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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
COMMISSION FILE NUMBER 1-10863
YORK INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3473472
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
631 SOUTH RICHLAND AVENUE, YORK, PA 17403
(717) 771-7890
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 3, 2004
----- -----------------------------
Common Stock, par value $.005 41,421,197 shares
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations - (unaudited)
Three and Six Months Ended June 30, 2004 and 2003 3
Condensed Consolidated Balance Sheets -
June 30, 2004 (unaudited) and December 31, 2003 4
Condensed Consolidated Statements of Cash Flows - (unaudited)
Six Months Ended June 30, 2004 and 2003 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4. Controls and Procedures 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 28
Item 6. Exhibits 28
Signatures 30
Exhibit Index 31
2
PART I - FINANCIAL INFORMATION
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
----------- ------------ ----------- -----------
Net sales:
Products $ 1,104,388 $ 975,073 $ 1,938,106 $ 1,744,116
Services 117,320 109,344 222,969 208,658
----------- ----------- ----------- -----------
Net sales 1,221,708 1,084,417 2,161,075 1,952,774
Cost of goods sold:
Products (902,001) (771,758) (1,580,586) (1,398,963)
Services (94,032) (86,295) (183,758) (167,347)
----------- ----------- ----------- -----------
Cost of goods sold (996,033) (858,053) (1,764,344) (1,566,310)
----------- ----------- ----------- -----------
Gross profit 225,675 226,364 396,731 386,464
Selling, general and administrative expenses (177,303) (156,796) (343,484) (305,828)
Restructuring and other charges, net -- (33,060) -- (49,154)
----------- ----------- ----------- -----------
Income from operations 48,372 36,508 53,247 31,482
Interest expense, net (10,072) (12,115) (20,933) (24,131)
Equity in earnings of affiliates 4,227 2,477 4,719 3,565
----------- ----------- ----------- -----------
Income before income taxes 42,527 26,870 37,033 10,916
Provision for income taxes (4,131) (7,664) (2,840) (5,346)
----------- ----------- ----------- -----------
Net income $ 38,396 $ 19,206 $ 34,193 $ 5,570
=========== =========== =========== ===========
Basic earnings per share $ 0.94 $ 0.48 $ 0.84 $ 0.14
=========== =========== =========== ===========
Diluted earnings per share $ 0.91 $ 0.48 $ 0.81 $ 0.14
=========== =========== =========== ===========
Cash dividends per share $ 0.20 $ 0.15 $ 0.40 $ 0.30
=========== =========== =========== ===========
Weighted average common shares and
common equivalents outstanding:
Basic 41,037 39,631 40,819 39,594
Diluted 42,270 39,861 42,050 39,748
See accompanying supplemental notes to condensed consolidated financial
statements.
3
PART I - FINANCIAL INFORMATION
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
JUNE 30, 2004 DECEMBER 31,
(UNAUDITED) 2003
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 50,584 $ 49,650
Receivables, net 797,079 638,510
Inventories:
Raw material 147,051 138,108
Work in progress 172,203 147,094
Finished goods 253,116 227,512
------------ ------------
Total inventories 572,370 512,714
Prepayments and other current assets 130,863 129,921
------------ ------------
Total current assets 1,550,896 1,330,795
Deferred income taxes 101,132 107,566
Investments in affiliates 32,193 28,200
Property, plant and equipment, net 537,061 541,118
Goodwill 526,822 529,182
Intangibles, net 35,711 36,744
Deferred charges and other assets 99,033 99,530
------------ ------------
Total assets $ 2,882,848 $ 2,673,135
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 20,448 $ 30,755
Accounts payable and accrued expenses 1,018,774 899,093
Income taxes 26,662 38,453
------------ ------------
Total current liabilities 1,065,884 968,301
Long-term warranties 52,460 46,888
Long-term debt 671,011 582,027
Postretirement and postemployment benefits 242,915 249,912
Other long-term liabilities 51,438 49,607
------------ ------------
Total liabilities 2,083,708 1,896,735
Stockholders' equity 799,140 776,400
------------ ------------
Total liabilities and stockholders' equity $ 2,882,848 $ 2,673,135
============ ============
See accompanying supplemental notes to condensed consolidated financial
statements.
