<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 1-10863
YORK INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3473472
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
631 SOUTH RICHLAND AVENUE, YORK, PA 17403
(717) 771-7890
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 7, 1997
----- -------------------------------
Common Stock, par value $.005 41,392,329 shares
<PAGE>
-2-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Form 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
INDEX
-----
Page No.
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C> <C>
Consolidated Condensed Statements of Operations (Unaudited) -
Nine Months and Three Months Ended September 30, 1997 and 1996 3
Consolidated Condensed Balance Sheets -
September 30, 1997 (Unaudited) and December 31, 1996 4
Consolidated Condensed Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1997 and 1996 5
Supplemental Notes to Consolidated Condensed
Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
-3-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
ITEM 1
FINANCIAL STATEMENTS
Consolidated Condensed Statements of Operations (Unaudited)
- -----------------------------------------------------------
(thousands except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30, Three Months Ended Sept. 30,
---------------------------- ------------------------------
1997 1996 1997 1996
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Net sales $2,434,944 $2,377,130 $749,780 $787,303
Cost of goods sold 1,922,016 1,860,694 589,985 618,486
---------- ---------- -------- --------
Gross profit 512,928 516,436 159,795 168,817
Selling, general and
administrative expenses 363,052 324,408 119,087 105,775
---------- ---------- -------- --------
Income from operations before
purchase accounting amortization 149,876 192,028 40,708 63,042
Purchase accounting amortization 7,626 7,398 2,542 2,542
---------- ---------- -------- --------
Income from operations 142,250 184,630 38,166 60,500
Interest expense, net 30,296 25,201 9,880 7,665
Equity in (earnings) losses of affiliates (7,820) 208 (6,951) (602)
---------- ---------- -------- --------
Income before income taxes 119,774 159,221 35,237 53,437
Provision for income taxes 38,927 50,564 11,452 14,598
---------- ---------- -------- --------
Net income $ 80,847 $ 108,657 $ 23,785 $ 38,839
========== ========== ======== ========
Earnings per share of common stock $ 1.86 $ 2.48 $ 0.55 $ 0.88
========== ========== ======== ========
Cash dividends per share $ 0.36 $ 0.27 $ 0.12 $ 0.09
========== ========== ======== ========
Weighted average common shares
and common equivalents outstanding
(in thousands) 43,557 43,832 42,868 44,035
See accompanying supplemental notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-4-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
- -------------------------------------
(thousands of dollars)
<TABLE>
<CAPTION>
Sept. 30, 1997 December 31,
(Unaudited) 1996
--------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,788 $ 11,470
Receivables 551,085 563,099
Inventories:
Raw materials 179,695 178,771
Work in process 126,035 118,847
Finished goods 291,588 311,724
---------- ----------
Total inventories 597,318 609,342
---------- ----------
Prepayments and other current assets 98,660 107,344
---------- ----------
Total current assets 1,254,851 1,291,255
Deferred income taxes 20,113 19,265
Unallocated excess of cost
over net assets acquired 346,827 350,370
Investments in affiliates 20,323 22,205
Property, plant and equipment, net 365,255 360,432
Deferred charges and other assets 26,359 31,244
---------- ----------
Total assets $2,033,728 $2,074,771
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion
of long-term debt $ 69,559 $ 128,461
Accounts payable and accrued expenses 554,945 602,359
Income taxes 32,072 36,292
---------- ----------
Total current liabilities 656,576 767,112
Warranties 38,123 33,135
Long-term debt 406,113 313,641
Postretirement benefit liabilities 131,315 128,411
Other long-term liabilities 49,142 52,095
---------- ----------
Total liabilities 1,281,269 1,294,394
Stockholders' equity 752,459 780,377
---------- ----------
Total liabilities and stockholders' equity $2,033,728 $2,074,771
========== ==========
See accompanying supplemental notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-5-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Consolidated Condensed Statements of Cash Flows (Unaudited)
- ----------------------------------------------------------
(thousands of dollars)
Nine Months Ended Sept. 30,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 80,847 $108,657
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 39,453 36,050
Amortization of deferred charges 10,690 11,853
Provision for doubtful accounts receivable 6,038 5,252
Other (4,280) 8,372
Change in assets and liabilities net of
effects from purchase of other companies:
Receivables 12,266 (4,541)
Inventories 28,974 (92,036)
Prepayments and other current assets 13,569 15,814
Deferred income taxes (1,303) 1,437
Other assets 3,546 (3,311)
Accounts payable and accrued expenses (76,681) (26,603)
Income taxes (6,423) (4,647)
Warranties 7,592 4,856
Post-retirement benefit liabilities 2,904 3,327
Other long-term liabilities (5,403) (2,169)
-------- --------
Net cash provided by operating activities 111,789 62,311
-------- --------
Cash flows from investing activities:
Net Payments for purchases of and investments in
other companies (net of cash acquired) (8,978) (2,903)
Capital expenditures (46,498) (53,555)
Other 4,447 941
-------- --------
Net cash used by investing activities (51,029) (55,517)
-------- --------
Cash flows from financing activities:
Common stock issued 3,159 9,185
Treasury stock purchased (85,777) (1,739)
Net proceeds from issuance of bank loans 82,248 -
Long-term debt payments (105,420) (11,953)
Net payments on short term debt (58,902) (21,379)
Net proceeds from issuance of commercial paper 115,644 26,959
Dividends paid (15,455) (11,692)
-------- --------
Net cash used by financing activities (64,503) (10,619)
-------- --------
Effect of exchange rate changes on cash 61 4
-------- --------
Net decrease in cash and cash equivalents (3,682) (3,821)
Cash and cash equivalents at beginning of period 11,470 8,838
-------- --------
Cash and cash equivalents at end of period $ 7,788 $ 5,017
======== ========
See accompanying supplemental notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
-6-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Supplemental Notes to Consolidated Condensed Financial Statements (Unaudited)
- -----------------------------------------------------------------------------
(1) The consolidated condensed financial statements included herein have been
prepared by the registrant pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to applicable rules and regulations, although
the registrant believes that the disclosures herein are adequate to make
the information presented not misleading. In the opinion of the Company,
the accompanying consolidated condensed financial statements contain all
adjustments (consisting of only normally recurring accruals) necessary to
present fairly the financial position as of September 30, 1997 and December
31, 1996, the results of operations for the three and nine month periods
ended September 30, 1997 and 1996, and the cash flows for the nine months
ended September 30, 1997 and 1996.
