Award - the annual award earned by a Participant
------------------------
under the Mid-Term Program at the end of a Measurement Period.
1.18 Mid-Term Performance Objectives - the performance objectives set
-------------------------------
forth in Section 4.2 used to determine Mid-Term Incentive Awards.
1.19 Mid-Term Program - the mid-term incentive program portion of the
----------------
Plan set forth in Article 4.
1.20 Participant - an individual eligible to participate in the Plan in
-----------
accordance with Article 2.
1.21 Performance Unit - a compensation unit granted to a Participant
----------------
under the Mid-Term Program at the beginning of the Measurement Period.
1.22 Plan - The York International Corporation 1996 Incentive
----
Compensation Plan.
1.23 Retirement - termination of employment with the Company on or after
----------
the date the employee either attains 62 years of age or attains 55 years of age
and completes 10 years of service.
1.24 Termination of Employment - a termination of employment with the
-------------------------
Company other than by reason of death, incurring a Disability, or Retirement.
1.25 Termination for Cause - a Termination of Employment if the employee
---------------------
was terminated for (i) providing the Company with materially false
representations relied upon by the Company in furnishing information to
shareholders, a stock exchange or the Securities and
5
<PAGE>
Exchange Commission, (ii) maintaining, an undisclosed, unauthorized and material
conflict of interest in the discharge of duties owed to the Company, (iii)
misconduct causing a serious violation by the Company of state or federal laws,
(iv) theft of Company funds or assets, or (v) conviction of a crime involving
moral turpitude.
ARTICLE 2 - ELIGIBILITY.
- -----------------------
(a) An individual shall be eligible for the Annual Program if he is (i) a
Covered Employee or (ii) a management or key employee who is
approved by the Compensation Committee to participate in the Annual
Program for the specified Fiscal Year.
(b) An individual who is hired or has changed position after the
beginning of the Fiscal Year shall be eligible for the Annual Program if he is a
management or key employee who is approved by the Compensation
Committee to participate in the Annual Program for the specified Fiscal Year.
Such a Participant shall be entitled to a pro-rated Annual Cash Award as
described in Section 3.3(c) for that Fiscal Year payable in the same form and at
the same time as Annual Cash Awards are paid to other Participants.
(c) An individual shall be eligible for the Mid-Term Program if he is (i)
a Covered Employee or (ii) a management or key employee who is approved by the
Compensation Committee to participate in the Mid-Term Program for the specified
Fiscal Measurement Period. An individual who previously received an award under
the Mid-Term Program, but is not currently eligible to do so will nonetheless
participate in the Mid-Term Program with respect to Performance Units previously
granted until such Mid-Term Incentive Award is paid out or such Performance
Units are forfeited.
(d) An individual who is hired or has changed position after the beginning
of a Measurement Period shall be eligible for the Annual Mid-Term Program if he
is a management or
6
<PAGE>
key employee who is approved by the Compensation Committee to participate in the
Mid-Term Program for the specified Measurement Period. Such a Participant shall
be entitled to a pro-rated Mid-Term Incentive Award as described in Section
4.3(c) for that Measurement Period payable in the same form and at the same time
as Mid-Term Incentive Awards are paid to other Participants for that Measurement
Period.
ARTICLE 3 - ANNUAL CASH PROGRAM.
3.1 Annual Cash Award Grants
------------------------
(a) Annual Cash Awards shall be determined in accordance with pre-
established Annual Performance Objectives as described in Section 3.2. Once
established, the Compensation Committee shall not have discretion to modify the
terms of the Annual Cash Awards. It is intended that all Annual Cash Awards
under the Plan to Covered Employees will satisfy the requirements for
deductibility under Section 162(m) of the Code.
(b) Not later than 90 days after the beginning of the Fiscal Year (or, if
earlier, the date as of which 25% of the Participant's period of service for the
Fiscal Year has elapsed), the Compensation Committee will approve the Annual EV
Amount for each Participant's Annual Cash Award. The Annual EV Amount will be
based on several factors, including market competitive data, job
responsibilities, and the aggressiveness of the financial budget relative to
prior year performance and other economic factors. The Compensation Committee
shall approve in writing a schedule setting forth the percentage of Annual EV
Amount payable based on the level of performance objective achieved.
(c) At the end of a Fiscal Year the Compensation Committee shall approve
the payment to each Participant of his Annual Cash Award, if any. The Annual
Cash Award shall be based on the degree to which the predetermined Annual
Performance Objectives for that Fiscal
7
<PAGE>
Year are achieved. Prior to the payment of any Annual Cash Awards the
Compensation Committee shall certify the degree of achievement of the applicable
Annual Performance Objective. The maximum amount payable to any individual
Participant as an Annual Cash Award for a Fiscal Year shall be $2,000,000.
3.2 Annual Performance Objectives. Annual Performance Objectives shall be
-----------------------------
developed through the Company's business planning process and shall be approved
the Compensation Committee in writing not later than 90 days after the beginning
of the Fiscal Year. The Annual Performance Objectives shall be composed of more
of the following: fully diluted earnings per share, division earnings before
interest and taxes (after a pro-forma charge for the cost of capital), revenue,
sales, profit after tax, gross profit, operating profit, unit volume, return on
equity, changes in working capital, return on capital, cash flow, total
shareholder return or, for Participants other than Covered Employees, other
objectively measurable goals approved by the Compensation Committee. In
establishing the goals, the Compensation Committee will keep in mind the
requirement of Reg. (S) 1.162-27 (e)(2) that the outcome must be substantially
uncertain at the time the Annual Performance Objectives are established. The
attainment of Annual Performance Objectives will not be impacted by any
extraordinary, unusual, or non-recurring items; or changes in Generally Accepted
Accounting Principles. A different combination of goals may be used for
different Participants or different positions (including differences between
corporate and division positions). The goals used may vary for each Fiscal Year.
However, the specific goals to be used for a Participant or a class of
Participants for a specific Fiscal Year shall be approved in writing by the
Compensation Committee.
8
<PAGE>
3.3 Forfeitability of Annual Cash Award.
-----------------------------------
(a) Except as provided in Section 3.3(b) and Article 5, a Participant must
remain employed by the Company until the last day of the Fiscal Year to receive
his Annual Cash Award, if any. If a Participant has a Termination of Employment
which is a Termination for Cause or which is voluntary prior to the end of the
Fiscal Year, all rights to the Annual Cash Award for that Fiscal Year shall be
forfeited.
(b) If a Participant dies, incurs a Disability, has a Retirement or has a
Termination of Employment other than a termination described in 3.3(a) before
the end of the Fiscal Year or takes an unpaid leave of absence of longer than 30
days during the Fiscal Year, then such Participant shall be entitled to a pro-
rated Annual Cash Award for that Fiscal Year as described in Section 3.3(c),
payable at the same time applicable to other Participants.
(c) The amount of the pro-rated Annual Cash Award referred to in Section
3.3(b) shall be equal to the product of (i) the amount of the Annual Cash Award
for that Participant determined under Sections 3.1 and 3.2 and (ii) a fraction,
the numerator of the which is the number of completed calendar months of service
performed (in the case of a Disability, the number of completed months through
the date of Disability) by the Participant for the Fiscal Year and the
denominator of which is twelve.
3.4 Payment of Annual Cash Award. A Participant's Annual Cash Award for a
----------------------------
Fiscal Year shall be paid in a single cash payment within 75 days of the end of
that Fiscal Year.
9
<PAGE>
ARTICLE 4 - MID-TERM PROGRAM.
- ----------------------------
4.1 Performance Units Grants
------------------------
(a) The Mid-Term Incentive Award shall be granted in the form of
Performance Units. Once established, the Compensation Committee shall not have
discretion to modify the terms of the Performance Units except as provided in
Section 4.1(d). It is intended that all payments hereunder to Covered Employees
will satisfy the requirements for deductibility under Section 162(m) of the
Code.
(b) The number of each Participant's Performance Units granted as his Mid-
Term EV Amount for the Measurement Period shall be approved by the Compensation
Committee no later than 90 days after the commencement of the Participant's
period of service during the Measurement Period. The Mid-Term Award shall be
based on the degree to which the pre-determined Mid-Term Performance Objectives
for that Measurement Period are achieved. The Compensation Committee shall
approve in writing a schedule setting forth the percentage of Mid-Term EV Amount
payable based on the level of performance objective achieved.
(c) At the end of the Measurement Period, the Compensation Committee shall
approve the payment to each Participant of his Mid-Term Incentive Award, if any.
Prior to the payment of any Mid-Term Incentive Awards, the Compensation
Committee shall certify the degree of achievement of the applicable Mid-Term
Performance Objectives. The maximum amount payable to any individual Participant
as a Mid-Term Incentive Award for a given Measurement Period is 100,000
Performance Units.
(d) The amount of a Participant's Performance Units and the maximum number
of Performance Units payable hereunder, shall be adjusted to reflect changes in
corporate capitalization, such as a stock split or a corporate transaction such
as a merger, spin-off or
10
<PAGE>
corporate split-up, reorganization, consolidation or partial or complete
liquidation, which occurs during the Measurement Period.
4.2 Mid-Term Performance Objectives.
-------------------------------
The Mid-Term Performance Objectives shall be developed through the
Company's business planning process and shall be approved by the Compensation
Committee in writing not later than 90 days after the beginning of the
Measurement Period to which they apply. The Mid-Term Performance Objectives
shall be composed of the following: cumulative earnings per share over a
specified period and total return to shareholders as compared to a relevant
index of publicly traded companies as approved by the Compensation Committee or
for Participants other than covered Employees, other objectively measurable
goals approved by the Compensation Committee. The achievement of Mid-Term
Performance Objectives shall not be impacted by any extraordinary, unusual, or
non-recurring items; or changes in Generally Accepted Accounting Principles. In
establishing the goals, the Compensation Committee will keep in mind the
requirement of Reg. (S) 1.162-27(e)(2) that the outcome must be substantially
uncertain at the time the Mid-Term Performance Objectives are established. The
goals used may vary for each Measurement Period. However, the specific goals to
be used for a Participant or a class of Participants for a specific Measurement
Period shall be approved writing by the Compensation Committee.
4.3 Forfeitability of the Mid-Term Incentive Award.
----------------------------------------------
(a) Except as provided in Section 4.3(b) and Article 5, a Participant must
remain employed by the Company until the end of the applicable Measurement
Period to receive his full Mid-Term Incentive Award. If the Participant has a
Termination of Employment which is a
11
<PAGE>
Termination for Cause or which is voluntary prior to the end of the applicable
Measurement Period, all rights to the Mid-Term Incentive Award shall be
forfeited.
(b) If a Participant dies, incurs a Disability , has a Retirement or has a
Termination of Employment other than a termination described in Section 4.3(a)
before the end of the applicable Measurement Period or takes an unpaid leave of
absence of longer than 30 days during the Measurement Period, then such
Participant shall be entitled to a pro-rated Mid-Term Incentive Award for that
Measurement Period, as described in Section 4.3(c).
(c) The amount of the pro-rated Mid-Term Incentive Award referred to in
Section 4.3(b) shall be equal to the product of (i) the amount of the Mid-Term
Incentive Award for that Participant determined under Sections 4.1 and 4.2 and
(ii) a fraction, the numerator of which is the number of completed calendar
months of service performed (in the case of a Disability, the number of
completed months through the date of Disability) by the Participant for the
Measurement Period and the denominator of which is the number of months in the
Measurement Period.
4.4 Payment of Mid-Term Incentive Award. The payment of the Mid-Term
-----------------------------------
Incentive Award, if any, will be made in cash within 75 days after the end of
the Measurement Period. The value of each Performance Unit shall be equal to the
average of the closing sale prices of the Company's common stock during the 120
consecutive trading days immediately preceding the last day of the Measurement
Period. At the Company's election, payment may be made in an equivalent value of
shares of the Company's common stock, subject to shareholder approval of the
issuance of such shares, if required.
12
<PAGE>
ARTICLE 5 - CHANGE OF CONTROL.
- -----------------------------
5.1 Effect of Change of Control. In the event that a Change of Control,
---------------------------
the Plan shall terminate and the Participants' right to receive an Annual Cash
Award and Mid-Term Incentive Awards under the Annual Program and any Mid-Term
Programs then in effect shall be measured as of the end of the fiscal month
immediately preceding the date of the Change of Control pursuant to Sections
5.2 and 5.3.
