<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
York International Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
York International Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LETTERHEAD OF YORK INTERNATIONAL CORPORATION APPEARS HERE]
NOTICE OF 1997 ANNUAL MEETING
PROXY STATEMENT
ANNUAL FINANCIAL STATEMENTS AND REVIEW OF OPERATIONS
TO THE STOCKHOLDERS
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of York International Corporation (the "Company"). It will be held at the
Yorktowne Hotel, York, Pennsylvania on Thursday, May 1, 1997 at 10:00 a.m., EDT,
to consider and act on the following matters:
1. Election of a Board of Directors to hold office for one year.
2. Approval of the Amended and Restated 1992 Omnibus Stock Plan.
3. Ratification of the appointment of KPMG Peat Marwick LLP as independent
accountants.
4. The transaction of any other business properly brought before the
meeting.
Stockholders of record at the close of business on March 12, 1997 will be
entitled to notice of and to vote at the meeting.
If you cannot attend the meeting, PLEASE TAKE THE TIME TO PROMPTLY SIGN,
DATE AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE WE HAVE PROVIDED. A majority of
the outstanding shares of Common Stock must be represented at the meeting in
order to transact business, and regardless of the number of shares you own, your
proxy is important in fulfilling this requirement. THE PROMPT RETURN OF YOUR
PROXY WILL SAVE THE EXPENSE INVOLVED IN FURTHER COMMUNICATIONS. If you choose to
attend the meeting, you may vote in person, even if you have previously sent us
your proxy.
By Order of the Board of Directors
JANE G. DAVIS
Vice President, Secretary and
General Counsel
March 25, 1997
<PAGE>
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by
York International Corporation (the "Company") of proxies to be voted at the
1997 Annual Meeting of Stockholders to be held on May 1, 1997 at 10:00 a.m.,
EDT, at the Yorktowne Hotel, York, Pennsylvania, and at any adjournment or
postponement thereof. The expense of preparing, printing and mailing this proxy
statement and the proxy materials will be borne by the Company. The Company has
engaged Chase Mellon Shareholder Services, L.L.C. to assist in the solicitation
of proxies from stockholders for a fee of up to $4,500 plus reimbursement of its
out-of-pocket expenses. In addition to solicitations by mail, regular employees
of the Company without additional compensation, as well as employees of Chase
Mellon Shareholder Services, L.L.C., may solicit proxies in person or by
telephone. The Company will reimburse brokerage houses and other custodians,
nominees, and fiduciaries for the costs of sending this proxy statement and the
proxy materials to their principals.
Any proxy may be revoked by a stockholder at any time prior to its use by
(i) executing another proxy at a later date, (ii) delivering a written notice to
any of the persons named in the proxy, or (iii) voting in person at the 1997
Annual Meeting.
Holders of record of outstanding common stock of the Company, $.005 par
value per share ("Common Stock"), at the close of business on March 12, 1997
(the "Record Date") are entitled to notice of and to vote at the 1997 Annual
Meeting. Each share of Common Stock is entitled to one vote. There is no
provision for cumulative voting. Shares represented by any proxy properly
executed and received by the Company will be voted at the meeting in accordance
with the proxy or, if the proxy does not specify, in accordance with the
recommendation of the Board of Directors. See "Vote Required to Approve Matters"
for a description of quorum and voting requirements and the effect of
abstentions and "broker non-votes" on such requirements. On March 12, 1997, the
Company had 43,475,318 shares of Common Stock outstanding and entitled to vote
at the meeting (45,769,399 shares if adjusted to include all stock options
exercisable within sixty days after March 12, 1997).
The principal executive offices of the Company are located at 631 South
Richland Avenue, York, Pennsylvania 17403. The approximate date on which this
proxy statement and enclosed form of proxy will be mailed to stockholders is
March 25, 1997.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of Directors to be elected at
eight. All Directors now in office are standing for re-election. Proxies
solicited hereby cannot be voted for a greater number of persons than the number
of nominees named.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
Unless contrary instructions are given in a proxy, the persons named as
proxy voters will vote in favor of the nominees listed below to serve for the
coming year and until their successors are elected and qualified.
The Company has no reason to believe that any nominee will be unable to
serve as a Director. However, if any nominee should become unable to serve, the
shares represented by a proxy will be voted for a substitute nominee designated
by the Board of
1
<PAGE>
Directors. In nominating candidates for the Board of Directors, the Directors
take into account certain considerations. The first is that the Board of
Directors should be composed of a majority of independent Directors. The second
is that nominees should bring to the Board experience in a field relevant to the
Company's operations, such as manufacturing, marketing, technology or finance.
The third is that candidates of different ages, races and genders should be
considered in order to provide the Company with the benefits of diversity.
Should a Board vacancy occur, the Board will take every reasonable step to
ensure that candidates meeting the above criteria are in the pool from which
nominees are chosen.
<TABLE>
<CAPTION>
Name and Age Other Positions with the Company Director
on Record Date or Nominee's Principal Occupation Since
-------------- --------------------------------- -----
<S> <C> <C>
Robert N. Pokelwaldt (60).................. Chairman of the Board of Directors, 1991
President and Chief Executive Officer
Malcolm W. Gambill (66).................... Retired Chairman of the Board and Chief 1993
Executive Officer of Harsco Corporation
Robert F. B. Logan (64).................... Retired Chairman of the Board and Chief 1988
Executive Officer of Banc One Arizona
Corporation and Senior Executive of
Banc One Corporation's Western
Region
Gerald C. McDonough (68)................... Private Business Consultant 1988
Donald M. Roberts (61)..................... Retired Vice Chairman and Treasurer of 1988
United States Trust Company of New York
and U.S. Trust Corporation
James A. Urry (43)......................... Vice President of Citicorp Venture 1992
Capital Ltd.
John E. Welsh, III (46).................... Vice Chairman of Mobile 1990
Telecommunications Technologies
Corporation
Walter B. Wriston (77)..................... Private Business Consultant 1992
</TABLE>
Mr. Pokelwaldt has been Chairman of the Board of Directors since January
1993 and President, Chief Executive Officer and Director of the Company since
June 1991. Prior thereto he was 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.
Pokelwaldt is a Director of Mohawk Industries, Inc.
Mr. Gambill was Chairman of the Board of Harsco Corporation from 1991 until
he retired in 1994. Mr. Gambill was Harsco's Chief Executive Officer from 1987
to 1993 and its President from 1987 to 1991.
2
<PAGE>
Mr. Logan was Chairman of the Board and Chief Executive Officer of Banc One
Arizona Corporation and Bank One Arizona, N.A. and Senior Executive of Banc One
Corporation's Western Region from April 1995 until his retirement on March 31,
1996. From April 1993 until April 1995, Mr. Logan was a private business
consultant. Prior thereto he was with Valley National Bank, as President and
Chief Operating Officer from January 1990 until April 1993 and as Senior
Executive Vice President from May 1989 to January 1990. Mr. Logan was President
and Chief Operating Officer of Alexander Hamilton Life Insurance Company of
North America from October 1988 to April 1989, an independent financial advisor
from October 1986 to October 1988, and Group Chief Executive and Deputy Chairman
of Samuel Montagu & Co. (Holdings) Limited from March 1985 to July 1986.
Mr. McDonough has been a private business consultant since 1988. Prior
thereto he was Chairman and Chief Executive Officer of Leaseway Holdings, Inc.
from 1987 to July 1988 and Chairman and Chief Executive Officer of Leaseway
Transportation Corp. from 1982 to 1987. Mr. McDonough is a Director of Brush-
Wellman Corporation, Commercial Intertech Corporation, Associated Estates Realty
Corporation, and CUNO, Inc. and is a Trustee of The Fidelity Funds.
Mr. Roberts was Vice Chairman and Treasurer of the United States Trust
Company of New York and its parent, U.S. Trust Corporation from February 1990
until his retirement in September 1995. Prior thereto Mr. Roberts was Executive
Vice President and Treasurer of both companies from January 1989 to February
1990 and Executive Vice President of both companies from November 1979 to
January 1989. Mr. Roberts is a Director of Burlington Resources, Inc.
Mr. Urry has been a Vice President of Citicorp Venture Capital Ltd. since
1989 and has been Vice President of Citibank, N.A. since 1986. He is a Director
of CORT Business Services Corporation, AmeriSource Health Corporation, Hancor
Holdings, CLARK Material Handling Corporation, IKS Corporation, Palomar
Products, Inc. and Recreation Vehicle Products Company.
Mr. Welsh has been Vice Chairman of Mobile Telecommunications Technologies
Corporation since May 1995 and its Managing Director since 1992. From 1990 to
1992, Mr. Welsh was a Managing Director of Prudential-Bache Interfunding Inc.
Prior thereto he was a Managing Director of Prudential-Bache Securities, Inc.
from 1985 to 1990 and Co-Head of its Mergers and Acquisitions Department from
1988 to 1990. Mr. Welsh is a Director of Mobile Telecommunications Technologies
Corporation.
Mr. Wriston has been a private business consultant since he retired as the
Chairman and Chief Executive Officer of Citicorp in 1984. Mr. Wriston is a
Director of Tandem Computers Incorporated, ICOS Corporation, Cygnus, Inc.,
United Meridian Corporation, and Vion Pharmaceuticals, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit and Finance Committee, a Compensation Committee
and no standing Nominating Committee. Set forth below is a description of the
functions of the Company's committees and the members of the Board of Directors
who serve on these committees.
Audit and Finance Committee. The Audit and Finance Committee, which is
composed exclusively of outside Directors, recommends to the Board of Directors
the independent auditors, reviews the proposed scope of the audit and the
auditors' reports and approves the audit fees to be paid. The Committee also
reviews with the independent auditors and with the Company's financial and
accounting officers the adequacy and effectiveness of the Company's internal
auditing and accounting procedures
3
<PAGE>
and its financial controls. The Committee is also responsible for monitoring
compliance with the Company's ethics policies and applicable laws and
regulations. The members of the Audit and Finance Committee are Messrs.
McDonough, Roberts and Welsh. The Audit and Finance Committee held two meetings
in 1996.
Compensation Committee. The Compensation Committee, which is composed
exclusively of outside Directors, recommends to the Board of Directors the
salaries of all corporate officers of the Company, all division and subsidiary
presidents and general managers and certain other highly compensated employees.
It also determines, subject to further approval of the Board of Directors, the
fees for Directors and supervises the administration of all benefit plans and
other matters affecting executive compensation. The members of the Compensation
Committee are Messrs. Wriston, Gambill, Logan, and Urry. The Compensation
Committee held three meetings in 1996.
DIRECTOR COMPENSATION
The Company pays Directors who are not employees of the Company an annual
retainer of $24,000, a fee of $1,000 for attendance at each regular and special
meeting of the Board or any Committee and, for Committee chairmen, an annual
retainer of $2,500. Directors are reimbursed for expenses incurred in attending
Board of Directors and Committee meetings. Directors who are not employees of
the Company do not participate in any pension or health and welfare plans of the
Company.
