<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 33-94330
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO AMENDMENT AND COMPLETION.
SUBJECT TO COMPLETION, DATED MAY 19, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 20, 1995
[YORK INTERNATIONAL LOGO]
$200,000,000
YORK INTERNATIONAL CORPORATION
% SENIOR NOTES DUE JUNE , 2008
------------------------
The % Senior Notes due June , 2008 will constitute a series of Senior
Debt Securities to be issued by York International Corporation. Interest on the
Notes is payable on June 1 and December 1 of each year, commencing December 1,
1998. The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) as determined by a Quotation Agent
(as defined herein), the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined herein) plus 25
basis points, in each case, plus accrued interest thereon to the date of
redemption. The Notes will be represented by one or more global Notes registered
in the name of the Depository Trust Company. Beneficial interests in the Notes
will be shown on, and transfers thereof will be effected only through, the
facilities of DTC and its participants. Except as described herein, Notes in
definitive form will not be issued. The Notes will be issued in denominations of
$1,000 and integral multiples thereof. See "Description of the Notes."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ --------------
<S> <C> <C> <C>
Per Note...................................... % % %
Total......................................... $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from June , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $ payable by the Company.
------------------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Notes
will be ready for delivery in book-entry form only through the facilities of DTC
in New York, New York, on or about June , 1998, against payment therefor in
immediately available funds.
GOLDMAN, SACHS & CO. CIBC OPPENHEIMER
------------------------
The date of this Prospectus Supplement is May , 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THE COMPANY
York International Corporation ("York" or the "Company") is a full-line,
global designer and 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 World Trade Center in New York. In 1997 the
Company's products were sold in over 100 countries through over 750 sales and
distribution facilities and are in use in such diverse locations as the Kuala
Lumpur City Centre in Malaysia, the British Houses of Parliament, the Tokyo
World Trade Center, the Pentagon, NASA's Vehicle Assembly Building at Cape
Canaveral, NASA's Johnson Space Center, the Los Angeles International Airport,
the Jeddah Airport, the Overseas Union Bank Centre in Singapore, the Sydney
Opera House, the National Library Complex in Beijing, the Atlantic City
Convention Center, the English Channel Eurotunnel, the Hong Kong Exposition
Centre and the Lantau Airport Railway System in Hong Kong.
Headquartered in York, Pennsylvania, the Company has manufacturing
facilities in 13 states and 13 foreign countries. As of December 31, 1997, the
Company employed approximately 20,270 people worldwide. The Company's principal
executive offices are located at 631 South Richland Avenue, York, Pennsylvania
17403, and its telephone number is (717) 771-7890.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the %
Senior Notes due June , 2008 (the "Notes") are estimated to be $ ,
after deducting expenses of approximately $ payable by the Company. The
net proceeds from the sale of the Notes will be used to repay indebtedness
outstanding under the Company's commercial paper program. As of the date hereof,
the rate at which such commercial paper bears interest ranges from 5.52% to
5.67% per annum.
RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratios of earnings to fixed charges, earnings
consist of pretax income plus fixed charges. Fixed charges consist of interest
expense, amortization of financing costs and an estimated portion of rentals
representing interest costs.
The following table sets forth the ratios of earnings to fixed charges for
the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------
1993 1994 1995(1) 1996 1997 1997 1998
---- ---- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges....... 5.2x 5.3 --x 6.1x 2.7x 5.6x 2.7x
</TABLE>
- ---------------
(1) Fixed charges for 1995 exceeded earnings before taxes, net of such fixed
charges, by $71 million, as a result of a charge for impairment loss on
long-lived assets of $244 million.
S-2
<PAGE> 3
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at March 31, 1998, and as adjusted to give effect to the sale of the
Notes offered hereby (without giving effect to the underwriting discount and the
Company's estimated offering expenses) and adjusted to reflect the application
of the proceeds therefrom to reduce indebtedness outstanding under the Company's
commercial paper program. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31,
MARCH 31, 1998
1998 AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Bank loans................................................ $ 75,575 $ 75,575
Current portion of long term debt......................... 8,704 8,704
Other..................................................... 811 811
---------- ----------
Total short-term debt.................................. 85,090 85,090
---------- ----------
Long-term debt:
Commercial paper.......................................... $ 221,755 $ 21,755
Bank lines................................................ 109,860 109,860
6.75% Senior Notes due 2003............................... 100,000 100,000
% Senior Notes due 2008.............................. -- 200,000
Other..................................................... 13,110 13,110
---------- ----------
Total long-term debt................................... 444,725 444,725
---------- ----------
Stockholders' equity........................................ 653,274 653,274
---------- ----------
Total capitalization........................................ $1,183,089 $1,183,089
========== ==========
</TABLE>
S-3
<PAGE> 4
SELECTED FINANCIAL DATA
The selected financial data presented below for, and as of the end of, each
of the years in the five-year period ended December 31, 1997, are derived from
the consolidated financial statements of York International Corporation and
subsidiaries, which financial statements have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. The consolidated financial
statements as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, and the report thereon, which refers
to the Company's adoption, effective October 1, 1995, of the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
are incorporated by reference elsewhere in this Prospectus Supplement. The
unaudited selected financial data presented below for the three-month periods
ended March 31, 1998 and 1997, and as of March 31, 1998, are derived from the
unaudited condensed consolidated financial statements of York International
Corporation and subsidiaries incorporated by reference elsewhere in this
Prospectus Supplement.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997(a) 1997 1998
---- ---- ---- ---- ------- ---- ----
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $2,031,949 $2,421,864 $2,929,948 $3,218,534 $3,193,657 $ 800,767 $ 741,988
Cost of goods sold................... 1,573,117 1,913,204 2,300,569 2,532,677 2,557,431 637,032 584,956
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit....................... 438,832 508,660 629,379 685,857 636,226 163,735 157,032
Selling, general and administrative
expenses........................... 289,705 336,693 406,576 447,473 522,224 131,915 122,436
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations before
impairment loss on long-lived
assets........................... 149,127 171,967 222,803 238,384 114,002 31,820 34,596
Impairment loss on long-lived
assets(c).......................... -- -- 244,473 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations...... 149,127 171,967 (21,670) 238,384 114,002 31,820 34,596
Interest expense, net................ 23,495 29,188 41,412 34,544 40,876 9,434 11,071
Equity in (earnings) losses of
affiliates......................... (1,550) (1,668) 7,700 (623) (5,342) 240 1,307
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes
and accounting changes(b)........ 127,182 144,447 (70,782) 204,463 78,468 22,146 22,218
Accounting changes(b)................ 70,251 -- -- -- -- -- --
Provision for income taxes .......... 51,720 54,677 25,290 56,554 31,075 7,286 7,554
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income(loss)................... $ 5,211 $ 89,770 $ (96,072) $ 147,909 $ 47,393 $ 14,860 $ 14,664
========== ========== ========== ========== ========== ========== ==========
Per Share Data:
Basic earnings (loss) per share of
common stock:
Income (loss) before accounting
changes.......................... 2.01 2.43 (2.38) 3.43 1.11 .34 .36
Cumulative effect of changes in
accounting methods(b)............ (1.87) -- -- -- -- -- --
Net income(loss)................... .14 2.43 (2.38) 3.43 1.11 .34 .36
Diluted earnings (loss) per share of
common stock:
Income (loss) before accounting
changes.......................... 2.01 2.40 (2.38) 3.37 1.10 .34 .36
Cumulative effect of changes in
accounting methods (b)........... (1.87) -- -- -- -- -- --
Net income (loss).................. .14 2.40 (2.38) 3.37 1.10 .34 .36
Cash dividends per share............. .08 .16 .24 .36 .48 .12 .12
Weighted average common shares and
common equivalents outstanding:
Basic.............................. 37,529 36,901 40,321 43,136 42,550 43,435 40,469
Diluted............................ 37,614 37,397 40,321 43,950 43,040 44,012 40,726
</TABLE>
S-4
<PAGE> 5
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997(a) 1997 1998
---- ---- ---- ---- ------- ---- ----
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Capital expenditures................. 30,621 81,625 66,242 73,576 66,854 13,639 13,737
Depreciation and amortization........ 31,337 34,030 42,841 48,581 52,776 12,416 14,960
Amortization of deferred charges..... 12,672 15,635 18,643 18,410 15,978 3,598 3,834
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................... 181,076 236,443 393,063 524,143 535,123 536,855
Total assets......................... 1,335,181 1,587,980 1,927,002 2,074,771 1,996,298 2,030,887
Current and long-term debt........... 276,431 348,259 400,354 442,102 521,782 529,815
Stockholders' equity................. 456,967 526,930 624,814 780,377 646,285 653,274
</TABLE>
- ---------------
(a) During the fourth quarter of 1997, the Company recorded a charge to
operations of $62.1 million related to global manufacturing rationalization,
and rationalization of products and distribution.
(b) Effective January 1, 1993, the Company changed its methods of accounting for
income taxes, postretirement benefits other than pensions and postemployment
benefits, resulting in a cumulative effect charge of $70.3 million.
(c) 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.
S-5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AS COMPARED WITH THREE MONTHS ENDED MARCH
31, 1997
Net sales for the three months ended March 31, 1998 decreased 7.3% to
$742.0 million as compared to $800.8 million for the three months ended March
31, 1997. Income from operations for the first quarter of 1998 was $34.6 million
compared to $31.8 million for the first quarter of 1997. First quarter revenues
decreased in all three business units. Engineered Systems products revenue
decreased 9.1% from the first quarter of 1997 primarily as a result of
disruptions related to the accident at the Company's Grantley facility. See
"-- Manufacturing Operations." Sales of the Engineered Systems products group
were also affected by the economic downturn in Asia that occurred in late 1997.
Revenue from the Unitary products group decreased by $14.9 million or 4.0% for
the first quarter of 1998 compared to the same period in 1997. The decrease was
due to distributors and dealers taking less product in advance of the cooling
season in North America in response to the delayed cooling season in 1997 which
also created a decrease in sales of OEM compressors as manufacturers have
reduced preseason purchases and production. The Refrigeration group had a sales
decrease of 14.1%, or $14.5 million for the first quarter of 1998 compared to
the first quarter of 1997. The decrease resulted primarily from the sale of the
German commercial refrigeration business. Excluding the commercial refrigeration
impact, revenues were generally flat as compared to 1997.
For the first quarter of 1998, aggregate non-U.S. sales decreased 9.7% from
the first quarter of 1997 to $314.1 million primarily as a result of weakness in
the Asian economy that was partially offset by generally strong performance
throughout Latin America. For the first quarter of 1998, domestic revenue
decreased 5.5% to $427.9 million compared to the first quarter of 1997 primarily
as a result of the damage to the Grantley facility and to the fact that dealers
and distributors ordered fewer products in advance of the cooling season in
North America.
Order backlog at March 31, 1998 was $984.6 million representing a 7.4%
increase over March 31, 1997. Domestic backlog increased 16.7% to $575.3 million
for the first quarter of 1998 compared to the first quarter of 1997. This
increase resulted primarily from strong Engineered Systems products backlog in
North America. International backlog decreased 3.4% to $409.3 million during the
same period principally as a result of the downturn in the Asian economies and
the sale of the German commercial refrigeration business. The decreases were
partially offset by significant increases in Latin America and the Middle East.
The following table sets forth revenue by product and geographic market:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1998
---- ----
(IN THOUSANDS)
<S> <C> <C>
Engineered Systems products................................. $323,155 $293,862
Unitary products............................................ 374,815 359,869
Refrigeration products...................................... 102,797 88,257
-------- --------
Total revenue.......................................... $800,767 $741,988
======== ========
U.S......................................................... 57% 58%
International............................................... 43% 42%
----
Total.................................................. 100% 100%
----
</TABLE>
Gross profit for the first quarter of 1998 was $157.0 million (21.2% of
sales) compared to $163.7 million (20.4% of sales) for the first quarter of
1997. Improved gross profit margin resulted
S-6
<PAGE> 7
primarily from improved performance in manufacturing facilities. Incremental
costs and losses related to the accident at the Grantley plant were offset by a
portion of the anticipated insurance recovery.
Selling, General and Administrative expenses ("SG&A") for the first quarter
of 1998 decreased 7.2% to $122.4 million (16.5% of sales) from $131.9 million
(16.5% of sales) for the first quarter of 1997. SG&A expenses were relatively
flat considering the $9.4 million charge in the first quarter of 1997 for the
costs associated with the closing of the Houston manufacturing facility and the
downsizing of the Company's German operations.
Interest expense, net for the first quarter of 1998 increased to $11.1
million from $9.4 million for the same period in 1997. This was mainly due to
higher average borrowing levels and slightly higher average rates.
Provision for income taxes of $7.6 million in the first quarter of 1998
relates both to U.S. and non-U.S. operations. An increase in the effective tax
rate outside the U.S. is the primary reason for the slightly higher overall
effective tax rate in the first quarter of 1998 compared to 1997.
Net income, as a result of the above factors, was $14.7 million in the
first quarter of 1998 as compared to net income of $14.9 million in the first
quarter of 1997.
1997 AS COMPARED WITH 1996
The following table sets forth revenue by product and geographic market:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995(A) 1996 1997
------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Engineered Systems products................ $1,182,624 $1,313,587 $1,370,983
Unitary products........................... 1,212,620 1,417,007 1,394,142
Refrigeration products..................... 534,704 487,940 428,532
---------- ---------- ----------
Total revenue......................... $2,929,948 $3,218,534 $3,193,657
========== ========== ==========
U.S. ...................................... 55% 54% 58%
International.............................. 45% 46% 42%
---------- ---------- ----------
100% 100% 100%
========== ========== ==========
</TABLE>
- ---------------
(a) For 1995 revenue by product is based on estimates to account for the
management reorganization by product during 1996 and 1997.