5.2 Measurement of Achievement under Annual Program.
-----------------------------------------------
(a) To the extent the percentage of an Annual Performance Objective that
was anticipated to be achieved as of the date for measurement set forth in
Section 5.1 can be ascertained from the financial operating budget on which the
Annual Program was based, achievement of such Annual Performance Objective shall
be measured based on actual achievement as of such time versus anticipated
achievement as of such time.
(b) In the event Section 5.2(a) above shall not apply, if any Annual
Performance Objective is based on a measure which is not subject to proration,
achievement of such Annual Performance Objective shall be measured as of the
date set forth in Section 5.1 above. To the extent any Annual Performance Award
is capable of proration, achievement of such Annual Performance Objective shall
be measured as of the date set forth in Section 5.1 on a prorated basis. The
prorated Annual Performance Objective shall be equal to the product of the (i)
the Annual Performance Objective and (ii) a fraction, the numerator of which is
the number of fiscal months elapsed under the Annual Program and the denominator
of which is 12.
13
<PAGE>
5.3 Measurement of Achievement under Mid-Term Programs.
--------------------------------------------------
(a) Achievement of that portion of all Mid-Term Incentive Awards
outstanding as of the date of a Change in Control that is based on performance
against an index shall be measured against such index as of the date set forth
in Section 5.1 above.
(b) To the extent the percentage of a Mid-Term Performance Objective that
was anticipated to be achieved as of the date for measurement set forth in
Section 5.1 can be ascertained from the long-term plan on which the Mid-Term
Program was based, achievement of such Mid-Term Performance Objective shall be
measured based on actual achievement as of such time versus anticipated
achievement as of such time.
(c) In the event that Sections 5.3(a) or 5.3(b) shall not be applicable,
if any Mid-Term Performance Objective is based on a measure which is not subject
to proration, achievement of such Mid-Term Performance Objective shall be
measured as of the date set forth in Section 5.1 above. To the extent any such
Mid-Term Performance Objective is capable of proration, achievement of such
Annual Performance Objective shall be measured as of the date set forth in
Section 5.1 on a prorated basis. The prorated Mid-Term Performance Objective
shall be equal to the product of (i) the Mid-Term Performance Objective and (ii)
a fraction, the numerator of which is the number of fiscal months elapsed in the
Measurement Period and the denominator of which is the total number of fiscal
months in the Measurement Period.
5.4 Payment of Awards. To the extent any Annual Cash Award or Mid-Term
-----------------
Incentive Award has been earned, based on the methods of measurement set forth
in Sections 5.2 and 5.3 above, respectively, such Annual Cash Award or Mid-Term
Incentive Award shall be payable without any further approval by the
Compensation Committee and without proration based on the amount of time elapsed
under either the Annual Program or any Mid-Term Program.
14
<PAGE>
All payments shall be made as soon as practicable after the Change in Control,
but in no event later than forty-five (45) days after the Change in Control. For
purposes of payment under the Mid-Term Program, the stock price on which payment
is based shall be the price of the Company's common stock on the date of the
Change in Control.
ARTICLE 6 - GENERAL.
- -------------------
6.1 Nonassignability of Incentive Awards. No right under the Plan shall be
------------------------------------
subject to anticipation, sale, assignment, encumbrance or transfer other than by
will or the laws of intestate succession.
6.2 Unsecured Interest. A Participant shall have no interest in any fund
------------------
or specified asset of the Company. Any amounts which are or may be set aside
under the provisions of this Plan shall continue for all purposes to be a part
of the general funds of the Company, and no person or entity other than the
Company shall, by virtue of the provisions of this Plan, have any interest in
such assets. No right to receive payments from the Company pursuant to this Plan
shall be greater than the right of any unsecured creditor of the Company.
6.3 No Right or Obligation of Continued Employment. Nothing contained in
----------------------------------------------
the Plan shall require the Company or a related company to continue to employ a
Participant, nor shall the Participant be required to remain in the employment
of the Company or a related company.
6.4 Withholding. The Company shall withhold all required local, state and
-----------
federal and foreign taxes from the amount of any award. If awards are made in
stock, the employee may deliver shares in satisfaction of the tax.
6.5 Amendment and Termination of the Plan. The Plan may be amended or
-------------------------------------
terminated at any time by the Board or by the Compensation Committee as
delegated by the Board, provided that such termination or amendment shall not,
without the consent of any Participant, affect such
15
<PAGE>
Participant's rights with respect to awards previously awarded to him. With the
consent of the Participant affected, the Board, or by delegation of authority by
the Board, the Committee, may amend outstanding awards in a manner not
inconsistent with the Plan. Further, no amendment which would require
shareholder approval under Section 162(m) of the Internal Revenue Code shall be
made without that approval.
6.6 Binding on Successors. The obligations of the Company under the Plan
---------------------
shall be binding upon any organization which shall succeed to all or
substantially all of the assets of the Company, and the term "Company," whenever
used in the Plan, shall mean and include any such organization after the
succession.
6.7 References. Any masculine personal pronoun shall be considered to
----------
mean also the corresponding feminine or neuter personal pronoun, as the context
requires.
6.8 Applicable Law. The Plan shall be governed by and construed in
--------------
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the York International Corporation 1996 Incentive
Compensation Plan is, by the authority of the Board of Directors of the
Corporation, executed as of the 13th day of December, 1995.
------ ----------
Attest YORK INTERNATIONAL CORPORATION
/s/ Jane G. Davis By: /s/ Robert N. Pokelwaldt
- -------------------------- ------------------------------
Secretary
[Corporate Seal]
16
<PAGE>
EXHIBIT 10.10
SECOND AMENDMENT TO THE
YORK INTERNATIONAL CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Pursuant to the powers of amendment reserved to the Compensation Committee
under Article X of the York International Corporation Executive Deferred
Compensation Plan (the "Plan"), the Plan is hereby amended, effective as of
January 1, 1997, by amending the Plan as follows:
1. Section 2.1(r) is hereby amended to read, in its entirety, as
follows:
(r) Valuation Date. Valuation Date shall mean the end of the business
--------------
day immediately preceding the date as of which any payment, or other
determination dependent on the value of Participant Accounts, is to be made. If
exact information concerning the value of a Participant's Account as of the
close of the business day immediately preceding the date of a distribution is
not available, the Compensation Committee shall make a reasonable, good faith,
determination of the value of the Participant's Account as of the end of that
preceding business day and will base the distribution on that value.
2. Section 6.1 is hereby amended to read, in its entirety, as
follows:
6.1 Time and Manner of Distribution.
-------------------------------
(a) Upon the earliest of a Participant's termination of employment,
ceasing to be an eligible Outside Director or death, the Administrative
Committee shall commence payment of the Participant's Account to the Participant
or the Participant's Beneficiary, as applicable, as soon as practicable
thereafter; provided, however, that the Compensation Committee may determine in
its sole and absolute discretion to delay payment commencement to any
Participant if necessary to avoid application of the deduction limitations of
Section 162(m) of the Code to the Employer.
(b) All distributions will be based on the value of a Participant's
Account measured as of the Valuation Date immediately preceding the date of
distribution. The Compensation Committee's determination of value shall be
conclusive and binding upon the Employer, the Participant and any other person
claiming benefits through the Participant.
(c) Unless otherwise elected by the Participant, all payments under
this Plan shall be made in a single-sum payment.
<PAGE>
(d) A Participant may elect, by a written election filed with the
Compensation Committee, no later than 180 days before the benefit described in
Section 6.1(c) would otherwise become payable, to receive distribution in
substantially equal quarterly, semi-annual or annual payments (adjusted
periodically to reflect Value Adjustments allocated to the Participant's Account
pursuant to Section 5.2) over a period of time not to exceed ten years. Any such
election, once made, shall be irrevocable.
(e) A Participant who has not elected the form of benefit described
in (d) above 180 days or more before that benefit is to commence, or a
Participant's Beneficiary, may request that form of benefit, by a written
request filed with the Compensation Committee, which request may be granted or
denied in the sole and absolute discretion of the Compensation Committee.
(f) Notwithstanding any provision of the Plan to the contrary, the
Compensation Committee may, if it determines that such action is in the best
interest of the Employer, the Participant or the Participant's Beneficiary, pay
the remaining amount of any benefit otherwise payable under (d) or (e) above, in
a single sum payment. The Compensation Committee's determination under this
Section 6.1(f) shall be conclusive and binding upon the Employer, the
Participant and any other person claiming benefits through the Participant.
3. Article XII of the Plan is hereby amended to read, in its
entirety, to read as follows:
ARTICLE XII
YORK STOCK FUND
12.1 YORK STOCK FUND PROVISIONS. Notwithstanding anything in the
--------------------------
Plan to the contrary, the following provisions shall apply to the York Stock
Fund.
(a) The Administrative Committee may, but is not required to,
establish an investment fund whereby the value of a Participant's Account, or
portion thereof, that is allocated to such investment fund is invested, as
provided in further detail below, in York International Corporation common stock
("York Common Stock"), (such fund shall hereinafter be referred to as the "York
Stock Fund").
(b) Only Directors' Fee Deferrals shall be allocable to the York
Stock Fund.
(c) A Participant may provide the Administrative Committee with
investment allocation directions, pursuant to such procedures set forth by the
Administrative Committee from time to time, that direct that all or a portion of
the Participant's Directors' Fee Deferrals be allocated to the York Stock Fund.
Any such
-2-
<PAGE>
investment allocation direction shall be prospective in nature and shall apply
only to Directors' Fee Deferrals allocated to the Participant's Account after
delivery of such investment allocation direction to the Administrative
Committee.
(d) Directors' Fee Deferrals allocated to the York Stock Fund may not
be reallocated to another investment fund.
(e) No hardship withdrawals made pursuant to Section 6.3 of the Plan
may be made from the portion of a Participant's Account allocated to the York
Stock Fund.
(f) The Trustee may purchase York Common Stock for the York Stock
Fund in the open market or may receive York Common Stock from the Corporation.
(g) The Trustee will purchase only whole shares of York Common Stock.
To the extent that the amount of any Directors' Fee Deferral would result in a
fractional share of York Common Stock, the Trustee will retain such excess
amount in cash until there is an amount sufficient to purchase a whole share.
(h) The Trustee will reinvest dividends paid on York Common Stock in
additional shares of York Common Stock. To the extent that the amount of any
dividend payment would result in a fractional share of York Common Stock, the
Trustee will retain such excess amount in cash until there is an amount
sufficient to purchase a whole share.
(i) As soon as practicable after the effective date of this
Amendment, the Trustee will credit to the Account of each Participant who has
previously allocated any or all of his Account to the York Stock Fund a number
of shares equal to the number of units which the Participant's bookkeeping
account contained as of the effective date of this Amendment.
(j) Notwithstanding any other provision of this Plan, the
Compensation Committee may impose any restrictions, including a six month
holding period, on any share of York Common Stock distributable under this Plan
that may be necessary or appropriate, in the determination of the Compensation
Committee, to insure compliance with Section 16 of the Securities Exchange Act
of 1934, as amended, and the rules promulgated thereunder.
-3-
<PAGE>
The York International Corporation Executive Deferred Compensation Plan, as
amended by this Second Amendment effective as of January 1, 1997, is hereby
ratified and confirmed in all respects.
IN WITNESS WHEREOF, the Compensation Committee has caused this Second
Amendment to be executed this 17th day of December, 1996.