(2) The results of operations for interim periods are not necessarily
indicative of the results expected for the full year.
(3) The following tables summarize the capitalization of the Company at
September 30, 1997 and at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Sept. 30, 1997 December 31, 1996
-------------------- --------------------------
Current Long Term Current Long Term
-------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Indebtedness:
Bank loans $62,865 $ 82,248 $122,059 $ -
Commercial paper - 200,680 6,402 85,036
Term loans - 8,498 - 109,723
Senior notes, 6.75% interest, due March 2003 - 100,000 - 100,000
Other 6,694 14,687 - 18,882
------- -------- -------- --------
Total notes payable and
long-term debt $69,559 $406,113 $128,461 $313,641
======= ======== ======== ========
<CAPTION>
Sept. 30, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Stockholders' equity:
Common Stock $.005 par value; 200,000 shares
authorized; issued 43,886 shares at September 30,1997
and 43,720 shares at December 31, 1996 $ 219 $ 219
Additional paid in capital 672,508 667,775
Retained earnings 211,723 146,331
Currency translation adjustment (38,049) (23,478)
Treasury stock, 1,983 shares at September 30, 1997
and 98 shares at December 31, 1996, at cost (89,321) (3,875)
Unearned compensation (4,621) (6,595)
-------- --------
Total stockholders' equity $752,459 $780,377
======== ========
</TABLE>
(continued)
<PAGE>
-7-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Supplemental Notes to Consolidated Condensed Financial Statements (Unaudited)
- -----------------------------------------------------------------------------
During May 1997, the Company increased the borrowing capacity and term of
its Amended and Restated Credit Agreement (the Agreement) from $350 million
to $500 million. The Agreement expires on July 31, 2002. At September 30,
1997 and December 31, 1996, no amounts were outstanding under the facility.
The Amended Agreement provides for borrowings under the facility at LIBOR
plus .16% or at bid rates as specified in the Agreement. At September 30,
1997 and December 31, 1996 the LIBOR rate was 5.68% and 5.56%,
respectively. A fee of .09% is paid on the facility. The Agreement, as
amended, contains financial covenants requiring the Company to maintain
certain financial ratios and restricting its ability to incur indebtedness,
make investments and create or permit to exist certain liens.
The Company's non-U.S. subsidiaries maintain bank credit facilities in
various currencies that provided for borrowings of $230.9 million and
$252.5 million at September 30, 1997 and December 31, 1996, respectively,
of which $158.2 million and $121.1 million, respectively, were unused. In
some instances, borrowings against these credit facilities have been
guaranteed by the Company to assure availability of funds at favorable
rates.
The Company established commercial paper facilities in November, 1995.
Commercial paper borrowings are expected to be reborrowed in the ordinary
course of business. The average interest rate on the commercial paper was
5.69% and 5.43% as of September 30, 1997 and December 31, 1996,
respectively.
During the second quarter of 1997, the Company arranged four separate
unsecured bank lines. These bank lines provide for total borrowings of
$185 million which are expected to be reborrowed in the ordinary course of
business. At September 30, 1997, the Company had $82.2 million outstanding
under these bank lines. The average interest rate on the bank lines was
5.65% as of September 30, 1997.
During 1995, the Company arranged two term loans denominated in foreign
currencies. The Company borrowed $26.2 million with a final maturity on
November 15, 1998 and an interest rate of 3.98%. The loan is repayable in
four annual installments. On December 21, 1995, the Company borrowed $100
million with an interest rate of 4.87%. This loan was repaid in total in
June 1997. The remaining term loan agreement contains financial covenants
that are equivalent to the covenants of the Company's Amended and Restated
Credit Agreement.
In July 1995, the Company registered $200 million in debt securities with
the Securities and Exchange Commission. Under terms of the registration
statement, the Company may offer and sell up to that amount of such
securities at prices and terms to be determined at or prior to sale. No
amounts of such debt securities are outstanding at September 30, 1997 or
December 31, 1996.
Under a receivables sales agreement entered into in 1992, the Company sold
a fractional ownership interest in a defined pool of trade accounts
receivable for $100 million in 1997 and 1996. The sold accounts receivable
are reflected as a reduction of receivables in the accompanying
consolidated balance sheets. Under an Amended and Restated Receivables
Sales Agreement entered into on March 26, 1997, the maximum amount of the
purchasers' investment is currently $120 million and is subject to decrease
based on the level of eligible accounts receivable and restrictions on
concentrations of receivables. The discount rate on the receivables sold
at September 30, 1997 and December 31, 1996 was approximately 5.58% and
5.40%, respectively.
During May 1997, the Stockholders approved the Amended and Restated 1992
Omnibus Stock Plan authorizing the issuance of up to 4,380,000 shares of
the Company's common stock as stock options or restricted share awards.
The exercise price of the stock options granted under this plan is not less
than the fair market value of the shares on the date the option is granted.
The restricted shares will be granted at a price determined by the Board of
Directors. In March, 1997, key employees were awarded options to purchase
737,932 shares at an exercise price of $45.375 per share.