Net sales for the year ended December 31, 1997, decreased 0.8% to $3,193.7
million from $3,218.5 million for 1996. (See table above which shows revenue by
product and geographic market, and note 15 to the consolidated financial
statements, which gives additional information on geographic distribution.)
Revenues increased in the Company's Engineered Systems product group and
decreased in the Unitary and Refrigeration product groups. Order backlog at
December 31, 1997, was $834.5 million compared to $845.1 million as of December
31, 1996.
Engineered Systems products revenue increased 4.4% primarily due to
increased volume in the domestic equipment business; the acquisition of Pace and
Gamewell; continued international expansion in Latin America and the People's
Republic of China; and the introduction of new products. The increase was
partially offset by a weak domestic retrofit and replacement chiller market and
weakness in the Southeast Asian markets. Backlog increased $30.1 million, or
6.7%, to $477.2 million as a result of strong domestic orders, partially offset
by decreased backlog in Asia due to poor economic conditions.
S-7
<PAGE> 8
Unitary products revenue decreased 1.6% due to lower-than-average
temperatures in North America and Europe and excess inventory levels in the
industry at the beginning of the year. This decrease was partially offset by
continued Latin American growth due to expanded distribution. Backlog decreased
$14.8 million, or 6.3%, to $220.6 million as a result of lower orders for
domestic Unitary products.
Refrigeration products revenue decreased 12.2% due to the sale of the
German commercial refrigeration business in the second quarter of 1997. This
decrease was partially offset due to continued Latin American growth. The
year-over-year revenue performance was consistent in all other areas of the
world. Backlog decreased $25.9 million, or 15.9%, to $136.7 million as a result
of the sale of the German commercial refrigeration business and poor economic
conditions in Asia, particularly Southeast Asia.
From a geographic perspective, domestic revenue increased 6.5% to $1,838.9
million and international revenue decreased by 9.3% to $1,354.8 million.
The Company recorded the following non-recurring items during 1997: a
charge of $13.4 million (recorded in the first quarter) for the costs to close
the Houston manufacturing facility and downsize the German operations, a gain of
$6.0 million (recorded in the third quarter) on the sale of an investment in an
Egyptian air conditioning company, and a charge of $62.1 million (recorded in
the fourth quarter) for profit improvement initiatives. As part of the Company's
profit improvement initiatives, actions are being taken to rationalize global
capacity by closing and streamlining operations, and also to rationalize global
distribution and products. The Company expects these actions to increase
profitability, strengthen its position in the marketplace and reduce its overall
cost structure. The total of these charges were recorded as $28.1 million to
Cost of Goods Sold, $45.9 million to Selling, General and Administrative
expenses and a gain of $4.5 million to affiliates' earnings.
Gross profit in 1997 decreased 7.2% to $636.2 million (19.9% of sales) from
$685.9 million (21.3% of sales) for 1996. The impact of the non-recurring
charges accounted for over one-half of the reduction in gross profit and gross
profit margin percentage during 1997.
Engineered Systems products margins decreased due to lower volume of large
chiller systems and lower volume of higher margin replacement and retrofit
orders in the U.S.market.
Unitary products margins decreased due to lower-than-expected volume in the
Unitary products OEM factories and lower-than-expected volume in Europe.
Refrigeration products margins increased due to better overall plant
performance and the impact of the sale of the commercial refrigeration business
in Germany.
Selling, General and Administrative expenses (SG&A) increased 16.7% to
$522.2 million in 1997 (16.4% of sales) from $447.5 million (13.9% of sales) in
1996. The absolute dollar increase was primarily due to the impact of the
non-recurring charges. Other factors contributing to the increases include the
cost of continued investment in distribution in growing markets, specifically
Asia and Latin America, increased research and development spending, costs
associated with new product introductions and inflation. Lower-than-anticipated
revenues impacted the increases in SG&A as a percent of sales. The Company
intends to continue to expand and strengthen its distribution in areas which
will benefit future growth.
Net interest expense increased to $40.9 million in 1997 from $34.5 million
in 1996, due to both higher average interest rates and higher average borrowing
levels.
Provision for income taxes of $31.1 million for the year ended December 31,
1997, relates to both U.S. and non-U.S. operations. The effective rate is 39.6%,
which is a significant increase over 1996 primarily due to the impact of the
$62.1 million fourth quarter charge which included components for which no
deferred tax benefits were recorded. The 1997 effective tax rate excluding the
impact of the $62.1 million non-recurring charge is consistent with expected
rates. If enacted tax
S-8
<PAGE> 9
rates remain unchanged, the Company's worldwide effective tax rate for 1998 is
expected to be less than the federal statutory rate of 35%.
Net income, as a result of the above factors, was $47.4 million in 1997 as
compared to $147.9 million in 1996.
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.
Revenues increased due to increased volume in the Engineered Systems 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.
Total domestic revenue increased 8.0% to $1,726 million in 1996 due to the
strength of the Engineered System equipment performance and 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.
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.
SG&A expenses increased to $447.5 million in 1996 (13.9% of sales) from
$406.6 million (13.9% 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.
Income from operations before impairment loss on long-lived assets
increased 7.0% to $238.4 million in 1996 as compared to $222.8 million for 1995.
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
borrowing levels.
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
of 27.7% benefited 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.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital requirements are generally met through a
combination of internally generated funds, bank lines of credit, commercial
paper issuances, financing of trade receivables and credit terms from suppliers
which approximate receivable terms 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 1998. Additional sources of working capital include
customer deposits and progress payments.
At March 31, 1998, the Company had working capital of $536.9 million
compared to $535.1 million as of December 31, 1997. The current ratio was 1.75
at March 31, 1998, as compared to 1.78 for December 31, 1997.
S-9
<PAGE> 10
Long-term indebtedness was $444.7 million at March 31, 1998, primarily
consisting of borrowings under commercial paper, bank lines and the $100 million
senior notes. As of March 31, 1998, there were no borrowings under the revolving
credit facility.
At March 31, 1998, the Company maintained a $500 million Amended and
Restated Credit Agreement with a group of commercial banks led by Canadian
Imperial Bank of Commerce, as Agent (the "Agreement") that expires on July 31,
2002. The Company had a line of credit available under the Agreement of up to
$500 million. The Agreement provides for borrowings under the facility at LIBOR
plus .16% or at specified bid rates. At March 31, 1998, the LIBOR rate was
5.65%. The Company pays a fee of .09% on the facility. The Agreement contains
financial and operating covenants requiring the Company to maintain certain
financial ratios and standard provisions limiting leverage, investments and
liens.
The Company's international subsidiaries maintain bank credit facilities in
various currencies that provide for borrowings of $247.6 million and $245.2
million at March 31, 1998 and December 31, 1997, respectively, of which $166.1
million and $175.5 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 5.64% and
5.84% as of March 31, 1998 and December 31, 1997, respectively.
During the second quarter of 1997, the Company arranged four separate
unsecured bank lines of credit similar to commercial paper borrowings. These
bank lines provide for total borrowings of $295 million which are expected to be
reborrowed in the ordinary course of business. At March 31, 1998 and December
31, 1997, the Company had $109.9 million and $169.8 million, respectively
outstanding under these bank lines. The average rate on the bank lines of credit
was 5.67% and 5.92%, at March 31, 1998 and December 31, 1997, respectively.
The $100 million of Senior Notes bear interest at a 6.75% fixed rate and
are due March 2003.
During 1995, the Company arranged a term loan denominated in a foreign
currency. The Company borrowed $26.2 million with a final maturity on November
15, 1998 and an interest rate of 3.98%. The loan is repayable in four annual
installments. The term loan agreement contains financial and operating covenants
that are equivalent to the covenants of the Company's Amended and Restated
Credit Agreement.
In 1992, the Company sold a fractional ownership interest in a defined pool
of trade accounts receivable for $100 million (the "Receivables Sales
Agreement"). At March 31, 1998 and December 31, 1997, the discount rate on the
accounts receivable was approximately 5.53% and 5.78%, respectively. Because the
Company's obligations under the 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 and commercial paper
borrowings.
In the ordinary course of business, the Company enters into various types
of transactions that involve contracts and financial instruments with
off-balance-sheet risk. The Company enters into these financial instruments to
manage financial market risk, including foreign exchange, commodity price and
interest rate risk. The Company enters into these financial instruments
utilizing over-the-counter as opposed to exchange traded instruments. The
Company mitigates the risk that counterparties to these over-the-counter
agreements will fail to perform by only entering into agreements with major
international financial institutions.
Capital expenditures currently anticipated for expanded capacity, cost
reductions and the introduction of new products during the next twelve months
will be in excess of depreciation and
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<PAGE> 11
amortization. These expenditures will be funded from a combination of operating
cash flows and availability under the Agreement and commercial paper borrowings.
Cash dividends of $0.12 per share were paid on common stock in the first
quarter of 1998. The declaration and payment of future dividends will be at the
sole discretion of the Board of Directors and will depend upon such factors as
the Company's profitability, financial condition, cash requirements and future
prospects.
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 1997, 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
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 has begun to derive a significant portion of its
revenue from the service, repair and replacement market. In 1997, 1996 and 1995
on a worldwide basis, service, repair and replacement revenue accounted for an
estimated 41%, 49% and 50% respectively, of the Company's total sales, while new
construction sales accounted for the remaining 59%, 51% and 50%. 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 Unitary products 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. Demand for hermetic
compressors in the original equipment market generally increases from January
through July as manufacturers increase production to meet anticipated seasonal
demand. Requirements for service and repair parts for Engineered Systems
products also increase during summer months. The Company provides incentives for
distributors to purchase products in advance of seasonal sales that reduce the
impact of seasonal fluctuations on the Company's sales of residential equipment.
The overall effect of seasonality is also dampened by the Company's Engineered
Systems and Refrigeration products, for which demand is not susceptible to
seasonality to the same extent as the Company's other products.
YEAR 2000
Management has initiated an enterprise-wide program to prepare the
Company's computer systems and applications for the year 2000. The Company
expects to incur internal staff costs as well as consulting and other expenses
related to infrastructure and facilities enhancements necessary to prepare
systems and applications for the year 2000. The cost of testing and conversion
of systems and applications will not have a material affect on the Company's
results of operations or financial position. A significant proportion of these
costs are not likely to be incremental costs to the Company, but rather will
represent the redeployment of existing information technology resources or be a
component of planned system improvements.
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<PAGE> 12
MANUFACTURING OPERATIONS
In February 1998, an accident occurred at the Company's Grantley facility
which primarily manufactures Engineered Systems products. Certain fabrication
and assembly areas were affected and must be rebuilt. The Company is adequately
insured and the net financial impact of the incident will not be material to the
Company's results of operations or financial position.
NEW ACCOUNTING STANDARDS
In January 1997, the Securities and Exchange Commission amended regulations
and forms, including Regulation S-X and S-K, to clarify and expand existing
disclosure requirements about accounting policies for certain derivative
instruments, and to add new disclosure requirements about the risk of loss from
changes in market rates or prices which are inherent in derivatives. The
Company's disclosures in its annual report on Form 10-K conform to the
disclosure requirements set forth in the amended regulations. Adoption by the
Company of the disclosure requirement relating to risk of loss, which
requirements are effective for fiscal years ending after June 15, 1998, are not
expected to have a material affect on the Company's financial statements.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information." In January 1998, the FASB issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." These statements establish
standards for reporting information about business segments and products in
financial statements and establish new disclosure requirements relating to
pension and other postretirement benefits. These pronouncements are effective
for fiscal years beginning after December 15, 1997.
Adoption of these statements is not expected to have a material impact on
the Company's financial statements.
FORWARD-LOOKING INFORMATION
This Prospectus Supplement, the accompanying Prospectus and the documents
incorporated therein by reference may contain "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act which represent the Company's projections, estimates, expectations
or beliefs concerning, among other things, financial items that relate to
management's future plans or objective or to the Company's future economic and
financial performance. Forward-looking statements involve known and unknown
risks and uncertainties and are indicated by words such as "anticipates,"
"expects," "plans," "believes," "could," "may," "will," "seeks," "pro forma" and
similar words and phrases and the negative thereof or variations thereon. These
risks and uncertainties include, but are not limited to, the competitive
environment in the industry in general and the Company's specific markets in
particular, technological advances by competitors, patents granted to or
contested by competitors, delays in product development and in addition,
unseasonably cool spring or summer weather in the northeastern United States or
in Europe could adversely affect the Company's residential air conditioning
business, as could a failure to reduce manufacturing costs in its Scroll
Technologies joint venture. Anticipated improvement in the Company'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 Company could be affected by any serious economic
downturns in the United States, Europe, Latin America or Asia. Potential
investors are cautioned that certain events or circumstances could cause the
Company's actual performance and financial results in future periods to differ
materially from those estimated or anticipated.
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<PAGE> 13
BUSINESS
GENERAL
The Company is a full-line, global designer and 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 1997 the Company's products were sold in over 100
countries through over 750 sales and distribution facilities and are in use in
such diverse locations as the Kuala Lumpur City Centre in Malaysia, the British
Houses of Parliament, the Tokyo World Trade Center, the Pentagon, NASA's Vehicle
Assembly Building at Cape Canaveral, NASA's Johnson Space Center, the Los
Angeles International Airport, the Jeddah Airport, the Overseas Union Bank
Centre in Singapore, the Sydney Opera House, the National Library Complex in
Beijing, the Atlantic City Convention Center, the English Channel Eurotunnel,
the Hong Kong Exposition Centre and the Lantau Airport Railway System in Hong
Kong.