4
PART I - FINANCIAL INFORMATION
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
SIX MONTHS ENDED JUNE 30,
2004 2003
---------- ----------
Cash flows from operating activities:
Net income $ 34,193 $ 5,570
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization of property, plant and equipment 35,038 33,288
Amortization of deferred charges and intangibles 1,649 1,764
Provision for doubtful receivables 6,712 7,038
Effect of non-cash charges -- 31,185
Deferred income taxes (6,560) 9,699
Loss on sale of fixed assets 535 761
Other 537 (1,709)
Change in assets and liabilities net of effects from
acquisitions and divestitures:
Receivables, net (171,684) (68,380)
Inventories (63,624) (49,730)
Prepayments and other current assets 10,490 (31,478)
Accounts payable and accrued expenses 124,131 92,939
Income taxes (11,831) (1,074)
Other long-term assets and liabilities 1,174 4,917
---------- ----------
Net cash (used) provided by operating activities (39,240) 34,790
---------- ----------
Cash flows from investing activities:
Purchases of other companies, net of cash acquired (728) (3,160)
Capital expenditures (37,105) (35,916)
Proceeds from sale of fixed assets 954 170
---------- ----------
Net cash used by investing activities (36,879) (38,906)
---------- ----------
Cash flows from financing activities:
Net payments of short-term debt (9,899) (245)
Net proceeds from credit agreement -- 20,000
Payment of senior notes -- (100,000)
Net proceeds from other long-term debt 88,751 49,621
Net reduction in sale of receivables -- (5,000)
Common stock issued 14,980 322
Treasury stock purchases (74) (5)
Dividends paid (16,478) (11,904)
---------- ----------
Net cash provided (used) by financing activities 77,280 (47,211)
---------- ----------
Effect of exchange rate changes on cash and cash equivalents (227) (421)
---------- ----------
Net increase (decrease) in cash and cash equivalents 934 (51,748)
Cash and cash equivalents at beginning of period 49,650 92,940
---------- ----------
Cash and cash equivalents at end of period $ 50,584 $ 41,192
========== ==========
See accompanying supplemental notes to condensed consolidated financial
statements.
5
PART I - FINANCIAL INFORMATION
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements (unaudited)
(1) FINANCIAL STATEMENTS
The condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission, and certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. We believe that the information presented is not
misleading and the disclosures are adequate. In our opinion, the condensed
consolidated financial statements contain all adjustments necessary to
present fairly our financial position as of June 30, 2004 and December 31,
2003, results of operations for the three and six months ended June 30,
2004 and 2003, and cash flows for the six months ended June 30, 2004 and
2003. Our results of operations for interim periods are not necessarily
indicative of results expected for the full year.
Certain reclassifications have been made to the 2003 condensed
consolidated financial statements to conform to the 2004 presentation.
(2) STOCK-BASED COMPENSATION
We apply the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for our stock-based
compensation plans. Accordingly, no compensation expense has been
recognized for our stock-based compensation plans other than restricted
stock and performance-based awards. Had compensation expense for all stock
and employee stock purchase plans been determined based upon the fair
value at the grant date for awards under these plans consistent with the
methodology prescribed under Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," as amended, our
net income and earnings per share would have been adjusted to the pro
forma amounts as follows (in thousands, except per share data):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net income - as reported $ 38,396 $ 19,206 $ 34,193 $ 5,570
Add: Stock-based employee compensation
expense included in reported net
income, net of related tax effects 571 256 877 279
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects (1,633) (977) (2,733) (3,166)
------------ ------------ ------------ ------------
Pro forma net income $ 37,334 $ 18,485 $ 32,337 $ 2,683
============ ============ ============ ============
Earnings per share:
Basic - as reported $ 0.94 $ 0.48 $ 0.84 $ 0.14
Basic - pro forma 0.91 0.47 0.79 0.07
Diluted - as reported 0.91 0.48 0.81 0.14
Diluted - pro forma 0.88 0.46 0.77 0.07
Since the determination of fair value of all stock options granted
includes variable factors, including volatility, and additional stock
option grants are expected to be made each year, the above pro forma
disclosures are not representative of pro forma effects on reported net
income and earnings per share for future periods.