(continued)
<PAGE>
-8-
PART I - FINANCIAL INFORMATION
------------------------------
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Supplemental Notes to Consolidated Condensed Financial Statements (Unaudited)
- -----------------------------------------------------------------------------
During February 1997, the Board of Directors authorized the Company to
purchase up to 3.8 million shares of its Common Stock over the next four
years to fund the Company's Employee Stock Purchase Plan and the Amended
and Restated 1992 Omnibus Stock Plan. In September 1997, the authorization
was increased to 6.0 million shares. The purchases are made from time to
time in the open market.
(4) Purchase accounting amortization primarily represents the amortization of
the unallocated excess of cost over net assets acquired, incurred in
connection with the acquisition of the Company in 1988.
(5) The Company's earnings per share are based on the weighted average
outstanding common shares and common share equivalents.
(6) Acquisitions
On May 6, 1997, the Company acquired the assets of the Performance Air
Division of CleanPak International (PACE) located in Portland, Oregon and
Pace Gamewell (Gamewell) located in Salisbury, North Carolina. Pace and
Gamewell develop, manufacture and sell air handling products equipment in
the United States.
On December 31, 1996, the Company acquired certain assets of Snomax located
in Rochester, New York. Snomax develops, 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.
On July 31, 1996, the Company acquired the outstanding shares of Northfield
Equipment and Manufacturing Company (NEMCO), located in Northfield,
Minnesota. NEMCO designs and manufactures food processing freezing
equipment.
(7) Reference is made to the Registrant's 1996 Annual Report on Form 10-K for
more detailed financial statements and footnotes.
<PAGE>
-9-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net sales for the three months ended September 30, 1997 decreased 4.8% to $749.8
million as compared to $787.3 million for the three months ended September 30,
1996. Income from operations for the third quarter of 1997 was $38.2 million
compared to $60.5 million for the third quarter of 1996. Net sales for the nine
months ended September 30, 1997 increased 2.4% to $2,434.9 million as compared
to $2,377.1 million for the nine months ended September 30, 1996. Income from
operations for the first nine months of 1997 was $142.3 million as compared to
$184.6 million for the first nine months of 1996. For the first nine months of
1997 as compared to the same period in 1996, Engineered products sales increased
9.0% due to strength in the North American Equipment business partially offset
by weakness in the chiller market in Europe and Southeast Asia. Unitary
products revenues were up only 0.1% for the first nine months of 1997 compared
to 1996, due to lower than average temperatures in North America and Europe and
excess inventory levels in the industry at the beginning of the year, offset by
continued Latin American and Asian growth due to expanded distribution.
Refrigeration products revenue decreased 7.6% for nine months of 1997 compared
to 1996 due to the sale of the German commercial refrigeration business in the
second quarter of 1997.
For the third quarter, aggregate non-U.S. sales decreased 7.5% from the third
quarter of 1996 to $322.0 million primarily as a result of weak markets for all
products in Europe partially offset by favorable conditions in China and Latin
American markets. Domestic revenue decreased 2.6% to $427.8 million primarily
as a result of weaker Unitary markets in the U.S. due to cooler than normal
weather.
Equipment order backlog at September 30, 1997 was $776.9 million which is 14.7%
less than one year ago and 8.1% less than the $845.1 million backlog at December
31, 1996. Domestic backlog was up 8.9% from the third quarter of 1996 and 3.6%
from December 31, 1996 due to an increase in engineered products equipment
orders. Non-U.S. backlog was down 14.7% from the third quarter of 1996 and
20.0% from December 31, 1996. The Non-U.S. backlog decrease was due to the sale
of the German Commercial refrigeration business (approximately $30 million),
reduced Unitary Products orders worldwide, and the poor economic conditions in
Europe and Southeast Asia.
The following table sets forth third quarter revenue by product and geographic
market (in millions of dollars):
<TABLE>
<CAPTION>
Three months ended Sept. 30,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Engineered products $319.0 $303.2
Unitary products 329.5 355.1
Refrigeration products 101.3 129.0
------ ------
Total revenue $749.8 $787.3
====== ======
U.S. 57% 56%
International 43% 44%
------ ------
Total 100% 100%
====== ======
</TABLE>
(continued)
<PAGE>
-10-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Gross profit in the third quarter of 1997 decreased 5.3% to $159.8 million or
21.3% of net sales as compared to $168.8 million or 21.4% of net sales for the
1996 period. Gross profit for the nine month period decreased 0.7% to $512.9
million or 21.1% of net sales as compared to $516.4 million or 21.7% of net
sales for the same period in 1996. The decrease in gross profit is primarily
the result of the mix between new and replacement equipment sales in the
domestic market and a shift away from higher margin large tonnage chillers, both
of which are amplified by the weak retrofit market and price competitiveness and
lower than expected volume in Unitary Products, partially offset by better plant
performance in the Refrigeration Group.
Selling, general and administrative expenses in the third quarter of 1997 were
$119.1 million, 15.9% of net sales, versus $105.8 million, 13.4% of net sales,
in 1996. Selling, general, and administrative expenses for the nine months
ended September 30, 1997 of $363.1 million were 14.9% of net sales as compared
to 13.6% of net sales for the same nine month period in 1996. The increase in
selling, general and administrative expenses is a result of continued investment
in our distribution channels while experiencing lower than expected volume in
Unitary revenue worldwide and across all product groups in Europe for which SG&A
is not variable in the short-term. Also, research and development expenditures
have increased due to concentration on new product development. We expect
present market conditions to be temporary and will continue to expand and
strengthen our distribution in areas which will benefit our future.
Interest expense during the third quarter increased to $9.9 million in 1997 from
$7.7 million in 1996. This was a result of higher average borrowing levels and
a slightly higher average domestic borrowing rate.
Equity in earnings of affiliates includes a one-time gain from the sale of our
investment in Miraco, an Egyptian air conditioning company, of approximately $6
million.
The provision for income taxes of $11.5 million in the third quarter of 1997
relates both to U.S. and non-U.S operations. The effective tax rate remains
relatively flat primarily as a result of the benefit of increased export
incentives and utilization of foreign tax credits. These benefits were
partially offset by the tax impact of nondeductible items, including the
amortization of goodwill.