The Company was founded in 1874 in York, Pennsylvania. From 1956 until 1986
the Company was a part of Borg-Warner Corporation ("Borg-Warner"). In 1986 it
was spun off to Borg-Warner shareholders and became an independent, publicly
held company. In 1988 the Company was purchased in a leveraged buyout by a
corporation organized by affiliates of Citicorp Investments Inc. ("CII") and two
investors (the "Acquisition"). In October 1991, the Company completed an initial
public offering of its Common Stock and in 1992 CII and the other non-management
investors in the Acquisition sold their remaining shares in a public offering.
Headquartered in York, Pennsylvania, the Company has manufacturing
facilities in 13 states and 13 foreign countries. As of December 31, 1997, the
Company employed approximately 20,270 people worldwide.
The Company's principal executive offices are located at 631 South Richland
Avenue, York, Pennsylvania 17403, and its telephone number is (717) 771-7890.
STRATEGY
The Company's strategy is to focus on the global air conditioning equipment
and worldwide service, repair and replacement markets and increase its presence
in the worldwide refrigeration and gas compression market. The Company has
grown, and expects to continue to grow, through expansion of its current product
lines, acquisitions of businesses, establishment of joint ventures and licensing
of technology in the HVAC&R industry.
The Company intends to continue its strategy of increasing its market share
by broadening its product range to offer a complete line of environmentally
acceptable and energy efficient products. The Company seeks to take advantage of
regulatory changes by developing products that comply with tightening
environmental and energy efficiency requirements and regulations before they
become effective. The Company has implemented its environmental strategy by
developing product lines that utilize its screw, centrifugal, reciprocating,
hermetic, scroll and inertia compressor technology employing HCFC-123, HCFC-22,
R-407C, R-410A, R-404A, R-507, R-717 (ammonia) and HFC-134a as a refrigerant.
The screw and centrifugal compressors utilize designs which separate the
refrigerant from the motor housing. See "Environmental Matters" below. The
Company has increased the overall efficiency of its product offerings by
employing internally developed advanced heat transfer and compressor technology
and introducing large air conditioning systems that utilize advanced thermal
storage and absorption technologies.
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<PAGE> 14
The Company is also seeking to expand into new markets. The Company intends
to expand sales of its equipment throughout the international markets by
broadening its product line, expanding its distribution capabilities and
pursuing acquisitions.
The Company also focuses on controlling manufacturing and operating
expenses and thus improving its operating margins by redesigning products,
acquiring more efficient manufacturing equipment and processes and reducing
costs not directly associated with the manufacturing process. In addition, the
Company has implemented a continuous planning process to enable it to carefully
monitor the amount of capital used in its business and to reposition its
business units in light of changing conditions throughout the year. The Company
believes that its management stock ownership plans and management incentive
compensation plans, which reward the management team of each operating unit for
achieving the planned objectives of that unit, have been key elements in
implementing its strategies and achieving its financial objectives.
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.
PRODUCTS AND MARKETS
All of the Company's products are in the HVAC&R industry and the Company
operates solely in this industry. Within HVAC&R, the Company's products fall
into three general categories. The first is Engineered Systems 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.
The second is Unitary products, consisting of air conditioning and furnace units
and hermetic and scroll compressors designed for use in residential and light
commercial applications. 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 systems products, the Company's refrigeration and gas compression
equipment is designed specifically for the customer's needs and applications.
ENGINEERED SYSTEMS PRODUCTS
The Company's Engineered Systems products consist of heating and air
conditioning equipment for buildings ranging from small office buildings and
fast food restaurants to large commercial and industrial complexes. Engineered
Systems air conditioning products include air-cooled and water-cooled chillers,
central air handling units, variable air volume units and control equipment to
monitor and control the entire system. Larger units for facilities such as
hospitals, office towers, hotels, airports district cooling and manufacturing
operations are custom designed and manufactured by the Company's Applied Systems
Business Unit. The Applied Systems Business Unit also supplies specially
designed chilled water systems for use on U.S., British, French and other naval
vessels. The Company is currently the major supplier of water chillers to the
U.S. Navy for both surface vessels and submarines.
The Company has a line of standard indoor air handling equipment
incorporating the latest technologies for indoor air quality and a line of
customized indoor and outdoor air handling products. In 1997, the Company
acquired PACE and Gamewell which designs, manufactures and sells air handling
equipment. York manufactures the broadest line of air handling equipment of any
manufacturer in the industry.
The Company markets its Engineered Systems products under the "YORK",
"MILLER-PICKING", "TEMPMASTER", "SEVESO" and "PACE" brands. In the United States
and Canada, distribution of Engineered Systems products are coordinated by 8
regional offices and approximately 61 district offices. These district offices
market products directly to end users and contrac-
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<PAGE> 15
tors. The Company has approximately 120 direct sales representatives and 115
independent sales agents in the North American market.
The Company derives substantial revenues by selling replacement equipment
and parts, and by providing routine maintenance and emergency service for
products manufactured by the Company and its competitors through annual service
contracts. The Company has a corporate and national account sales program to
service customers with multiple locations throughout the world.
The Company believes its reputation for service and repair is excellent.
The Company's more than 3,500 service technicians in offices throughout the
world generate substantial revenues through the sale of replacement parts and by
providing routine and emergency service for air conditioning and refrigeration
systems manufactured by the Company and its competitors. In 1997 on a worldwide
basis, the higher margin service, repair and replacement business accounted for
an estimated 41% of the Company's total sales. The Company believes that its
emphasis on service and repair, combined with the growth and aging of the
installed base of air conditioning and refrigeration equipment, will be key
factors in increasing the Company's revenues derived from the service, repair
and replacement market.
The Company's Engineered Systems products are principally manufactured in
York, Pennsylvania; Albany, Missouri; Hattiesburg, Mississippi; Portland,
Oregon; Salisbury, North Carolina; San Antonio, Texas; Basildon, England;
Barlassina, Italy; Carquefou, France; Mannheim, Germany; Asquith, Australia;
Montevideo, Uruguay; Wuxi, China; Guangzhou, China; Durango Mexico; and
Monterrey, Mexico.
Many of the components of the Company's engineered products, such as
motors, control elements and castings, are purchased from outside suppliers. The
other components are custom manufactured by the Company. Using these components
and custom-designed specifications, the engineered products are machined,
assembled, tested, shipped and installed. Following installation, the Company
assists in the start-up of the system, and supplies ongoing maintenance, service
and replacement parts.
UNITARY PRODUCTS
The Company's primary unitary products are ducted central air conditioning
and heating systems, light commercial equipment and ductless mini-splits
manufactured and sold by the Company's Unitary Products Group ("UPG") and
hermetic compressors manufactured and sold by Bristol Compressors. Revenues from
Bristol Compressors were approximately $381 million, $448 million and $504
million during 1995, 1996, and 1997, respectively.
Unitary products consist of split systems and packaged products. A split
system consists of an outdoor unit containing a compressor and condenser, and a
connected indoor unit containing a heat exchanger, an electric, gas or oil
heating section, an indoor blower system and associated controls. A packaged
product is a single, self-contained unit with compressor, condenser, heat
exchanger, electric, gas or oil heating section, blower and associated controls.
These units are typically installed on rooftops or on a slab beside a structure.
Ducted products distribute conditioned air throughout building structures with
ductwork connected to the system's blower, whereas ductless installations
provide conditioned air directly from indoor blowers without the use of
ductwork.
A hermetic compressor is an integral part of an air conditioning system.
The Company's products use compressors manufactured by Bristol as well as those
purchased from other vendors. In 1995, 1996, and 1997, approximately 83% of
Bristol's revenues were attributable to sales of products to other air
conditioning equipment manufacturers. During 1995, Bristol entered into a joint
venture, Scroll Technologies, to design and manufacture scroll compressors. This
allowed Bristol to expand its product offering to include scroll compressor
capabilities.
The Company markets its Unitary products under the "YORK", "LUXAIRE",
"FRASER-JOHNSTON", "COLEMAN(R) EVCON", "GUARDIAN", "AIRPRO" and "SEVESO" brands.
"YORK"
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<PAGE> 16
is the Company's full line brand, which is sold through Company-owned
distribution centers and exclusive independent distributors throughout the
world. The "YORK" brand is sold with a high level of customer service and sales
support. The Company's 1995 acquisition of Evcon Holdings expanded UPG's
capabilities and distribution network in the domestic unitary market. The
Company's other brands are sold through more than 200 non-exclusive distributors
primarily for resale to contractors. The Company also sells unitary products
directly to the manufactured housing industry in North America on an OEM basis.
In 1995 the Company formed a joint venture, Aeromaster, a mini-split
manufacturer located in Bangkok, Thailand. The mini-split market represents a
significant portion of the unitary business in the Asia Pacific Region and
Aeromaster enables York to compete in this market with a product manufactured
within the Region. Aeromaster supplies mini-split product to York offices
located around the world.
Sales of Unitary products and Bristol compressors include both new
installations and replacement systems. The Company estimates that more than half
of its Unitary products revenues in North America are attributable to the
replacement market. The replacement market is not affected by levels of new home
construction and therefore tends to be less cyclical. The replacement market is
significantly affected by ambient temperature. Hot spring weather causes
existing older units to fail earlier in the season, leading customers to
accelerate replacement of a unit which might otherwise be deferred in the case
of a late season failure.
New residential products cover a wide range of efficiencies and may be able
to qualify for rebates offered by local utility companies for high efficiency
equipment. The Company's commercial products have been redesigned to meet the
five year compliance requirement of the U.S. Energy Policy Act of 1992 (EPACT).
This includes the energy efficiency rating (EER) of the system as well as the
efficiency of certain motors. Bristol markets an INERTIA reciprocating
compressor that directly competes against other technologies in meeting high
efficiency requirements. Bristol has also developed a new compressor design
known as TS(TM) Technology. These new compressors provide higher system
efficiencies, greater reliability, and increased comfort. Scroll Technologies
continues to upgrade the scroll compressor technology and performance.
Unitary and light commercial products are manufactured principally in
plants located in Elyria, Ohio; Norman, Oklahoma; Wichita, Kansas; Barlassina,
Italy; Bogota, Colombia; Monterrey, Mexico; Coffs Harbour, Australia; Bangkok,
Thailand; Johannesburg, South Africa; and Guangzhou, China. The Company's
manufacturing process relies on the purchase of certain components (including
hermetic compressors, copper tube, fan motors, fan blades, and control elements)
from outside suppliers, and in-house fabrication of sheet metal cabinets and
refrigerant coils. The various unitary products are then assembled and tested
before shipment. Bristol compressors are manufactured at the Company's factories
in Bristol, Virginia and Sparta, North Carolina, and by Scroll Technologies in
Arkadelphia, Arkansas. As with other Company products, Bristol compressors are
assembled using purchased parts (including motors, castings, forgings and
electronic components) as well as parts manufactured by the Company.
REFRIGERATION PRODUCTS
The Company has developed a successful line of industrial and commercial
refrigeration products. The Company manufactures screw and reciprocating
compressors. Screw compressors enable the Company to produce a highly reliable,
ammonia refrigeration system required for commercial and industrial applications
in the food, beverage, chemical and petrochemical industries. The Company
believes that screw compressors are the most reliable and energy efficient
compressors available for ammonia refrigeration systems. Food processing
equipment produced by the Company includes spiral and tunnel freezers for the
poultry, frozen vegetable and prepared food businesses. In addition, the Company
manufactures packaged refrigeration systems to cool chemical and petrochemical
products during their production processes. Gram Refrigeration and
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Gram Contractors provide similar manufacturing capabilities in Europe and
increase distribution and availability of advanced technology. Gram also makes
reciprocating compressors for refrigeration applications. The Company's
refrigeration and gas compression equipment is engineered and manufactured to
customer specifications.
The Company markets its refrigeration and gas compression equipment under
the "YORK", "YORK FOOD SYSTEMS", "FRICK", "FRIGID COIL", "IMECO", "RECO", "RITE
COIL", "RECOLD", "NORTHFIELD", "ACUAIRE" and "GRAM REFRIGERATION" brands. The
products are sold by the Company's sales engineers located in 14 offices and a
national network of more than 40 independent agents in the United States as well
as nine offices, 20 independent distributors and two licensees elsewhere in the
world. In addition, the Company believes that developing countries offer
opportunities for increasing sales of refrigeration equipment.
The Company's Food Systems Group develops commercial food freezing and
processing machinery in the domestic and international markets. Customers of
this group include Tyson Foods, H. J. Heinz, Cargill, Unilever and Nestle. The
Food Systems Group pulls through sales of refrigeration products from the
refrigeration products group.
The Company's new products in this area include smaller capacity packaged
commercial freezing machines down-sized to meet the needs of the developing new
markets, and a growing capability to design and deliver turn-key food processing
lines which include a broad spectrum of York products.
Refrigeration equipment is manufactured at Company-owned facilities in
Dixon, Illinois; Polo, Illinois; Waynesboro, Pennsylvania; Northfield,
Minnesota; Smithville, Ohio; San Antonio, Texas; Carquefou, France; and Vojens,
Denmark, and at a leased facility in Santa Fe Springs, California.