6
(3) RECEIVABLES, NET
Pursuant to the terms of an annually renewable revolving facility, we sell
certain of our trade receivables to a wholly-owned, consolidated
subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells,
on a revolving basis, an undivided ownership interest in the purchased
trade receivables to bank-administered asset-backed commercial paper
vehicles. In May 2004, we amended the facility, increasing the
availability from $150 million to $200 million. We continue to service
sold trade receivables. No servicing asset or liability has been
recognized as our cost to service sold trade receivables approximates the
servicing income.
In accordance with the facility, YRFLLC has sold $150 million of an
undivided interest in trade receivables as of June 30, 2004 and December
31, 2003. The proceeds from the sale were reflected as a reduction of net
receivables reflected in our condensed consolidated balance sheets as of
June 30, 2004 and December 31, 2003. The discount rate on trade
receivables sold was 1.26% and 1.12% as of June 30, 2004 and December 31,
2003, respectively. The program fee on trade receivables sold was 0.4% and
0.5% as of June 30, 2004 and December 31, 2003, respectively.
(4) GOODWILL
The changes in the carrying amount of goodwill for the six months ended
June 30, 2004 by segment, are as follows (in thousands):
NET FOREIGN
BALANCE AS OF GOODWILL CURRENCY BALANCE AS OF
DEC. 31, 2003 ACQUIRED FLUCTUATION JUNE 30, 2004
------------- -------- ----------- -------------
Global Applied:
Americas $ 92,949 $ -- $ (197) $ 92,752
Europe, Middle East and Africa 130,166 429 (2,512) 128,083
Asia 109,314 -- (80) 109,234
------------- -------- ----------- ------------
332,429 429 (2,789) 330,069
Unitary Products Group 140,440 -- -- 140,440
Bristol Compressors 56,313 -- -- 56,313
------------- -------- ----------- ------------
$ 529,182 $ 429 $ (2,789) $ 526,822
============= ======== =========== ============
(5) INTANGIBLES, NET
The following table summarizes the major intangible asset classes subject
to amortization included in our condensed consolidated balance sheets as
of June 30, 2004 and December 31, 2003 (in thousands):
GROSS CARRYING ACCUMULATED NET CARRYING
AMOUNT AMORTIZATION AMOUNT
-------------- ------------ -------------
June 30, 2004
Trade names and trademarks $40,821 $ 6,865 $33,956
Other 3,005 1,250 1,755
------- ------- -------
$43,826 $ 8,115 $35,711
======= ======= =======
December 31, 2003
Trade names and trademarks $42,028 $ 6,723 $35,305
Other 2,536 1,097 1,439
------- ------- -------
$44,564 $ 7,820 $36,744
======= ======= =======
Amortization expense for trade names and trademarks and other intangible
assets for the three and six months ended June 30, 2004 was $0.4 million
and $0.8 million, respectively. For the three and six months ended June
30, 2003, amortization expense for trade names and trademarks and other
intangible assets was $0.5 million and $0.9 million, respectively.