As a result of the above factors, the Company had a net income of $23.8 million
in the third quarter of 1997 as compared to net income of $38.8 million in the
third quarter of 1996.
Liquidity and Capital Resources
- -------------------------------
Working capital requirements are generally met through a combination of
internally generated funds, bank lines of credit, commercial paper issuances,
financing of trade receivables and credit terms from suppliers which approximate
receivable terms from the Company's customers. The Company believes that its
bank lines of credit under its 1995 Amended and Restated Credit Agreement will
be sufficient to meet working capital needs through 1997. Additional sources of
working capital include customer deposits and progress payments.
The Company had working capital of $598 million and $524 million as of September
30, 1997 and December 31, 1996, respectively. The current ratio was 1.9 at
September 30, 1997 as compared to 1.7 at December 31, 1996.
At September 30, 1997, the Company maintained a $500 million Amended and
Restated Credit Agreement (the Agreement) expiring on July 31, 2002. At
September 30, 1997 the Company could borrow up to $500 million under the
Agreement. The Agreement provides for borrowings under the facility at LIBOR
plus .16% or at bid rates as specified in the Agreement. At September 30, 1997
the LIBOR rate was 5.68% and a fee of .09% is paid on the facility. The
Agreement, as amended, contains financial covenants requiring the Company to
maintain certain financial ratios and restricting its ability to incur
indebtedness, make investments and create or permit to exist certain liens.
Commercial paper and bank line borrowings are expected to be reborrowed in the
ordinary course of business. The average interest rate on the commercial paper
was 5.69% as of September 30, 1997.
(continued)
<PAGE>
-11-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the second quarter of 1997, the Company arranged four separate unsecured
bank lines. These bank lines provide for total borrowings of $185 million which
are expected to be reborrowed in the ordinary course of business. At September
30, 1997, the Company had $82.2 million outstanding under these bank lines. The
average interest rate on the bank lines was 5.65% as of September 30, 1997.
The Company has one term loan which matures on November 15, 1998 and bears
interest at a rate of 3.98%. The term loan agreement contains financial and
operating covenants that are equivalent to the covenants of the Company's
Amended and Restated Credit Agreement.
The $100 million of Senior Notes bear interest at a 6.75% fixed rate and have a
maturity of ten years from the date of issue.
The Company sold a fractional ownership interest in a defined pool of trade
accounts receivable for $100 million. At September 30, 1997, the discount rate
on the accounts receivable sold was approximately 5.58%.
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 September 30, 1997.
Because the Company's obligations under the Amended and Restated Credit
Agreement and Receivables Sales Agreement bear interest at floating rates, the
Company's interest costs are sensitive to changes in prevailing interest rates.
Based on historical cash flows, the Company believes that it will be able to
satisfy its principal and interest payment obligations and its working capital
and capital expenditure requirements from operating cash flows together with
funds available under the revolving credit facility.
In the ordinary course of business the Company enters into various types of
transactions that involve contracts and financial instruments with off-balance-
sheet risk. The Company enters into these financial instruments to manage
financial market risk, including foreign exchange, commodity price and interest
rate risk. The Company enters into these financial instruments utilizing over-
the-counter as opposed to exchange traded instruments. The Company mitigates
the risk that counterparties to these over-the-counter agreements will fail to
perform by only entering into agreements with major international financial
institutions.
Capital expenditures currently anticipated for expanded capacity, cost
reductions and the introduction of new products during the next twelve months
will be in excess of depreciation and amortization. These expenditures will be
funded from a combination of operating cash flows and funds available under the
revolving credit facility or commercial paper.
Cash dividends of $0.12 per share were paid on common stock in the third quarter
of 1997. The declaration and payment of future dividends will be at the sole
discretion of the Board of Directors and will depend upon such factors as the
Company's profitability, financial condition, cash requirements and future
prospects.
New Accounting Standards
- ------------------------
In January 1997, the Securities and Exchange Commission amended regulations and
forms, including Regulation S-X and S-K, to clarify and expand existing
disclosure requirements about accounting policies for certain derivative
instruments, and to add new disclosure requirements about the risk of loss from
changes in market rates or prices which are inherent in derivatives. The
Company's disclosures in its annual report on Form 10-K for 1996 conform to the
disclosure requirements set forth in the amended regulations. Adoption by the
Company of the disclosure requirement relating to risk of loss, which
requirements are effective for fiscal years ending after June 15, 1998, are not
expected to have a material effect on the Company's financial statements.
(continued)
<PAGE>
-12-
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In February 1997, the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standards No.128 (SFAS128), "Earnings per
share". SFAS128 establishes standards for computing and presenting earnings per
share and will be effective for periods ending after December 15, 1997.
In February 1997, the FASB issued Statement of Financial Accounting Standards
No.129, "Disclosure of Information about Capital Structure" (SFAS129). SFAS129
establishes standards for disclosing information about a company's capital
structure, including pertinent rights and privileges of various securities
outstanding and is effective for periods ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board (FSAB) issued Statements
of Financial Accounting Standards No.130, "Reporting Comprehensive Income," and
No.131, "Disclosures about Segments of an Enterprise and Related Information."
These statements establish standards for reporting and display of comprehensive
income and its components and for reporting information about business segments
and products in financial statements, and are effective for years beginning
after December 15, 1997
Adoption of these statements is not expected to have a material effect on the
Company's financial statements.
Forward-Looking Information - Risk Factors
- ------------------------------------------
To the extent the Registrant has made "forward-looking statements," certain risk
factors could cause actual results to differ materially from those anticipated
in such forward-looking statements.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
Not Applicable
Item 2 Changes in Securities
Not Applicable
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5 Other Information
On October 28, 1997, the Registrant announced the appointment of
John R. Tucker as President and Chief Operating Officer.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 Form of Severance Agreement entered into by the
Registrant and certain of its Officers and Employees
Exhibit 27 Financial Data Schedule (EDGAR only)
(b) None
<PAGE>
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned unto duly authorized.