INTERNATIONAL DISTRIBUTION
The Company markets its equipment and service in Europe through companies
located in Austria, Switzerland, Bulgaria, Russia, other former Commonwealth of
Independent States countries, the Czech Republic, Hungary, Poland, Slovakia,
Romania, England, France, Germany, Denmark, Belgium, Netherlands, and Italy. The
Company's European operations have supplied equipment for such locations as the
Kremlin in Moscow, the Pompidou Center in Paris, the La Scala Opera House in
Milan, the English Channel Eurotunnel and the Frankfurt Airport.
The Company markets its equipment and service in the Middle East and India
through offices in Dubai, Abu Dhabi, Kuwait, Istanbul, New Delhi, Mumbai, Cairo,
Karachi, and through numerous distributors throughout the region. The Company
has sales and service joint ventures throughout the Kingdom of Saudi Arabia. The
Company's ability to manufacture large tonnage air-cooled air conditioning
equipment capable of operating under extreme conditions has resulted in winning
a substantial number of large contracts in the water short Middle East. The
Company has installed systems throughout the region, including equipment in the
Jeddah Airport, the Prophet's Mosque in Medina, the U.S. Embassy in New Delhi,
the Cairo Airport, the Abu Dhabi National Oil Company and the stock exchanges in
Kuwait and Istanbul.
The Company markets and services its products in the Pacific Rim region
through offices in Hong Kong, China, Singapore, Korea, Australia, Indonesia, and
Thailand, joint ventures in Taiwan and Malaysia, and various distributors
throughout the region. The Company manufactures products through joint ventures
in China, and Malaysia, and wholly owned facilities in Australia and Thailand.
The Company has installed systems throughout the region, including equipment in
the Shanghai Opera House, Shenzhen Railway Station, Hong Kong Exposition Centre,
Overseas Union Bank Centre in Singapore, Grand Hotel in Taipei, Sydney Opera
House, and the Kuala Lumpur City Centre in Malaysia, the world's tallest
building.
Sales through Latin America are handled through offices in Mexico,
Argentina, Brazil, Chile, Colombia, Miami, (USA), Puerto Rico, Argentina,
Ecuador, Peru and Venezuela, and sales
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representatives and independent distributors located throughout Latin America.
Installations include the World Trade Centers in Mexico, Colombia, and Chile,
the Sao Market Place in Brazil, the Mexican Stock Exchange and the Hotel
Intercontinental in Argentina.
RAW MATERIALS AND PURCHASED COMPONENTS
The Company purchases compressors, steel, copper, aluminum, electric
motors, castings, forgings, stampings, fabricated copper tubes, electronic
starters and controls, aluminum fin, fan blades, capacitors, transformers,
refrigerant gases, valves, fittings and other components from many outside
suppliers. Alternate sources of supply are available for all raw materials and
components for which the Company uses a single supplier. The Company believes
that it has adequate sources of supplies of raw materials and component parts
for its manufacturing requirements. In order to hedge against certain raw
material price increases, from time to time the Company enters into forward
contracts for the purchase of certain raw materials, principally copper and
aluminum.
JOINT VENTURES IN FOREIGN MARKETS
In addition to its wholly-owned production and distribution facilities, the
Company produces, distributes and services Unitary and Engineered Systems
products in foreign markets through its participation in several foreign joint
ventures, which are described in the following table:
<TABLE>
<CAPTION>
JOINT VENTURE
JOINT VENTURE (PERCENT OWNED BY PRINCIPAL
PRINCIPAL LOCATION PARTNER THE COMPANY) PRODUCTS/SERVICES MARKETS SERVED
------------------ ------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Malaysia...................... OYL Industries BHD. OYL-Condair Manufacture Unitary Asia Pacific
Industries SDN.BHD. and Engineered System Middle East
(49%) products
Malaysia...................... OYL Industries BHD. York (Malaysia) Sales and service of Malaysia
Service SDN.BHD. air conditioning
(30%) equipment
People's Republic of China.... Guangzhou Sinro Air York Guangzhou Air Manufacture Unitary China
Conditioning Conditioning and and Engineered
Mechanical and Refrigeration Co. Systems products
Electrical Equipment Ltd. (97%)
Company Ltd.
Republic of China (Taiwan).... Taipei Engineering York Taiwan Inc. Sales and service of Taiwan
Development (60%) air conditioning
equipment
Spain......................... Compania Roca Clima Roca-York S.L. Manufacture Unitary Spain
Radiadores S.A. (50%) products
Cyprus........................ Sabinco Ltd. KROY Ltd. (50%) Sales of air Middle East
conditioning
equipment and parts
People's Republic of China.... Wuxi Boiler Group York Wuxi Air Manufacture China
Conditioning and Engineered Systems
Refrigeration Co. products
Ltd. (80%)
Brazil........................ Mayside Participacoes York International Sales of air Brazil
Administracao e Comercial Ltda. (80%) conditioning
Comercio Ltda. equipment
Saudi Arabia.................. Al Salem United Al Salem-York Service and repair of Saudi Arabia
Contracting Co. Services Ltd. (49%) air conditioning
equipment
</TABLE>
Dividends received by the Company from foreign joint ventures were $0.6
million in 1995, $1.5 million in 1996 and $1.2 million in 1997. Total Company
investments in foreign joint ventures were $16.7 million, $22.2 million and
$17.7 million at December 31, 1995, 1996 and 1997, respectively. Total sales by
the Company to foreign joint ventures are less than 1% of the Company's total
revenues.
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RESEARCH AND DEVELOPMENT
The Company's ongoing research and development program involves redesigning
existing products to reduce manufacturing costs and to increase product
efficiencies, developing electronic controls for existing products and creating
new products. During the years 1995, 1996 and 1997, the Company spent $26.9
million, $28.0 million and $30.6 million, respectively, for all product
development activities.
Product development activities in 1996 and 1997 encompassed a wide range of
products. The Company's centrifugal chiller line was expanded for use with
HCFC-22, HCFC-123 and HFC-134a, all considered environmentally acceptable
replacements for CFCs in the United States. The Company also offers screw
compressors which use R-717 (ammonia). The product line now extends from 300 to
2,000 tons for these refrigerants. The Company also completed development of a
new custom air handling product line in the range of 2,000 to 50,000 cubic feet
per minute (CFM). The new products include the latest technologies to insure
indoor air quality. The combination of air handling product development and
existing product lines gives York the broadest line of air handling products of
any single manufacturer in the industry. The Company announced a new line of
centrifugal chillers ranging from 400 to 2,000 tons, incorporating natural gas
engine drives supplied by Caterpillar Inc. The product line boasts the highest
efficiency of any gas-powered air conditioning system on the market. The
development of prototype HFC-134a centrifugal chillers for Surface and Submarine
Vessels continued under various U.S. Navy contracts. These chillers are targeted
for introduction in the Navy's new construction programs in 1998. Development of
HFC-236fa retrofit kits for R-114 systems were also developed in 1997 for fleet
demonstration in 1998. In 1995, the Company introduced more efficient
centrifugal chillers utilizing HCFC-123, HCFC-22 and HFC-134a. The efficiency
levels of .50 to .52 kw/ton are expected to be among the best in the industry.
The Company has also introduced a new line of variable speed drives for
centrifugal chillers to 1,000 tons. This product is compact enough to mount
directly on the chiller and is applicable to the retrofitting of any centrifugal
chiller on the market.
Bristol developed its 1.5 - 5 ton "Inertia" reciprocating compressor and
put it into production in 1991. Bristol continues to improve on the efficiency
level of the "Inertia" and a higher efficiency version was developed and put
into production during 1994. The "Inertia" compressor is being sold in the
residential equipment market for high energy efficiency air conditioning and
heat pump applications. Bristol has developed a new breakthrough design, TS(TM)
Technology, for compressors which provide higher system efficiencies, greater
reliability, and increased comfort. Scroll compressor technology and capability
are expanding through the joint venture established in 1995.
COMPETITION
All of the markets in which the Company does business are very competitive.
Participants compete on the basis of service and the price, quality, reliability
and efficiency of products. Several of the Company's competitors have greater
financial resources than the Company.
In the domestic market for Engineered Systems air conditioning equipment,
the Company competes primarily with two large United States manufacturers,
Carrier Corporation, a subsidiary of United Technologies Corporation, and Trane
Company, a division of American Standard Inc. Engineered Systems product
manufacturers compete on the basis of product design, reliability and
post-installment service. Architects and engineers play an important part in
determining which manufacturer's products will be used in an application.
In the Unitary products market, the Company competes with numerous national
and regional manufacturers. In this market, price competition and maximum market
coverage are particularly important, as there is relatively little perceived
differentiation among competing product lines.
In the hermetic compressors market, the Company competes directly with two
United States manufacturers, Copeland Corporation, a subsidiary of Emerson
Electric Inc., and Tecumseh, a
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division of Tecumseh Corporation. In this market, the Company competes primarily
on the basis of reliability and price as well as delivery, service and product
efficiency.
In the market for refrigeration equipment, the Company competes primarily
with FES, BAC, Evapco, Krack Corp., Sabroe and Frigoscandia.
In international markets for air conditioning equipment, the Company
competes primarily with Carrier Corporation, Trane Company and several Japanese
manufacturers, including Matsushita, Hitachi, Mitsubishi Electric and Toshiba.
PATENTS AND TRADEMARKS
The Company holds numerous patents that relate to the design and use of its
products that it considers important, but not essential, to the overall conduct
of its business. It is the Company's policy to obtain patent protection for as
many of its new and developmental products as possible, and to enforce such
patent rights as appropriate. No patents which the Company considers material
will expire within the next five years.
The Company owns several trademarks that it considers important in the
marketing of its products, including "YORK." "LUXAIRE", "FRASER-JOHNSTON",
"RECOLD", "FRICK", "FRIGID COIL", "BRISTOL", "IMECO", "MILLER PICKING", "RECO",
"COLEMAN(R) EVCON", "AIRPRO", "GUARDIAN", "YORK FOOD SYSTEMS", "RITE COIL",
"NORTHFIELD FREEZING SYSTEMS", "SEVESO", "GRAM", "AEROMASTER", "ACUAIRE" and
"TEMPMASTER." The Company believes that its rights in these trademarks are
adequately protected and of unlimited duration.
MAJOR CUSTOMERS
During 1997, no customer, distributor, dealer or licensee accounted for
more than 10% of the Company's revenues. The loss of a few customers,
distributors, dealers or licensees would not have a materially adverse effect on
the Company's business.
BACKLOG
As of March 31, 1998, the Company's backlog was $984.6 million as compared
to $917.0 million as of March 31, 1997. Substantially all of the orders are
expected to be fulfilled within the next 12 months.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 20,270 persons
worldwide. Approximately 12,555 persons are employed in the United States and
7,715 persons are employed in foreign countries. Approximately 3,482 domestic
employees are covered by collective bargaining agreements which expire between
December 31, 1998 and March 31, 2003. The Company considers its relations with
its employees to be satisfactory.
ENVIRONMENTAL MATTERS
Environmental laws that affect or could affect the Company's domestic
operations include, among others, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Clean Air Act, the Clean Water Act,
the Resource Conservation and Recovery Act, the Occupational Safety and Health
Act, the National Environmental Policy Act, the Toxic Substances Control Act,
any regulations promulgated under these acts, and various other Federal, state
and local laws and regulations governing environmental matters. The Company
believes it is in substantial compliance with such existing environmental laws
and regulations.
The Company's foreign operations are also subject to various environmental
statutes and regulations. Generally, these requirements tend to be no more
restrictive than those in effect in the
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<PAGE> 21
United States. The Company believes it is in substantial compliance with such
existing environmental statutes and regulations. In 1993, the Council of
European Communities agreed on EC regulation number 1836/93 which recommended
that each company voluntarily complete an ECO-Audit. The Company has completed
these audits at several of its European facilities.
In September 1987, the United States became a signatory to an international
agreement titled the Montreal Protocol on Substances that Deplete the Ozone
Layer (the "Montreal Protocol"). The Montreal Protocol requires its signatories
to reduce production and consumption of CFCs and Halons, some of which are
utilized in air conditioning and refrigeration equipment. In 1988, the EPA
issued regulations under the Clean Air Act implementing the Montreal Protocol in
the United States. Many other countries have also become signatories to the
Montreal Protocol. The manner in which these countries implement the Montreal
Protocol and regulate CFCs could differ from the approach taken in the United
States.
The 1990 Clean Air Act amendments implement the Montreal Protocol by
establishing a program for limiting the production, importation and use of
certain ozone depleting chemicals (including those governed by the Montreal
Protocol) some of which are refrigerants currently used by the Company. Under
the Act, the production and consumption of the refrigerants designated as "Class
I substances" including all CFCs must be phased out beginning in 1991 and are to
be banned completely by 2000. Certain other refrigerants, including all HCFCs,
are designated as "Class II substances", and must be phased out between 2015 and
2030.
The Clean Air Act allows the EPA to accelerate the statutory phase-out
schedule for any Class I or Class II substance. In November 1992, the parties to
the Montreal Protocol agreed to amend the Protocol to require the complete
phase-out of CFC production by the beginning of 1996. Further, the parties
agreed to a 1996 production cap on HCFCs and a complete phase-out of HCFC
production by 2030. The EPA published a final rule requiring accelerated
phase-out of the production of all CFCs by 1996 and of all HCFCs by 2030.
None of the Company's manufactured products contains Class I substances.