Directors who are not employees of the Company may elect to defer 100% of
their annual retainer and meeting fees pursuant to the Company's deferred
compensation plan. Amounts deferred are credited to a reserve fund and are
invested in one of several investment options selected by the Director. The
investment options available are those in which employees may invest funds under
the York International Investment Plan, together with an option to invest in
Common Stock of the Company at fair market value. Dividends payable upon such
Common Stock are reinvested in Common Stock of the Company. Upon termination of
the Director's services with the Company, the amounts allocated to each Director
in the reserve fund will be paid to the Director in a lump sum or installments,
with investments in Common Stock of the Company distributed as stock.
On May 2, 1996 each of the non-employee Directors received an option to
purchase 2,000 shares of the Company's Common Stock pursuant to the Company's
Amended and Restated 1992 Omnibus Stock Plan. Each person who serves as a
Director (and is not an employee of the Company) as of the annual meeting of
stockholders or who becomes a Director within six months after such meeting is
entitled under such plan to an option to purchase 2,000 shares of Common Stock
exercisable at a price equal to the fair market value of the stock on the date
of grant. The options are not exercisable immediately and become exercisable to
the extent of 25% of the underlying shares on each of the next four
anniversaries of the date of grant, subject to acceleration in the event of
certain changes in control of the Company. The options have a ten-year term but
expire sooner if the holder ceases to be a Director.
Directors and members of Committees of the Board of Directors who are
employees of the Company are not compensated for their service as Directors.
Mr. Pokelwaldt is the only Director who is an employee of the Company.
The Board of Directors held eight meetings in 1996. Each of the Directors
attended at least 75% of the aggregate of the meetings of the Board and of the
Committee on which he served.
4
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
Relationship of Compensation to Performance
The Compensation Committee believes that the compensation of the Company's
officers should provide a strong incentive to achieve the Company's performance
objectives. The objectives, which are established by the Board of Directors in
tandem with management, are intended to maximize corporate and divisional
performance and, ultimately, deliver strong value to the stockholders.
Consequently, in addition to salary, a significant portion of cash compensation
is in the form of an annual bonus, which is paid only if certain financial
objectives are met and which can be larger if such financial objectives are
exceeded. The more senior an officer, the more his or her total compensation
depends on the bonus payment. The Company's Incentive Compensation Plan also
contains a Mid-Term Program that provides for the grant of Performance Units to
be earned over a longer measurement period based on the Company's cumulative
earnings per share and total return to stockholders. In addition, the
Compensation Committee grants stock options or may grant restricted stock,
designed to provide long-term incentives to key employees and tie their
interests directly to those of the Company's stockholders.
Salaries
The Compensation Committee sets the base salary of the Chief Executive
Officer and of each of the other officers based on a number of factors,
including level of responsibility, tenure with the Company, financial
performance of the Company, prior individual performance, and comparable
salaries for officers at other large industrial corporations. The Committee
believes that base salary levels should be competitive with the base salaries
(excluding bonuses) of companies in comparable industries and that the
opportunity to increase compensation above base salaries should be directly
related to the achievement of objective financial performance targets. The
companies considered by the Committee include a larger number and broader range
of companies than are included in the S & P Electrical Equipment Index, shown in
the Stock Performance Graph below, reflecting the Committee's view that the
employment market for the Company's officers includes a broader range of
companies than that within which the Company should be compared for financial
performance purposes. The services of a prominent executive compensation
consulting firm are used in determining market practice for all forms of
executive compensation.
Performance-Based Bonuses
Annual Cash Program - The Company pays annual cash bonuses under the Annual
Cash Program of its Incentive Compensation Plan. Each year, the Company
establishes financial objectives for its various business units for the
succeeding year which are, in turn, used to establish overall targets for the
financial performance of the Company. For 1996, the financial objectives
selected were earnings before interest and taxes ("EBIT") with a capital charge
for net capital employed and goodwill for the operating divisions and earnings
per share ("EPS") for the Company. The financial objectives are presented to
the Compensation Committee, which approves threshold, expected and
overachievement targets based on these objectives. Each of the Company's
management employees, including its executive officers, is eligible each year to
earn a performance bonus equal to a percentage of base salary. The applicable
percentage depends on the employee's level of responsibility and on the extent
to which targets are achieved (i.e., the more senior the employee and the
greater the level of performance of the area for which he or she is responsible,
the higher the applicable percentage used to calculate his or her bonus).
5
<PAGE>
Bonuses for each individual are primarily based upon the performance of
that individual's business unit. In the case of those individuals with
responsibility at the corporate level, such as the Chief Executive Officer and
other corporate officers, bonuses are based on overall Company performance. A
portion of the bonus of high level individuals in the business units is also
based on overall Company performance. Bonus awards to the executive officers
listed in the Summary Compensation Table are disclosed in that table.
Mid-Term Program - The Mid-Term Program of the Incentive Compensation Plan
is intended to cover successive Measurement Periods. The objectives for the
Measurement Period are approved by the Compensation Committee, which also
approves the number of Performance Units granted, based on market competitive
data and job responsibilities. At the end of the Measurement Period, the number
of Performance Units earned, if any, is based on the extent to which the
established objectives have been met. The value of each Performance Unit earned
will be equal to the average of the closing sale price of the Company's Common
Stock during the 120 consecutive trading days ending on the last day of the
Measurement Period.
In March 1996 and February 1997, the Compensation Committee approved Mid-
Term Performance Objectives for the three-year periods from 1996 through 1998
and 1997 through 1999, respectively, based on cumulative earnings per share and
total return to stockholders as compared to the Industrial Component of the
Standard & Poor's Midcap 400 Index and granted Performance Units that can be
earned based on the achievement of these Mid-Term Objectives.
Stock Awards
In order to align the interests of management more closely with the long
term interests of the Company's stockholders, the Compensation Committee also
issues stock options and may issue restricted stock, pursuant to the Company's
1989 Employee Stock Option Plan and the Amended and Restated 1992 Omnibus Stock
Plan. The Committee grants options to individual employees based on its
evaluation of a number of factors, including level of base salary, level of
responsibility, expected level of contribution to the Company, prior individual
performance and prior stock option and restricted stock grants. The largest
grants are awarded to the most senior employees, who, in the view of the
Compensation Committee, have the greatest potential impact on the Company's
profitability and growth. However, the Committee also awards options to
individuals at all levels of the organization in order to focus employee
attention on the performance of the Company's stock. Options under the plan may
be either incentive stock options or non-qualified stock options at the
discretion of the Compensation Committee. In 1996, the Committee granted stock
options exercisable at fair market value to certain key employees, including the
Company's officers. Stock option awards to the executive officers named in the
Summary Compensation Table are disclosed in that table. The Company has never
repriced any stock options. In 1996, the Compensation Committee did not grant
any restricted stock awards to executive officers named in the Summary
Compensation Table.
In August 1994, in order to more effectively retain certain key employees,
the Compensation Committee awarded shares of restricted stock to them, including
to the executive officers listed in the Summary Compensation Table. Forty
percent of these shares vested in 1996. Unless vesting is accelerated in
certain unusual events such as death, disability, or termination of employment
as a result of certain changes in control, 20% of the shares will vest in each
of the three years thereafter. Under certain circumstances, the vesting of
shares issued to certain highly-compensated officers will be delayed until such
time as the Company's deduction of compensation expense associated with such
vesting
6
<PAGE>
would not be limited by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") (see below). If an award recipient is terminated for
cause, voluntarily terminates his or her employment with the Company, or
breaches certain obligations of confidentiality, he or she will forfeit any
unvested shares.
Compensation of Chief Executive Officer
Mr. Pokelwaldt's compensation, including base salary, bonus award and stock
option award, was determined by the Compensation Committee in accordance with
the criteria described above in the "Relationship of Compensation to
Performance," "Salaries," "Performance-Based Bonuses" and "Stock Awards"
sections of this report.
Mr. Pokelwaldt received an increase in his base compensation to $632,000
per annum effective March 1, 1996, which reflects the Compensation Committee's
assessment of his performance during the prior year. In 1995, the Company
reported sales of almost $3 billion, an increase of 21% over 1994, and reported
record operating income of $235.5 million, an increase of 27.3% over the prior
year. During 1995, two significant acquisitions were completed: Evcon
Industries, which increased the Company's residential products business in the
United States, and Gram Refrigeration of Denmark, which increased the Company's
worldwide presence in industrial refrigeration. Other strategic acquisitions and
joint ventures were concluded which expanded the Company's global opportunities
in Thailand, South Africa and the Peoples' Republic of China. The Committee also
wanted to align Mr. Pokelwaldt's salary with that of chief executive officers in
comparable companies.
In 1996, Mr. Pokelwaldt's bonus was based on EPS for the Company. He
received a bonus of $543,090 for the year, representing 85.9% of his 1996 base
salary. This reflects the level of achievement by the Company of its 1995 EPS
target. In 1996, Mr. Pokelwaldt also received a grant of 9,269 Performance
Units under the Mid-Term Program of the Company's Incentive Compensation Plan.
Achievement of the targets on which the earning of these units will be based,
cumulative EPS and the Company's total return to stockholders compared to a
published index, will be measured at the end of 1998. Mr. Pokelwaldt was also
awarded options to purchase 40,000 shares of the Company's Common Stock (on
terms described above under "Stock Awards") at the market price on the date of
grant, reflecting the view of the Compensation Committee and the Board of
Directors of Mr. Pokelwaldt's expected substantial contribution to the future
progress and growth of the Company's business.
Additional details of Mr. Pokelwaldt's compensation over the past three
fiscal years are disclosed in the Summary Compensation Table and in other
sections of this "Executive Compensation" section.
In making its compensation decisions, the Committee considers the effect of
Section 162(m) of the Code, which limits to $1,000,000 the allowable federal
income tax deduction for compensation paid to the Company's Chief Executive
Officer and next four most highly compensated officers. The limit on
deductibility does not apply to performance-based compensation paid pursuant to
a plan approved by the stockholders. The Company expects that expense
associated with stock option awards made under the Company's Amended and
Restated 1992 Omnibus Stock Option Plan will not be limited by Section 162(m)
since the Company obtained stockholder approval of this Plan in 1995. The
expense associated with restricted share awards that are not performance-based
may be limited under Section 162(m) and, if that should be the case, the
Committee may defer the vesting of such awards until such time as the associated
expense is fully deductible. In 1996, the Company obtained stockholder approval
of its Incentive Compensation Plan and does not anticipate that the expense
associated with this Plan will be limited by Section 162(m).
7
<PAGE>
In the opinion of the Committee, the Company's performance-based cash
compensation system, together with the grant of fair market value options and,
in limited circumstances, restricted stock awards, provides all management
employees, including executive officers, with an incentive to achieve objective
financial targets designed to increase stockholder value.