7
The following table estimates the amount of amortization expense for trade
names and trademarks and other intangible assets for the remainder of 2004
and each of the fiscal years indicated (in thousands):
2004 (July 1 - December 31) $ 791
2005 1,655
2006 1,655
2007 1,555
2008 1,555
Thereafter 28,500
--------------
$ 35,711
==============
(6) NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of (in thousands):
JUNE 30, DECEMBER 31,
2004 2003
--------- ------------
Notes payable and current portion of long-term debt:
Bank loans (primarily foreign currency) $ 17,885 $ 27,784
Current portion of long-term debt 2,563 2,971
--------- ---------
Total $ 20,448 $ 30,755
========= =========
Long-term debt:
Domestic bank lines at an average rate of 2.05%
in 2004 and 1.58% in 2003 $ 117,200 $ 25,000
Danish retail notes, 2% interest, due October
2004 40,950 41,844
Senior notes, 6.625% interest, due August 2006 200,000 200,000
Senior notes, 6.7% interest, due June 2008 200,000 200,000
Senior notes, 5.8% interest, due November 2012 100,000 100,000
Other (primarily foreign bank loans) at an
average rate of 6.08% in 2004 and 6.3% in 2003 15,424 18,154
--------- ---------
Total 673,574 584,998
Less current portion (2,563) (2,971)
--------- ---------
Noncurrent portion $ 671,011 $ 582,027
========= =========
The domestic bank lines and the Danish retail notes are classified as
long-term, as they are supported by our Five Year Credit Agreement.
8
The following table summarizes the terms of our lines of credit (in
thousands):
LIMIT AVAILABILITY (a)
JUNE 30, DEC. 31, JUNE 30, DEC. 31, BORROWING ANNUAL
2004 2003 2004 2003 EXPIRES RATE (b) FEE
-------- -------- -------- -------- ---------- --------- ------
Five Year
Credit LIBOR +
Agreement $400,000 $400,000 $400,000 $400,000 May 29, 2006 1.175% 0.2%
364-Day
Credit LIBOR +
Agreement (c) 200,000 200,000 200,000 200,000 March 11, 2005 0.85% 0.15%
Domestic
bank lines 150,000 135,000 32,800 110,000 Uncommitted Various --
Non-U.S
bank credit
facilities 386,100 355,246 251,072 246,298 Uncommitted Various --
(a) Availability is reduced for outstanding borrowings and bank
guarantee and letters of credit usage.
(b) The one-month LIBOR (London Interbank Offering Rate) rate was 1.37%
and 1.12% as of June 30, 2004 and December 31, 2003, respectively.
(c) We renewed our 364-Day Credit Agreement in March 2004.
(7) POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
PENSION PLANS
Effective January 1, 2004, we replaced our defined benefit pension plans
for U.S. salaried non-bargaining and certain U.S. salaried bargaining
employees with a new defined contribution plan.
Net periodic benefit cost includes the following components (in
thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------
Components of net periodic benefit cost:
Service cost $ 2,917 $ 4,741 $ 6,143 $ 10,546
Interest cost 7,971 7,418 16,423 16,572
Expected return on plan assets, income (10,062) (8,198) (20,324) (18,477)
Amortization of prior service cost 550 736 1,122 1,705
Amortization of net loss 664 457 1,332 932
Settlement and other -- 289 1,049 289
------------- ------------- ------------- -------------
Net periodic benefit cost $ 2,040 $ 5,443 $ 5,745 $ 11,567
============= ============= ============= =============
We previously disclosed in our consolidated financial statements for the
year ended December 31, 2003 that we expected to contribute $14.3 million
to our pension plans in 2004. As of June 30, 2004, $9.7 million of
contributions have been made. We currently anticipate contributing an
additional $4.4 million to fund our plans in 2004 for a total of $14.1
million.
9
DEFINED CONTRIBUTION PLANS
Effective January 1, 2004, certain U.S. employees participate in our new
defined contribution plan. We contribute a cash amount to the plan on an
annual basis, based on employees' eligible earnings, vesting service, and
age. We recorded expense of approximately $2.4 million and $5.2 million
related to the plan in the three and six months ended June 30, 2004,
respectively.