York International Corporation
By: /S/ Jane E. Davis
----------------------------
Attest:
/S/ R. A. King
- -------------------------------
-4-
<PAGE>
EXHIBIT 11
YORK INTERNATIONAL CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Shares used in computation of per share earnings
primary shares:
Average shares outstanding 37,134,000 40,630,000 43,149,000
Equivalent effect of options outstanding 263,000 - 701,000
---------- ---------- ----------
Shares used in computation of primary earnings
per share 37,397,000 40,630,000 43,950,000
========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 12
YORK INTERNATIONAL CORPORATION
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings(loss) before taxes $123,410 127,182 144,447 (70,782) 204,463
Interest expense 39,826 23,495 29,188 41,412 34,544
Interest component of
rental expense 5,657 6,845 4,537 5,055 5,590
-------- ------- ------- ------- -------
$168,893 157,522 178,172 (24,315) 244,597
======== ======= ======= ======= =======
Interest expense $ 39,826 23,495 29,188 41,412 34,544
Interest component of
rental expense 5,657 6,845 4,537 5,055 5,590
-------- ------- ------- ------- -------
$ 45,483 30,340 33,725 46,467 40,134
======== ======= ======= ======= =======
Fixed charge coverage ratio 3.7 5.2 5.3 .0 6.1
======== ======= ======= ======= =======
</TABLE>
Note - Earnings (loss) before taxes for 1995 are after a charge for impairment
loss on long-lived assets of $244,473. As a result, fixed charges exceed
earnings (loss) before taxes for 1995, net of such fixed charges by $70,782.
<PAGE>
EXHIBIT 13
APPENDIX
YORK INTERNATIONAL CORPORATION
ANNUAL FINANCIAL STATEMENTS
AND REVIEW OF OPERATIONS
1996
1
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
MANAGEMENTS REPORT ON FINANCIAL STATEMENTS................. 4
AUDITORS' REPORT........................................... 4
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA............... 5
MANAGEMENT'S DISCUSSION AND ANALYSIS....................... 6
FINANCIAL STATEMENTS....................................... 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................. 16
SUMMARY OF QUARTERLY RESULTS............................... 29
TRADING AND DIVIDEND INFORMATION........................... 29
</TABLE>
2
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
To the Stockholders of York International Corporation:
The management of York International Corporation is responsible for the
preparation of the accompanying financial statements of the Company. In
management's opinion, the financial statements have been prepared in conformity
with generally accepted accounting principles. The Company believes that the
accounting systems and related controls that it maintains are sufficient to
provide reasonable assurance that financial records are reliable for preparing
financial statements and maintaining accountability for assets. These systems
and controls are tested and evaluated regularly by the Company's internal
auditors as well as by the independent auditors in connection with their annual
audit.
The directors of York International Corporation have established an Audit
Committee currently comprised of three outside directors. The Audit Committee
meets with management, the internal auditors and the independent auditors and
monitors generally the accounting affairs of the Company. The Audit Committee
also recommends to the stockholders the selection of the independent auditors.
/s/ Robert N. Pokelwaldt /s/ Dean T. DuCray
Robert N. Pokelwaldt Dean T. DuCray
Chairman of the Board and Vice President and
Chief Executive Officer Chief Financial Officer
February 11, 1997
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders, York International Corporation:
We have audited the accompanying consolidated balance sheets of York
International Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, cash flows and stockholders'
equity for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of York
International Corporation and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in note 17 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," effective October 1, 1995.
/s/ KPHG PEAT MARWICK LLP
Harrisburg, Pennsylvania
February 11, 1997
4
<PAGE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
=========================================================================================================
(in thousands, except per share
data and other information) 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $3,218,534 2,929,948 2,421,864 2,031,949 1,939,397
Gross profit 685,857 629,379 508,660 438,832 431,614
Income from operations before
impairment loss on long-lived assets 238,384 222,803 171,967 149,127 161,673
Impairment loss on long-lived assets (b) -- 244,473 -- -- --
Interest expense, net 34,544 41,412 29,188 23,495 39,826
Income (loss) before income taxes,
extraordinary items
and accounting changes 204,463 (70,782) 144,447 127,182 123,410
Provision for income taxes 56,554 25,290 54,677 51,720 54,153
Income (loss) before extraordinary
items and accounting changes 147,909 (96,072) 89,770 75,462 69,257
Net income (loss) (a) (b) (c) 147,909 (96,072) 89,770 5,211 50,909
Earnings (loss) per share of common stock:
Income (loss) before extraordinary
items and accounting changes 3.37 (2.36) 2.40 2.01 1.90
Extraordinary items (c) -- -- -- -- (0.50)
Cumulative effect of changes
in accounting methods (a) -- -- -- (1.87) --
Net income (loss) 3.37 (2.36) 2.40 0.14 1.40
Cash dividends per share 0.36 0.24 0.16 0.08 0.04
Weighted average
common shares outstanding 43,950 40,630 37,397 37,614 36,474
Capital expenditures $ 73,576 66,242 81,625 30,621 36,952
Depreciation and amortization 48,581 42,841 34,030 31,337 29,886
Amortization of deferred charges 18,410 18,643 15,635 12,672 13,039
Balance Sheet Data:
Working capital $ 524,143 393,063 236,443 181,076 165,139
Total assets 2,074,771 1,927,002 1,587,980 1,335,181 1,164,414
Long-term debt 313,641 314,246 280,627 204,105 227,425
Stockholders' equity 780,377 624,814 526,930 456,967 455,252
Other Information:
Employees 20,100 19,000 15,900 13,800 12,500
Backlog (in thousands) $ 845,076 868,640 778,700 696,900 559,500
Total debt as a percent of total capital 36.2% 39.1% 39.8% 37.7% 38.4%
Current ratio 1.68 1.50 1.39 1.35 1.40
Book value per share $ 17.89 14.51 14.03 12.25 12.26
=========================================================================================================
</TABLE>
(a) Effective January 1, 1993, the Company changed its method of accounting for
income taxes, postretirement benefits other than pensions and postemployment
benefits resulting in a cumulative effect charge of $70.3 million.
(b) In 1995, the Company adopted SFAS 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" resulting in
a charge of $244.5 million to operations.
(c) In 1992, the Company recorded an extraordinary charge of $12.1 million, net
of taxes of $8.1 million, resulting from the write-off of costs relating to
the early extinguishment of the former credit agreement debt. In addition,
the Company recorded an extraordinary charge of $6.2 million, net of taxes
of $4.1 million, in estimated interest rate swap payments to which the
Company was obligated under the former credit agreement.
5
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table sets forth revenue by product and geographic market:
<TABLE>
<CAPTION>
===============================================================
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Commercial products $1,478,133 $1,342,355 $1,157,071
Residential products 1,031,798 953,554 795,357
Refrigeration products 708,603 634,039 469,436
- ---------------------------------------------------------------
Total revenue $3,218,534 $2,929,948 $2,421,864
===============================================================
U.S. 54% 55% 56%
International 46% 45% 44%
- ---------------------------------------------------------------
Total 100% 100% 100%
===============================================================
</TABLE>
RESULTS OF OPERATIONS
1996 AS COMPARED WITH 1995
Net sales for the year ended December 31, 1996, increased 9.8% to $3,218.5
million as compared to $2,929.9 million for the year ended December 31, 1995.
See table above which sets forth revenue by product and geographic market and
note 15 to the consolidated financial statements which gives additional
information concerning geographic distribution. Revenues increased in the
Company's commercial, residential and refrigeration product groups. Commercial
products revenue increased 10.1% primarily due to increased volume in the
equipment business, international expansion, favorable market conditions in the
international marketplace, and the introduction of new products which was
partially offset by a flat domestic retrofit and replacement chiller market.
Residential products revenue increased 8.2% due to international expansion and
the introduction of new product offerings. Refrigeration products revenue
increased 11.8% due to favorable market conditions in most geographic regions
worldwide, and the growth of the international service and repair business in
spite of weak markets in France and Germany which represent large refrigeration
markets. Total domestic revenue increased 8.0% to $1,726 million in 1996 due to
the strength of the commercial equipment performance and the strength of the
domestic refrigeration market. International revenue increased by 12.1% to
$1,493 million in 1996 as a result of strong markets in Latin America and the
Asia-Pacific region partially offset by flat year-over-year performance in
Europe. Order backlog at December 31, 1996 was $845.1 million compared to $868.6
million as of December 31, 1995. Domestic backlog decreased 8.7% and
international backlog decreased 3.0% from December 1995's backlog. The reduction
in backlog is primarily the result of low levels of retrofit and replacement
chiller bookings, low refrigeration bookings in Europe (primarily Germany) and
lower than expected residential bookings resulting from a flat fourth quarter.
Gross profit in 1996 increased 9.0% to $685.9 million (21.3% of sales) as
compared to $629.4 million (21.5% of sales) for 1995. The gross profit margin
percentage reduction during 1996 was primarily the result of lower than expected
performance of the refrigeration manufacturing plants, reduced refrigeration
selling margins in Europe, excess manufacturing costs of absorption chillers in
the Houston facility due to low volumes, inflationary cost increases partially
offset by realized price increases, cost reductions and new products. The
Company expects that inflation will continue to pressure margin levels in 1997
and that any adverse effect on gross profit margins will be offset by realized
price increases, improved operating efficiencies (primarily in refrigeration
operations), cost savings from new product development and cost reduction
programs. In addition, the Company expects to close the Houston manufacturing
facility in early 1997, and the Company expects to significantly reduce the size
of its German refrigeration operations during 1997. Both of these items will
result in unfavorable charges to operating income during 1997.
Selling, general and administrative expenses increased to $437.5 million in
1996 (13.6% of sales) from $393.9 million (13.4% of sales) in 1995. The increase
was primarily due to the costs of infrastructure investment in growing markets,
specifically Asia (People's Republic of China) and Latin America (Brazil and
Argentina), increased research and development spending, costs associated with
new product introductions and inflation. These increased costs were partially
offset by leveraging expenses against higher sales.
6
<PAGE>
Income from operations before purchase accounting amortization and
impairment loss on long-lived assets increased 5.4% to $248.3 million in 1996 as
compared to $235.5 million for 1995. As described below, during 1995, the
Company adopted SFAS 121, resulting in a charge of $244.5 million to operations.
Net interest expense decreased to $34.5 million in 1996 from $41.4 million
in 1995, as a result of both lower average interest rates and decreased
borrowings.
Provision for income taxes of $56.6 million for the year ended December 31,
1996 relates to both U.S. and non-U.S. operations. The 1996 effective tax rate
benefitted significantly from increased export incentives and foreign tax credit
refunds which were the result of significant tax planning efforts and studies of
the Company's tax reporting procedures allowing the Company to take advantage of
additional foreign tax credits and incentive opportunities resulting in
amendments to prior returns. If enacted tax rates remain unchanged, the
Company's effective tax rate for 1997 is expected to be less than the federal
statutory rate of 35%.
Net income, as a result of the above factors, was $147.9 million in 1996 as
compared to a loss of $96.1 million in 1995.
1995 AS COMPARED WITH 1994
Net sales for the year ended December 31, 1995, increased 21.0% to $2,929.9
million as compared to $2,421.9 million for the year ended December 31, 1994.
See table above which sets forth revenue by product and geographic market and
note 15 to the consolidated financial statements which gives additional
information concerning geographic distribution. Revenues increased in the
Company's commercial, residential and refrigeration product groups. Commercial
products revenue increased 16.0% primarily due to increased volume in the
aftermarket portion of the business, favorable market conditions in the
international marketplace, and the introduction of new products. Residential
products revenue increased 19.9% from 1994 primarily as a result of the
acquisition of Evcon Holdings, Inc. (Evcon), international expansion and the
introduction of new product offerings. Refrigeration products revenue increased
35.1% due to favorable market conditions, the acquisition of Gram Refrigeration
and Gram Contractors (Gram), and the growth of the international service and
repair business. Total domestic revenue increased 17.8% to $1,597.9 million in
1995 due to the strength of the commercial aftermarket revenue, the acquisition
of Evcon, new product offerings, and the strength of the domestic refrigeration
market. International revenue increased by 25.0% to $1,332.0 million in 1995 as
a result of strong markets in Europe and the Asia-Pacific region, the
acquisition of Gram and a joint venture in Thailand.
Gross profit in 1995 increased 23.7% to $629.4 million (21.5% of sales) as
compared to $508.7 million (21.0% of sales) for 1994. The increase in gross
profit margin during 1995 was primarily the result of realized price increases
together with the impact of previously instituted cost reduction programs
partially offset by inflationary cost increases.
Selling, general and administrative expenses increased to $393.9 million in
1995 (13.4% of sales) from $323.6 million (13.4% of sales) in 1994. The increase
in absolute cost was primarily due to costs associated with 1995 acquisitions
which typically have a higher initial SG&A rate than the Company, increased
amortization of unallocated costs in excess of net assets acquired for 1995
acquisitions, increased research and development spending and costs associated
with new product introductions and inflation. These increased costs were offset
by leveraging expenses against higher sales and savings from previously
instituted cost reduction programs.