The foregoing report is hereby submitted by the members of the Compensation
Committee.
Walter B. Wriston, Chairman
Malcolm W. Gambill
Robert F. B. Logan
James A. Urry
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning cash compensation
paid by the Company to the Chief Executive Officer and each of the next four
most highly compensated officers of the Company for services rendered in all
capacities to the Company and its subsidiaries during the three fiscal years
ended December 31, 1996.
<TABLE>
<CAPTION>
Long Term
Compensation Awards
------------------------
Annual Securities
Compensation (1)(2) Restricted Underlying
---------------------
Stock Options All Other
Name Year Salary Bonus Award (3) Granted (4) Compensation (5)
---- ---- --------- -------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Pokelwaldt................ 1996 $618,333 $543,090 0 40,000 10,159
Chairman of the Board, President 1995 541,667 666,731 0 25,000 2,952
and Chief Executive Officer 1994 490,000 926,656 974,975 28,400 5,181
Peter C. Spellar.................... 1996 245,000 234,342 0 12,000 2,324
Vice President and President of 1995 191,911 218,643 0 10,000 1,957
Applied Systems Group 1994 179,562 257,016 545,986 4,800 741
Dean T. DuCray...................... 1996 247,500 193,944 0 10,000 3,278
Vice President and 1995 232,283 256,389 0 9,400 2,057
Chief Financial Officer 1994 216,483 364,787 584,985 9,400 2,816
Thomas D. Washburne, Jr............. 1996 237,500 151,725 0 10,000 1,658
Vice President and President of 1995 222,600 270,407 0 12,000 1,729
International Business Group 1994 207,500 344,709 584,985 10,000 1,518
Joseph D. Smith..................... 1996 189,167 191,286 0 9,000 1,882
Vice President and President of 1995 173,334 134,292 0 6,000 1,840
Airside Products Group 1994 110,000 143,682 662,983 3,000 157
</TABLE>
___________
(1) No compensation that would be categorized as "Other Annual Compensation"
was paid to officers in any of the years presented.
(2) Includes amounts deferred at the election of the officer pursuant to the
York International Investment Plan, a plan established under Section 401(k)
of the Code and the York International Corporation Executive Deferred
Compensation Plan, a non-qualified deferred compensation plan.
(3) Comprises the dollar value of the 1994 award of restricted stock,
calculated by multiplying the closing price (net of the per share purchase
price paid by the officers) of the Common Stock on the date of grant by the
number of shares awarded. The shares vested 40% on the second anniversary
of the grant and will vest 20% on each of the three subsequent
anniversaries. The number of shares represented by the awards listed in the
table are as follows: Mr. Pokelwaldt -- 25,000 shares; Mr. Spellar --
14,000 shares; Mr. DuCray -- 15,000 shares; Mr. Washburne -- 15,000 shares;
and Mr. Smith --17,000 shares. The vesting of restricted shares granted in
1994 could be delayed if the deductibility of the related compensation
expense would be limited by Section 162(m) of the Code. See "Executive
Compensation --Report of the Compensation Committee." Any dividends payable
with respect to Common Stock will be paid with respect to the restricted
stock. Unvested shares are subject to repurchase by the Company under
certain circumstances at the nominal purchase price per share. The
restricted stock holdings of the officers and the value of such holdings as
of December 31, 1996, based upon the 1996 year-end closing price (net of
the purchase price paid by the officer) are as follows: Mr. Pokelwaldt --
15,000 shares ($838,110), Mr. Spellar 8,400 shares ($469,342), Mr. DuCray
-- 9,000 shares ($502,866), Mr. Washburne -- 9,000 shares ($502,866), Mr.
Smith -- 10,200 shares ($569,915).
9
<PAGE>
(4) Excludes options to purchase Common Stock at 85% of fair market value
through automatic payroll deductions acquired in December 1996 under the
1992 Employee Stock Purchase Plan ("Purchase Plan"), in which Messrs.
Pokelwaldt, Spellar, DuCray, Washburne, and Smith each elected to
participate, and pursuant to which Mr. Spellar acquired 467 shares, Mr.
Smith acquired 437 shares and Messrs. Pokelwaldt, DuCray and Washburne each
acquired 531 shares of Common Stock.
(5) Comprises matching contributions by the Company under the York
International Investment Plan, and for Mr. Pokelwaldt and Mr. Smith under
the York International Deferred Compensation Plan, and term life insurance
premiums for the named individuals for policies with a face amount equal to
the individual's base salary, as follows:
<TABLE>
<CAPTION>
Investment Plan Insurance
Contributions Premium
--------------- ---------
<S> <C> <C>
R. N. Pokelwaldt........................ $2,177 $7,982
P. C. Spellar........................... 1,200 1,124
D. T. DuCray............................ 1,500 1,778
T. D. Washburne, Jr..................... 1,275 383
J. D. Smith............................. 1,598 284
</TABLE>
OPTION GRANTS
The following table shows, as to each person named, the options to purchase
Common Stock granted by the Company in 1996 under the Amended and Restated 1992
Omnibus Stock Plan. The grants do not include options to purchase Company stock
through automatic payroll deductions under the Purchase Plan (see note (4) to
the Summary Compensation Table above).
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
% of
Number of Total
Securities Options Potential Realizable Value at
Underlying Granted Assumed Annual Rates of Stock
Options to All Exercise Price Appreciation for Option
Granted Employees Price Per Expiration Term (End of Year Value) (1)
-----------------------------
Name (Shares) (2) in 1996 Share Date 0% 5% (3) 10% (3)
---- ----------- ------- ----- ---- -- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
R. N. Pokelwaldt....... 40,000 5.0% $46.75 03/12/06 $0 $1,176,000 $2,980,400
P. C. Spellar.......... 12,000 1.5 46.75 03/12/06 0 352,800 894,120
D. T. DuCray........... 10,000 1.3 46.75 03/12/06 0 294,000 745,100
T. D. Washburne, Jr.... 10,000 1.3 46.75 03/12/06 0 294,000 745,100
J. D. Smith............ 9,000 1.1 46.75 03/12/06 0 264,600 670,590
</TABLE>
_____________
(1) Represent arbitrarily assumed rates of appreciation of the Common Stock
price, mandated by the Securities and Exchange Commission's rules,
compounded annually over the term of the option and are not intended to
forecast possible future appreciation, if any, of the Common Stock. The
market value of the Common Stock on the date of grant was $46.75; the value
of the Common Stock at the end of the options' term based on a compounded
5% growth rate would be $76.15 per share, and based on a compounded 10%
growth rate would be $121.26 per share.
(2) The options are non-qualified, non-transferable other than by will or the
laws of descent and distribution, become exercisable in full one year from
the date of grant and are exercisable for nine years thereafter, unless
terminated sooner in the event of death, disability, retirement or
termination of employment.
10
<PAGE>
(3) No gain to the optionees is possible without an increase in stock price
which will benefit all stockholders commensurately. A zero percent gain in
stock price will result in zero dollars for the optionee.
OPTION EXERCISES AND 1996 YEAR-END OPTION VALUES
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning 1996 year-end stock option
values. None of these individuals exercised any options during 1996.
AGGREGATE YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 1996 Year-End at 1996 Year-End (1)
-------------------------- --------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------------------- --------------------------
<S> <C> <C>
R. N. Pokelwaldt.............. 122,697/40,000 3'091,607/$365,000
P. C. Spellar................. 29,700/12,000 551,538/ 109,500
D. T. DuCray.................. 36,150/10,000 686,356/ 91,250
T. D. Washburne, Jr........... 58,640/10,000 1,209,410/ 91,250
J. D. Smith................... 9,000/9,000 156,375/ 82,125
</TABLE>
___________
(1) Based upon an assumed fair market value of $55.875 per share, which was the
closing price on the New York Stock Exchange of the Common Stock on
December 31, 1996.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The following table shows, as to each person named, the Performance Units
granted by the Company in 1996 under the Mid-Term Program of the Incentive
Compensation Plan. At the end of the three-year measurement period, the number
of Performance Units earned, if any, will be based on the extent to which the
established objectives of cumulative earnings per share and total return to
stockholders as compared to the Industrial Component of the Standard & Poor's
Midcap 400 Index have been met. If the threshold objective is not met, no
Performance Units are earned. If the target objective is exceeded, additional
Performance Units can be earned, up to the number of the original grant. The
value of each Performance Unit earned will be equal to the average of the
closing sale price of the Company's Common Stock during the 120 consecutive
trading days ending on the last day of the measurement period.
11
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares, Units Performance or
or Other Other Period Until
Name Rights (#) Maturation or Payout
- ---- ---------- --------------------
<S> <C> <C>
R. N. Pokelwaldt..................... 9,269 12/31/98
P. C. Spellar........................ 2,966 12/31/98
D. T. DuCray......................... 3,168 12/31/98
T. D. Washburne, Jr.................. 3,034 12/31/98
J. D. Smith.......................... 1,573 12/31/98
</TABLE>
RETIREMENT PLANS
The Company has a defined benefit retirement plan (the "Retirement Plan")
covering the salaried employees who are not subject to collective bargaining
agreements of certain of the Company's business units. The Retirement Plan
covers each of the officers named in the Summary Compensation Table.
The following table indicates the amount of annual retirement income which
would be payable under the Retirement Plan (but for certain limitations imposed
by the Code) at normal retirement age to participants in specified salary and
bonus levels and years of credited service categories. For 1996 the Code limits
to $150,000 the amount of earnings which may be taken into account to calculate
benefits, and to $120,000 the benefits payable. The limits are adjusted
annually for inflation.
The compensation covered by the Retirement Plan consists of base salary and
bonus paid in that year. The covered compensation (excluding the effect of Code
limitations) and credited years of service, as of December 31, 1996, for each of
the officers named in the Summary Compensation Table above were as follows: Mr.
Pokelwaldt -- $741,451, 8 years; Mr. Spellar -- $315,347, 4 years; Mr. DuCray
- -- $405,283, 10 years; Mr. Washburne -- $395,263, 4 years; Mr. Smith --
$315,347, 3 years.
<TABLE>
<CAPTION>
Assumed Average Annual
Earnings for Highest
Five Consecutive
Years in 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
Preceding Retirement Service Service Service Service Service
-------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000...... $ 36,000 $ 48,000 $ 60,000 $ 72,000 $ 75,750
200,000...... 48,000 64,000 80,000 96,000 101,000
250,000...... 60,000 80,000 100,000 120,000 126,250
300,000...... 72,000 96,000 120,000 144,000 151,500
400,000...... 96,000 128,000 160,000 192,000 202,000
500,000...... 120,000 160,000 200,000 240,000 252,500
600,000...... 144,000 192,000 240,000 288,000 303,000
700,000...... 168,000 224,000 280,000 336,000 353,600
</TABLE>
The benefits shown in the above table are subject to reduction by an amount
equal to a percentage of Social Security benefits. The benefits are calculated
on a straight-life annuity basis assuming retirement at age 65.