Certain employees participate in various other investment plans. Under the
plans, the employees may voluntarily contribute a percentage of their
compensation. We contribute a cash amount based on the participants'
contributions. Our contributions to plans were approximately $0.9 million
and $1.7 million in the three and six months ended June 30, 2004,
respectively, and $0.4 million and $0.7 million in the three and six
months ended June 30, 2003, respectively. We recorded expense of
approximately $1 million and $2 million related to the plans in the three
and six months ended June 30, 2004, respectively, and $0.4 million and
$0.8 million related to the plans in the three and six months ended June
30, 2003, respectively.
POSTRETIREMENT HEALTH AND LIFE INSURANCE PLANS
Net periodic benefit cost includes the following components (in
thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------
Components of net periodic benefit cost:
Service cost $ 321 $ 618 $ 675 $ 1,032
Interest cost 1,908 2,863 3,969 4,782
Amortization of prior service cost (1,370) (838) (2,730) (1,400)
Amortization of net loss 872 1,110 1,972 1,855
------------- ------------- ------------- -------------
Net periodic benefit cost $ 1,731 $ 3,753 $ 3,886 $ 6,269
============= ============= ============= =============
We previously disclosed in our consolidated financial statements for the
year ended December 31, 2003 that we expected to contribute $7.4 million
to our postretirement health and life insurance plans in 2004. As of June
30, 2004, $4.4 million of contributions have been made. We currently
anticipate contributing an additional $3.6 million to fund our plans in
2004 for a total of $8 million.
(8) GUARANTEES AND WARRANTIES
We issue various types of guarantees in the normal course of business. As
of June 30, 2004, we have the following guarantees outstanding (in
thousands):
Standby letters of credit and surety bonds $ 111,402
Performance guarantees 170,185
Commercial letters of credit 4,013
Guarantee of affiliate debt 30,000
Changes in our warranty liabilities for the three and six months ended
June 30, 2004 are as follows (in thousands):
ACCRUALS
BALANCE PAYMENTS ACCRUALS FOR FOR BALANCE
AS OF MADE UNDER WARRANTIES PREEXISTING AS OF
MARCH 31, 2004 WARRANTIES ISSUED WARRANTIES JUNE 30, 2004
- ---------------- ---------- ------------ ----------- -------------
$102,683 $(17,580) $18,997 $20,000 $124,100
10
ACCRUALS
BALANCE PAYMENTS ACCRUALS FOR FOR BALANCE
AS OF MADE UNDER WARRANTIES PREEXISTING AS OF
DEC. 31, 2003 WARRANTIES ISSUED WARRANTIES JUNE 30, 2004
- ------------- ---------- ------------ ----------- -------------
$ 101,675 $ (35,172) $ 37,597 $ 20,000 $ 124,100
During the second quarter of 2004, we finalized field and factory testing
to investigate failures found in heat exchangers of certain sealed
combustion gas furnaces used in the manufactured housing industry. We
found that installation and application factors combined with component
part variation can result in excessive heat exchanger temperatures, which
may contribute to failures in certain furnace models manufactured in the
years 1995 to 2000. We no longer produce these furnace models. As a
result, we recorded a $20 million warranty charge for the Unitary Products
Group furnace inspection and remediation program during the second quarter
of 2004. The $20 million warranty charge represents our best estimate of
repair costs within a reasonable estimated range of $13 million and $30
million. Repair cost estimates are mainly comprised of the expected cost
of repair kits or new heat exchangers and installation labor. Our
estimates are based upon the projected number of furnace units to be
serviced (find rate), current repair costs, and the estimated number of
furnace units requiring repair. Differences between estimated and actual
find rate, costs to manufacture and install repair kits or heat
exchangers, and number of furnace units that require repair could have a
significant impact on our consolidated results of operations. We expect to
begin repairs in the third quarter of 2004 and complete repairs by the end
of 2006.