YORK INTERNATIONAL CORPORATION
------------------------------
Registrant
Date November 7, 1997 /s/ Dean T. DuCray
-------------------- ------------------------------------------
Vice President and Chief Financial Officer
<PAGE>
-14-
EXHIBIT INDEX
- -------------
Exhibit No. Description
- ----------- -----------------------------------------------------------------
10.1 Form of Severance Agreement entered into by the Registrant and
certain of its Officers and Employees
27 Financial Data Schedule (EDGAR only)
<PAGE>
Exhibit 10.1
SEVERANCE AGREEMENT
-------------------
THIS AGREEMENT, dated August 18, 1997, is made by and between YORK
INTERNATIONAL CORPORATION, a Delaware corporation (the "Company"), and NAME~
(the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continued employment of key management personnel;
and
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound, the Company and
the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this
-------------
Agreement are provided in the last Section hereof.
<PAGE>
2. Term of Agreement. The Term of this Agreement shall commence on
-----------------
the date hereof and shall continue in effect through December 31, 1999;
provided, however, that commencing on January 1, 1999 and each January 1
- -------- -------
thereafter, the Term shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
------- --------
however, that if a Change in Control shall have occurred during the Term, the
- -------
Term shall expire no earlier than the last day of the twenty-fourth (24th) month
following the month in which such Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the Executive
------------------------------
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no Severance Payments shall be payable under this Agreement unless there
shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as other wise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
2
<PAGE>
4. The Executive's Covenants. The Executive agrees that, subject to
-------------------------
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the Term, the Executive will remain in the employ of the
Company until the earliest of (i) a date which is six (6) months from the date
of such Potential Change in Control, (ii) the date of a Change in Control, (iii)
the date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
------------------------------------------
5.1 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination, together with all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive's normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and benefits shall
be determined under, and paid in accordance with, the Company's retirement,
insurance and other compensation or benefit
3
<PAGE>
plans, programs and arrangements as in effect immediately prior to the Date of
Termination.
6. Severance Payments.
------------------
6.1 Subject to Section 6.2 hereof, if the Executive's employment is
terminated following a Change in Control and during the Term, other than (A) by
the Company for Cause, (B) by reason of death or Disability, or (C) by the
Executive without Good Reason, then the Company shall pay the Executive the
amounts, and provide the Executive the benefits, described in this Section 6.1
("Severance Payments"), in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement,
the Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive's employment is terminated by the Company without
Cause prior to a Change in Control (but only if a Change in Control occurs
within 1 year of the Date of Termination) and such termination was at the
request or direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in Control, (ii) the
Executive terminates his employment for Good Reason prior to a Change in Control
(but only if a Change in Control occurs within 1 year of the Date of
Termination) and the circumstance or event which constitutes Good Reason occurs
at the request or direction of such Person, or (iii) the Executive's employment
is terminated by the Company without Cause or by the Executive for Good Reason
and such termination or the circumstance or event which constitutes
4
<PAGE>
Good Reason is otherwise in connection with or in anticipation of a Change in
Control (but only if a Change in Control occurs within 1 year of the Date of
Termination).
(A) In lieu of any severance benefit otherwise payable to the
Executive, the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to three times the sum of (i) the Executive's base
salary as in effect immediately prior to the Date of Termination or, if
higher, in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, and (ii) 100% of the Annual EV
Amount determined for the Executive under the Company's 1996 Incentive
Compensation Plan for the fiscal year of the Company in which occurs the
Date of Termination or, if higher, the fiscal year in which the Change in
Control occurs (or, if no such Annual EV Amount has been determined prior
to the Change in Control for either such fiscal year, 100% of the Annual EV
Amount for the fiscal year of the Company preceding the fiscal year in
which the Change in Control occurs).
(B) For the thirty-six (36) month period immediately following
the Date of Termination, the Company shall arrange to provide the Executive
and his dependents health insurance benefits substantially similar to those
provided from time to time following the Date of Termination to employees
of the Company serving in positions of similar grade level to the position
in which the Executive served immediately prior to the first occurrence of
an event or
5
<PAGE>
circumstance constituting Good Reason, at no greater cost to
the Executive than the cost to such employees as in effect from time to
time; provided, however, that, unless the Executive consents to a different
-------- -------
method (after taking into account the effect of such method on the
calculation of "parachute payments" pursuant to Section 6.2 hereof), such
health insurance benefits shall be provided through a third-party insurer.
The Company's obligation to provide benefits to the Executive pursuant to
this Section 6.1(B) shall terminate from and after the time that benefits
of the same type are received by or made available to the Executive during
the thirty-six (36) month period following the Date of Termination (and any
such benefits received by or made available to the Executive shall be
reported to the Company by the Executive). If the Severance Payments shall
be de creased pursuant to Section 6.2 hereof, and the Company's obligation
to provide the Section 6.1(B) benefits which remain payable after the
application of Section 6.2 hereof is thereafter terminated pursuant to the
immediately preceding sentence, the Company shall, no later than five (5)
business days following such reduction, pay to the Executive the least of
(a) the amount of the decrease made in the Severance Payments pursuant to
Section 6.2 hereof, (b) the amount of the subsequent reduction in these
Section 6.1(B) benefits, or (c) the maximum amount which can be paid to the
Executive without being, or causing any other payment to be, nondeductible
by reason of section 280G of the Code.