The Company has a defined benefit supplemental retirement plan (the
"Supplemental Retirement Plan") covering certain key executive officers,
including those named in the Summary Compensation Table other than Mr. Smith.
12
<PAGE>
The following table indicates the amount of annual retirement income which
would be payable under the Supplemental Retirement Plan at normal retirement age
to participants in specified salary and bonus levels and years of credited
service categories.
The Supplemental Retirement Plan provides a retirement benefit equal to up
to 50% (based on a maximum of 20 years of credited service (no credit is given
for service beyond 20 years) and final compensation) of the officer's highest
average salary and bonus for three out of the last five years preceding
retirement. The covered compensation and credited years of service under the
Supplemental Retirement Plan based on 1996 salaries and bonuses as of December
31, 1996, would be approximately: Mr. Pokelwaldt -- $876,680, 18 years; Mr.
Spellar -- $317,295, 18 years; Mr. DuCray -- $354,310, 10 years; and Mr.
Washburne -- $338,448, 4 years.
<TABLE>
<CAPTION>
Assumed Average
Annual Earnings for
Highest Three Consecutive
Years in 5 Years 15 Years 20 Years 25 Years 30 Years 35 Years
Preceding Retirement Service Service Service Service Service
-------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$150,000............ $ 56,250 $ 75,000 $ 75,000 $ 75,000 $ 75,000
200,000............ 75,000 100,000 100,000 100,000 100,000
250,000............ 93,750 125,000 125,000 125,000 125,000
300,000............ 112,500 150,000 150,000 150,000 150,000
400,000............ 150,000 200,000 200,000 200,000 200,000
500,000............ 187,500 250,000 250,000 250,000 250,000
600,000............ 225,000 300,000 300,000 300,000 300,000
700,000............ 262,500 350,000 350,000 350,000 350,000
</TABLE>
The benefits shown in the above table are subject to reduction by an amount
equal to a percentage of Social Security benefits, benefits under the Retirement
Plan and any other retirement benefits received. The benefits are calculated on
a straight-life annuity basis assuming retirement at age 62.
The Frick/Frigid Coil Pension Plan for Salaried Employees (the "Frick
Plan"), in which Mr. Pokelwaldt participated from 1979 until his transfer to the
Retirement Plan in 1988, is intended to provide Mr. Pokelwaldt with retirement
benefits. Upon attaining age 65, Mr. Pokelwaldt is eligible to receive an annual
retirement benefit of $8,900 under the Frick Plan. Mr. Spellar also participated
in the Frick Plan. His participation was from 1979 until his transfer to the
Retirement Plan in 1992. Upon attaining age 65, Mr. Spellar is eligible to
receive an annual retirement benefit of $16,289 from the Frick Plan.
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total return on the Company's
Common Stock for the 5-year period from December 31, 1991 through December 31,
1996 to the cumulative total return for the same period of the Standard & Poor's
500 Stock Index, the Standard & Poor's Midcap 400 Index, the Industrial
Component of the Standard & Poor's Midcap 400 Index, and the Standard & Poor's
Electrical Equipment Index. The Company has in the past used the Standard &
Poor's 500 Stock Index as one of the comparisons, but intends in the future to
replace that index with the Standard & Poor's Midcap 400 Index since the Company
is included in that index. The Company is also adding the Industrial Component
of the Standard & Poor's Midcap 400 Index since that is the index against which
the Company's total return to stockholders is measured for purposes of the Mid-
Term Program of its Incentive Compensation Plan. The graph assumes that the
value of the investment in the Common Stock and each index was $100 on December
31, 1991 and that all dividends were reinvested.
COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN
AMONG YORK INTERNATIONAL, THE S&P 500 INDEX
THE S&P MIDCAP 400 INDEX, THE INDUSTRIAL COMPONENT
OF THE S&P MIDCAP 400 INDEX
AND THE S&P ELECTRICAL EQUIPMENT INDEX
[FOLLOWING DATA IS GRAPHED IN THE PRINTED PROXY DOCUMENT]
<TABLE>
<CAPTION>
Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YORK INTERNATIONAL (YRK) 100 125.78 136.69 143.60 184.05 220.34
S&P ELECTRICAL EQUIPMENT-500 100 109.50 132.12 133.60 187.57 257.60
S&P MIDCAP 400 INDEX 100 111.91 127.53 122.96 161.00 191.91
S&P 500 INDEX 100 107.62 118.46 120.03 165.13 203.05
INDUSTRIAL COMPONENT
OF THE S&P MIDCAP 400 100 110.41 126.89 125.22 158.03 183.35
--------------------------------------------------------------
</TABLE>
14
<PAGE>
OWNERSHIP OF COMMON STOCK
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of February 28, 1997 with
respect to beneficial ownership of shares of the Company's Common Stock,
assuming exercise of options exercisable within 60 days of such date, by each
Director, by each executive officer named in the Summary Compensation Table and
by all Directors and executive officers as a group. Except as otherwise noted,
the beneficial owners have sole voting and investment power as to all such
shares.
<TABLE>
<CAPTION>
Number of
Shares
Beneficially Percentage of
Name of Beneficial Owner Owned (a) Outstanding
- ------------------------ --------- -----------
<S> <C> <C>
Robert N. Pokelwaldt (b)...................... 355,905 *
Malcolm W. Gambill (c)........................ 7,568 *
Robert F. B. Logan (d)........................ 75,308 *
Gerald C. McDonough (e)....................... 68,300 *
Donald M. Roberts (f)......................... 74,377 *
James A. Urry (g)............................. 6,807 *
John E. Welsh, III (h)........................ 5,400 *
Walter B. Wriston (i)......................... 31,980 *
Peter C. Spellar (j).......................... 119,243 *
Dean T. DuCray (k)............................ 209,427 *
Thomas D. Washburne, Jr. (l).................. 105,660 *
Joseph D. Smith (m)........................... 34,066 *
All directors and executive officers of the
Company as a group (19 persons) (n)......... 1,440,384 3.31%
</TABLE>
___________
* Represents less than 1.0% of the aggregate shares of Common Stock
outstanding.
(a) Includes shares issuable upon exercise of options that are exercisable
within 60 days.
(b) Includes 162,697 shares issuable upon exercise of options.
(c) Includes 3,000 shares issuable upon exercise of options, and 2,568 shares
representing Director fees deferred into the York Common Stock Fund of the
Company's Deferred Compensation Plan.
(d) Includes 200 shares owned by Mr. Logan's wife as to which he disclaims
beneficial ownership, 3,000 shares issuable upon exercise of options, and
1,715 shares representing Director fees deferred into the York Common Stock
Fund of the Company's Deferred Compensation Plan.
(e) Includes 3,000 shares issuable upon exercise of options.
(f) Includes 13,679 shares owned by Mr. Roberts' adult child and 13,678 shares
owned by Mr. Roberts' wife on behalf of their two minor children as to
which Mr. Roberts has no voting or investment power and as to which he
disclaims beneficial ownership, 3,000 shares issuable upon exercise of
options, and 984 shares representing Director fees deferred into the York
Common Stock Fund of the Company's Deferred Compensation Plan.
(g) Includes 3,000 shares issuable upon exercise of options, and 2,807 shares
representing Director fees deferred into the York Common Stock Fund of the
Company's Deferred Compensation Plan.
(h) Includes 3,000 shares issuable upon exercise of options.
(i) Includes 3,000 shares issuable upon exercise of options.
(j) Includes 2,000 shares owned by Mr. Spellar's daughter and 30,000 shares
held in trust for his children, as to which he disclaims any beneficial
ownership, and 41,700 shares issuable upon exercise of options.
15
<PAGE>
(k) Includes 1,000 shares held in trust for the children of Mr. DuCray and
46,150 shares issuable upon exercise of options.
(l) Includes 68,640 shares issuable upon exercise of options.
(m) Includes 18,000 shares issuable upon exercise of options.
(n) Includes 548,540 shares issuable upon exercise of options.
OWNERSHIP OF OTHER BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Voting Dispositive Total Amount Percent
Authority Authority of Beneficial of
Name and Address Sole Shared Sole Shared Ownership Class
- ---------------- ---- ------ ---- ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
Loomis, Sayles & Company,
L.P. (1) 1,027,725 38,050 0 2,484,930 2,484,930 5.7%
One Financial Center
Boston, MA 02111
Brinson Partners, Inc. (2) (3) (3) (3) (3)
209 South Lasalle 0 2,345,447 0 2,345,447 2,345,447 5.4%
Chicago, IL 60604-1295
First Chicago NBD
Corporation 2,026,413 49,750 1,904,692 298,128 2,216,495 5.1%
One First National Plaza
Chicago, IL 60670 (4)
</TABLE>
___________
(1) Based on Schedule 13G filed by Loomis, Sayles & Company, L.P. with the
Securities and Exchange Commission on February 14, 1997. The Schedule 13G
does not identify any shares with respect to which there is a right to
acquire beneficial ownership.
(2) Based on a Schedule 13G filed by Brinson Partners, Inc. ("BPI") with the
Securities and Exchange Commission on February 12, 1997 on behalf of itself
and on behalf of Brinson Trust Company, a wholly owned subsidiary of BPI,
Brinson Holdings, Inc., parent of BPI, SBC Holding (USA), Inc., parent of
Brinson Holdings, Inc., and Swiss Bank Corporation, parent of SBC Holding
(USA), Inc.
(3) Schedule 13G filed by BPI indicates that each of BPI, Brinson Holdings,
Inc., SBC Holding (USA), Inc. and Swiss Bank Corporation have the
beneficial ownership indicated. The Schedule 13G indicates that Brinson
Trust Company beneficially owns 444,000 shares, 1% of the class, as to
which it has shared voting power and shared dispositive power. The Schedule
13G does not identify any shares with respect to which there is a right to
acquire beneficial ownership.
(4) Based on a Schedule 13G filed by First Chicago NBD Corporation with the
Securities and Exchange Commission on February 4, 1997 which indicates that
the shares reported were held in a fiduciary capacity by one or more
subsidiaries of First Chicago NBD Corporation. The Schedule 13G does not
identify any shares with respect to which there is a right to acquire
beneficial ownership.
16
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of Forms 3, 4 and 5 furnished to the Company with respect
to its most recent fiscal year, the Company is not aware of any person subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") with respect to the Company that failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act, except that one transaction for
Peter C. Spellar occurring on the last day of a calendar month was reported on
the Form 4 for the following month.