Income from operations before the leveraged buyout purchase accounting
amortization and impairment loss on long-lived assets for 1995 increased 27.3%
to $235.5 million as compared to $185.1 million for 1994. The increase of 27.3%
from 1994 compares favorably to a sales growth of 21.0% in 1995 from 1994.
Income from operations before the purchase accounting amortization and
impairment loss on long-lived assets was $235.5 million in 1995, which is 8.0%
of net sales in 1995 as compared to 7.6% in 1994.
The Company adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," as of October 1, 1995. An impairment loss on
long-lived assets of $244.5 million was recorded in the 1995 financial
statements as a charge to operating expenses. In accordance with the provisions
of SFAS 121, the impairment loss represents the excess of the carrying value of
long-lived assets or groups of long-lived assets and goodwill attributed to such
assets, over the fair value of those assets or groups of assets. Under SFAS 121,
fair value is generally represented by
7
<PAGE>
(MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS)
discounted future cash flows identified with assets or groups of assets. Prior
to implementing SFAS 121, the Company considered the recoverability of long-
lived assets and goodwill on an aggregate basis.
Interest expense increased to $41.4 million in 1995 from $29.2 million in
1994. This was a result of both higher average interest rates and increased
borrowings based on the increased operating volumes and indebtedness incurred in
connection with acquisitions.
Provision for income taxes of $25.3 million for the year ended December 31,
1995 relates to both U.S. and non-U.S. operations. The 1995 effective tax rate,
including the impact of the impairment loss on long-lived assets, benefitted
from the results of various tax planning strategies, tax refunds and export
incentives, partially offset by the tax impact of the amortization of goodwill
and other nondeductible expenses.
Net income (loss), as a result of the above factors, was a loss of $96.1 million
in 1995 as compared to $89.8 million of income in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Working capital requirements are generally met through a combination of
internally generated funds, bank lines of credit, issuance of commercial paper,
sale of a partial interest in trade receivables and credit terms from suppliers
which approximate receivable terms to the Company's customers. The Company
believes that these sources, including its bank lines of credit under the
Amended and Restated Credit Agreement will be sufficient to meet working capital
needs during 1997. Additional sources of working capital include customer
deposits and progress payments.
The Company had working capital of $524.1 million and $393.1 million as of
December 31, 1996 and 1995, respectively. Accounts receivable increased in
absolute terms due to increased sales volume in 1996. Inventory levels were
higher at December 31, 1996, than at December 31, 1995, because of higher
activity levels in some areas of the business, higher levels of production in
preparing for the impact of potential work stoppages in 1996 that did not occur,
and, to a lesser extent, a desire by the Company to have stock to respond more
quickly to customer demand. The current ratio was 1.68 at December 31, 1996, as
compared to 1.50 at December 31, 1995.
Long-term indebtedness was $313.6 million at December 31, 1996, primarily
consisting of borrowings under commercial paper, term loans and the $100 million
senior notes. As of December 31, 1996, there were no borrowings under the
revolving credit facility.
At December 31, 1996, the Company maintained a $350 million Amended and
Restated Credit Agreement (the Agreement) expiring on July 31, 2000. The
Agreement was amended and restated on July 21, 1995. At December 31, 1996 the
Company could borrow $350 million. The Agreement provides for borrowings under
the facility at LIBOR plus .20% or at specified bid rates. At December 31, 1996
the LIBOR rate was 5.56%. A fee of .10% is paid on the facility. The Agreement,
as amended, contains financial and operating 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 provide for borrowings of $252.5 million and $266.8
million at December 31, 1996 and 1995, respectively, of which $121.1 million and
$163.6 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.
Commercial paper borrowings are expected to be reborrowed in the ordinary
course of business. The interest rate on the commercial paper was 5.43% and
5.88% as of December 31, 1996 and December 31, 1995, respectively.
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 from a major international bank. The loan is repayable in four annual
installments. On December 21, 1995, the Company borrowed $100 million which
matures on December 14, 2000. All principal and interest payments for the five-
year term were swapped to U.S. dollars at inception. The term loan agreements
contain 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 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
8
<PAGE>
million in 1996 and 1995. The discount rate on the accounts receivable sold at
December 31, 1996 and December 31, 1995 was approximately 5.40% and 5.76%,
respectively.
On June 7, 1995, the Company issued 4,945,000 shares of common stock in a
public offering. The stock was sold for $42 per share less commissions and
generated net proceeds of $199.2 million.
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 December 31, 1996.
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 the availability 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. Financial instruments are more fully
discussed in note 2 to the consolidated financial statements.
Capital expenditures for expanded capacity, cost reductions and the
introduction of new products during 1996 were $73.6 million as compared to $66.2
million in 1995. In 1996, the Company expanded and upgraded its screw compressor
capabilities and unitary products facilities. Capital expenditures during 1997
are anticipated to be comparable to 1996's expenditures, and they are expected
to be in excess of annual depreciation and amortization. These expenditures will
be funded from a combination of operating cash flows and availability under the
revolving credit facility.
Cash dividends of $0.36 per share were paid on common stock in 1996. The
declaration and payment of future dividends will be at the sole discretion of
the Board of Directors and will depend on the Company's profitability, financial
condition, cash requirements, future prospects and other factors deemed relevant
by the Board of Directors.
Employee stock plans include the 1989 Employee Stock Option Plan, the 1992
Employee Stock Purchase Plan which authorizes the allocation of 1,500,000 shares
of stock for the plan and the Amended and Restated 1992 Omnibus Stock Plan which
authorizes the issuance of up to 3,000,000 shares of the Company's common stock
as stock options or restricted share awards. Approximately 389,416 shares
remained available for grant at December 31, 1996.
On February 12, 1997, the Board of Directors has authorized the Company to
purchase shares of its common stock to provide for these plans. Such stock
purchases may be made from time to time in the open market and privately
negotiated transactions.
Company management believes that these employee stock plans provide
valuable incentives to a broad range of York employees by giving them a direct
equity interest in the Company. Company management further believes that funding
the required shares through share repurchases will mitigate the dilutive impact
such employee plans would otherwise have.
ACQUISITIONS
On December 31, 1996, the Company acquired certain assets of Snomax located
in Rochester, New York. Snomax develops, manufactures 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
9
<PAGE>
(MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS)
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.
On July 29, 1995, the Company acquired the outstanding shares of Northfield
Freezing Systems, Inc. (NFS), located in Northfield, Minnesota. NFS develops,
designs, sells and services food processing freezing equipment.
On July 5, 1995, the Company and a Thai partner formed a manufacturing
joint venture in Thailand. The Company has a 67% interest in this joint venture
which acquired the operating assets of the partner's existing facility. The
venture produces residential air conditioning products for distribution
primarily in markets outside of North America.
On May 31, 1995, the Company acquired two divisions of Gram A/S, Gram
Refrigeration and Gram Contractors, headquartered in Vojens, Denmark (Gram
Divisions). The Gram Divisions develop, manufacture, sell and service components
for industrial refrigeration worldwide. Gram Refrigeration's principal product
offerings include screw and reciprocating compressors, plate freezers, flake ice
machines and refrigerant valves. Gram Contractors installs Gram equipment and
components in Denmark. The addition of these two divisions expanded the
Company's international presence in the global industrial refrigeration market
and provided additional manufacturing capacity and engineering expertise to the
Company's existing screw compressor and industrial refrigeration product lines.
On May 25, 1995, the Company purchased an additional 20% interest in
Taiwan-YORK Company, Inc. raising the Company's ownership from 40% to 60%. As a
result, the Company has a controlling interest in this joint venture which sells
and services HVAC&R equipment in the Republic of China (Taiwan).
On May 3, 1995, Bristol Compressors, Inc., a subsidiary of the Company,
formed a partnership to operate a new joint venture for the development and
production of scroll compressors. The joint venture, called Scroll Technologies,
is a partnership to own and operate a scroll compressor plant. The Company
believes that this venture is beneficial to both companies because it combines
scroll technology developed by the partner and the manufacturing expertise of
Bristol. Each company markets the product produced by the venture through its
own independent distribution channels.
On April 19, 1995, the Company formed a joint venture with a partner in
Guangzhou 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 March 1, 1995, the Company acquired the capital stock of Evcon Holdings,
Inc. (Evcon). The Company funded the transaction through existing credit
commitments. Evcon, based in Wichita, Kansas, designs, manufactures and supplies
high quality air conditioning, heating and air handling equipment to the
residential, manufactured housing and light commercial markets. Evcon's
principal product offerings include both split and packaged air conditioning and
heat pump systems, as well as residential and OEM furnaces and indoor air
handling units.
In January 1995, the Company acquired the assets of Mining and Industrial
Air Conditioning (Pty) Ltd. (MIAC), based in Johannesburg, South Africa. MIAC is
a design engineering, supplier and service company to the mining and process
refrigeration industries, as well as a supplier to air conditioning contractors.
The Company also acquired a 50% interest in a joint venture with Compania Roca
Radiadores S.A., located in Sabadell, Spain and known as Clima Roca York (Roca).
Roca manufactures residential and commercial air conditioning products in Spain
and distributes air conditioning products throughout Western Europe.
In addition during 1994, the Company acquired a 40,000 square foot
manufacturing facility in Bogota, Colombia, which produces unitary air
conditioners and fan coils. Also acquired during 1994 was a line of energy-
efficient thermal transfer products for the industrial refrigeration industry
from Rite Coils, Inc. The manufacturing line for this product line was moved to
the Company's manufacturing facility in Polo, Illinois.
The aforementioned acquisitions and investments do not, in the aggregate,
have a significant impact on the Company's results of operations, except for
Evcon, as to which pro forma information is included in note 16 to the
consolidated financial statements.
10
<PAGE>
INFLATION
Management does not believe inflation has had a significant impact on the
Company's results of operations for the periods presented. Although the Company
was not able to totally offset the effect of inflation through price increases
in 1996, management believes that, to the extent inflation affects the costs of
the Company in the future, the Company can generally offset the net effect of
inflation and maintain operating margins through increases in the prices of its
products and services and continued cost reductions.
CYCLICALITY
Approximately 14% of the Company's worldwide sales are attributable to new
residential construction, which is cyclical in nature, and 25% of the Company's
worldwide sales are attributable to the construction of industrial, commercial
and office buildings, which is also cyclical. From the standpoint of the
domestic U.S. market, these two markets each account for less than 10% of
consolidated revenue.
Exposure to cyclicality in the new construction market is mitigated by the
Company's emphasis on the service, repair and replacement market and
participation in the refrigeration market, each of which is less cyclical. As
the installed base of heating, air conditioning and refrigeration equipment has
grown and aged, the Company now derives a significant portion of its revenue
from the service, repair and replacement market. In 1996, 1995 and 1994,
respectively, on a worldwide basis, service, repair and replacement revenue
accounted for an estimated 49%, 50% and 48% of the Company's total sales, while
new construction sales accounted for the remaining 51%, 50% and 52%. The Company
expects growth in the service, repair and replacement market over the next
several years to outpace growth in the new construction market.
SEASONALITY
Sales of the Company's residential equipment historically have been
seasonal. Demand for residential air conditioning equipment in the new
construction market varies according to the season, with increased demand
generally in the summer months. Demand in the residential replacement market
generally peaks in early summer for air conditioners and in the fall for
furnaces. Requirements for service and repair parts for commercial applications
also increase during summer months. Demand for hermetic compressors in the
original equipment market generally increases from January through July as
manufacturers increase production to meet anticipated seasonal demand. The
Company provides incentives for distributors to purchase products in advance of
seasonal sales. These incentives, together with advance production schedules,
reduce the impact of seasonal fluctuations on the Company's sales of residential
equipment. The effect of seasonality is also dampened by the Company's
commercial equipment and refrigeration products, demand for which is not as
seasonal.
NEW ACCOUNTING STANDARD
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125
(SFAS 125), "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996, and is to be applied prospectively. This Statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based upon consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. Management of the Company does not expect that the adoption of SFAS
125 will have a material impact on the Company's financial position, results of
operations, or liquidity.