6
<PAGE>
(C) In addition to the retirement benefits to which the
Executive is entitled under each Pension Plan or any successor plan
thereto, the Company shall pay the Executive a lump sum amount, in cash,
equal to the excess of (i) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity commencing
at the date (but in no event earlier than the third anniversary of the Date
of Termination) as of which the actuarial equivalent of such annuity is
greatest) which the Executive would have accrued under the terms of all
Pension Plans (without regard to (x) any amendment to any Pension Plan made
subsequent to a Change in Control and on or prior to the Date of
Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder, (y) Sections 3.02 and 4.05
of the SERP and (z) whether any of the conditions set forth in Section
4.01(b) of the SERP have been satisfied), determined as if the Executive
were fully vested thereunder and had accumulated (after the Date of
Termination) thirty-six (36) additional months of service credit thereunder
and had been credited under each Pension Plan during such period with
compensation equal to the Executive's compensation (as defined in such
Pension Plan) during the twelve (12) months immediately preceding the Date
of Termination or, if higher, during the twelve months immediately prior to
the first occurrence of an event or circumstance constituting Good Reason,
over (ii)
7
<PAGE>
the actuarial equivalent of the aggregate retirement pension (taking into
account any early retirement subsidies associated therewith and determined
as a straight life annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial equivalent of such
annuity is greatest) which the Executive had accrued pursuant to the
provisions of the Pension Plans as of the Date of Termination. For purposes
of this Section 6.1(D), "actuarial equivalent" shall be determined using
the same assumptions utilized under the tax-qualified defined benefit
pension plan in which the Executive participates immediately prior to the
Date of Termination or, if more favorable to the Executive, immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.
(D) If the Executive would have become entitled to benefits
under the Company's post-retirement health care or life insurance plans, as
in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Executive's employment terminated at any time during the period of thirty-
six (36) months after the Date of Termination, the Company shall provide
such post-retirement health care or life insurance benefits to the
Executive and the Executive's dependents commencing on the later of (i) the
date on which such coverage would have first become available and (ii) the
date on which benefits
8
<PAGE>
described in subsection (B) of this Section 6.1 terminate.
6.2 (A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be
received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (all such payments and
benefits, including the Severance Payments, being hereinafter called "Total
Payments") would not be deductible (in whole or part), by any one of the
Company, an affiliate or Person making such payment or providing such
benefit as a result of section 280G of the Code, then, to the extent
necessary to make such portion of the Total Payments deductible (and after
taking into account any reduction in the Total Payments provided by reason
of section 280G of the Code in such other plan, arrangement or agreement),
the cash Severance Payments shall first be reduced (if necessary, to zero),
and all other Severance Payments shall thereafter be reduced (if necessary
, to zero); provided, however, that the Executive may elect to have the
-------- -------
noncash Severance Payments reduced (or eliminated) prior to any reduction
of the cash Severance Payments.
(B) For purposes of this Section 6.2, (i) no portion of the Total
Payments the receipt or enjoyment of
9
<PAGE>
which the Executive shall have waived at such time and in such manner as
not to constitute a "payment" within the meaning of section 280G(b) of the
Code shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which, in the opinion of the accounting firm
which was, immediately prior to the Change in Control, the Company's
independent auditor (the "Auditor"), does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code, including by
reason of section 280G(b)(4)(A) of the Code, (iii) the Severance Payments
shall be reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered within
the meaning of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section 280G of the
Code, in the opinion of the Auditor, and (iv) the value of any noncash
benefit or any deferred payment or benefit included in the Total Payments
shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
(C) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that, notwithstanding the
good faith of the Executive and the Company in applying the terms of this
Section 6.2, the Severance Payments paid to or for the Executive's benefit
are in an amount that would result in
10
<PAGE>
any portion of such Severance Payments being subject to the Excise Tax,
then the Executive shall have an obligation to pay the Company upon demand
an amount equal to the sum of (i) the excess of the Severance Payments paid
to or for the Executive's benefit over the Severance Payments that could
have been paid to or for the Executive's benefit without any portion of
such Severance Payments being subject to the Excise Tax; and (ii) interest
on the amount set forth in clause (i) of this sentence at the rate provided
in section 1274(b)(2)(B) of the Code from the date of the Executive's
receipt of such excess until the date of such payment.
(D) Anything in this Agreement to the contrary notwithstanding,
if the Severance Payments are reduced to zero and the Auditor determines
that any portion of the Total Payments would nevertheless be subject to the
Excise Tax, then the cash Total Payments that are not Severance Payments
shall also be reduced (but not below zero) to the extent necessary so that
no portion of the Total Payments will be subject to the Excise Tax, but
only if (A) the net amount of such Total Payments, as so reduced (and after
subtracting the net amount of federal, state and local income taxes on such
reduced Total Payments) is greater than or equal to (B) the net amount of
such Total Payments without such reduction (but after subtracting the net
amount of federal, state and local income taxes on such Total Payments and
11
<PAGE>
the amount of Excise Tax to which the Executive would be subject in respect
of such unreduced Total Payments); provided, however, that the Executive
-------- -------
may elect to have the noncash Total Payments reduced (or eliminated) prior
to any reduction of the cash Total Payments. For purposes of this Section
6.2(D), in calculating the Excise Tax, no portion of such Total Payments
shall be taken into account which, in the opinion of the Auditor,
constitutes reasonable compensation for services actually rendered, within
the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base
Amount allocable to such reasonable compensation.
(E) If the Executive is a non-resident alien (within the meaning of
the Code) or an employee of one or more of the Company's foreign
subsidiaries, the provisions of this Section 6.2 shall be applied under the
principles of sections 280G and 4999 of the Code, irrespective of whether
such provisions are applicable to the Executive.