Class I substances previously used by the Company have been substituted for by
Class II substances or substances that are currently unregulated. The Company
does, however, believe that revenues from servicing and repairing existing
equipment that uses Class I substances are and will be significant. These
activities are regulated by the EPA which imposes guidelines affecting service
and maintenance of equipment that uses Class I and Class II substances. The
Company trains and licenses its service technicians in service and maintenance
procedures that comply with the new regulations. Therefore, the Company believes
that the new regulations will not have a material adverse effect on its
operations. The phase-out of Class I substances will require modifications to
existing air conditioning equipment as availability of recycled Class I
substances decreases. Since the Company's technology enables it to modify
existing equipment for use with Class II substances, it believes that this will
continue to generate additional service revenues. While the Company expects to
derive substantial revenue from the sale of products utilizing Class II
substances, it is not expected that any phase-out will have a significant impact
on the sales of such products prior to the end of the decade. Nonetheless, as
the supply of virgin and recycled Class II substances falls, it will be
necessary to address the need to substitute permitted substances for Class II
substances.
The Company, in conjunction with major chemical manufacturers, is
continually in the process of reviewing and addressing the impact of refrigerant
regulations on its products. The Company believes that the combination of those
products which presently utilize Class II substances and those products in the
field which can be retrofitted to such refrigerants provides a complete line of
commercial and industrial products. Therefore, the Company does not foresee any
material adverse impact on its business or competitive position as a result of
the Montreal Protocol, the 1990 Clean Air Act amendments or their implementing
regulations. However, the Company believes that the implementation of severe
restrictions on the production, importation or use of refrigerants employed in
larger quantities by the Company could have such an impact. The Company believes
that the
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<PAGE> 22
Engineered Systems products that it has produced will be well positioned to
utilize the next generation of refrigerants without substantial modification. If
the next generation of refrigerants is incompatible with the hermetic
compressors used by the Company and all of its competitors for Unitary products,
design modifications would be required.
GOVERNMENTAL REGULATIONS
The Company is subject to regulations promulgated under the National
Appliance Energy Conservation Act of 1987, as amended, and various state
regulations concerning the energy efficiency of its products. The Company has
developed and is developing products which will comply with these regulations,
and does not believe that such regulations will have a material adverse effect
on its business.
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<PAGE> 23
EXECUTIVE OFFICERS
The following table lists York's executive officers as of the date of this
Prospectus Supplement. Officers are elected by and serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert N. Pokelwaldt...................... 61 Chairman of the Board of Directors and Chief
Executive Officer
John R. Tucker............................ 50 President and Chief Operating Officer
William G. Cowles, Jr..................... 52 Vice President and President of Refrigeration
Joseph D. Smith........................... 44 Vice President, Manufacturing
Peter J. Spellar.......................... 53 Vice President and President of Applied Systems
Michael R. Young.......................... 53 Vice President and President of Bristol
Compressors
Jane G. Davis............................. 48 Vice President, Secretary and General Counsel
Wayne J. Kennedy.......................... 55 Vice President, Human Resources
Helen S. Marsteller....................... 37 Vice President, Investor Relations and Corporate
Communications
Mark V. Stanga............................ 44 Vice President, Government Affairs
James P. Corcoran......................... 52 Treasurer
C. David Myers............................ 34 Controller
</TABLE>
Mr. Pokelwaldt has been Chairman of the Company since January 1993. Prior
thereto he was President, Chief Executive Officer and Director of the Company
since June 1991, President and Chief Operating Officer from January 1990 to June
1991, Vice President of the Company and President of Applied Systems from
September 1988 to January 1990 and Chairman and Chief Executive Officer of Frick
Company from June 1983 to September 1988.
Mr. Tucker has been President and Chief Operating Officer of the Company
since October 1997. Prior to joining the Company, he was President of Aerospace
Equipment Systems Sector of Allied Signal, Inc. from January 1996 to October
1997, President and Chief Executive Officer of Motoren und Turbinen Union (Jet
Engine Division) of Daimler-Benz, A.G. from 1994 to 1996 and President of AEG
Transportation Systems, Inc. from 1988 to 1994, and held various positions with
Westinghouse Electric Corporation from 1968 to 1988.
Mr. Cowles has been Vice President and President of Refrigeration Products
Group since January 1997. Prior thereto, he was President, Northfield Freezing
Systems from September 1985 to January 1997.
Mr. Smith has been Vice President, Manufacturing since December 1997. Prior
thereto he was President of the Airside Products Group since October 1994. Prior
thereto he was Vice President of Special Projects of the Company from May 1994
to October 1994. Prior to joining the Company, Mr. Smith was Vice President and
General Manager of Spherical Roller Bearing Division of SKF USA, Inc. since May
1992. Previous to this, Mr. Smith held various positions with Harley Davidson
and General Motors.
Mr. Spellar has been Vice President of the Company and President, Applied
Systems Worldwide since November 1995. Prior thereto, he was Vice President of
the Company and Vice President, European Operations from August 1992 to November
1995, President, Frick Division from May 1987 to August 1992 and President of
the Frick Company from May 1979 to May 1987.
Mr. Young has been Vice President of the Company, and Chief Executive
Officer and President of Bristol Compressors since October 1996. Prior thereto,
he was President, Chairman and Chief Executive Officer of Evcon Industries, Inc.
from 1991-1995, President and Chief Operating Officer of York International Inc.
from 1988 to 1989, and Chairman, President and Chief Executive Officer of
Bristol Compressors from 1983 to 1987.
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<PAGE> 24
Ms. Davis has been Vice President, Secretary and General Counsel of the
Company since March 1995. Prior thereto, she was Vice President, General Counsel
and Secretary of Joy Technologies Inc. from September 1988 to February 1995.
Mr. Kennedy has been Vice President, Human Resources, of the Company since
May 1993. Prior thereto he was the Vice President of Human Resources for the
Millipore Corporation from 1985 to 1993.
Ms. Marsteller has been Vice President, Investor Relations and Corporate
Communications since September 1997. Prior thereto, she was Director of Investor
Relations from 1992 to September 1997. Prior thereto, she held various financial
positions in the Unitary Products Group from 1986 to 1992.
Mr. Stanga has been Vice President of Government Affairs since February
1997. Prior thereto, he was Director of Government Affairs from October 1995 to
February 1997. Prior to joining the Company, Mr. Stanga was Environmental
Affairs counsel for Litton Industries from April 1988 to October 1995, Associate
Director of the Office of Ocean and Coastal Resources Management in the U.S.
Commerce Department from April 1986 to April 1988, and Attorney Advisor at the
U.S. Environmental Protection Agency from February 1983 to April 1986.
Mr. Corcoran has been Treasurer of the Company since July 1992. Prior
thereto he was Treasurer of Griffith Laboratories from August 1990 to May 1992,
Treasurer of AM International from March 1987 to August 1990 and Director,
Treasury Operations of Borg-Warner Corporation from February 1977 to March 1987.
Mr. Myers has been Controller since July 1995. Prior thereto, he was
Director of Finance, Airside Products Group to July 1995 and Director of
Financial Planning and Controls from March 1994 to December 1994. Prior to
joining the Company, he was with KPMG Peat Marwick LLP from August 1986 to March
1994.
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<PAGE> 25
DESCRIPTION OF THE NOTES
GENERAL
The following description of the particular terms of the Notes supplements
the description of the general terms and provisions of the Notes set forth in
the accompanying Prospectus under "Description of Debt Securities." This summary
of the terms of the Notes is subject to and qualified by the provisions of the
Indenture and any supplement thereto, and should be read in conjunction with
(and, to the extent inconsistent, in substitution for), the "Description of Debt
Securities" in the accompanying Prospectus.
The Notes offered hereby will be limited to $200,000,000 aggregate
principal amount and will be issued pursuant to an Indenture to be dated as of
June , 1998 (the "Indenture"), between the Company and State Street Bank and
Trust Company, as trustee (the "Trustee"). The Notes will be issued in fully
registered form only in the form of global notes registered in the name of Cede
& Co., the nominee of DTC. Beneficial interests in the Notes will be shown on,
and transfers thereof will be offered only through, records maintained by DTC
and its participants. See "Description of Debt Securities -- Provisions
Applicable to Senior, Senior Subordinated and Subordinated Debt
Securities -- Global Securities" in the accompanying Prospectus. The Notes will
not be issued in definitive form except in the circumstances described under
such caption in the Prospectus.
The Notes will mature on June 1, 2008. The Notes will bear interest from
June 1, 1998 at the rate per annum shown on the front cover of this Prospectus
Supplement payable semiannually on June 1 and December 1 of each year and at
maturity (each such date, an "Interest Payment Date"), commencing December 1,
1998, to the person in whose name the Note (or one or more predecessor Notes) is
registered at the close of business on the May 15 or November 15, as the case
may be, next preceding such Interest Payment Date.
The Notes rank pari passu in right of payment with any existing and future
unsecured senior indebtedness of the Company and senior to all existing and
future senior subordinated and subordinated indebtedness of the Company.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) as determined by a Quotation Agent
(as defined below), the sum of the present values of the remaining scheduled
payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined below) plus 25
basis points plus, in each case, accrued interest thereon to the date of
redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and
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<PAGE> 26
lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average of all
such Quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company.
"Reference Treasury Dealer" means (i) Goldman, Sachs & Co. and its
successors; provided, however, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer,
and (ii) any other Primary Treasury Dealer selected by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Company, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption.
SETTLEMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds or the equivalent, so long as the
Depositary continues to make its Same-Day Funds Settlement System available to
the Company.
Secondary trading in long-term notes and debentures of corporate issuers
generally is settled in clearinghouse or next-day funds. In contrast, the Notes
will trade in the Depositary's Same-Day Funds Settlement System, and secondary
market trading activity in the Notes will therefore be required by the
Depositary to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
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<PAGE> 27
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and each
Underwriter has severally agreed to purchase, the principal amount of the Notes
set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
----------- ---------------
<S> <C>
Goldman, Sachs & Co......................................... $
CIBC Oppenheimer Corp. .....................................
------------
Total............................................. $200,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
% of the principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Notes
than they are required to purchase from the Company in the offering. The
Underwriters may also impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the Notes sold in the offering may be reclaimed
by the Underwriters if such Notes are repurchased by the Underwriters in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price for the Notes which may be higher than the
price that might otherwise prevail in the open market; and these activities, if
commenced, may be discontinued at any time. These transactions may be effected
in the over-the-counter market or otherwise.
Certain Underwriters and their affiliates engage in transactions with and
perform services for the Company in the ordinary course of business. Canadian
Imperial Bank of Commerce, an affiliate of CIBC Oppenheimer, is a lender under
one of the Company's credit facilities.
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the
Company by Simpson Thacher & Bartlett, New York, New York. Certain legal matters
with respect to the Notes will be passed upon for the Underwriters by Davis Polk
& Wardwell, New York, New York.
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<PAGE> 28
EXPERTS
The consolidated financial statements and schedule of York International
Corporation and subsidiaries as of December 31, 1997 and 1996 and for each of
the years in the three-year period ended December 31, 1997, have been
incorporated by reference in the Registration Statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference in the Registration Statement and upon the authority
of said firm as experts in accounting and auditing. The reports of KPMG Peat
Marwick LLP refer to the Company's adoption, effective October 1, 1995, of the
provisions of Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."
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<PAGE> 29
PROSPECTUS
York International Corporation
Debt Securities
Warrants to Purchase Debt Securities
------------------------
York International Corporation ("York" or the "Company") may offer and sell
from time to time, in one or more series, (i) its unsecured debt securities
consisting of notes, debentures or other evidences of indebtedness (the "Debt
Securities") which may be senior ("Senior Debt Securities"), senior subordinated
("Senior Subordinated Debt Securities") or subordinated ("Subordinated Debt
Securities") and (ii) warrants ("Warrants") to purchase Debt Securities (the
Debt Securities and Warrants are collectively referred to as the "Securities"),
or any combination of the foregoing, at an aggregate initial offering price not
to exceed $200,000,000 at prices and on terms to be determined at or prior to
the time of sale.
Specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement
("Prospectus Supplement"), together with the terms of the offering of the
Securities and the initial price and the net proceeds to the Company from the
sale thereof. The Prospectus Supplement will set forth with regard to the
particular Securities, without limitation, the following: (i) in the case of
Debt Securities, the specific designation, aggregate principal amount, ranking
as senior debt, senior subordinated debt or subordinated debt, maturity, rate or
rates (or method of determining the same) and time or times for the payment of
interest, if any, any terms for optional or mandatory redemption or repurchase
or sinking fund provisions, any conversion or exchange rights and (ii) in the
case of Warrants, the number and terms thereof, the designation and the
principal amount of Debt Securities issuable upon their exercise, the exercise
price, the terms of the offering and sale thereof and, where applicable, the
duration and detachability thereof.
The Securities may be sold directly by the Company to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution." If any agents of the Company or any underwriters are
involved in the sale of any Securities in respect of which this Prospectus is
being delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in the Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 20, 1995.
<PAGE> 30
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission, 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at regional
offices of the Commission at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center, New
York, New York 10048. Copies of such material may be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such material may also be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement on
Form S-3, as amended (the "Registration Statement"), of which this Prospectus is
a part. For further information with respect to the Company and the Securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto. Statements made in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete; and while the Company
believes the descriptions of the material provisions of such contracts,
agreements and other documents contained in this Prospectus are accurate
summaries of such material provisions, reference is made to such contract,
agreement or other document filed as an exhibit to the Registration Statement
for a more complete description of the matter involved, and each such statement
is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents previously filed with the Commission pursuant to the
Exchange Act: (i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, (ii) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and (iii) the Company's Current Report on Form 8-K
dated March 14, 1995.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained in this Prospectus or in any subsequently
filed document that also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents that are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to York International Corporation, 631 South Richland Avenue, York,
Pennsylvania 17403, Attention: Jane G. Davis. Telephone requests may be directed
to Ms. Davis at (717) 771-7890.