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. Unseasonably cool spring or
summer weather in the northeastern United States or in Europe could adversely
affect the Registrant's residential air conditioning business, as could a
failure to reduce manufacturing costs in its Scroll Technologies joint venture.
Anticipated improvement in the Registrant's refrigeration business will require
the achievement of improved plant performance. The commercial air conditioning
business could be affected by a slowdown in the large chiller market and by the
level of CFC retrofits. Overall anticipated performance of the Registrant could
be affected by any serious economic downturns in the United States, Europe,
Latin America or Asia.
11
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
======================================================================================
(in thousands) December 31
------------------------------
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,470 $ 8,838
Receivables 563,099 554,557
Inventories 609,342 517,983
Prepayments and other current assets 107,344 98,133
- --------------------------------------------------------------------------------------
Total current assets 1,291,255 1,179,511
- --------------------------------------------------------------------------------------
Deferred income taxes 19,265 22,425
Unallocated excess of cost over net assets acquired 350,370 350,268
Investments in affiliates 22,205 16,694
Property, plant and equipment, net 360,432 332,088
Deferred charges and other assets 31,244 26,016
- --------------------------------------------------------------------------------------
Total assets $2,074,771 $1,927,002
======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 128,461 $ 86,108
Accounts payable and accrued expenses 602,359 664,490
Income taxes 36,292 35,850
- --------------------------------------------------------------------------------------
Total current liabilities 767,112 786,448
- --------------------------------------------------------------------------------------
Warranties 33,135 27,943
Long-term debt 313,641 314,246
Postretirement benefit liabilities 128,411 124,634
Other long-term liabilities 52,095 48,917
Stockholders' equity:
Common stock $.005 par value; 200,000 shares authorized
in 1996 and 100,000 shares authorized in 1995 219 216
Additional paid in capital 667,775 644,377
Retained earnings 146,331 14,024
Currency translation adjustment (23,478) (22,426)
Treasury stock (3,875) (1,909)
Unearned compensation (6,595) (9,468)
- --------------------------------------------------------------------------------------
Total stockholders' equity 780,377 624,814
- --------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,074,771 $1,927,002
======================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
===============================================================================================
(in thousands, except per share data) Years Ended December 31
--------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $3,218,534 $2,929,948 $2,421,864
Cost of goods sold 2,532,677 2,300,569 1,913,204
- -----------------------------------------------------------------------------------------------
Gross profit 685,857 629,379 508,660
Selling, general and administrative expenses 437,533 393,852 323,603
- -----------------------------------------------------------------------------------------------
Income from operations before purchase accounting
amortization and impairment loss on long-lived assets 248,324 235,527 185,057
Purchase accounting amortization 9,940 12,724 13,090
Impairment loss on long-lived assets -- 244,473 --
- -----------------------------------------------------------------------------------------------
Income (loss) from operations 238,384 (21,670) 171,967
Interest expense, net 34,544 41,412 29,188
Equity in (earnings) losses of affiliates (623) 7,700 (1,668)
- -----------------------------------------------------------------------------------------------
Income (loss) before income taxes 204,463 (70,782) 144,447
Provision for income taxes 56,554 25,290 54,677
- -----------------------------------------------------------------------------------------------
Net income (loss) $ 147,909 $ (96,072) $ 89,770
===============================================================================================
Earnings (loss) per share of common stock $ 3.37 $ (2.36) $ 2.40
===============================================================================================
Weighted average common shares and common
equivalents outstanding 43,950 40,630 37,397
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
===========================================================================================
(in thousands) Years Ended December 31
---------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 147,909 $ (96,072) $ 89,770
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 48,581 42,841 34,030
Amortization of deferred charges 18,410 18,643 15,635
Provision for doubtful accounts receivable 5,718 5,774 4,034
Other 7,154 12,555 2,147
Impairment loss on long-lived assets -- 244,473 ---
Change in assets and liabilities net of
effects from purchase of other companies:
Receivables (8,381 (105,890) (98,238)
Inventories (92,643 (86,843) (35,165)
Prepayments and other current assets (9,220 (48,946) (6,121)
Deferred income taxes 3,390 7,612 360
Other assets (11,117 (9,314) (1,290)
Accounts payable and accrued expenses (69,203 103,321 81,168
Income taxes 453 6,457 (5,586)
Warranties 5,316 3,037 3,013
Postretirement benefit liabilities 3,776 3,639 6,182
Other long-term liabilities (1,469 10,996 (4,799)
- -------------------------------------------------------------------------------------------
Net cash provided by operating activities 48,674 112,283 85,140
- -------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payment for purchase of and investments
in other companies (net of cash acquired) (16,468 (288,173 (45,674)
Capital expenditures (73,576 (66,242 (81,625)
Other 1,222 1,061 (51)
- -------------------------------------------------------------------------------------------
Net cash used by investing activities (88,822 (353,354 (127,350)
- -------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock issued 19,994 207,937 6,572
Net treasury stock (purchased) issued (1,966 36 (11,920)
Proceeds from issuance of long-term debt -- 277,061 2,000
Long-term debt payments (40,851 (156,000 (111,912)
Borrowings (payments) on revoving term loan -- (150,000 142,980
Borrowings on short-term debt 40,965 30,167 23,003
Net proceeds from issuance of commercial paper 40,246 44,790 --
Dividends paid (15,602 (9,960 (5,941)
- -------------------------------------------------------------------------------------------
Net cash provided by financing activities 42,786 244,031 44,782
- -------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (6 (37 (42)
- -------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,632 2,923 2,530
Cash and cash equivalents at beginning of year 8,838 5,915 3,385
- -------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 11,470 $ 8,838 $ 5,915
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
====================================================================================================================================
(IN THOUSANDS, EXCEPT
SHARE DATA) ADDITIONAL CURRENCY
COMMON STOCK ISSUED PAID IN RETAINED TRANSLATION TREASURY STOCK UNEARNED
------------------------ ----------------------
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 37,550,044 $188 $434,384 $ 36,227 $ (3,027) 258,599 $ (9,220) $ (1,585)
Net income -- -- -- 89,770 -- -- -- --
Exercise of stock options 65,738 -- 318 -- -- -- -- --
Tax effect of options
exercised -- -- 861 -- -- -- -- --
Issuance of common stock
under executive stock
agreements -- -- 537 -- -- (297,000) 11,030 (11,567)
Issuance of common stock
under employees stock
purchase plan -- -- (1,326) -- -- (211,714) 7,580 --
Amortization of unearned
compensation -- -- -- -- -- -- -- 1,810
Purchase of treasury
stock, at cost -- -- -- -- -- 320,700 (11,920) --
Cash dividends on common
stock
($.16 per share) -- -- -- (5,941) -- -- -- --
Currency translation
adjustment -- -- -- -- (11,189) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 37,615,782 $188 $434,774 $120,056 $(14,216) 70,585 $ (2,530) $(11,342)
Net loss -- -- -- (96,072) -- -- -- --
Issuance of common stock
in public offering 4,945,000 25 199,225 -- -- -- -- --
Issuance of common stock
under executive stock
agreements 15,500 -- 700 -- -- (7,000) 251 (932)
Issuance of common stock
under employees stock
purchase plan 198,163 1 6,209 -- -- (318) 11 --
Other, primarily exercise
of stock options 351,268 2 2,108 -- -- (9,400) 338 --
Tax effect of options
exercised -- -- 1,346 -- -- -- -- --
Amortization of unearned
compensation -- -- -- -- -- -- -- 2,806
Issuance of treasury
stock, at cost -- -- 15 -- -- (5,511) 200 --
Purchase of treasury
stock, at cost -- -- -- -- -- 4,150 (179) --
Cash dividends on
common stock
($.24 per share) -- -- -- (9,960) -- -- -- --
Currency translation
adjustment -- -- -- -- (8,210) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 43,125,713 $216 $644,377 $ 14,024 $(22,426) 52,506 $ (1,909) $ (9,468)
Net income -- -- -- 147,909 -- -- -- --
Issuance of common stock
under executive stock
agreements 2,000 -- 2 -- -- -- -- --
Issuance of common stock
under employees stock
purchase plan 188,123 1 7,521 -- -- -- -- --
Other, primarily exercise
of stock options 404,017 2 12,468 -- -- -- -- --
Tax effect of options
exercised -- -- 3,393 -- -- -- -- --
Amortization of unearned
compensation -- -- -- -- -- -- -- 2,873
Issuance of treasury
stock, at cost -- -- 14 -- -- (1,928) 70 --
Purchase of treasury
stock, at cost -- -- -- -- -- 47,050 (2,036) --
Cash dividends on common
stock
($.36 per share) -- -- -- (15,602) -- -- -- --
Currency translation
adjustment -- -- -- -- (1,052) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 43,719,853 $219 $667,775 $146,331 $(23,478) 97,628 $(3,875) $ (6,595)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
York International Corporation is a multinational manufacturer and
engineering concern. The Company's principal line of business is heating,
ventilation, air conditioning and refrigeration (HVAC&R) with three major
product categories: commercial, residential and refrigeration. The primary
markets for HVAC&R products and technologies are the United States, Europe, the
Far East, Middle East, Latin America and Australia. The Company's customers
range from residential buyers to design builders, contractors and building
owners. Sales and related cost of goods sold are recognized based upon shipment
of products or performance of services.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. All significant
intercompany transactions have been eliminated.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) or first-in, first-out (FIFO) method.
UNALLOCATED EXCESS OF COSTS OVER NET ASSETS ACQUIRED
The unallocated excess of costs over net assets acquired is amortized on a
straight-line basis over periods of up to 40 years. Accumulated amortization
related to such excess at December 31, 1996 and 1995, is $68.3 million and $57.7
million, respectively. The Company assesses the recoverability or impairment, if
any, of the elements of this intangible asset by determining whether the
amortization of the balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operations or the long-
lived assets to which the unallocated excess is attributed.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are valued at cost less accumulated
depreciation. Expenditures for maintenance, repairs and renewals of relatively
minor items are generally charged to earnings as incurred. Renewals of
significant items are capitalized.
Depreciation is computed generally on a straight-line basis over the
estimated useful lives of related assets. For income tax purposes, accelerated
methods of depreciation are generally used.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Earnings of foreign operations are reinvested in the business
and no provision for domestic income tax or foreign withholding tax is made on
such earnings until distributed.
EARNINGS PER SHARE
The Company's earnings per share are based upon the weighted average
outstanding common shares and common share equivalents. Shares related to
options granted have been assumed to be outstanding and are included in the per
share calculations.
16
<PAGE>
RETIREMENT BENEFIT PLANS AND POSTEMPLOYMENT BENEFITS
A majority of domestic employees participate in noncontributory pension
plans, and substantially all non-U.S. employees participate in contributory or
noncontributory pension plans. Pension accounting information is disclosed in
note 14 to the consolidated financial statements.
The Company has certain postemployment benefits provided to former or
inactive employees who are not retirees. These benefits include salary
continuance, severance and disability health care. Those benefits are accrued
over the employee's service period or as an expense at the date of the event
triggering the benefit.
FOREIGN CURRENCY TRANSLATION
The functional currency for the majority of the Company's foreign
operations is the applicable local currency. The translation of the applicable
foreign currencies into U.S. dollars is performed for balance sheet accounts
using the exchange rate in effect at the balance sheet date. Revenue and expense
accounts are translated using the weighted average exchange rate experienced
during the period. The gains or losses resulting from such translation are
included in stockholders' equity. Gains or losses resulting from foreign
currency transactions are included in the results of operations.
NOTE 2 - FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
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.
FOREIGN CURRENCY INSTRUMENTS
Since the Company purchases raw materials and sells finished products in
various currencies, the Company is exposed to foreign currency risk. The Company
manages its foreign currency transaction risk by hedging the net external
currency exposures. However, the Company does not hedge certain foreign exchange
transaction exposures that are immaterial or are considered to be in currencies
highly correlated to the manufacturing entity's currency.
The Company primarily uses foreign currency forward contracts and purchased
options. These foreign currency and option contracts are matched to firm
commitments of foreign currency transactions and effectively fix the sales or
purchase price. These contracts are settled in cash upon expiration, with
settlement proceeds or payments included in the measurement of the item hedged.