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO YORK INTERNATIONAL CORPORATION
AMENDED AND RESTATED 1992 OMNIBUS STOCK PLAN
INTRODUCTION
The Board of Directors has approved and recommends that the stockholders
approve the 1992 Omnibus Stock Plan, as proposed to be amended and restated (the
"Omnibus Plan") to increase the number of shares which may be issued pursuant to
awards granted under the Omnibus Plan.
The Company provides options and, in more limited instances, restricted
shares under the Omnibus Plan and under the 1989 Employee Stock Option Plan (the
"1989 Plan") as an incentive to its executives and employees to promote the
growth and profitability of the Company. Management views such awards as a means
to attract and retain highly qualified executives and key employees upon whose
judgment, skill and initiative the Company's success is largely dependent. The
Company also grants stock options to employees below the executive and
managerial levels in order to recognize their individual achievements and
provide them with a stake in the Company's long-term results. An increase in the
number of shares available for grants under the Omnibus Plan is required in
order for the Company to continue its present compensation practices.
Under the current Omnibus Plan a total of 3,000,000 shares are authorized
and 258,986 shares remain available for grant. Under the 1989 Plan, options to
purchase 130,430 shares remain available for grant. It is the intention of the
Board of Directors to terminate the 1989 Plan (except with respect to 271,756
options still outstanding) upon approval of the amended Omnibus Plan and,
therefore, not to grant the remaining 130,430 shares. As amended, the Omnibus
Plan would provide for grants of options or restricted shares with respect to a
total of 4,380,000 shares, which would permit the issuance of an additional
1,380,000 shares, including the130,430 shares which will not be issued under the
1989 Plan. In order to minimize dilution of the interest of existing
stockholders, the Board of Directors has authorized a stock repurchase program
pursuant to which shares repurchased may be used for issuance under the Omnibus
Plan.
The Board of Directors has also approved certain other changes to the
Omnibus Plan which will permit participants to transfer stock options with the
approval of the Board's Compensation Committee. This change is intended to help
participants facilitate estate planning.
The full text of the Omnibus Plan (as proposed to be amended) appears as
Annex A to this Proxy Statement. The summary of the Omnibus Plan (as proposed to
be amended) which appears below is qualified by reference to the full text of
the Omnibus Plan.
17
<PAGE>
TERM
The Omnibus Plan terminates on August 20, 2002, unless sooner terminated by
the Board of Directors. Termination of the Omnibus Plan will not affect grants
made prior to termination, but no grants will be made after termination.
ADMINISTRATION; AMENDMENT
The Omnibus Plan is administered by a committee of the Board of Directors
(the "Compensation Committee") composed of two or more Directors who are (i)
"non-employee directors," as defined in Rule 16b-3 of the Securities Exchange
Act of 1934, as amended ("Rule 16b-3") and (ii) "outside directors," as defined
in Section 162(m) of the Code. Subject to the terms of the Omnibus Plan, and to
such approvals and other authority as the Board of Directors may reserve to
itself from time to time, the Compensation Committee has the authority to (i)
select employees to participate in the Omnibus Plan, (ii) determine the terms,
conditions (including the exercise prices and terms of any options) and
restrictions, if any, subject to which grants are made, (iii) modify, extend or
renew outstanding grants, accept the surrender of outstanding grants and
substitute new grants, (iv) construe and interpret the Omnibus Plan, and (v)
adopt, amend, or rescind such rules and regulations, and make such other
determinations for carrying out the Omnibus Plan as the Compensation Committee
deems necessary or appropriate. The Compensation Committee has no authority to
administer, modify or interpret provisions relating to the grant of options to
Directors, as described below.
The Board of Directors, without further approval of the stockholders, may
amend the Omnibus Plan, except that approval of the stockholders will be
obtained if such approval is required by Rule 16b-3. Presently, approval would
be required if the effect of any such amendment would be to (i) increase the
total number of shares reserved for issuance, (ii) materially change the classes
of employees eligible to participate, or (iii) materially increase benefits
accruing to participants.
The Compensation Committee has authority to amend any outstanding grant,
provided that, without the consent of the grantee, the Compensation Committee
may not modify an outstanding grant if such modification would materially
adversely affect such grant.
ELIGIBILITY
Officers and employees of the Company and its subsidiaries who have made or
are expected to make a significant contribution and are selected by the
Compensation Committee may participate in the stock option and share award
plans. As of the date hereof, approximately 450 employees meet these criteria.
Directors who are not officers or employees of the Company are eligible only to
receive "Director Options," described below.
SECURITIES SUBJECT TO THE OMNIBUS PLAN
The number of shares of the Common Stock which may be issued under the
Omnibus Plan may not exceed 4,380,000 (subject to antidilution adjustment),
provided that the number of restricted shares awarded under the Omnibus Plan may
not exceed 3% of the total number of shares of Common Stock outstanding at the
time of any such award (i.e., as of March 12, 1997, no more than 1,304,260
shares could be issued as restricted share grants). Awards of no more than
200,000 shares may be issued to any
18
<PAGE>
individual in any given calendar year. The closing price of the Common Stock on
the NYSE on March 12, 1997 was $45.375. If any grant made pursuant to the
Omnibus Plan terminates unexercised, expires, becomes unexercisable or is
forfeited or otherwise terminated or canceled as to any shares, the shares of
Common Stock subject to such grant shall again be made available for grant
unless such shares would not be deemed available for future grants pursuant to
Rule 16b-3. In the event of any changes in the Common Stock, such as stock
splits or other events described in the Omnibus Plan, the Compensation Committee
may make appropriate adjustments in the numbers of shares subject to grants
theretofore made to participants, in the exercise price per share of stock
options theretofore granted to participants and in the number and kinds of
shares which may be distributed under the Omnibus Plan.
STOCK OPTIONS
The Omnibus Plan authorizes grants of non-qualified stock options or
incentive stock options ("ISO's") to participants from time to time as
determined by the Compensation Committee. All stock options shall have an
exercise price that is not less than the fair market value of the Common Stock
on the date the option is granted, and none may be exercised more than ten years
from the date of grant. The Compensation Committee may establish dates on which
installment portions of an option may be exercised during its term, and may
accelerate the time at which installment portions of an outstanding option may
be exercised. In the event of certain defined changes in control of the
Company, all outstanding options shall automatically become exercisable. The
Board of Directors has approved an amendment to the Omnibus Plan to include the
definition of "change in control"; this term was previously defined by reference
to the definition contained in the Company's Certificate of Incorporation at the
time the Omnibus Plan became effective.
Grants of ISO's will be subject to certain additional restrictions imposed
by law, which may be amended from time to time. The present restrictions require
that the aggregate fair market value (as defined in the Omnibus Plan) of shares
of Common Stock with respect to which all ISO's first become exercisable by any
participant in any calendar year not exceed $100,000 in order to be treated as
ISO's. Also, the exercise price of any ISO granted for a participant who owns
more than 10% of the voting power of the stock of the Company may not be less
than 110% of the fair market value of the Common Stock on the grant date and the
term of any such option may not exceed five years. Finally, ISO's may not be
transferable other than by will or the laws of descent and distribution.
The Omnibus Plan (as amended) permits the transfer of non-qualified stock
options to family members, family trusts, partnerships and limited liability
companies, to charitable or non-profit entities, and to such other persons as
the Compensation Committee may specifically approve.
Payment for shares received upon exercise of a stock option may be made in
cash, shares of Common Stock, a combination of cash and shares, or in such other
manner as determined by the Compensation Committee. The Compensation Committee
may also approve loans or loan guarantees to assist in exercise of options.
DIRECTOR OPTIONS
The Omnibus Plan provides for the grant each year of an option exercisable
for 2,000 shares of Common Stock (subject to antidilution adjustment) to each
person who is a non-employee Director immediately following the Company's Annual
Meeting or who becomes a non-employee Director within six months after such
Annual Meeting. Such grants shall be made each year immediately following the
19
<PAGE>
Annual Meeting or within six months thereafter with respect to persons who
become eligible within that period. The exercise price shall be the fair market
value on the date of grant and shall be payable in cash. The term of each option
shall be 10 years, unless sooner terminated upon the Director's becoming
ineligible to receive future grants. The options shall become exercisable over
four years, unless accelerated sooner in the event of a change in control (as
defined in the Omnibus Plan). One year from the date of grant the options shall
become exercisable to the extent of 25% of the underlying shares and on each
subsequent anniversary of the grant, to the extent of an additional 25% of the
underlying shares.
SHARE AWARDS
Shares of Common Stock may be awarded to participants from time to time as
determined by the Committee; provided that the number of restricted shares
awarded under the Omnibus Plan may not exceed 3% of the total number of shares
outstanding at the time of any such award. The Committee will determine the
restrictions, if any, on such shares, the duration of such restrictions, and any
circumstance under which restricted shares will be forfeited. Participants may
be required to deposit shares with the Company during the period of any
restriction thereon and, except as otherwise provided by the Compensation
Committee, during any such period of restriction participants will have all of
the rights of a holder of Common Stock, including the rights to receive
dividends and to vote. All restrictions on shares granted shall lapse upon a
change in control (as defined in the Omnibus Plan) and except as otherwise
determined by the Compensation Committee, upon termination of a grantee's
employment due to death or disability. Except as otherwise provided by the
Committee, upon termination of an employee for any other reason, unvested shares
held by such employee shall be forfeited.
The following table shows the awards of options to purchase Common Stock
that have been granted in 1997 to the following persons under the Omnibus Plan,
subject to stockholder approval of the plan as proposed to be amended. The
options were awarded at the fair market value on the date of grant.
NEW PLAN BENEFITS
AMENDED AND RESTATED 1992 OMNIBUS STOCK PLAN
<TABLE>
<CAPTION>
Number of Shares
Name and Position Underlying Options
----------------- ------------------
<S> <C>
Robert N. Pokelwaldt........................ 40,000
Chairman of the Board, President and
Chief Executive Officer
Peter C. Spellar............................ 10,000
Vice President and President of
Applied Systems Group
Dean T. DuCray.............................. 8,500
Vice President and Chief Financial Officer
Thomas D. Washburne, Jr..................... 0
Vice President and President of
International Business Group
Joseph D. Smith............................. 8,000
Vice President and President
of Airside Products Group
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
All executive officers as a group........... 117,500
All non-employee Directors as a group (1)... *
All non-officer employees as a group........ 618,043
</TABLE>
__________
(1) Each non-employee Director who is in office following the Annual Meeting of
Stockholders will automatically receive options for 2,000 shares, pursuant
to the terms of the Omnibus Plan as currently in effect. In the event that
all Directors are re-elected, they would receive options for an aggregate
of 14,000 shares.
FEDERAL INCOME TAX EFFECTS
Counsel has provided the Company with the following brief summary of the
Federal income tax consequences, under the Code as currently in effect, with
respect to (i) incentive stock options, (ii) non-qualified stock options and
(iii) restricted stock awards:
(i) Incentive Stock Options. No taxable income is realized by the
optionee upon the grant or exercise of an incentive stock option.