6.3 (A) Subject to Section 6.3(B) below, the payments provided
in Section 6.1(A) and (C) hereof shall be made as soon as practicable, but
in no event later than the sixtieth (60th) day following the Date of
Termination. At the time that payments are made under this Agreement, the
Company shall provide the Executive with a written statement setting forth
the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice
the Company has received from the Auditor or other advisors or
12
<PAGE>
consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
(B) If the Company, based on written advice of reputable
counsel, a copy of which shall be provided to the Executive, determines
that any portion of the Total Payments would not be deductible for federal
income tax purposes solely as a result of section 162(m) of the Code (after
taking into account all other compensation and benefits paid to the
executive), then the portion of the Severance Payments otherwise payable in
the then current year shall be reduced, but not below zero, by the amount
of any such nondeductible amount. In such event, the Company shall pay the
amount by which the Severance Payments are so reduced to the Executive at
the earliest possible time that such amount may be paid to the Executive
without such amount being nondeductible as a result of section 162(m) of
the Code. If any other agreement between the Company and the Executive
provides for the deferral of payments from the Company to the Executive
solely as a result of the application of section 162(m) of the Code, this
Section 6.3(B) shall prevail and all deferrals shall be made first from the
Severance Payments before any amounts are deferred under any other
arrangements solely as a result of the application of section 162(m) of the
Code.
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in connection with any tax audit or
proceeding to the extent
13
<PAGE>
attributable to the application of section 4999 of the Code to any payment
or benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require, which written requests may be submitted
from time to time as such fees and expenses are incurred.
6.5 The Company shall not be required to fund in advance the
amounts and benefits payable under this Agreement until the earlier of the
occurrence of a Change of Control or the approval by the shareholders of
the Company of a transaction the consummation of which will constitute a
Change in Control (a "Funding Event"). Upon the occurrence of a Funding
Event, the Company shall immediately contribute to an irrevocable grantor
trust of which the Executive is the beneficiary and a third-party is the
trustee (the "Trust"), an amount in cash equal to 120% of the amounts that
would become payable to the Executive under this Agreement (determined as
if the Funding Event was a Change in Control and the Executive terminated
his employment for Good Reason immediately thereafter). No amount in the
Trust may revert to the Company until 90 days following the later of the
expiration of the Term or the date on which all amounts due the Executive
under this Agreement have been paid to the Executive. Notwithstanding the
above, if the Executive has made a claim against the Company for amounts or
benefits
14
<PAGE>
under this Agreement, no amounts from the Trust shall revert to the Company
while such claim is pending. To the extent any provision of this Agreement
provides for a payment from the Company to the Executive, the Company may
direct the trustee of the Trust to make such payment to the extent that the
assets that would remain in the Trust after making such payment are
reasonably expected to be sufficient to pay or provide such additional
amounts or benefits as may thereafter be due the Executive under this
Agreement.
7. Termination Procedures and Compensation During Dispute.
------------------------------------------------------
7.1 Notice of Termination. After a Change in Control and during the
---------------------
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 10 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of a majority of the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive,
15
<PAGE>
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect to any
-------------------
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days (except in the case of a Termination for Good Reason) nor
more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days
------------------------------
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning whether such termination is for Cause or for Good Reason, the
16
<PAGE>
Date of Termination shall be extended until the earlier of (i) the date on which
the Term ends, (ii) the date on which the Executive commences employment of a
comparable nature, or (iii) the date on which the dispute is finally resolved,
either by mutual written agreement of the parties or by a final judgment, order
or decree of an arbitrator or a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided, however, that the Date of
-------- -------
Termination shall be extended by a notice of dispute given by the Executive only
if such notice is given in good faith and the Executive pursues the resolution
of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs
---------------------------
following a Change in Control and during the Term and the Date of Termination is
extended in accordance with Section 7.3 hereof, the Company shall continue to
pay the Executive the full compensation in effect when the notice giving rise to
the dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with
Section 7.3 hereof. Amounts paid under this Section 7.4 shall be offset against
or reduce any other amounts due under Section 6 this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
-------------
employment with the Company terminates during the
17
<PAGE>
Term, the Executive is not required to seek other employment or to attempt in
any way to reduce any amounts payable to the Executive by the Company pursuant
to Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or
benefit provided for in this Agreement (other than Section 6.1(B) hereof) shall
not be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
-----------------------------
9.1 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
18
<PAGE>
9.2 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of the
Executive's estate.
10. Notices. For the purpose of this Agreement, notices and all
-------
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to the Executive, to the address inserted below the Executive's signature on the
final page hereof and, if to the Company, to the address set forth below, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Company:
York International Corporation
631 S. Richland Avenue
York, PA 17403
Attention: Corporate Secretary
19
<PAGE>
11. Miscellaneous.
-------------
11.1 No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
11.2 This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
-------- -------
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event that
the Executive's employment with the Company is terminated on or following a
Change in Control, by the Company other than for Cause or by the Executive for
Good Reason.
11.3 The validity, interpretation, construction and performance of
this Agreement shall be governed by the internal laws of the Commonwealth of
Pennsylvania without reference to principles of conflicts of law.
11.4 All references to sections of the Exchange Act or the Code shall
be deemed also to refer to any successor provisions to such sections.
20
<PAGE>
11.5 Any payments provided for hereunder shall be paid net of any
applicable withholding required under foreign, federal, state or local law and
any additional withholding to which the Executive has agreed.
11.6 The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total performance
after the expiration of the Term (including, without limitation, those under
Sections 6 and 7 hereof) shall survive such expiration.
12. Validity. The invalidity or unenforceability of any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
-----------------------------------
14.1 All claims by the Executive for benefits under this Agreement
shall be in writing and shall be directed to, and first determined by, the
Committee. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement
relied upon.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively
21
<PAGE>
by arbitration in Philadelphia, Pennsylvania in accordance with the rules of the
American Arbitration Association then in effect; provided, however, that the
-------- -------
evidentiary standards set forth in this Agreement shall apply. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary, the Executive
shall be entitled to seek specific performance of the Executive's right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement and the Company
shall be entitled to seek a declaratory judgment to the effect that the
Executive is not entitled to be so paid.