The option contracts are purchased in cash and amortized over the contract term.
The Company does not hedge firm commitments beyond three years.
COMMODITY CONTRACTS
Since the Company purchases commodities as raw materials, the Company is at
risk for fluctuations in the market price of those commodities. In connection
with the purchase of major commodities, principally copper and aluminum for
anticipated manufacturing requirements, the Company may enter into commodity
forward contracts to effectively fix the cost of the commodity to the Company.
These contracts require cash settlement between the Company and its counterparty
to coincide with cash market purchases of the actual commodity. Settlement
proceeds or payments are recognized as an adjustment to the cost of the
commodity purchased. The Company does not hedge firm commitments beyond three
years.
The notional amount and estimated fair value of the Company's hedging contracts
are as follows:
<TABLE>
<CAPTION>
===============================================================================
(IN THOUSANDS) 1996 1995
---------------- ------------------
NOTIONAL FAIR NOTIONAL FAIR
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Foreign currency forward contracts $48,314 $48,781 $27,875 $26,203
Commodity forward contracts $60,270 $58,686 -- --
===============================================================================
</TABLE>
17
<PAGE>
(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
OTHER FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's other
financial instruments are as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
-------------------- ---------------------
CARRYING FAIR CARRYING FAIR
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 11,470 $ 11,470 $ 8,838 $ 8,838
Short-term borrowings 128,461 128,461 86,108 86,108
Long-term debt:
Senior notes at 6.75% 100,000 99,360 100,000 102,900
Term loan at 4.87% 100,000 107,892 100,000 99,811
Other 113,641 113,641 114,246 114,246
================================================================================
</TABLE>
The fair values of each of the Company's long-term debt instruments are
based on the amount of future cash flows associated with each instrument
discounted using the Company's current borrowing rate for similar debt
instruments of comparable maturity.
NOTE 3 - RECEIVABLES
Receivables are as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Customers, trade $ 530,555 $531,016
Other receivables 53,281 40,770
- --------------------------------------------------------------------------------
583,836 571,786
Less allowance for doubtful accounts receivable 20,737 17,229
- --------------------------------------------------------------------------------
Net receivables $ 563,099 $554,557
================================================================================
</TABLE>
At December 31, 1996 and 1995, $100 million was outstanding under an
agreement whereby the Company sold a fractional interest in a defined pool of
trade accounts receivable as discussed in note 9.
NOTE 4 - INVENTORIES
Inventories are classified as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw material $ 178,771 $157,514
Work in progress 118,847 117,308
Finished goods 311,724 243,161
- --------------------------------------------------------------------------------
Total inventories $ 609,342 $517,983
================================================================================
</TABLE>
Inventories valued under the LIFO method comprised approximately 40%, 33%
and 51% of the December 31, 1996, 1995 and 1994 totals, respectively.
Inventories, if valued at current cost, would have been greater by $14.1 million
at December 31, 1996, $14.0 million at December 31, 1995 and $12.4 million at
December 31, 1994.
NOTE 5 - PREPAYMENTS AND OTHER CURRENT ASSETS
The components of prepayments and other current assets are summarized
below:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Deferred income tax assets $ 69,977 $ 65,264
Prepaid insurance 17,069 14,661
Other 20,298 18,208
- --------------------------------------------------------------------------------
Total prepayments and other current assets $ 107,344 $ 98,133
================================================================================
</TABLE>
NOTE 6 - INVESTMENTS IN AFFILIATES
The Company owns 50% or less of operations located in Egypt, Malaysia, the
Middle East, Spain and the U.S. Operations more than 20% owned are generally
accounted for using the equity method of accounting. Dividends
18
<PAGE>
received from affiliates carried at equity were $1.5 million in 1996, $0.6
million in 1995 and $1.0 million in 1994. Equity and cost investments are as
follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Investments carried on equity method $ 21,314 $ 15,803
Investments carried at cost 891 891
- --------------------------------------------------------------------------------
Total investments in affiliates $ 22,205 $ 16,694
================================================================================
</TABLE>
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 13,733 $ 9,862
Buildings 108,901 98,511
Machinery and equipment 476,687 423,968
Construction in progress 22,418 18,898
Capital leases 14,479 12,833
- --------------------------------------------------------------------------------
636,218 564,072
Less accumulated depreciation 275,786 231,984
- --------------------------------------------------------------------------------
Net property, plant and equipment $360,432 $332,088
================================================================================
</TABLE>
Amortization of capital lease assets has been included in depreciation
expense. Accumulated capital lease amortization was $3.1 million and $1.8
million at December 31, 1996 and 1995, respectively.
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
================================================================================
<S> <C> <C>
Accounts payable, trade and other $401,374 $457,563
Employee compensation, benefits and related accruals 98,160 95,391
Warranties and claims 38,988 34,227
Accrued insurance 16,811 26,008
Other accrued expenses 47,026 51,301
- --------------------------------------------------------------------------------
Total accounts payable and accrued expenses $602,359 $664,490
================================================================================
</TABLE>
NOTE 9 - NOTES PAYABLE AND LONG-TERM DEBT
The Company's notes payable and long-term debt are as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes payable and current portion of long-term debt:
Current portion of long-term debt $ 6,402 $ 7,109
Bank loans 122,059 78,999
- --------------------------------------------------------------------------------
Total notes payable and current portion
of long-term debt $128,461 $ 86,108
================================================================================
Long-term debt:
Commercial Paper $ 85,036 $ 44,790
Term loan, 3.98% interest, due
November 15, 1998 9,723 15,681
Term loan, 4.87% interest, due
December 14, 2000 100,000 100,000
Senior notes, 6.75% interest, due
March 2003 100,000 100,000
Other, primarily foreign bank loans,
at an average rate of 7.16% 18,882 53,775
-------------------------------------------------------------------------------
Total long-term debt $313,641 $314,246
================================================================================
</TABLE>
19
<PAGE>
(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
The Company maintains a $350 million revolving credit facility pursuant to
an Amended and Restated Credit Agreement (the Agreement) expiring on July 31,
2000. The facility was amended and restated on July 21, 1995. At December 31,
1996 and 1995, the Company could borrow $350 million. The Agreement provides for
borrowings under the facility at LIBOR plus .20% or at specified bid rates. At
December 31, 1996 and 1995, the LIBOR rate was 5.56% and 5.78%, respectively. A
fee of .10% is paid on the facility. The Agreement, as amended, contains
financial and operating 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 available borrowings of $252.5 million and
$266.8 million at December 31, 1996 and 1995, respectively, of which $121.1
million and $163.6 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 a commercial paper facility with two dealers in
November 1995. Commercial paper borrowings are expected to be reborrowed in the
ordinary course of business. The interest rate on the commercial paper was 5.43%
at December 31, 1996 and 5.88% at December 31, 1995.
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 with 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%, which matures on December 14, 2000. All principal and
interest payments for the five-year term were swapped to U.S. dollars at
inception. The term loan agreements contain financial and operating 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
from time to time at prices and terms to be determined at or prior to sale. No
amounts of such debt securities were outstanding at December 31, 1996 and
December 31, 1995.
Under a receivables sales agreement, the Company sold a fractional
ownership interest in a defined pool of trade accounts receivable for $100
million in 1996 and 1995. The sold accounts receivable are reflected as a
reduction of receivables in the accompanying consolidated balance sheets. Under
this agreement, the maximum amount of the purchasers' investment is currently
$100 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 December 31, 1996 and 1995 was approximately 5.40%
and 5.76%, respectively.
Annual principal payments on long-term debt are as follows for the fiscal
years indicated:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 6,402
1998 14,608
1999 2,080
2000 187,153
2001 2,167
Thereafter 107,633
================================================================================
</TABLE>
Interest expense is net of interest income of $5.1 million in 1996, $3.3
million in 1995 and $2.0 million in 1994.
20
<PAGE>
NOTE 10 - PROVISION FOR INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. Federal $32,052 $(53,590) $36,192
State 1,762 653 2,904
Non-U.S. 12,732 10,238 10,241
- --------------------------------------------------------------------------------
Total current 46,546 64,481 49,337
Deferred 10,008 (39,191) 5,340
- --------------------------------------------------------------------------------
Total provision for income taxes $56,554 $(25,290) $54,677
================================================================================
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to income (loss) before income taxes as a result
of the following:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at statutory rate $ 71,562 $(24,774) $50,556
Increase (decrease) resulting from:
Equity in earnings of
affiliates/minority interest (1,362) (664) (591)
Taxes on foreign earnings (4,189) 4,324 1,603
State income taxes - current 1,145 425 1,888
Purchase accounting adjustments (see note 17) (1,839) 56,647 4,046
State income taxes - deferred 1,600 (6,451) 603
Export incentives (10,378) (3,196) (2,739)
Other 15 (1,021) (689)
- --------------------------------------------------------------------------------
Total provision for income taxes $ 56,554 $ 25,290 $54,677
================================================================================
</TABLE>
Deferred income tax expense (benefit) results from temporary differences in
the recognition of income and expense for income tax and financial reporting
purposes. The sources and tax effects of those temporary differences are
presented below:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Excess of tax over book depreciation
(including the deferred tax effect of the
loss from impairment of long-lived
assets in 1995) $7,604 $(34,544) $ 221
Warranties and sales allowances (867) (201) (1,965)
Contingencies 4,620 4,153 3,253
Inventory reserves (4,121) (589) 404
Compensation, vacation and employee benefits (779) (2,630) 3,624
Postretirement benefits (357) (1,197) (2,306)
Other 3,908 (4,183) 2,109
- --------------------------------------------------------------------------------
Deferred income tax provision (benefit) $10,008 $(39,191) $ 5,340
================================================================================
</TABLE>
21
<PAGE>
(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $4,559 $3,641
Inventories, including uniform capitalization 18,550 13,272
Compensated absences and benefits, principally
due to accrual for financial reporting purposes 8,198 8,705
Contingencies, due to accrual for financial reporting purposes 8,605 10,549
Warranty reserves, due to accrual for
financial reporting purposes 22,893 21,326
Postretirement benefits 50,786 51,565
Other 19,929 12,858
- --------------------------------------------------------------------------------
Total gross deferred tax assets 133,520 121,916
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Plant and equipment, due to purchase accounting
adjustments and differences in depreciation 25,648 16,521
Inventory, due to purchase accounting adjustments 15,145 14,958
Other 3,485 2,748
- --------------------------------------------------------------------------------
Total gross deferred tax liabilities 44,278 34,227
- --------------------------------------------------------------------------------
Net deferred tax assets $89,242 $87,689
================================================================================
</TABLE>
Based on the Company's historical and current pre-tax earnings, management
believes it is more likely than not that the Company will realize the net
deferred tax assets.
The Internal Revenue Service (IRS) is currently examining the Federal tax
returns for 1993 and 1994. The Company does not anticipate any material effect
to the Company's financial statements as a result of the examinations. For the
Federal income tax returns for 1987 through 1992, the Company has reached a
settlement agreement with the IRS; this settlement did not have a material
effect on the financial statements.
Various state and foreign tax returns are under examination by the
applicable authorities. The Company does not anticipate any material effect to
the Company's financial statements resulting from these examinations.
Domestic income taxes or foreign withholding taxes have not been provided
on $68 million and $73 million of undistributed earnings of foreign subsidiaries
and affiliates at December 31, 1996 and 1995, respectively. These earnings are
considered to be permanently invested in the businesses and, under the tax laws,
are not subject to such taxes until distributed as dividends. If the earnings
were not considered permanently invested, approximately $2.9 million and $4.5
million of deferred income taxes, consisting of foreign withholding taxes, would
have been provided at December 31, 1996 and 1995, respectively. Such taxes, if
ultimately paid, may be recoverable as foreign tax credits in the U.S.
NOTE 11 - LEASE COMMITMENTS
The Company has non-cancelable leases with terms exceeding one year. At
December 31, 1996, rental amounts committed in future years are summarized as
follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) OPERATING LEASES
- --------------------------------------------------------------------------------
<S> <C>
1997 $22,846
1998 13,264
1999 9,726
2000 6,809
2001 3,194
Thereafter 1,494
- --------------------------------------------------------------------------------
Total $57,333
================================================================================
</TABLE>
Total rental expense was $30.4 million in 1996, $27.5 million in 1995 and
$24.1 million in 1994.