If there were no disposition of the option shares until more than
two years after the option is granted and more than one year
after the option is exercised, the gain or loss realized by the
optionee on the sale of such shares would be treated as long-term
capital gain or loss, and the Company would not be entitled to
any income tax deduction by reason of the grant or exercise of
the option. If the option shares were disposed of in a sale,
exchange, gift or other "disqualifying disposition" prior to the
expiration of the two-years-from-grant/one-year-from-exercise
holding period, generally (a) the optionee would realize taxable
ordinary income in the year of such disposition in an amount
equal to the excess (if any) of the fair market value of such
shares at the time of exercise of the option over the option
price thereof (except that, if the disposition is a sale or
exchange of the type on which a loss, if sustained, would be
recognized to such optionee, ordinary income would be realized by
such optionee in an amount equal to only the gain realized on
such sale or exchange if such gain is less than such excess) and
would realize capital gain on the balance of a gain, and (b) the
Company would be entitled to a deduction for such year in the
amount of the ordinary income so realized. Although the exercise
of an incentive stock option would not produce ordinary taxable
income to the optionee, it would produce an increase in the
optionee's alternative minimum taxable income.
(ii) Non-Qualified Options. No taxable income is realized by the
optionee upon the grant of a non-qualified option. On exercise,
the excess of the fair market value of the shares at the time of
exercise over the option price of such shares would be treated as
compensation. Any amounts treated as compensation (a) would be
taxable at ordinary income tax rates in the year of exercise, (b)
would be subject to withholding for Federal income tax purposes,
and (c) generally would be an allowable income tax deduction to
the Company. The optionee's tax basis for shares acquired upon
exercise of a non-qualified option would be equal to the option
price paid for the shares plus any amounts treated as
compensation. If an optionee were to hold shares acquired
pursuant to the exercise of a non-qualified option for more than
one year after the exercise of such option and then were to sell
such shares for more than their basis, the optionee would
generally be entitled to long-term capital gain treatment on the
difference.
(iii) Restricted Stock Awards. No income would be realized by an
employee in connection with the grant of a restricted stock
award. When the restrictions lapse, the employee
21
<PAGE>
would be required to include as taxable ordinary income the fair
market value of such shares at the time the restrictions lapse.
The Company would be entitled to a deduction for Federal income
tax purposes equal to the amount so included in such employee's
income. An employee may, by making a Section 83(b) election
within 30 days after the transfer of stock, choose to recognize
income upon the grant of a restricted stock award. If such
election is made, any appreciation in the stock value after the
grant date will, if the stock is held long enough, be eligible
for long-term capital gain treatment upon the subsequent sale of
the stock. However, if the stock is forfeited later, the loss
deduction allowable is limited to the price paid for the stock
(if any) minus any amounts received upon such forfeiture.
(iv) Payment of Withholding Taxes. The Company may withhold, or
require a participant to remit to the Company, an amount
sufficient to satisfy any federal, state and local withholding
tax requirements. The Committee may permit a participant to
satisfy a tax withholding requirement on exercise of an option by
delivery to the Company of shares of its Common Stock owned by
the participant, including shares the participant is entitled to
receive upon exercise of the option.
(v) Code Section 162(m). The Committee has reviewed the Omnibus Plan
with respect to Section 162(m) of the Code which limits the tax
deduction available for compensation paid to the Company's five
most highly-compensated individuals in excess of $1,000,000. The
Omnibus Plan is proposed to be amended so that to the extent
practicable, awards thereunder to designated executives will
qualify as "performance-based" compensation which is excluded
from the Section 162(m) cap on deductibility. Compensation
related to stock options issued under the Omnibus Plan is
expected to be fully deductible as performance-based. Restricted
stock awards issued to date are not expected to be deemed
performance-based within the meaning of he rule and, depending on
an officer's level of compensation when the stock vests, may not
be fully deductible.
(vi) Other. To the extent payments which are contingent on a change in
control are determined to exceed certain Code limitations, they
may be subject to a 20% nondeductible excise tax and the
Company's deduction with respect to the associated compensation
expense may be disallowed in whole or in part.
The foregoing discussion summarizes the Federal income tax consequences of
the Omnibus Plan based on current provisions of the Code which are subject to
change.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND
RESTATED 1992 OMNIBUS STOCK PLAN.
22
<PAGE>
PROPOSAL THREE
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected and recommends the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting. They will be given the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF THE INDEPENDENT ACCOUNTANTS.
VOTE REQUIRED TO APPROVE MATTERS
A quorum for the meeting requires the presence in person or by proxy of
holders of a majority of the outstanding shares of the Common Stock of the
Company. Votes cast by proxy or in person at the meeting will be tabulated by
the inspectors of election appointed for the meeting in accordance with Delaware
law. Abstentions, "broker non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares as to a matter with respect to
which the brokers or nominees do not have discretionary power to vote) and votes
withheld will be treated as present for purposes of determining the presence of
a quorum. Brokers that do not receive instructions are entitled to vote on the
election of directors and the ratification of appointment of auditors. With
respect to the other proposals, no broker may vote shares held for beneficial
owners or other persons entitled to vote without specific instructions from such
persons.
The election of each Director requires a plurality of the votes cast. Votes
withheld will be deemed not to have been cast. The approval of Proposal Two
(the Omnibus Stock Plan) and Proposal Three (the appointment of the auditors)
requires the affirmative vote of a majority of the shares present in person or
represented by proxy and voting at the Annual Meeting. Abstentions will not be
deemed votes cast and broker non-votes will be deemed not entitled to vote and
disregarded with respect to matters to be voted upon at the Annual Meeting other
than the election of Directors and the ratification of appointment of auditors.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the Company's proxy material for the
1998 Annual Meeting of Stockholders must be received at the Company's principal
executive offices not later than November 25, 1997.
Pursuant to a Company By-Law, no business, including a nomination for
election as a Director, may be brought before an annual or special meeting of
stockholders by any stockholder unless the stockholder is a stockholder of
record and has given written notice of the business to the Company's Secretary
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
23
<PAGE>
business on the later of (i) the sixtieth day prior to such annual and (ii) the
tenth day following the date on which public announcement of the date of such
meeting is first made. The notice must include certain information concerning
the stockholder, the business the stockholder proposes to bring before the
meeting and, in the case of a nomination for Director, the nominee. A copy of
the By-Laws may be obtained by any stockholder from the Secretary of the Company
at the address set forth in the accompanying notice.
OTHER BUSINESS
As of the date of this proxy statement, the Company does not intend to bring
any other matters before the 1997 Annual Meeting requiring action of the
stockholders, nor does it have any information that other matters will be
brought before the meeting. However, if any other matters requiring the vote of
the stockholders properly come before the 1997 Annual Meeting, it is the
intention of the persons named in the enclosed form of proxy to vote the proxy
in accordance with their best judgment.
JANE G. DAVIS
Vice President, Secretary and
General Counsel
March 25, 1997
24
<PAGE>
ANNEX A
YORK INTERNATIONAL CORPORATION
AMENDED AND RESTATED 1992 OMNIBUS STOCK PLAN
1. ESTABLISHMENT AND PURPOSE
York International Corporation hereby establishes the YORK INTERNATIONAL
CORPORATION 1992 OMNIBUS STOCK PLAN (the "Plan"). The Plan permits the grant of
stock options or restricted share awards or any combination of the foregoing.
The purpose of the Plan is to promote the growth and profitability of York
International Corporation (the "Company") by (i) providing directors, certain
officers and other employees of the Company and its subsidiaries with incentives
to improve stockholder value and contribute to the success of the Company, and
(ii) enabling the Company to attract, retain and reward the best available
persons for positions of substantial responsibility.
2. DEFINITIONS
"Cause" means the termination of employment of an employee for (i) providing
the Company with materially false representations relied upon by the Company in
furnishing information to stockholders, a stock exchange or the Securities and
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.
"Change in Control" shall mean
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(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) hereof; or
(b) Individuals who, as of the date of the most recent amendment hereof,
constitute the Board of Directors (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 of the most recent
amendment 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
<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 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.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor
statue.
"Disability" means the inability to perform the duties assigned by the
Company the participant by reason of any medically determined physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than twelve months.
"Fair Market Value" of a share of the Company's Common Stock for any purpose
shall mean the sale price of the Common Stock on the exchange where the Common
Stock is principally traded. If the Common Stock is not traded on an exchange,
but is traded in the over-the-counter market, Fair Market Value on the relevant
date shall mean the last sale price reported by the National Association of
Securities Dealers Automated Quotation Systems ("NASDAQ"), if the Common Stock
is included in the National Market System or the average of the closing bid and
asked prices reported on the preceding day on which such prices were reported.
If the Common Stock is not traded on an exchange or reported by NASDAQ, the
Board of Directors shall determine Fair Market Value. In the case of incentive
stock options, the Board's determination shall conform to the Treasury
Regulations under Section 422 of the Code.
"Retirement" means retirement as defined under the Company's Thrift and
Savings Plan or any successor plan thereto, or termination of employment on
retirement with the approval of the Board of Directors.
"Subsidiary" and "subsidiaries" mean only a corporation or corporations
within the meaning of the definition of "subsidiary corporation" provided in
Section 424(f) of the Code, or any successor thereto of similar import.
-2-
<PAGE>
3. ADMINISTRATION
The Plan shall be administered by a Committee appointed by the Board of
Directors of not less than two directors of the Company who are both "non-
employee directors" and "outside directors." "Non-employee directors" shall
have the meaning set forth in Rule 16b-3 of the Securities and Exchange
Commission and "outside directors" shall have the meaning set forth in Treasury
Regulation Section 1.162-27(e)(3) or any successor rule.
The Committee shall, consistent with the provisions of the Plan, be
authorized to (i) select persons to participate in the Plan, (ii) determine all
terms, conditions and restrictions of grants made under the Plan to each
participant, and the conditions and restrictions, if any, subject to which such
grants will be made, (iii) modify, extend or renew outstanding grants, accept
the surrender of outstanding grants and substitute new grants, provided that no
such action shall be taken with respect to any outstanding grant which would
adversely affect the participant without his consent, (iv) interpret the Plan
and (v) adopt, amend, or rescind such rules and regulations for carrying out the
Plan as it may deem appropriate. Decisions of the Committee on all matters
relating to the Plan shall be in the Committee's sole discretion and shall be
conclusive and binding on all parties, including the Company, its stockholders
and the participants in the Plan. The Committee shall have no authority to
administer, modify or interpret Section 7 of the Plan, except as to any
adjustments pursuant to Section 14. The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with applicable federal and state laws and rules and regulations
promulgated pursuant thereto.
Notwithstanding anything to the contrary herein, the Board of Directors may,
in its sole discretion, at any time and from time to time resolve to administer
the Plan. In such event, the term "Committee" used herein shall be deemed to
mean the Board of Directors.