2
<PAGE> 31
THE COMPANY
The Company is a full-line, global manufacturer of heating, ventilating,
air conditioning, process cooling and refrigeration ("HVAC&R") products. The
Company believes it is one of the leading companies in the worldwide HVAC&R
industry and the third largest manufacturer and marketer of such products in the
United States. 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 1994 the Company's products were sold in over 120 countries
through over 700 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, 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.
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 the
Company 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 other 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 10 states and 9 foreign countries. The Company employs
approximately 17,000 people worldwide. The Company's principal executive offices
are located at 631 South Richland Avenue, York, Pennsylvania 17403, and its
telephone number is (717) 771-7890.
USE OF PROCEEDS
Unless otherwise provided in the applicable Prospectus Supplement, the net
proceeds from the sale of the particular Securities offered by this Prospectus
and each Prospectus Supplement (the "Offered Securities") will be used to reduce
floating rate indebtedness under one or more of the Company's credit facilities.
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<PAGE> 32
RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratios of earnings to fixed charges, earnings
consist of pretax income plus fixed charges. Fixed charges consist of interest
expense, amortization of financing costs and an estimated portion of rentals
representing interest costs.
The following table sets forth the ratios of earnings to fixed charges for
the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.................... 3.5x 4.2x 5.3x 5.2x 3.7x 1.4x 1.2x
</TABLE>
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<PAGE> 33
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be unsecured senior, senior subordinated or
subordinated debt of the Company and will be issued, in the case of Senior Debt
Securities, under a Senior Indenture (the "Senior Debt Indenture") between the
Company and The First National Bank of Boston, as trustee, in the case of Senior
Subordinated Debt Securities, under a Senior Subordinated Indenture (the "Senior
Subordinated Debt Indenture") between the Company and The First National Bank of
Boston, as trustee, and in the case of Subordinated Debt Securities, under a
Subordinated Indenture (the "Subordinated Debt Indenture") between the Company
and The First National Bank of Boston, as trustee (the "Subordinated Debt
Trustee"). The Senior Debt Indenture, the Senior Subordinated Debt Indenture and
the Subordinated Debt Indenture are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures." None of the
Indentures limits the amount of Debt Securities that may be issued thereunder.
The Indentures permit the appointment of a different trustee for each series of
Debt Securities. As used herein, the term "Trustee" means The First National
Bank of Boston. If there is at any time more than one trustee under any
Indenture, the term "Trustee" as used in this Prospectus will mean each such
trustee and will apply to each such trustee only with respect to those series of
Debt Securities with respect to which it is serving as trustee. The Indentures
are filed as exhibits to the Registration Statement of which this Prospectus is
a part. The following summaries of certain provisions of the Indentures and the
Debt Securities do not purport to be complete and, while the Company believes
the descriptions of the material provisions of the Indentures and Debt
Securities contained in this Prospectus are accurate summaries of such material
provisions, such summaries are subject to the detailed provisions of the
applicable Indenture to which reference is hereby made for a full description of
such provisions, including the definition of certain terms used herein. Section
references in parentheses below are to sections in each Indenture unless
otherwise indicated. Wherever particular sections or defined terms of the
applicable Indenture are referred to, such sections or defined terms are
incorporated herein by reference as part of the statement made, and the
statement is qualified in its entirety by such reference. The Indentures are
substantially identical, except for provisions relating to subordination.
PROVISIONS APPLICABLE TO SENIOR, SENIOR SUBORDINATED AND SUBORDINATED DEBT
SECURITIES
General. The Debt Securities will be unsecured senior, senior subordinated
or subordinated obligations of the Company and may be issued from time to time
in one or more series. Except to the extent set forth in the applicable
Prospectus Supplement, none of the Indentures limits the payment of dividends or
the acquisition of stock of the Company. Except to the extent set forth in any
Prospectus Supplement, the Indentures do not, and the Debt Securities will not,
contain any covenants or other provisions that are intended to afford holders of
the Debt Securities special protection in the event of either a change of
control of the Company or a highly leveraged transaction by the Company.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Debt Securities being offered (the "Offered Debt
Securities") (to the extent such terms are applicable to such Offered Debt
Securities): (i) the title of the Offered Debt Securities; (ii) classification
as Senior Debt Securities, Senior Subordinated Debt Securities or Subordinated
Debt Securities, aggregate principal amount, purchase price and denomination;
(iii) the date or dates on which the Offered Debt Securities will mature; (iv)
the method by which amounts payable in respect of principal, premium, if any, or
interest, if any, on or upon the redemption of such Offered Debt Securities may
be calculated; (v) the interest rate or rates (or the method by which such will
be determined), and the date or dates from which such interest, if any, will
accrue; (vi) the date or dates on which such interest, if any, will be payable;
(vii) the place or places where and the manner in which the principal of,
premium, if any, and interest, if any, on the Offered Debt Securities will be
payable and the place or places where the Offered Debt Securities may be
presented for transfer; (viii) the right, if any, or obligation, if any, of the
Company to redeem, repay or purchase the Offered
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<PAGE> 34
Debt Securities pursuant to any sinking fund or analogous provisions or at the
option of a holder thereof, and the period or periods within which, the price or
prices (or the method by which such price or prices will be determined, or both)
at which, the form or method of payment therefor if other than in cash and the
terms and conditions upon which the Offered Debt Securities will be redeemed,
repaid or purchased pursuant to any such obligation; (ix) the terms for
conversion or exchange, if any, of the Offered Debt Securities; (x) any
provision relating to the issuance of the Offered Debt Securities at an original
issue discount; (xi) if the amounts of payments of principal of, premium, if
any, and interest, if any, on the Offered Debt Securities are to be determined
with reference to an index, the manner in which such amounts shall be
determined; (xii) any material United States federal income tax consequences;
(xiii) the currency or currencies for which the Offered Debt Securities may be
purchased and the currency or currencies in which principal, premium, if any,
and interest, if any, may be payable; (xiv) if a trustee other than The First
National Bank of Boston with respect to any series of Senior Debt Securities,
The First National Bank of Boston with respect to any series of Senior
Subordinated Debt Securities or The First National Bank of Boston with respect
to any series of Subordinated Debt Securities is named for such series of
Offered Debt Securities, the name of such Trustee; and (xv) any other specific
terms of the Offered Debt Securities, including any deleted, modified or
additional events of default or remedies or additional covenants provided with
respect to such Offered Debt Securities, and any terms that may be required by
or advisable under applicable laws or regulations.
Unless otherwise specified in any Prospectus Supplement, the Debt
Securities will be issuable in registered form and in denominations of $1,000
and any integral multiple thereof (Section 2.7). No service charge will be made
for any transfer or exchange of any Debt Securities but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith (Section 2.8).
Debt Securities may bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate may be sold at a discount below
their stated principal amount. Special United States federal income tax
considerations applicable to any such discounted Debt Securities or to certain
Debt Securities issued at par that are treated as having been issued at a
discount for United States federal income tax purposes will be described in the
applicable Prospectus Supplement.
In determining whether the holders of the requisite aggregate principal
amount of outstanding Debt Securities of any series have given any request,
demand, authorization, direction, notice, consent or waiver under the
Indentures, the principal amount of any series of Debt Securities originally
issued at a discount from their stated principal amount that will be deemed to
be outstanding for such purposes will be the amount of the principal thereof
that would be due and payable as of the date of such determination upon a
declaration of acceleration of the maturity thereof.
Global Securities. The Debt Securities of a series may be issued in whole
or in part in the form of one or more global securities ("Global Securities")
that will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security (i) may not be
transferred except as a whole and (ii) may only be transferred (A) by the
Depositary for such Global Security to its nominee, (B) by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or (C) by
such Depositary or any such nominee to a successor Depositary or nominee of such
successor Depositary (Section 2.8).
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
generally apply to all depositary arrangements.
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<PAGE> 35
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary. Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Debt Securities or by the Company if
such Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the applicable Depositary ("participants") or persons that may
hold interests through participants. Ownership of beneficial interests in such
Global Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants). The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Debt Securities
of the series represented by such Global Security for all purposes under the
Indenture governing such Debt Securities. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have any of
the individual Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture governing such Debt
Securities.
Payment of principal of, premium, if any, and interest, if any, on
individual Debt Securities represented by a Global Security registered in the
name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security
representing such Debt Securities. The Company expects that the Depositary for a
series of Debt Securities or its nominee, upon receipt of any payment of
principal of, premium, if any, and interest, if any, in respect of a Global
Security representing any such Debt Securities, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
for such Debt Securities as shown on the records of such Depositary or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name." Such payments will be the responsibility of such participants.
Neither the Company, the Trustee for such Debt Securities, any paying agent nor
the registrar for such Debt Securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of the Global Security for such Debt Securities
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Debt Securities, determine not to have any Debt
Securities of a series represented by a Global Security and, in such event, will
issue individual Debt Securities of such series in exchange for the Global
Security representing such series of Debt Securities. Further, if the Company so
specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of such
series may, on terms acceptable to the Company, the Trustee and the Depositary
for such Global Security, receive individual Debt Securities of such series in
7
<PAGE> 36
exchange for such beneficial interests, subject to any limitations described in
the Prospectus Supplement relating to such Debt Securities. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery of individual Debt Securities of the series
represented by such Global Security equal in principal amount to such beneficial
interest and to have such Debt Securities registered in its name. Individual
Debt Securities of such series so issued will be issued in registered form and
in denominations, unless otherwise specified in the applicable Prospectus
Supplement relating to such series of Debt Securities, of $1,000 and integral
multiples thereof.
Events of Default. Unless otherwise specified in the applicable Prospectus
Supplement, an Event of Default is defined under each Indenture with respect to
the Debt Securities of any series issued under such Indenture as being: (a)
failure to pay any installment of interest on any Debt Securities of such series
when due and the continuance of such failure for 30 days; (b) failure to pay the
principal at maturity or otherwise, on any Debt Securities of such series when
due; (c) failure for 60 days after notice to the Company by the Trustee, or by
the holders of 25% in aggregate principal amount of the Debt Securities of such
series then outstanding, to comply in any material respect with any other
covenant, condition or agreement in the Debt Securities of such series in the
Indenture or in any supplemental indenture; and (d) certain events of
bankruptcy, insolvency or reorganization of the Company (Section 5.1).
If any Event of Default shall occur and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debt
Securities of such series then outstanding, by notice in writing to the Company
(and to the Trustee, if given by the holders), may declare the principal (or, in
the case of any series of Debt Securities originally issued at a discount from
their stated principal amount, such portion of the principal amount as may be
specified in the terms of such series) of all of the Debt Securities of such
series and the interest, if any, accrued thereon to be due and payable
immediately; provided, however, that the holders of a majority in aggregate
principal amount of the Debt Securities of such series then outstanding, by
notice in writing to the Company and the Trustee, may rescind and annul such
declaration and its consequences if all defaults under such Indenture are cured
or waived (Section 5.1).
Each Indenture provides that no holder of any series of Debt Securities
then outstanding may institute any suit, action or proceeding with respect to,
or otherwise attempt to enforce, such Indenture, unless (i) such holder
previously shall have given to the Trustee written notice of default and of the
continuance thereof, (ii) the holders of not less than 25% in aggregate
principal amount of such series of Debt Securities then outstanding shall have
made written request to the Trustee to institute such suit, action or proceeding
and shall have offered to the Trustee such reasonable indemnity as it may
require with respect thereto and (iii) the Trustee for 60 days after its receipt
of such notice, request and offer of indemnity, shall have neglected or refused
to institute any such action, suit or proceeding; provided that, subject to the
subordination provisions applicable to the Senior Subordinated Debt Securities
and the Subordinated Debt Securities, the right of any holder of any Debt
Security to receive payment of the principal of, premium, if any, or interest,
if any, on such Debt Security, on or after the respective due dates, or to
institute suit for the enforcement of any such payment shall not be impaired or
affected without the consent of such holder (Section 5.4). The holders of a
majority in aggregate principal amount of the Debt Securities of such series
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Debt Securities of such
series, provided that the Trustee may decline to follow such direction if the
Trustee determines that such action or proceeding is unlawful or would involve
the Trustee in personal liability (Section 5.7).
The Company is required to furnish to the Trustee annually a certificate as
to the compliance by the Company with all conditions and covenants under each
Indenture (Section 4.3).
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<PAGE> 37
Discharge and Defeasance. Unless otherwise specified in the applicable
Prospectus Supplement, the Company can discharge or defease its obligations with
respect to any series of Debt Securities as set forth below (Article Ten).
The Company may discharge all of its obligations (except those set forth
below) to holders of any series of Debt Securities issued under an Indenture
that have not already been delivered to the Trustee for cancellation and that
have either become due and payable, or are by their terms due and payable within
one year (or scheduled for redemption within one year), by irrevocably
depositing with the Trustee cash or U.S. Government Obligations (as defined in
such Indenture), or a combination thereof, as trust funds in an amount certified
to be sufficient to pay when due the principal of, premium, if any, and
interest, if any, on all outstanding Debt Securities of such series and to make
any mandatory sinking fund payments, if any, thereon when due.