22
<PAGE>
NOTE 12 - RESEARCH AND DEVELOPMENT
Total research and development costs charged to expense amounted to $28.0
million in 1996, $26.9 million in 1995 and $22.6 million in 1994.
NOTE 13 - CONTINGENT LIABILITIES
It is the opinion of the Company's management and its general counsel that
various claims and litigation in which the Company is currently involved have
been adequately provided for or are covered by insurance and, therefore, the
resolution of such matters will not materially affect the Company's financial
position or future earnings.
At December 31, 1996, $28.0 million in standby letters of credit and $59.6
million of performance guarantees issued for the account of the Company were
outstanding. These items are expected to expire and be replaced with similar
items in the normal course of the Company's business.
NOTE 14 - POSTRETIREMENT BENEFIT PLANS AND POSTEMPLOYMENT BENEFITS
The Company has postretirement benefit plans for certain employees
including pension plans and postretirement benefit plans other than pensions,
including health and life insurance plans and other postemployment benefits as
follows:
PENSIONS
The Company and its subsidiaries have a number of noncontributory pension
plans covering substantially all employees. Plans covering salaried and
management employees provide pension benefits that are based on the employee's
compensation during the several years before retirement. Plans covering hourly
employees and union members generally provide benefits of stated amounts for
each year of service. Contributions to the plans are based upon the projected
unit credit actuarial funding method and are limited to amounts that are
currently deductible for tax reporting purposes.
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
==========================================================================================================
(IN THOUSANDS) 1996 1995
------------------ -------------------
FULLY UNDER FULLY UNDER
FUNDED FUNDED FUNDED FUNDED
PLANS PLANS PLANS PLANS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $(163,247) $ (93,293) $(155,907) $(82,247)
===========================================================================================================
Accumulated benefit obligations $(166,340) $(103,781) $(159,702) $(91,185)
===========================================================================================================
Projected benefit obligations for service rendered to date $(213,255) $(109,590) $(195,702) $(96,680)
Plan assets at fair value 272,708 68,007 239,581 50,746
- -----------------------------------------------------------------------------------------------------------
Projected benefit obligations less
than (in excess of) plan assets 59,453 (41,583) 43,879 (45,934)
Prior service cost 1,693 11,566 160 6,681
Unrecognized net (gain) loss (56,631) (7,563) (39,573) 1,268
- -----------------------------------------------------------------------------------------------------------
(Accrued) prepaid pension cost included in liabilities $ 4,515 $ (37,580) $ 4,466 $(37,985)
===========================================================================================================
</TABLE>
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
======================================================================================
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 13,289 $ 9,690 $ 10,575
Interest cost on projected benefit obligations 21,497 19,766) 18,775
Actual return on plan assets (45,390) (57,156) 4,383
Net amortization and deferral 19,043 31,712 (27,608)
- --------------------------------------------------------------------------------------
Net periodic pension cost $ 8,439 $ 4,012 $ 6,125
======================================================================================
</TABLE>
23
<PAGE>
(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
The weighted average discount rate was 7.5% and 7.25% as of December 31,
1996 and 1995, respectively, for substantially all plans. The rate of increase
in future compensation used in determining the actuarial present value of the
projected benefit obligation was 4.75% as of December 31, 1996 and 1995. The
change in the actuarial assumptions for the discount rate had the effect of
decreasing the projected benefit obligations by approximately $7.3 million. The
related expected long-term rate of return on plan assets was 9.75% in 1996 and
1995. Unrecognized net gains and losses in excess of the corridor are amortized
over an average of approximately 13 years, the estimated remaining service
period of employees. Net assets of the pension trust consist primarily of stocks
and debt securities.
The Company has an unfunded supplemental benefit plan which was adopted in
1993 to provide certain senior management with supplemental retirement benefits.
The provisions of SFAS 87, "Employers' Accounting for Pensions," require
recognition in the balance sheet of an additional minimum liability and related
intangible asset for pension plans with accumulated benefits in excess of plan
assets.
Salaried and eligible hourly employees of the Company may participate in
the York International Corporation Investment Plan by contributing up to 16% of
their earnings as pre-tax contributions. Beginning in 1990, the Company
contributed 25% of the employee contribution up to a maximum Company
contribution of 1% of earnings for all eligible employees. The Company's
contributions were approximately $0.9 million in 1996, $0.9 million in 1995 and
$0.7 million in 1994.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has several postretirement health and life insurance plans
covering certain employees who were hired before February 1, 1993, who retire
under the normal, early or disability retirement provisions of one of the
Company's domestic defined benefit pension plans and who have at least 10 years
of service. Employees who retired prior to February 1, 1993 contribute to the
cost of the plan, although the Company pays the major cost. Employees retiring
after February 1, 1993 contribute to the cost of the plan based on an indexed
service-related premium. Employees hired after February 1, 1993 are not eligible
for the plan. The plan is not funded.
The net periodic cost of postretirement benefits other than pensions is as
follows:
<TABLE>
<CAPTION>
===========================================================================================
(IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $2,326 $2,379 $2,312
Interest cost on accumulated postretirement
benefit obligation 6,708 6,863 7,185
Net amortization and deferral (46) (34) 193
- -------------------------------------------------------------------------------------------
Net cost $8,988 $9,208 $9,690
===========================================================================================
</TABLE>
Accrued postretirement benefits other than pensions at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
===========================================================================================
(IN THOUSANDS) 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $ (41,989) $ (51,677)
Active - fully eligible (11,891) (11,522)
Active - other (33,969) (35,193)
- -------------------------------------------------------------------------------------------
Total obligations (87,849) (98,392)
Unrecognized gain (17,518) (1,770)
Unrecognized prior service cost 1,445 --
- -------------------------------------------------------------------------------------------
Accrued cost of postretirement benefits
other than pensions included in liabilities $(103,922) $(100,162)
===========================================================================================
</TABLE>
The discount rate used to present value the obligations was 7.50% at
December 31, 1996 and 7.25% at December 31, 1995. The change in the discount
rate assumption decreased the accumulated postretirement benefit obligation by
$3.2 million. The prescription plan was changed from a base major medical plan
to a $15 prescription card plan increasing the accumulated post retirement
benefit obligation by $1.4 million. For measurement purposes, a 12% annual rate
of increase in the cost of covered health care benefits was assumed for 1995,
10% for 1996, 8% for 1997 and 1998, 6% for 1999 and 2000 and 5.5% for 2001 and
thereafter. A one
24
<PAGE>
percentage point increase each year would increase the accumulated
postretirement benefit obligation for health care benefits at December 31, 1996
by approximately $16.1 million, and the service and interest costs components of
the net cost of postretirement benefits other than pensions for 1996 by
approximately $1.9 million.
NOTE 15 - DOMESTIC AND FOREIGN OPERATIONS
The Company is engaged in one principal industry - air conditioning and
related equipment. The Company's customers are not concentrated in any specific
geographic region, and no single customer accounts for a significant amount of
the Company's sales. As of December 31, 1996 and 1995, the Company had no
significant concentrations of credit risk. Information related to domestic and
foreign operations is as follows:
<TABLE>
<CAPTION>
===========================================================================================
(IN THOUSANDS) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales:
United States $2,022,581 $1,887,182 $1,599,393
Canada 54,186 43,712 30,054
Europe 612,884 592,867 477,108
Other Non-United States 528,883 406,187 315,309
- -------------------------------------------------------------------------------------------
$3,218,534 $2,929,948 $2,421,864
===========================================================================================
Sales or transfers between geographic areas:
United States $ 321,168 $ 282,405 $ 202,652
Europe 83,411 63,145 28,070
Other Non-United States 99,550 53,375 33,596
- -------------------------------------------------------------------------------------------
$ 504,129 $ 398,925 $ 264,318
===========================================================================================
Income (loss) from operations:
United States $ 194,875 $ 179,380 $ 138,904
Canada 3,206 2,190 574
Europe 25,541 30,617 22,871
Other Non-United States 14,762 10,616 9,618
Impairment loss on long-lived assets (see note 17) -- (244,473) --
- -------------------------------------------------------------------------------------------
$ 238,384 $ (21,670) $ 171,967
===========================================================================================
Identifiable assets at end of year:
United States $1,345,104 $1,303,975 $1,138,166
Canada 20,131 17,701 14,235
Europe 411,450 389,342 288,106
Other Non-United States 298,086 215,984 147,473
- -------------------------------------------------------------------------------------------
$2,074,771 $1,927,002 $1,587,980
===========================================================================================
</TABLE>
Included in United States sales are export sales of $296.7 million in 1996,
$289.3 million in 1995 and $243.0 million in 1994.
NOTE 16 - ACQUISITIONS
On December 31, 1996, the Company acquired certain assets of Snomax located
in Rochester, New York. Snomax develops, manufactures 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.
25
<PAGE>
(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
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.
On July 29, 1995, the Company acquired the outstanding shares of Northfield
Freezing Systems, Inc. (NFS), located in Northfield, Minnesota. NFS develops,
designs, sells and services food processing freezing equipment.
On July 5, 1995, the Company and a Thai partner formed a manufacturing
joint venture in Thailand. The Company has a 67% interest in this joint venture
which acquired the operating assets of the partner's existing facility. The
venture produces residential air conditioning products for distribution
primarily in markets outside of North America.
On May 31, 1995, the Company acquired two divisions of Gram A/S, Gram
Refrigeration and Gram Contractors, headquartered in Vojens, Denmark (Gram
Divisions). The Gram Divisions develop, manufacture, sell and service components
for industrial refrigeration worldwide.
On May 25, 1995, the Company purchased an additional 20% interest in
Taiwan-YORK Company, Inc. raising the Company's ownership from 40% to 60%.
On May 3, 1995, Bristol Compressors, Inc., a subsidiary of York
International Corporation, formed a partnership to operate a new joint venture
for the development and production of scroll compressors. The joint venture,
called Scroll Technologies, is a partnership that owns and operates a scroll
compressor plant.
On April 19, 1995, the Company formed a joint venture with a partner in
Guangzhou of the People's Republic of China ("P.R.C.") which manufactures
certain commercial air conditioning products in the P.R.C.
On March 1, 1995, the Company acquired all of the capital stock of Evcon
Holdings, Inc. (Evcon), a Delaware corporation, for approximately $165.2
million. Evcon designs, manufactures and supplies air conditioning, heating and
air handling equipment for the residential, manufactured housing and light
commercial markets. Evcon is based in Wichita, Kansas and maintains
manufacturing facilities there. Evcon is the sole shareholder of Evcon Supply,
Inc. with operations primarily in Canada. The Company is continuing to operate
the acquired companies. The cost of the acquisition, which was accounted for as
a purchase, was allocated on the basis of estimated fair values. This allocation
resulted in approximately $98.7 million of cost in excess of net assets
acquired. Such excess is being amortized on a straight-line basis over forty
years. Evcon's results of operations have been included in the Company's
consolidated results of operations since the acquisition date. The unaudited
consolidated results of operations of the Company for 1995 and 1994 on a pro
forma basis assuming Evcon was acquired as of the beginning of the respective
periods are as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $2,950,249 $2,602,789
Net income (loss) (96,315) 93,876
Earnings (loss) per share (2.37) 2.51
================================================================================
</TABLE>
In January 1995, the Company acquired the assets of Mining and Industrial
Air Conditioning (Pty) Ltd. ("MIAC"), based in Johannesburg, South Africa. MIAC
is a design engineering, supplier and service company to the mining and process
refrigeration industries, as well as a supplier to air conditioning contractors.
The Company also acquired a 50% interest in a joint venture with Compania Roca
Radiadores S.A., located in Sabadell, Spain and known as Clima Roca York
("Roca"). Roca manufactures residential and commercial air conditioning products
in Spain and distributes air conditioning products throughout Western Europe.
During the first quarter of 1994, the Company's wholly-owned Italian
subsidiary acquired certain assets of Seveso Clima SpA ("Seveso"), an Italian
corporation. Seveso, based in Barlassina, Italy, designs, manufactures and
supplies air conditioning, heating and air handling equipment to the commercial
and residential markets throughout Europe.