4. SHARES AVAILABLE FOR THE PLAN; ANNUAL LIMIT ON GRANTS
Subject to adjustments as provided in Section 14 as of any date the total
number of shares of Common Stock with respect to which awards may be granted
under the Plan shall be equal to 4,380,000 shares, provided that the number of
restricted shares awarded under the Plan may not exceed 3% of the total number
of shares of Common Stock outstanding at the time of any such award. Subject to
adjustments as contemplated by Section 14, no person may be granted more than
200,000 restricted shares, or options to purchase more than 200,000 shares,
during any one calendar year. If any grant under the Plan expires or terminates
unexercised, becomes unexercisable or is forfeited or otherwise terminated or
canceled as to any shares, the shares subject to such grants shall thereafter be
available for further grants under the Plan unless such shares would not be
deemed available for future grants pursuant to Rule 16b-3 of the Securities
Exchange Act of 1934, as from time to time amended.
5. PARTICIPATION
Participation in the Plan shall be limited to those officers including
directors who are officers of the Company, and other employees of the Company
and its subsidiaries who have made or are expected to make a significant
contribution to the Company and its subsidiaries, selected by the Committee.
Only directors who are not officers or employees of the Company shall be
eligible to participate in Section 7 of the Plan. Nothing in the Plan or in any
grant thereunder shall confer any right on an employee to continue in the employ
of the Company or shall interfere in any way with the right of the Company to
terminate an employee at any time.
-3-
<PAGE>
Directors who are officers of the Company shall be eligible to participate in
the Plan. No director who is not an officer of the Company shall be eligible to
participate, except pursuant to Section 7.
Stock options, restricted share awards or any combination thereof may be
granted to such persons and for such number of shares as the Committee shall
determine, subject to the limitations in Section 4. A grant of any type made in
any one year to an eligible employee shall neither guarantee not preclude a
further grant of that or any other type to such employee in that year or
subsequent years.
6. STOCK OPTIONS
Subject to the other applicable provisions of the Plan the Committee may from
time to time grant to eligible participants nonqualified stock options or
incentive stock options as that term, is defined in Section 422 of the Code.
The options granted shall be subject to the following terms and conditions:
(a) Price. The price per share payable upon the exercise of each option
("exercise price") shall not be less than 100% of the Fair Market Value of the
shares on the date the option is granted.
(b) Payment. Options may be exercised in whole or in part by payment of the
exercise price of the shares to be acquired. Payment may be made in cash or,
unless otherwise, determined by the Company, in shares of Common Stock or a
combination of cash and shares of Common Stock. The Fair Market Value of shares
of Common Stock delivered on exercise of options shall be determined on the
date of exercise. Shares or Common Stock delivered in payment of the exercise
price may be previously owned shares or, if approved by the Company, shares
acquired upon exercise of the option. Any fractional share will be paid in
cash. The Company may make or guarantee loans to participants to assist them in
exercising options. Unless otherwise determined by the Company, a participant
may also deliver Common Stock of the Company, including shares acquired upon
exercise of the option, in satisfaction of any amount the Company is required to
withhold for taxes in connection with the exercise of an option subject, if the
optionee is subject to Section 16(b) of the Securities Exchange Act of 1934, to
such restrictions as may be imposed from time to time by the Securities and
Exchange Commission to comply with Section 16(b).
An election to deliver Common Stock to pay withholding taxes must be made on
or before the date the amount of tax to be withheld is determined and once made
will be irrevocable. The withholding tax obligation that may be paid by the
withholding or delivery of shares may not exceed the participant's estimated
federal, state and local income tax obligations in connection with the exercise
of the option or the sale of shares received upon exercise of the option. The
Fair Market Value of the shares to be withheld or delivered will be the Fair
Market Value on the date as of which the amount of tax to be withheld is
determined.
(c) Terms of Options. The term during which each option may be exercised
shall be determined by the Committee, provided that upon a Change in Control,
all outstanding options shall automatically become immediately exercisable. In
no event shall an option be exercisable more than ten years from the date it is
granted. Prior to the exercise of the option and delivery of the stock
represented thereby, the optionee shall no have any rights to receive any
dividends or be entitled to any voting rights on any stock represented by
outstanding options.
-4-
<PAGE>
(d) Restrictions on Incentive Stock Options. The aggregate Fair Market Value
(determined as of the grant date) of shares of Common Stock with respect to
which all incentive stock options first become exercisable by any participant in
any calendar year under this or any other plan of the Company or any related or
predecessor corporation of the Company or any related corporation (as defined in
the applicable regulations under the Code) may not exceed $100,000 or such
higher amount as may be permitted from time to time under Section 422 of the
Code. To the extent that such aggregate fair market value shall exceed
$100,000, or applicable higher amount, such options shall be treated as options
which are not incentive stock options.
The exercise price of any incentive stock option granted to a participant who
owns (within the meaning of Section 422(b)(6) of the Code, after the application
of the attribution rules in Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of shares of the Company or any related
corporation shall be not less than 110% of the Fair Market Value of the Common
Stock on the grant date and the term of such option shall not exceed five years.
Incentive stock options can only be issued to employees of the Company.
7. DIRECTOR STOCK OPTIONS
Each person who is a director of the Company and who is not an officer or
employee of the Company (a "non-employee director") as of immediately following
the election of directors at the Company's annual stockholder meeting, or who
became a non-employee at any time within six months thereafter, shall be granted
as of such date (or on the next day the New York Stock Exchange is open for
trading) an option exercisable for 2,000 shares of Common Stock (which number of
shares is subject to adjustment in accordance with Section 14).
Each option shall terminate, and cease to be exercisable, on the earliest of
the occurrence of: (i) the tenth anniversary of the date of grant of the option,
or (ii) 90 days following the date on which the grantee is no longer a director
eligible to receive options under this Section (including, but not limited to,
such date as the director resigns or dies).
The exercise price of each option granted pursuant to this Section shall be
the Fair Market Value of the shares on the date the option is granted.
Each option granted pursuant to this Section shall be exercisable as follows:
(a) On or before the first anniversary of the date the option is granted, the
option will not be exercisable with respect to any of the shares subject to the
option, and
(b) On the first anniversary of the grant date, the option will become
exercisable to the extent of 25% of the shares subject to the option, and to the
extent of an additional 25% of such shares on each subsequent anniversary of the
date of grant, provided that upon a Change in Control any outstanding option
shall automatically become immediately exercisable in full, in accordance with
Section 14.
Options may be exercised in whole or in part by payment of the exercise price
of the shares to be acquired. Payment shall be in cash.
-5-
<PAGE>
8. RESTRICTED SHARE AWARDS
Subject to the other applicable provisions of the Plan, the Committee may at
any time and from time to time award shares to such participants and in such
amounts and for such consideration, as it determines. Each award of shares
shall specify the applicable restrictions on such shares, if any, the duration
of such restrictions, and the time or times at which such restrictions shall
lapse with respect to all or a specified number of shares that are part of the
award. Notwithstanding the foregoing, the Committee may reduce or shorten the
duration of any restriction applicable to any shares awarded to any participant
under the Plan.
Restricted shares may be issued at the time of award, subject to forfeiture
if the restrictions do not lapse, or upon lapse of the restrictions. If shares
are issued at the time of the award, the participant may be required to deposit
the certificates with the Company during the period of any restriction thereon
and to execute a blank stock power therefor. Except as otherwise provided by
the Committee, during such period of restriction the participant shall have all
of the rights of a holder of Common Stock, including but not limited to the
rights to receive dividends (or amounts equivalent to dividends) and to vote.
If shares are issued upon lapse of restrictions, the Committee may provide that
the participant will be entitle to receive any amounts per share pursuant to any
dividend or distribution paid by the Company on its Common Stock to stockholders
of record after the award and prior to the issuance of the shares.
During any period of restriction, upon a Change in Control, and except as
otherwise provided by the Committee, upon termination of a grantee's employment
due to death or Disability, during any period of restriction, all restrictions
on shares awarded to such grantee shall lapse. Except as otherwise provided by
the Committee, on termination of a grantee's employment for any other reason
(including Retirement), all restricted shares subject to awards made to such
grantee shall be forfeited to the Company.
9. WITHHOLDING OF TAXES
The Company may permit or require, as a condition to any grant under the Plan
or to the delivery of certificates for shares issued hereunder, that the grantee
pay to the Company, in cash or, unless otherwise determined by the Company, in
shares of Company Common Stock valued at Fair Market Value on the date as of
which the withholding tax liability is determined, any federal, state or local
taxes of any kind required by law to be withheld with respect to any grant or
any delivery of shares. The Company, to the extent permitted or required by
law, shall have the right to deduct from any payment of any kind (including
salary or bonus) otherwise due to a grantee any federal, state or local taxes of
any kind required by law to be withheld with respect to any grant or to the
delivery of shares under the Plan, or to retain or sell without notice a
sufficient number of the shares to be issued to such grantee to cover any such
taxes. In the event of a transfer of an option pursuant to Section 11, the
grantee shall remain liable for any tax required to be withheld.
10. WRITTEN AGREEMENT
Each person to whom a grant is made under the Plan shall enter into a written
agreement with the Company that shall contain such provisions, consistent with
the provisions of the Plan, as may be established by the Committee.
-6-
<PAGE>
11. TRANSFERABILITY
To the extent required to comply with Rule 16b-3 and in any event in the case
of an incentive stock option, no option or restricted share award granted under
the Plan shall be transferable by a participant otherwise than by will or the
laws of descent and distribution, or as permitted by this Section 11. The
Committee may, in its discretion, authorize all or a portion of the options
granted to a participant to be transferred to:
(a) a member of the participant's family;
(b) a trust or trusts for the exclusive benefit of members of the
participant's family;
(c) a family partnership, family limited partnership, or family limited
liability partnership or company;
(d) a charitable or non-profit organization, trust or foundation under
Section 501(c)(3) of the Code; or
(e) such other person or entity as the Committee may in its discretion
permit.
An option may be exercised only by the optionee or grantee thereof, his
permitted transferee or his or her guardian or legal representative. Subsequent
transfers of options transferred pursuant to this Section 11 shall be prohibited
except those by will or the laws of descent and distribution. Following any
permitted transfer, any transferred options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer and
such options shall be exercisable by the transferee only to the extent and for
the periods that they would have been exercisable by the participant.
12. LISTING AND REGISTRATION
If the Company determines that the listing registration or qualification upon
any securities exchange or under any law of shares subject to any option or
restricted share award is necessary or desirable as a condition of, or in
connection with, the granting of same or the issue or purchase of shares
thereunder, no such option may be exercised in whole or in part and no
restrictions on such restricted share award shall lapse, unless such listing,
registration or qualification is effected free of any conditions not acceptable
to the Company.