Warranties include standard warranties and extended warranty contracts
sold to customers to increase the warranty period beyond the standard
period. Extended warranty contracts sold are reflected as accruals for
warranties issued and amortized revenue is reflected as payments made
under warranties in the above table.
(9) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We are exposed to market risk associated with changes in interest rates,
foreign currency exchange rates, and certain commodity prices. To enhance
our ability to manage these market risks, we enter into derivative
instruments for periods consistent with the related underlying hedged
exposures. The changes in fair value of these hedging instruments are
offset in part or in whole by corresponding changes in fair value or cash
flows of the underlying hedged exposures. We mitigate the risk that the
counter-party to these derivative instruments will fail to perform by only
entering into derivative instruments with major financial institutions. We
do not typically hedge our market risk exposures beyond three years and do
not hold or issue derivative instruments for trading purposes.
Recognized gains or losses in cost of goods sold due to the discontinuance
of ineffective currency and commodity cash flow hedges for the three and
six months ended June 30, 2004 and 2003 were immaterial.
Currency Rate Hedging
We manufacture and sell our products in a number of countries throughout
the world, and therefore, are exposed to movements in various currencies
against the U.S. dollar and against the currencies in which we
manufacture. Through our currency hedging activities, we seek to minimize
the risk that cash flows resulting from the sale of products, manufactured
in a currency different from the currency used by the selling subsidiary,
will be affected by changes in foreign currency exchange rates. Foreign
currency derivative instruments (forward contracts) are matched to the
underlying foreign currency exposures and are executed to minimize foreign
exchange transaction costs.
As of June 30, 2004, we forecasted that $0.4 million of net gains in
accumulated other comprehensive losses will be reclassified into earnings
within the next twelve months.
Hedges of Net Investment
We issued Danish denominated, retail notes as a hedge to protect the value
of a portion of our net investment in a Danish subsidiary. Hedges of a net
investment are accounted for under SFAS No. 52, "Foreign Currency
Translation." Under SFAS No. 52, the gains or losses on a
foreign-denominated, nonderivative financial instrument designated as a
hedge of a net investment are recorded in foreign currency translation
adjustments within accumulated other comprehensive losses. The gains and
losses are accounted for in a similar manner as the foreign denominated
net assets, offsetting a portion of the change in net assets due to
foreign currency fluctuations. As of June 30, 2004, we have designated $41
million in Danish retail notes as a hedge of a net investment.
11
Commodity Price Hedging
We purchase raw material commodities and are at risk for fluctuations in
the market price of those commodities. In connection with the purchase of
major commodities, principally copper for manufacturing requirements, we
enter into commodity swap contracts to effectively fix our cost of the
commodity. These contracts require each settlement between us and our
counterparty to coincide with cash market purchases of the actual
commodity.
As of June 30, 2004, we forecasted that $10.1 million of net gains in
accumulated other comprehensive losses will be reclassified into earnings
within the next twelve months.
Interest Rate Hedging
We manage our interest rate risk by entering into both fixed and variable
rate debt. In addition, we enter into interest rate swap contracts in
order to achieve a balanced mix of fixed and variable rate indebtedness.
In May 2004, we entered into a $100 million notional amount interest rate
swap contract with a final maturity at November 2012.
As of June 30, 2004, we had interest rate swap contracts to pay variable
interest, based on the six-month LIBOR rate, and receive a blended fixed
rate of interest of 6.2125% on a notional amount of $200 million ($100
million related to the senior notes due August 2006 and $100 million
related to the senior notes due November 2012). As of June 30, 2004, the
fair value of these swap contracts was an unrealized gain of $6.9 million.
We have designated our outstanding interest rate swap contracts as fair
value hedges of underlying fixed rate debt obligations. The fair value of
these contracts is recorded in other long-term assets or liabilities with
a corresponding increase or decrease in the fixed rate debt obligations.