14.3 The Company shall also pay to the Executive all legal fees and
expenses incurred by the Executive in disputing any issue hereunder relating to
the termination of the Executive's employment or in seeking to enforce any
benefit or right provided by this Agreement, but only if, as a result of such
dispute, the Company pays additional amounts or provides additional benefits to
the Executive.
15. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
22
<PAGE>
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the manner in which the Board
believes that the Executive has not substantially performed the Executive's
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this
23
<PAGE>
provision, no claim by the Company that Cause exists shall be given effect
unless the Company establishes to the Committee by clear and convincing evidence
that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(I) The acquisition by any Person of beneficial ownership
of 30% or more of the then outstanding shares of common stock of the
Company (the "Out standing Company Common Stock); provided, however,
that for purposes of this Section 15(G) the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Company or (ii) any acquisition in connection with a
transaction described in clauses (i) or (ii) of Section 15(G)(III)
below; or
(II) 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
24
<PAGE>
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
(III) 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 (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 60% 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,
25
<PAGE>
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; or
(IV) A complete liquidation or dissolution of the Company.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(I) "Committee" shall mean (i) the individuals who, on the date six
months before a Change in Control, constitute the Compensation Committee of the
Board, plus (ii) in the event that fewer than three individuals are available
from the group specified in clause (i) above for any reason, such individuals as
may be appointed by the individual or individuals so available (including for
this purpose any individual or individuals previously so appointed under this
clause (ii)).
26
<PAGE>
(J) "Company" shall mean York International Corporation and, except
in determining under Section 15(G) hereof whether or not any Change in Control
of the Company has occurred, shall include (i) any successor to its business
and/or assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise and (ii) where applicable, any 50% or greater subsidiary of
York International Corporation by which the Executive is employed.
(K) "Date of Termination" shall have the meaning set forth in Section
7.2 hereof.
(L) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
27
<PAGE>
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Funding Event" shall have the meaning set forth in Section 6.5
hereof.
(Q) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii) and (iii) of the second sentence of
Section 6.1 hereof (treating all references in paragraphs (I) through (V) below
to a "Change in Control" as references to a "Potential Change in Control"), of
any one of the following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described in paragraph (I),
(II) or (V), below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties
materially inconsistent with the Executive's status as an executive of
the Company or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
28
<PAGE>
(II) any change in the Executive's total compensation and
benefits package from the Company that, in the aggregate, materially
decreases the Executive's total compensation. Such changes shall
include, but not be limited to, a decrease in the Executive's annual
base salary, a decrease in any incentive compensation opportunity, a
decrease in any material benefit plan, program or policy in which the
Executive is participating at the time of the Change in Control, or
the taking of any action by the Company that would adversely affect
the Executive's participation in or materially reduce the Executive's
opportunity to receive benefits under any such benefit plan, program
or policy or that would deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the change in Control;
provided, however, that no single decrease shall be determinative, but
rather the aggregate of all such decreases and any increases in
compensation or benefits shall determine whether there has been a
material decrease in the Executive's total compensation and benefits
package;
(III) the relocation of the Executive's principal place of
employment to a location more than 35 miles from the Executive's
principal place of
29
<PAGE>
employment immediately prior to the Change in Control or the Company's
requiring the Executive to be based anywhere other than such principal
place of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent substantially
consistent with the Executive's business travel obligations prior to
the Change in Control;
(IV) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation, or to pay to the
Executive any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7)
days of the date such compensation is due; or
(V) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
30
<PAGE>
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(R) "Notice of Termination" shall have the meaning set forth in
Section 7.1 hereof.
(S) "Pension Plan" shall mean any tax-qualified, supplemental or
excess benefit pension plan maintained by the Company and any other plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits.
(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
(U) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
31
<PAGE>
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if consummated,
would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or more of
either the then outstanding shares of common stock of the Company or
the combined voting power of the Company's then outstanding
securities (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its
affiliates); or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(V) "Retirement" shall be deemed the reason for the termination by
the Executive of the Executive's employment if such employment is terminated in
accordance with the Company's retirement policy, including early retirement,
generally applicable to its salaried employees.
(W) "SERP" shall mean the York International Corporation Supplemental
Executive Retirement Plan.
32
<PAGE>
(X) "Severance Payments" shall have the meaning set forth in Section
6.1 hereof.
(Y) "Term" shall mean the period of time described in Section 2
hereof (including any extension, continuation or termination described therein).
(Z) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
(AA) "Trust" shall have the meaning set forth in Section 6.5 hereof.
YORK INTERNATIONAL CORPORATION
By:________________________________
Name: Wayne J. Kennedy
Title: Vice President,
Human Resources
By:________________________________
EXECUTIVE
Address:
--------------------------------
--------------------------------
--------------------------------
(Please print carefully)
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Condensed Statements of Operations for the Nine Months Ended
September 30, 1997 (Unaudited), the Consolidated Condensed Balance Sheets at
September 30, 1997 (Unaudited), and the Consolidated Condensed Statements of
Cash Flows for the Nine Months Ended September 30, 1997 (Unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,788
<SECURITIES> 0
<RECEIVABLES> 498,937
<ALLOWANCES> 18,621
<INVENTORY> 597,318
<CURRENT-ASSETS> 1,254,851
<PP&E> 667,600
<DEPRECIATION> 302,345
<TOTAL-ASSETS> 2,033,728
<CURRENT-LIABILITIES> 656,576
<BONDS> 406,113
219
0
<COMMON> 0
<OTHER-SE> 752,240
<TOTAL-LIABILITY-AND-EQUITY> 2,033,728
<SALES> 2,434,944
<TOTAL-REVENUES> 2,434,944
<CGS> 1,922,016
<TOTAL-COSTS> 1,922,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,038
<INTEREST-EXPENSE> 30,296
<INCOME-PRETAX> 119,744
<INCOME-TAX> 38,927
<INCOME-CONTINUING> 80,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,847
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.86
</TABLE>