13. TRANSFER OF EMPLOYEE
Transfer of an employee from the Company to a subsidiary, from a subsidiary
to the Company, and from one subsidiary to another shall not be considered a
termination of employment. Nor shall it be considered a termination of
employment if an employee is placed on military or sick leave or such other
leave of absence which is considered as continuing intact the employment
relationship; in such a case, the employment relationship shall be continued
until the date when an employee's right to reemployment shall no longer be
guaranteed either by law or contract.
-7-
<PAGE>
14. ADJUSTMENTS; BUSINESS COMBINATIONS
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, share exchange, consolidation,
distribution of assets, or any other change in the corporation structure or
shares of the Company, the Committee shall make such adjustments as it deems
appropriate in the number and kind of shares reserved for issuance under the
Plan, in the number and kind of shares covered by, outstanding options and
restricted share awards made under the Plan, and in the exercise price of
outstanding options.
In the event of any merger, share exchange, consolidation or other
reorganization in which the Company is not the surviving or continuing
corporation, or in which the Company's stockholders become entitled to receive
cash, securities of the Company other than voting Common Stock or securities of
another issuer, or any Change of Control, all outstanding options and share
restricted awards shall be exercisable and shall vest notwithstanding any
restriction on exercise or vesting at a date to be determined by the Committee
not later than the effective date of the transaction.
15. TERMINATION AND MODIFICATION OF THE PLAN
The Board of Directors, without further approval of stockholders may modify
or terminate the Plan, except that no modification shall become effective
without prior approval of the stockholders of the Company if stockholder
approval would be required for continued compliance with Rule 16b-3 of the
Securities and Exchange Commission. No amendment to Section 7 of the Plan shall
be made more than once every six months other than to conform with changes in
the Code or the rules thereunder.
The Committee may amend or modify the grant of any outstanding option or
restricted share award in any manner to the extent that the Committee would have
had the authority to make such grant as so modified or amended, including
without limitation to change the date or dates is of which (i) an option becomes
exercisable of (ii) restrictions on shares are to be removed. No modification
may be made that would materially adversely affect any grant previously made
under the Plan without the approval of the grantee. The Committee shall be
authorized to make minor or administrative modifications to the Plan as well as
modifications to the Plan that may be dictated by requirements of federal or
state laws applicable to the Company or that may be authorized or made desirable
by such laws.
16. LIMITATION ON BENEFITS
With respect to persons subject to Section 16 of the Securities Exchange Act
of 1934 transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under such Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee.
17. EFFECTIVE DATE; TERMINATION DATE
The Plan is effective as of August 20, 1992, the date on which the Plan was
adopted by the Board of Directors. The Plan was amended by the Board of
Directors on March 4, 1993, amended and rested on March 13, 1995, and amended
and restated on March 12, 1997 subject to approval of the stockholders at the
1997 meeting of stockholders. Unless previously terminated, the Plan shall
terminate the close of business on August 20, 2002, ten years from the effective
date.
-8-
<PAGE>
APPENDIX
YORK INTERNATIONAL CORPORATION
GENERAL AND FINANCIAL INFORMATION
1996
1
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
DESCRIPTION OF BUSINESS.................................... 3
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
DIRECTORS AND OFFICERS..................................... 30
INVESTOR AND STOCKHOLDER INFORMATION....................... 31
CORPORATE DATA............................................. 31
</TABLE>
2
<PAGE>
DESCRIPTION OF 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, 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 English Channel Eurotunnel and the Hong Kong
Exposition Centre, and the Lantan 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. 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.
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>
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
MALCOLM W. GAMBILL
Retired Chairman and Chief Executive Officer of Harsco Corporation
Member of the Compensation Committee
ROBERT F. B. LOGAN
Retired Chairman and Chief Executive Officer of Banc One Arizona
Corporation
Member of the Compensation Committee
GERALD C. MCDONOUGH
Private Business Consultant
Retired Chairman and Chief Executive Officer of Leaseway Holdings, Inc.
Chairman of the Audit Committee
ROBERT N. POKELWALDT
Chairman of the Board, President and Chief Executive Officer
DONALD M. ROBERTS
Retired Vice Chairman and Treasurer of United States Trust Company of New
York and its parent, U.S. Trust Corporation
Member of the Audit Committee
JAMES A. URRY
Vice President of Citicorp Venture Capital, Ltd.
Member of the Compensation Committee
JOHN E. WELSH, III
Vice Chairman of Mobile Telecommunications Technologies Corporation
Member of the Audit Committee
WALTER B. WRISTON
Private Business Consultant
Retired Chairman and Chief Executive Officer of Citicorp
Chairman of the Compensation Committee
OFFICERS
ROBERT N. POKELWALDT
Chairman of the Board, President and Chief Executive Officer
SCOTT J. BOXER
Vice President, and President of Unitary Products Group
JOSEPH D. SMITH
Vice President, and President of Airside Products Group
PETER C. SPELLAR
Vice President, and President of Applied Systems Group
THOMAS D. WASHBURNE, JR.
Vice President, and President of International Business Group
MICHAEL R. YOUNG
Vice President, and President of Bristol Compressors
DEAN T. DUCRAY
Vice President and Chief Financial Officer
JANE G. DAVIS
Vice President, Secretary and General Counsel
WAYNE J. KENNEDY
Vice President, Human Resources
VICTOR R. MCCLOSKEY
Vice President, Corporate Development
JAMES P. CORCORAN
Treasurer
C. DAVID MYERS
Controller
30
<PAGE>
INVESTOR AND STOCKHOLDER INFORMATION
STOCKHOLDER INQUIRIES
Questions concerning your account, dividend payments, address changes,
consolidation of duplicate accounts, lost certificates and related matters
should be addressed to York International Corporation's transfer agent:
Chase Mellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-851-9677
http://www.cmssonline.com
DIVIDEND POLICY
The declaration and payment of quarterly dividends is made at the
discretion of York's board of directors. The dividend is reviewed by the board
quarterly. York has paid quarterly dividends on its common shares without
interruption and has increased the dividend each year since going public in
1991.
DIRECT DEPOSIT OF DIVIDENDS
Stockholders who would like their dividends directly deposited in a U.S.
bank account should contact the transfer agent at the above address for an
enrollment form.
DIVIDEND REINVESTMENT PROGRAM
An automatic dividend reinvestment plan is available to all stockholders of
record. Dividends can be automatically reinvested in York common stock.
Participants also may add cash for the purchase of additional shares. For more
information, contact Chase Mellon Shareholder Services, L.L.C. at (800) 758-
5804.
INVESTOR RELATIONS PROGRAM
York International has an active investor relations program directed to
both individual and institutional investors. The Company's investor relations
mission is to maintain an ongoing awareness of the Company's performance among
its stockholders and the financial community. The Company welcomes inquiries
from its investors, large or small, as well as from members of the financial
community. For further information, contact:
Investor Relations Department
York International Corporation
P.O. Box 1592 - 364M
York, PA 17405-1592
(717) 771-7890 Telephone
(717) 771-7440 Facsimile
ABOUT YORK'S SHAREHOLDERS
At year-end, the Company had approximately 4,500 registered shareholders.
Approximately 22% of the Company shares are held by individual investors. The
Company shares were also held by about 150 institutions. At year-end, there were
approximately 4,500 employee shareholders participating in the York
International Employee Stock Purchase Plan, for an estimated 30% enrollment of
eligible employees.
CORPORATE DATA
CORPORATE OFFICES
Street Address:
York International Corporation
631 South Richland Avenue
York, PA 17403
Mailing Address:
York International Corporation
P.O. Box 1592
York, PA 17405
Telephone: (717) 771-7890
Facsimile: (717) 771-7440
ADDITIONAL INFORMATION
Stockholder, financial and other information about York is available from
several sources. The Company's 10K Report, 10Q and Quarterly Reports to
Stockholders are available through the company's automated telephone system by
dialing: (717) 771-7409.
You can also request these publications by writing:
Stockholder Relations
York International Corporation
P.O. Box 1592-364M
York, PA 17405-1592
(717) 771-7381 Facsimile
York news releases, including earnings announcements, are available by fax
24 hours a day through Company News On-Call at (800) 758-5804. The York
extension is 992638.
You can access financial and other information, such as quarterly press
releases on earnings and product announcements, through the Internet. To connect
to York's World Wide Web page, set your browser software to: http://www.york.com
STOCK EXCHANGE LISTING
The New York Stock Exchange
STOCK TRADING SYMBOL
YRK
31
<PAGE>
03/14/97
YORK INTERNATIONAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jane G. Davis and Dean T. DuCray, or either
of them, the proxy of proxies of the undersigned with full powers of
substitution, to vote all shares of stock of Common Stock of York International
Corporation held of record by the undersigned at the close of business on March
12, 1997 at the Annual Meeting of Stockholders of the Company to be held on
Thursday, May 1, 1997 at 10:00 a.m., Eastern time, and at any adjournment or
adjournments thereof, upon the following matters set forth on the reverse side.
PLEASE MARK YOUR CHOICE IN BLUE OR BLACK INK
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ACCOMPANYING ENVELOPE
<PAGE>
Please mark
[X] votes as in
this example
If properly executed, the shares represented by this proxy will be voted in the
manner directed herein by the undersigned stockholder, or to the extent
directions are not given, such shares will be voted FOR each of the nominees and
each other proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW AND A
VOTE "FOR" PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS.
Nominees: Robert N. Pokelwaldt, Malcolm W. Gambill, Robert F.B. Logan,
Gerald C. McDonough, Donald M. Roberts, James A. Urry, John E.
Welsh, III, and Walter B. Wriston
FOR ALL WITHHOLD
[_] NOMINEES [_] AUTHORITY FOR
LISTED ALL NOMINEES
(EXCEPT AS LISTED
INDICATED)
To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below.
- ---------------------------------
2. APPROVAL OF THE COMPANY'S AMENDED AND FOR AGAINST ABSTAIN
RESTATED 1992 OMNIBUS STOCK PLAN
[_] [_] [_]
3. RATIFICATION OF APPOINTMENT OF KPMG [_] [_] [_]
PEAT MARWICK LLP AS INDEPENDENT
ACCOUNTANTS
4. IN THEIR DISCRETION, THE PROXIES ARE [_] [_] [_]
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT
THEREOF
NEW ADDRESS MARK HERE
FOR ADDRESS
- ---------------------------- CHANGE AND [_]
NOTE SUCH CHANGE
- ---------------------------- AT LEFT
- ----------------------------
PLEASE DO NOT FOLD OR PERFORATE THIS PROXY
Please sign exactly as your name or names appear. Persons acting in a fiduciary
capacity should so indicate. PLEASE NOTE any change of address and supply any
missing Zip Code number.
Signature: Date:
------------------------- ---------------------------
Signature: Date:
------------------------- ---------------------------