The change in fair values of both the fair value hedge instruments and the
underlying debt obligations are recorded as equal and offsetting
unrealized gains and losses in the net interest expense component of the
condensed consolidated statements of operations. All existing fair value
hedges are determined to be 100% effective under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended. As a
result, there is no impact on current earnings resulting from hedge
ineffectiveness.
(10) COMPREHENSIVE INCOME
Comprehensive income is determined as follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
----------- ------------ ---------- -----------
Net income $ 38,396 $ 19,206 $ 34,193 $ 5,570
Other comprehensive (loss) income:
Foreign currency translation adjustment (3,401) 50,194 (12,601) 57,925
Cash flow hedges:
Reclassification adjustment, net of tax 2,147 (674) 3,437 (1,285)
Net derivative (loss) income, net of tax (7,811) 1,457 (4,116) 2,305
Available for sale securities, net of tax (35) (21) 2 (21)
----------- ----------- ---------- ----------
Comprehensive income $ 29,296 $ 70,162 $ 20,915 $ 64,494
=========== =========== ========== ==========
12
(11) STOCKHOLDERS' EQUITY
The following table summarizes our stockholders' equity as of June 30,
2004 and December 31, 2003 (in thousands, except per share data):
JUNE 30, DECEMBER 31,
2004 2003
--------- ------------
Common stock $.005 par value; 200,000 shares authorized; issued 46,278 shares at
June 30, 2004 and 46,248 shares at December 31, 2003 $ 231 $ 231
Additional paid-in capital 732,325 732,339
Retained earnings 316,910 299,195
Accumulated other comprehensive losses (64,875) (51,597)
Treasury stock, at cost; 4,962 shares at June 30, 2004 and 5,420 shares at
December 31, 2003 (183,866) (200,856)
Unearned compensation (1,585) (2,912)
--------- ---------
Total stockholders' equity $ 799,140 $ 776,400
========= =========
(12) EARNINGS PER SHARE
Net income as set forth in our condensed consolidated statements of
operations is used in the computation of basic and diluted earnings per
share information. Reconciliations of shares used in the computations of
earnings per share are as follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------ ------------ ----------- -----------
Weighted average common shares
outstanding used in the computation
of basic earnings per share 41,037 39,631 40,819 39,594
Effect of dilutive securities:
Non-vested restricted shares 371 96 371 96
Stock options 862 134 860 58
------ ------ ------ ------
Weighted average common shares and
equivalents used in the computation
of diluted earnings per share 42,270 39,861 42,050 39,748
====== ====== ====== ======
Stock options not included in the
earnings per share computation as
their effect would have been anti-
dilutive 984 4,072 984 4,072
====== ====== ====== ======
(13) SEGMENT INFORMATION
Our global business operates in the heating, ventilating, air
conditioning, and refrigeration (HVAC&R) industry. Our organization
consists of Global Applied, Unitary Products Group, and Bristol
Compressors. The Global Applied business is comprised of three geographic
regions: Americas; Europe, Middle East and Africa (EMEA); and Asia. Global
Applied's three geographic regions, Unitary Products Group, and Bristol
Compressors represent our reportable segments.
13
Global Applied designs, produces, markets, and sells HVAC&R equipment and
solutions and provides maintenance and service of equipment manufactured
by us and by others. Types of equipment include air-cooled and
water-cooled chillers, central air handling units, variable air volume
units, screw and reciprocating compressors, condensers, evaporators, heat
exchangers, ductless minisplits, process refrigeration systems, hygienic
air distribution systems, gas compression systems, and control equipment
to monitor and control the entire system. Heating and air conditioning
solutions are provided for buildings ranging from small office buildings
and fast food restaurants to large commercial and industrial complexes.
Refrigeration systems are provided for industrial applications in the
food, beverage, chemical and petroleum industries. Cooling and
refrigeration systems are also supplied for use on naval, commercial and
passenger vessels.
Unitary Products Group (UPG) produces heating and air conditioning
solutions for buildings ranging from private homes and apartments to small
commercial buildings. UPG products include ducted central air conditioning
and heating systems (air conditioners, heat pumps, and furnaces), and
light commercial heating and cooling equipment.