Unless otherwise provided in the applicable Prospectus Supplement, the
Company may also elect at any time to (a) defease and be discharged from all of
its obligations (except those set forth below) to holders of any series of Debt
Securities issued under each Indenture ("defeasance") or (b) be released from
all of its obligations with respect to certain covenants applicable to any
series of Debt Securities issued under each Indenture ("covenant defeasance"),
if, among other things: (i) the Company irrevocably deposits with the Trustee
cash or U.S. Government Obligations, or a combination thereof, as trust funds in
an amount certified to be sufficient to pay when due the principal of, premium,
if any, and interest, if any, on all outstanding Debt Securities of such series
and to make any mandatory sinking fund payments, if any, thereon when due and
such funds have been so deposited for 91 days; (ii) such deposit will not result
in a breach or violation of, or cause a default under, any agreement or
instrument to which the Company is a party or by which it is bound; and (iii)
the Company delivers to the Trustee an opinion of counsel to the effect that the
holders of such series of Debt Securities will not recognize income, gain or
loss for United States federal income tax purposes as a result of such
defeasance or covenant defeasance and that defeasance or covenant defeasance
will not otherwise alter the United States federal income tax treatment of such
holders' principal and interest payments, if any, on such series of Debt
Securities. Such opinion in the case of defeasance under clause (a) above must
be based on a ruling of the Internal Revenue Service or a change in United
States federal income tax law occurring after the date of the Indenture relating
to the Debt Securities of such series, since such a result would not occur under
current tax law (Section 10.1).
Notwithstanding the foregoing, no discharge, defeasance or covenant
defeasance described above shall affect the following obligations to or rights
of the holders of any series of Debt Securities: (i) rights of registration of
transfer and exchange of Debt Securities of such series, (ii) rights of
substitution of mutilated, defaced, destroyed, lost or stolen Debt Securities of
such series, (iii) rights of holders of Debt Securities of such series to
receive payments of principal thereof and premium, if any, and interest, if any,
thereon, upon the original due dates therefor (but not upon acceleration), and
to receive mandatory sinking fund payments thereon when due, if any, (iv)
rights, obligations, duties and immunities of the Trustee, (v) rights of holders
of Debt Securities of such series as beneficiaries with respect to property so
deposited with the Trustee payable to all or any of them and (vi) obligations of
the Company to maintain an office or agency in respect of Debt Securities of
such series (Section 10.1).
The Company may exercise its defeasance option with respect to any series
of Debt Securities notwithstanding its prior exercise of its covenant defeasance
option with respect to any series of Debt Securities. If the Company exercises
its defeasance option with respect to any series of Debt Securities, payment of
such series of Debt Securities may not be accelerated because of an Event of
Default with respect to such series of Debt Securities. If the Company exercises
its covenant defeasance option with respect to any series of Debt Securities,
payment of such series of Debt Securities may not be accelerated by reason of an
Event of Default with respect to the covenants to which such covenant defeasance
is applicable. However, if such acceleration were to occur by reason of another
Event of Default, the realizable value at the acceleration date of the cash and
U.S.
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<PAGE> 38
Government Obligations in the defeasance trust could be less than the principal
of, premium, if any, and interest, if any, and any mandatory sinking fund
payments, if any, then due on such series of Debt Securities, in that the
required deposit in the defeasance trust is based upon scheduled cash flow
rather than market value, which will vary depending upon interest rates and
other factors.
Modification of the Indenture. Each Indenture provides that the Company
and the Trustee may enter into supplemental indentures without the consent of
the holders of the Debt Securities to (a) evidence the assumption by a successor
entity of the obligations of the Company under such Indenture, (b) add covenants
or new events of default for the protection of the holders of such Debt
Securities, (c) cure any ambiguity or correct any inconsistency in the
Indenture, (d) establish the form and terms of Debt Securities of any series,
(e) evidence the acceptance of appointment by a successor trustee, (f) in the
case of Senior Debt Securities, secure such Debt Securities, (g) designate a
bank or trust company other than The First National Bank of Boston to act as
Trustee for a series of Senior Debt Securities, The First National Bank of
Boston to act as Trustee for a series of Senior Subordinated Debt Securities and
The First National Bank of Boston to act as Trustee for a series of Subordinated
Debt Securities and (h) modify the existing covenants and events of default
solely in respect of, or add new covenants and events of default that apply
solely to, Debt Securities not yet issued and outstanding on the date of such
supplemental indenture (Section 8.1).
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of Debt Securities of each series then outstanding
and affected, to add any provisions to, or change in any manner or eliminate any
of the provisions of, such Indenture or of any supplemental indenture or modify
in any manner the rights of the holders of the Debt Securities of such series;
provided that the Company and the Trustee may not, without the consent of the
holder of each outstanding Debt Security affected thereby, (a) extend the stated
final maturity of any Debt Security, reduce the principal amount thereof, reduce
the rate or extend the time of payment of interest, if any, thereon, reduce or
alter the method of computation of any amount payable on redemption, repayment
or purchase by the Company, change the coin or currency in which principal,
premium, if any, and interest, if any, are payable, reduce the amount of the
principal of any original issue discount security payable upon acceleration or
provable in bankruptcy, impair or affect the right to institute suit for the
enforcement of any payment or repayment thereof or, if applicable, adversely
affect any right of prepayment at the option of the holder or (b) reduce the
aforesaid percentage in aggregate principal amount of Debt Securities of any
series issued under such Indenture, the consent of the holders of which is
required for any such modification (Section 8.2).
Consolidation, Merger or Sale. Except as otherwise provided in the
applicable Prospectus Supplement, the Company shall not consolidate with or
merge into any other person or transfer, lease or otherwise dispose of all or
substantially all of its assets to any person, unless (a) the person formed by
or surviving any such consolidation or merger (if other than the Company) or to
which such transfer or lease shall have been made is a corporation, partnership
or trust organized and validly existing under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes all of the
obligations of the Company under the Debt Securities and under the Indenture,
and (b) immediately after giving effect to such transaction, no Default or Event
of Default exists. Upon any such consolidation, merger, sale, transfer or lease,
the successor corporation formed by such consolidation, or into which the
Company is merged or to which such sale, transfer or lease is made, shall
succeed to, and be substituted for, and may exercise the rights and powers of,
the Company under the Indenture and under the Debt Securities (Sections 9.1 and
9.2).
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
General. Senior Debt Securities will be issued under the Senior Debt
Indenture and will rank pari passu with all other unsecured and unsubordinated
debt of the Company.
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<PAGE> 39
Limitation on Liens. The Senior Debt Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary (as defined) to, (a)
issue, assume or guarantee any indebtedness for money borrowed ("Debt") if such
Debt is secured by a mortgage, pledge or lien ("Lien") upon, or (b) directly or
indirectly secure any outstanding Debt by a Lien upon, any Principal Property
(as defined), now owned or hereafter acquired, without effectively providing
that the Notes shall be secured equally and ratably with such Debt, except that
the foregoing restrictions shall not apply to (i) Liens on any Principal
Property acquired after the date of the Indenture to secure or provide for the
payment of the purchase price or acquisition cost thereof, (ii) Liens on any
Principal Property acquired after the date of the Indenture existing at the time
such Principal Property is acquired, provided that (A) the principal amount of
the Debt secured by such Lien does not exceed 100% of such purchase price or
acquisition cost and (B) such Lien does not cover any Principal Property other
than such Principal Property and any improvements on or rights appurtenant
thereto acquired in such transaction, (iii) Liens on any Principal Property or
shares of stock or Debt acquired from a corporation merged with or into the
Company or a Restricted Subsidiary, (iv) Liens to secure Debt of a Subsidiary to
the Company or another Subsidiary, (v) Liens in existence on any Principal
Property of the Company or any Restricted Subsidiary on the date of the
Indenture, (vi) Liens on any Principal Property constituting unimproved real
property constructed or improved after the date of the Indenture to secure or
provide for the payment or cost of such construction or improvement, provided
that (A) the principal amount of the Debt secured by such Lien does not exceed
100% of such cost and (B) such Lien does not cover any Principal Property other
than such unimproved real property and any improvements on or rights appurtenant
thereto constructed or approved in such transaction, (vii) Liens in favor of
governmental bodies to secure advance or progress payments pursuant to any
contract or statute or indebtedness incurred for the purpose of financing the
purchase price or cost of constructing or improving the Principal Property
subject thereto, (viii) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements, (ix) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, (x) Liens securing any
extension, renewal, substitution or replacement (or successive extensions,
renewals, substitutions or replacements) of Debt of the Company or any
Restricted Subsidiary outstanding as of December 31, 1994, and (xi) any
extension, renewal, substitution or replacement (or successive extensions,
renewals, substitutions or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses (i) through (x), inclusive (Section 3.6(a)
of the Senior Debt Indenture).
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
may, without equally and ratably securing the Notes, issue, assume or guarantee
secured Debt (which would otherwise be subject to the foregoing Lien
restrictions) in an aggregate amount which, together with all other such secured
Debt of the Company and its Restricted Subsidiaries (that is, not including
secured Debt of the Company and its Restricted Subsidiaries permitted pursuant
to the preceding paragraph) and the Attributable Debt (as defined) in respect of
Sale and Lease-Back Transactions (as defined) existing at such time (other than
Sale and Lease-Back Transactions permitted in accordance with the first
paragraph under the caption "Limitation on Sale and Lease-Back Transactions"
below), does not at the time exceed 15% of the shareholders' equity in the
Company and its consolidated Subsidiaries as shown on the audited consolidated
balance sheet contained in the latest annual report to shareholders of the
Company (Section 3.6(b) of the Senior Debt Indenture).
The term "Principal Property" means all property, assets or revenue of the
Company and each of the Restricted Subsidiaries now owned or hereafter acquired
and all shares of stock and Debt of any Restricted Subsidiary now owned or
hereafter acquired (Section 1.1 of the Senior Debt Indenture).
The term "Restricted Subsidiary" means any Subsidiary organized and
existing under the laws of the United States of America, Canada or Mexico,
including any branch of any such Subsidiary
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<PAGE> 40
whether such branch is located in the United States of America, Canada, Mexico
or any other country (Section 1.1 of the Senior Debt Indenture).
Limitation on Sale and Lease-Back Transactions. Sale and Lease-Back
Transactions (as defined) by the Company or any Restricted Subsidiary are
prohibited by the Senior Debt Indenture unless the proceeds of such sale or
transfer are at least equal to the fair value (as determined by the Board of
Directors) of the Principal Property to be leased pursuant to such Sale and
Lease-Back Transaction and either (i) the Company or such Restricted Subsidiary
could incur a Lien on such Principal Property under the covenant described in
"Limitation on Liens" above, (ii) such Sale and Lease-Back Transactions are
between or among the Company and any of its Subsidiaries or between or among
Subsidiaries, (iii) the lease is for a period not exceeding three years and the
Company or such Restricted Subsidiary that is a party to such lease intends that
its use of such Principal Property will be discontinued on or before the
expiration of such period, or (iv) the Company applies, or causes such
Restricted Subsidiary to apply, an amount equal to the fair value (as determined
by the Board of Directors) of the Principal Property sold pursuant to such Sale
and Lease-Back Transaction to (A) the retirement, within 60 days after the
effective date of any such Sale and Lease-Back Transaction, of Funded Debt (as
defined) of the Company or of such Restricted Subsidiary, or (B) the purchase of
other property that will constitute Principal Property (Section 3.7(a) of the
Senior Debt Indenture).
Notwithstanding the provisions of the preceding paragraph, the Company or
any Restricted Subsidiary may enter into any Sale and Lease-Back Transaction
which would otherwise be subject to the foregoing restrictions, if the amount of
the Attributable Debt (as defined) in respect of such Sale and Lease-Back
Transaction, together with all secured Debt of the Company and its Restricted
Subsidiaries (other than secured Debt of the Company and Restricted Subsidiaries
permitted under the first paragraph under the caption "Limitation on Liens"
above) and all other Attributable Debt in respect of Sale and Lease-Back
Transactions existing at such time (other than Sale and Lease-Back Transactions
permitted pursuant to the preceding paragraph), does not at the time exceed 15%
of the shareholders' equity in the Company and its consolidated Subsidiaries as
shown on the audited consolidated balance sheet contained in the latest annual
report to shareholders of the Company (Section 3.7(b) of the Senior Debt
Indenture).
The term "Attributable Debt" means, with respect to any particular series
of Debt Securities and as of any particular time, the present value, discounted
at a rate per annum equal to the interest rate or yield per annum of the Debt
Securities, of the obligation of a lessee for rental payments (not including
amounts payable by the lessee for maintenance, property taxes and insurance) due
during the remaining term of any lease (including any period for which such
lease has been extended or may, at the option of the lessor, be extended)
(Section 1.1 of the Senior Debt Indenture).
The term "Funded Debt" means Debt which by its terms matures at, or is
extendable or renewable at the option of the obligor to, a date more than twelve
months after the date of the creation of such Debt, including but not limited
to, outstanding Revolving Credit Loans (Section 1.1 of the Senior Debt
Indenture).
The term "Sale and Lease-Back Transaction" means the sale or transfer of
any Principal Property owned by the Company or any Restricted Subsidiary with
the intention of taking back a lease on such property (Section 1.1 of the Senior
Debt Indenture).
PROVISIONS APPLICABLE SOLELY TO SENIOR SUBORDINATED AND SUBORDINATED DEBT
SECURITIES
Subordination. The Subordinated Debt Securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all Senior Indebtedness of the Company. "Senior Indebtedness" is
defined in the Subordinated Debt Indenture as Debt of the Company outstanding at
any time (other than the Debt evidenced by the Subordinated Debt Securities of
any series), except (a) any Debt as to which, by the terms of the instrument
creating or evidencing the same, it is provided that such Debt is not senior in
right of payment to the
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<PAGE> 41
Subordinated Debt Securities or is pari passu or subordinate by its terms in
right of payment to the Subordinated Debt Securities, (b) any Debt of the
Company to a wholly-owned Subsidiary of the Company, (c) interest accruing after
the filing of a petition initiating certain events of bankruptcy or insolvency
unless such interest is an allowed claim enforceable against the Company in a
proceeding under federal or state bankruptcy laws and (d) trade payables.