In addition during 1994, the Company acquired a 40,000 square foot
manufacturing facility in Bogota, Colombia, which produces unitary air
conditioners and fan coils. Also acquired during 1994 was a line of energy-
efficient thermal transfer products for the industrial refrigeration industry
from Rite Coils, Inc. The manufacturing line for this product was moved to the
Company's manufacturing facility in Polo, Illinois.
Except for the acquisition of Evcon, as to which pro forma information is
set forth above, the effect on the Company's results of operations and financial
position of the acquisitions and investments described in the preceding
paragraphs is not significant.
26
<PAGE>
NOTE 17 - IMPAIRMENT LOSS ON LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," as of October 1, 1995. In connection therewith, for
long-lived assets as to which actual operating cash results or forecasted cash
flows indicate that the recoverability of the carrying amount of such assets may
be impaired, the Company compared estimated expected future cash flows
(undiscounted and without interest charges) identified with each long-lived
asset or group thereof, as appropriate, to the carrying amount of such asset or
group of assets. For purposes of such comparison, portions of unallocated excess
of cost over net assets acquired were attributed to related long-lived assets
and identifiable intangible assets, based upon the relative fair values of such
assets at acquisition.
The Company recognized an impairment loss of $244.5 million in 1995 for
those long-lived assets or groups of assets where the sum of such estimated
expected future cash flows (undiscounted and without interest) was less than the
carrying amount of such assets or groups of assets, including attributed
portions of unallocated excess cost over net assets acquired. SFAS 121 requires
analysis of each item on an individual asset-by-asset basis, where applicable,
versus the analysis of the aggregate asset value and aggregate cash flows
previously used. The amount of the impairment loss is the excess of the carrying
amount of the impaired asset over the fair value of the asset. Generally, fair
value represents the Company's expected future cash flows from the use of the
asset or group of assets, discounted at a rate commensurate with the risks
involved.
NOTE 18 - STOCKHOLDERS' EQUITY
The 1992 Employee Stock Purchase Plan authorizes the allocation of
1,500,000 shares of stock for the plan. The purchase price of the shares under
the purchase plan is 85% of the lower of the fair market value of shares at the
beginning of the period or end of the period. No compensation expense is
recorded in connection with the plan. In 1996, 1995 and 1994, there were 188,123
shares, 198,481 shares and 211,714 shares, respectively, purchased by employees
at a price of $39.95 per share, $31.39 per share and $29.54 per share,
respectively.
During March 1995, the Stockholders approved an amendment to the 1992
Omnibus Stock Plan. The amended and restated 1992 Omnibus Stock Plan authorizes
the issuance of up to 3,000,000 shares of the Company's common stock as stock
options or restricted share awards, of which up to 3% of the total outstanding
shares are available for restricted share awards. The exercise price of 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 are granted at a
price determined by the Board of Directors. In 1996 and 1995, under the 1992
Omnibus Stock Plan, key employees were awarded 2,000 and 22,500 shares,
respectively, of restricted stock generally vesting over five years.
Accordingly, unearned compensation of $0.9 million was recorded as a charge to
equity in 1995 which is being amortized over the vesting period.
In 1989, the Company adopted a management equity plan whereby restricted
stock may be awarded under Executive Stock Agreements and stock options may be
granted under the 1989 Stock Option Plan to key employees.
Changes in the number of shares under the stock option plans are as
follows:
<TABLE>
<CAPTION>
==============================================================================================
1996 1995 1994
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1, 1,976,778 $35.14 1,463,522 $31.92 1,060,100 $27.19
Granted 818,390 46.91 668,100 38.60 499,500 38.93
Exercised (404,017) 29.97 (138,509) 17.69 (65,738) 5.92
Canceled (25,292) 46.68 (16,335) 35.82 (30,340) 38.43
- ----------------------------------------------------------------------------------------------
Outstanding, December 31, 2,365,859 39.97 1,976,778 35.14 1,463,522 31.92
==============================================================================================
Exercisable, December 31, 1,551,061 $36.45 1,305,878 $33.37 968,622 $28.32
==============================================================================================
Available, December 31, 389,416 1,184,514 458,779
==============================================================================================
</TABLE>
27
<PAGE>
(NOTES TO CONSOLIDATED FINANCIAL STATEMENTS)
The exercise price of options outstanding and those exercised under the
stock option plans is $0.24 per share for 1991, $31.75 to $33.75 per share for
1992, $34.25 to $40.00 per share for 1993, $35.75 to $39.00 per share for 1994,
$38.25 to $46.00 per share for 1995, and $46.00 to $54.875 per share for 1996
grants.
In 1993, the Board of Directors authorized the Company to purchase up to
3,100,000 shares of its Common Stock over the four subsequent years to fund the
Company's 1992 Employee Stock Purchase Plan and 1992 Omnibus Stock Plan. The
stock purchases were made from time to time in the open market and the
authorization expired in August 1996. During 1996, no shares were repurchased
under the program. In 1995 and 1994, 500 shares and 320,700 shares,
respectively, were purchased under this program.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for restricted stock and performance-
based awards. Had compensation cost for the Company's other stock option and
employee stock purchase plans been determined based upon the fair value at the
grant date for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below (in
thousands except per share data):
<TABLE>
<CAPTION>
================================================================================
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net earnings (loss) - as reported $147,909 $ (96,072)
Net earnings (loss) - pro forma 137,765 (102,739)
Earnings (loss) per share - as reported 3.37 (2.36)
Earnings (loss) per share - pro forma 3.13 (2.53)
================================================================================
</TABLE>
The per share weighted average fair value of the options granted during
1996 and 1995 is estimated as $18.30 and $16.07, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions: dividend yield .1%, volatility of 18.6% and 19.2% in 1996 and 1995,
risk-free interest rate of 6.4% and 7.2% in 1996 and 1995, and an expected life
of 7 years.
Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation costs for stock options
granted prior to January 1, 1995 is not reflected in the pro forma net income
amounts presented above because compensation cost for options granted prior to
January 1, 1995 is not considered. The effects of applying SFAS No. 123 for
disclosing compensation costs under such pronouncement may not be representative
of the effects on reported net income for future years.
NOTE 19 - STATEMENT OF CASH FLOW INFORMATION
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $34,454 $44,000 $30,397
Income taxes 46,683 47,567 48,076
================================================================================
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisitions in which liabilities were assumed are as follows:
<TABLE>
<CAPTION>
================================================================================
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value of assets acquired $ 23,336 $ 362,973 $ 86,586
Less cash paid (16,468) (288,173) (45,674)
- --------------------------------------------------------------------------------
Liabilities assumed $ 6,868 $ 74,800 $ 40,912
================================================================================
</TABLE>
28
<PAGE>
SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
===========================================================================================
(IN THOUSANDS, FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Net sales $728,165 $861,662 $787,303 841,404
Gross profit 153,222 194,397 168,817 169,421
Net income 23,965 45,853 38,839 39,252
Earnings per common share .55 1.05 .88 .89
1995
Net sales $604,304 $775,034 $718,956 831,654
Gross profit 130,082 174,262 153,753 171,282
Net income (loss) 18,780 35,553 29,950 (180,355) /(a)/
Earnings (loss) per common share .50 .91 .70 (4.22) /(a)/
===========================================================================================
/(a)/ After the impairment loss recorded in the fourth quarter
(see note 17 to the consolidated financial statements)
TRADING AND DIVIDEND INFORMATION
<CAPTION>
===================================================================================
Dividends
High Low Declared
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
1996
Fourth quarter $ 56 1/4 $ 47 3/8 $.09
Third quarter 51 7/8 44 3/4 .09
Second quarter 53 5/8 46 3/4 .09
First quarter 49 5/8 44 5/8 .09
1995
Fourth quarter $ 47 1/8 $ 40 1/8 $.06
Third quarter 48 1/2 41 3/8 .06
Second quarter 45 1/4 38 1/8 .06
First quarter 39 3/4 34 1/8 .06
===================================================================================
</TABLE>
29
<PAGE>
EXHIBIT 21
YORK INTERNATIONAL CORPORATION
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
Name and Jurisdiction
of Incorporation Percent of Ownership
- ------------------ --------------------
<S> <C>
Bristol Compressors, Inc. (Delaware) 100%
Bristol Compressors Purchasing, Inc. (Delaware) 100%
Bristol Compressors Sparta, Inc. (Delaware) 100%
Codorus Acceptance Corp. (Delaware) 100%
Evcon Holdings Inc. (Kansas) 100%
Evcon Industries, Inc. (Delaware) 100%
Evcon Supply, Inc. (Kansas) 100%
Frigid Coil/Frick, Inc. (Delaware) 100%
IMECO, Inc. (Delaware) 100%
Miller-Picking of Mississippi, Inc. (Mississippi) 100%
Viron, Inc. (Missouri) 100%
York Air Conditioning and Refrigeration, Inc. (Delaware) 100%
York Food Systems International Limited (Delaware) 100%
York International Treasury Services, Inc. (Delaware) 100%
York-MIAC, Inc. (Delaware) 100%
York Snow, Inc. (Delaware) 100%
Airchal Industries, S.A. (France) 100%
Y.I.C. Ltd. (Cyprus) 100%
York Air Conditioning, Ltd. (Canada) 100%
York Airconditioning & Refrigeration FZE (U.A.E.) 100%
York Aire S.A. de C.V. (Mexico) 100%
York Foreign Sales Corporation (Barbados) 100%
York International A/S (Denmark) 100%
York Australia Pty, Ltd. (Australia) 100%
York International BV (Netherlands) 100%
York International CH (Korea) 100%
York International Comercial Limitada (Chile) 100%
York International Holdings GmbH (Germany) 100%
York International Limited (UK) 100%
York International Mexico S.A. de C.V. (Mexico) 100%
York International (Northern Asia) Limited (Hong Kong) 100%
York International Pte. Ltd. (Singapore) 100%
York International SA (France) 100%
York International S.A. (Uruguay) 100%
York International S.A. (Venezuela) 100%
York International S.p.A. (Italy) 100%
York International SA (Colombia) 67%
Aeromaster Industry Company Ltd. (Thailand) 67%
</TABLE>
<PAGE>
EXHIBIT 23
ACCOUNTANTS' CONSENT
--------------------
The Board of Directors and Stockholders
York International Corporation:
We consent to incorporation by reference in the Registration Statement on Forms
S-3 (File No. 33-91292 and File No. 33-41536) and S-8 (File No. 33-25440 1989
Employee Stock Option Plan, File No. 333-2384 Amended and Restated 1992 Omnibus
Stock Plan and File No. 33-64684 1992 Omnibus Stock Plan and 1992 Employee Stock
Purchase Plan) of York International Corporation of our reports dated February
11, 1997, relating to the consolidated balance sheets of York International
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the years in the three-year period ended December 31, 1996 and the
related financial statement schedule, which reports appear in or are
incorporated by reference in the December 31, 1996 annual report on Form 10-K of
York International Corporation. Our reports refer to adoption by the Company in
1995 of the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of".
KPMG PEAT MARWICK LLP
/s/ KPMG PEAT MARWICK LLP
Harrisburg, Pennsylvania
March 21, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Statements of Operations for the Year Ended December 31,
1996 (Audited), the Consolidated Condensed Balance Sheets at December 31, 1996
(Audited), and the Consolidated Condensed Statements of Cash Flows for the Year
Ended December 31, 1996 (Audited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,470
<SECURITIES> 0
<RECEIVABLES> 530,555
<ALLOWANCES> 20,737
<INVENTORY> 609,342
<CURRENT-ASSETS> 1,291,255
<PP&E> 636,218
<DEPRECIATION> 275,786
<TOTAL-ASSETS> 2,074,771
<CURRENT-LIABILITIES> 767,112
<BONDS> 313,641
0
0
<COMMON> 219
<OTHER-SE> 780,158
<TOTAL-LIABILITY-AND-EQUITY> 2,074,771
<SALES> 3,218,534
<TOTAL-REVENUES> 3,218,534
<CGS> 2,532,677
<TOTAL-COSTS> 2,532,677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,718
<INTEREST-EXPENSE> 35,544
<INCOME-PRETAX> 204,463
<INCOME-TAX> 56,554
<INCOME-CONTINUING> 147,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,909
<EPS-PRIMARY> 3.37
<EPS-DILUTED> 3.37
</TABLE>