The Senior Subordinated Debt Securities will be subordinate and junior in
right of payment, to the extent set forth in the Senior Subordinated Debt
Indenture, to all Senior Indebtedness of the Company. The Senior Subordinated
Debt Securities will rank senior to all existing and future Debt of the Company
that is neither Senior Indebtedness nor Senior Subordinated Indebtedness, and
only Debt of the Company that is Senior Indebtedness will rank senior to the
Senior Subordinated Debt Securities in accordance with the subordination
provisions of the Senior Subordinated Debt Indenture. "Senior Indebtedness" is
defined in the Senior Subordinated Debt Indenture as Debt of the Company
outstanding at any time except (a) any Debt as to which, by the terms of the
instrument creating or evidencing the same, it is provided that such Debt is not
senior in right of payment to the Senior Subordinated Debt Securities, (b) the
Senior Subordinated Debt Securities, (c) any Debt of the Company to a
wholly-owned Subsidiary of the Company, (d) interest accruing after the filing
of a petition initiating certain events of bankruptcy or insolvency unless such
interest is an allowed claim enforceable against the Company in a proceeding
under federal or state bankruptcy laws and (e) trade payables. "Senior
Subordinated Indebtedness" means the Senior Subordinated Debt Securities and any
other Debt of the Company that ranks pari passu with the Senior Subordinated
Debt Securities. Any Debt of the Company that is subordinate or junior by its
terms in right of payment to any other Debt of the Company shall be subordinate
to Senior Subordinated Indebtedness unless the instrument creating or evidencing
the same or pursuant to which the same is outstanding specifically provides that
such Debt (i) is to rank pari passu with other Senior Subordinated Indebtedness
and (ii) is not subordinated by its terms to any Debt of the Company which is
not Senior Indebtedness. "Subordinated Indebtedness" means the Senior
Subordinated Debt Securities, any other Senior Subordinated Indebtedness and any
other Debt that is subordinate or junior in right of payment to Senior
Indebtedness.
If (i) the Company should default in the payment of any principal of,
premium, if any, or interest, if any, on any Senior Indebtedness (as defined in
the Senior Subordinated Debt Indenture or Subordinated Debt Indenture, as
applicable) when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration of acceleration or otherwise or (ii)
any other default with respect to Senior Indebtedness shall occur and the
maturity of such Senior Indebtedness has been accelerated in accordance with its
terms, then, upon written notice of such default to the Company and the Trustee
by the holders of such Senior Indebtedness or any trustee therefor, unless and
until, in either case, such default shall have been cured or waived or shall
have ceased to exist or such acceleration shall have been rescinded or such
Senior Indebtedness has been paid in full, no direct or indirect payment (in
cash, property, securities, by set-off or otherwise) will be made or agreed to
be made for principal of, premium, if any, or interest, if any, on any of the
Senior Subordinated Debt Securities or the Subordinated Debt Securities, or in
respect of any redemption, retirement, purchase or other acquisition of the
Senior Subordinated Debt Securities or the Subordinated Debt Securities other
than those made in capital stock of the Company (or cash in lieu of fractional
shares thereof) (Sections 13.1 and 13.4 of the Senior Subordinated Debt
Indenture and Sections 13.1 and 13.4 of the Subordinated Debt Indenture).
If any default (other than a default described in the preceding paragraph)
under the Senior Indebtedness, pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods occurs (a "Senior Nonmonetary Default"), then, upon the receipt by the
Company and the Trustee of written notice thereof (a "Payment Notice") from or
on behalf of holders of such Senior Indebtedness specifying an election to
prohibit such payment and other action by the Company in accordance with the
following provisions of this paragraph, the Company
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<PAGE> 42
may not make any payment or take any other action that would be prohibited by
the immediately preceding paragraph during the period (the "Payment Blockage
Period") commencing on the date of receipt of such Payment Notice and ending on
the earlier of (i) the date, if any, on which the holders of such Senior
Indebtedness or their representative notify the Trustee that such Senior
Nonmonetary Default is cured or waived or ceases to exist or the Senior
Indebtedness to which such Senior Nonmonetary Default relates is discharged or
(ii) the 179th day after the date of receipt of such Payment Notice.
Notwithstanding the provisions described in the immediately preceding sentence,
the Company may resume payments on the Senior Subordinated Debt Securities and
the Subordinated Debt Securities after such Payment Blockage Period. In any
event, not more than one blockage period may be commenced during any period of
360 consecutive days, and there shall be a period of at least 181 consecutive
days in each period of 360 consecutive days when no blockage period is in
effect.
If (i) (A) without the consent of the Company, a receiver, conservator,
liquidator or trustee of the Company or of any of its property is appointed by
the order or decree of any court or agency or supervisory authority having
jurisdiction, and such decree or order remains in effect for more than 60 days
or (B) the Company is adjudicated bankrupt or insolvent or (C) any of its
property is sequestered by court order and such order remains in effect for more
than 60 days or (D) a petition is filed against the Company under any state or
federal bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, liquidation or receivership law of any jurisdiction whether
now or hereafter in effect, and is not dismissed within 60 days after such
filing; (ii) the Company (A) commences a voluntary case or other proceeding
seeking liquidation, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, liquidation or other relief with respect to itself or its
debt or other liabilities under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or (B) consents to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or (C) fails generally to, or cannot, pay its
debts generally as they become due or (D) takes any corporate action to
authorize or effect any of the foregoing; or (iii) any Subsidiary of the Company
takes, suffers or permits to exist any of the events or conditions referred to
in the foregoing clause (i) or (ii), then all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) will
first be paid in full before any payment or distribution, whether in cash,
securities or other property, is made to any holder of Senior Subordinated Debt
Securities or Subordinated Debt Securities on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in the subordination provisions with respect to the
indebtedness evidenced by the Senior Subordinated Debt Securities or the
Subordinated Debt Securities, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment) that would otherwise (but for the
subordination provisions) be payable or deliverable in respect of the Senior
Subordinated Debt Securities or the Subordinated Debt Securities of any series
will be paid or delivered directly to the holders of Senior Indebtedness in
accordance with the priorities then existing among such holders until all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) has been paid in full. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness, the holders of Senior Subordinated Debt Securities, together with
the holders of any obligations of the Company ranking on a parity with the
Senior Subordinated Debt Securities, will be entitled to be repaid from the
remaining assets of the Company the amounts at that time due and owing on
account of unpaid principal of, premium, if any, or interest, if any, on the
Senior Subordinated Debt Securities and such other obligations before any
payment or other distribution, whether in cash, property or otherwise, shall be
made on account of any capital stock or obligations of the Company ranking
junior to the Senior Subordinated Debt Securities (including the Subordinated
Debt Securities) and such other
14
<PAGE> 43
obligations (Section 13.1 of the Senior Subordinated Debt Indenture and Section
13.1 of the Subordinated Debt Indenture).
If, notwithstanding the foregoing, any payment or distribution of any
character, whether in cash, securities or other property (other than securities
of the Company or any other corporation provided for by a plan of reorganization
or readjustment the payment of which is subordinate, at least to the extent
provided in the subordination provisions with respect to the Senior Subordinated
Debt Securities or Subordinated Debt Securities, to the payment of all Senior
Indebtedness then outstanding and to any securities issued in respect thereof
under any such plan of reorganization or readjustment), shall be received by the
Trustee, or any holder of any Senior Subordinated Debt Securities or
Subordinated Debt Securities in contravention of any of the terms of the Senior
Subordinated Debt Indenture or the Subordinated Debt Indenture, as the case may
be, such payment or distribution of securities will be received in trust for the
benefit of, and will be paid over or delivered and transferred to, the holders
of the Senior Indebtedness then outstanding in accordance with the priorities
then existing among such holders for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all such Senior
Indebtedness in full (Section 13.1 of the Senior Subordinated Debt Indenture and
Section 13.1 of the Subordinated Debt Indenture).
By reason of such subordination, in the event of the insolvency of the
Company, holders of Senior Indebtedness may receive more, ratably, than holders
of the Senior Subordinated Debt Securities or Subordinated Debt Securities. Such
subordination will not prevent the occurrence of any Event of Default (as
defined in the Indentures) or limit the right of acceleration in respect of the
Senior Subordinated Debt Securities or Subordinated Debt Securities.
CONCERNING THE TRUSTEES
Pursuant to the Trust Indenture Act of 1939, as amended, should a default
occur with respect to any of the Senior Debt Securities, the Senior Subordinated
Debt Securities or the Subordinated Debt Securities, The First National Bank of
Boston would be required to resign as Trustee under two of the Indentures, to
the extent any Debt Securities have been issued under such Indentures, within 90
days of such default unless such default were cured, duly waived or otherwise
eliminated. The First National Bank of Boston, the Trustee under each Indenture,
may make loans to the Company in the normal course of business. If a bank or
trust company other than The First National Bank of Boston is to act as Trustee
for a series of Debt Securities, information concerning such other Trustee will
be set forth in the Prospectus Supplement relating to such series of Debt
Securities.
DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase Debt Securities. Warrants may be
issued independently of or together with any other Securities and may be
attached to or separate from such Securities. Each series of Warrants will be
issued under a separate Warrant Agreement (each a "Warrant Agreement") to be
entered into between the Company and a Warrant Agent ("Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Warrant of such series and will not assume any obligation or relationship of
agency or trust for or with holders or beneficial owners of Warrants. The
following sets forth certain general terms and provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreement will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the designation, aggregate principal amount and terms of the securities
purchasable upon exercise of such Warrants; (v) the designation and terms of the
Securities with which such Warrants are issued and the number of such Warrants
issued with each such security; (vi) if
15
<PAGE> 44
applicable, the date on and after which such Warrants and the related securities
will be separately transferable; (vii) the price at which the securities
purchasable upon exercise of such Warrants may be purchased; (viii) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (ix) the minimum or maximum amount of such Warrants
which may be exercised at any one time; (x) information with respect to
book-entry procedures, if any; (xi) a discussion of certain Federal income tax
considerations; and (xii) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities to or through underwriters or dealers,
and also may sell the Securities directly to one or more other purchasers or
through agents. The applicable Prospectus Supplement will set forth the names of
any underwriters or agents involved in the sale of the Offered Securities and
any applicable commissions or discounts.
Underwriters, dealers or agents may offer and sell the Offered Securities
at a fixed price or prices, which may be changed, or from time to time at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. In connection with the sale of the
Securities, underwriters or agents may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of the Securities for whom they may act
as agent. Underwriters or agents may sell the Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters or commissions from the purchasers for whom
they may act as agent.
The Securities, when first issued, will have no established trading market.
Any underwriters or agents to or through whom Securities are sold by the Company
for public offering and sale may make a market in such Securities, but such
underwriters or agents will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Securities.
Any underwriters, dealers or agents participating in the distribution of
the Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Securities may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended (the "1933 Act"). Underwriters, dealers or
agents may be entitled, under agreements entered into with the Company, to
indemnification against or contribution toward certain civil liabilities,
including liabilities under the 1933 Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases will be subject to the condition that
the purchase of the Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such agents will not have any responsibility in respect of the
validity or performance of such contracts.
LEGAL MATTERS
Certain legal matters with respect to the Securities will be passed upon
for the Company by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York, and for any underwriters or
agents by Davis Polk & Wardwell, New York, New York.
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<PAGE> 45
EXPERTS
The consolidated financial statements and schedule of York International
Corporation and subsidiaries as of December 31, 1994 and 1993 and for each of
the years in the three-year period ended December 31, 1994, and the consolidated
financial statements of Evcon Holdings, Inc. and subsidiaries as of December 31,
1994 and for the year then ended, have been incorporated by reference in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference in the
Registration Statement, and upon the authority of said firm as experts in
accounting and auditing. The reports of KPMG Peat Marwick LLP on the
consolidated financial statements and schedule of York International Corporation
and subsidiaries refer to changes by the Company in 1993 in its methods of
accounting for income taxes, postretirement benefits other than pensions and
other postemployment benefits.
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<PAGE> 46
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
PROSPECTUS SUPPLEMENT
The Company.............................. S-2
Use of Proceeds.......................... S-2
Ratio of Earnings to Fixed Charges....... S-2
Capitalization........................... S-3
Selected Financial Data.................. S-4
Management's Discussion and Analysis of
Financial Condition and Results of
Operation.............................. S-6
Business................................. S-13
Executive Officers....................... S-23
Description of the Notes................. S-25
Underwriting............................. S-27
Legal Matters............................ S-27
Experts.................................. S-28
PROSPECTUS
Available Information.................... 2
Incorporation of Certain Documents
by Reference........................... 2
The Company.............................. 3
Use of Proceeds.......................... 3
Ratio of Earnings to Fixed Charges....... 4
Description of Debt Securities........... 5
Description of Warrants.................. 15
Plan of Distribution..................... 16
Legal Matters............................ 16
Experts.................................. 17
</TABLE>
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$200,000,000
YORK INTERNATIONAL CORPORATION
% SENIOR NOTES
DUE JUNE , 2008
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YORK INTERNATIONAL LOGO
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GOLDMAN, SACHS & CO.
CIBC OPPENHEIMER
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