Bristol Compressors (Bristol) manufactures reciprocating and scroll
compressors for our use and for sale to original equipment manufacturers
and wholesale distributors. Bristol purchases an essential component from
one vendor. Due to consolidation in the vendor's industry, there are
limited alternate sources of supply. We believe an alternate source of
supply is attainable in the event the current vendor is unable to supply
the component. However, a change in vendors would cause a delay in
manufacturing and loss of sales, which would adversely impact the results
of operations of Bristol and our consolidated results of operations.
General corporate expenses and charges and other expenses are not
allocated to the individual segments for management reporting purposes.
General corporate expenses include certain incentive compensation,
pension, medical and insurance costs; corporate administrative costs;
development costs for information technology applications and
infrastructure; the $20 million warranty charge discussed in note 8; and
other corporate costs. Charges and other expenses in 2003 include
restructuring and other charges and operating expenses related to cost
reduction actions. Non-allocated assets primarily consist of prepaid
pension benefit cost, net deferred tax assets, LIFO inventory reserves,
and other corporate assets. For management reporting purposes,
intersegment sales are recorded on a cost-plus or market price basis.
Business segment management compensation is based on segment earnings
before interest and taxes, segment net capital employed, and consolidated
earnings per share.
14
The table below represents our operating results and assets by segment (in
thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------ ------------ ----------- -----------
Net sales:
Global Applied:
Americas $ 394,424 $ 362,839 $ 727,223 $ 660,252
EMEA 384,403 335,702 682,824 597,754
Asia 163,485 131,987 266,269 222,106
Intragroup sales (59,470) (54,252) (104,461) (94,618)
------------ ------------ ----------- -----------
882,842 776,276 1,571,855 1,385,494
Unitary Products Group 258,115 222,949 438,506 386,491
Bristol Compressors 138,965 138,837 252,443 276,399
Eliminations(1) (58,214) (53,645) (101,729) (95,610)
------------ ------------ ----------- -----------
1,221,708 1,084,417 2,161,075 1,952,774
============ ============ =========== ===========
(1)Eliminations include
the following
intersegment
sales:
Global Applied (400) (595) (1,131) (1,181)
Unitary Products Group (18,058) (17,787) (31,792) (30,476)
Bristol Compressors (39,756) (35,263) (68,806) (63,953)
------------ ------------ ----------- -----------
Eliminations (58,214) (53,645) (101,729) (95,610)
============ ============ =========== ===========
Income from operations:
Global Applied:
Americas 23,313 16,815 24,999 14,059
EMEA 14,600 12,451 14,591 13,040
Asia 22,082 22,423 31,656 32,116
------------ ------------ ----------- -----------
59,995 51,689 71,246 59,215
Unitary Products Group 30,191 24,049 42,217 32,269
Bristol Compressors 4,242 11,930 8,320 23,259
General corporate
expenses,
eliminations, and
other non-allocated
items (46,056) (16,130) (68,536) (30,245)
Charges and other -- (35,030) -- (53,016)
expenses
------------ ------------ ----------- -----------
48,372 36,508 53,247 31,482
------------ ------------ ----------- -----------
Interest expense, net (10,072) (12,115) (20,933) (24,131)
------------ ------------ ----------- -----------
Equity in earnings of
affiliates:
Global Applied:
EMEA 2,706 972 3,090 1,387
Asia 337 332 453 528
------------ ------------ ----------- -----------
3,043 1,304 3,543 1,915
Bristol Compressors 1,184 1,173 1,176 1,650
------------ ------------ ----------- -----------
4,227 2,477 4,719 3,565
------------ ------------ ----------- -----------
Income before income
taxes 42,527 26,870 37,033 10,916
Provision for income taxes (4,131) (7,664) (2,840) (5,346)
------------ ------------ ----------- -----------
Net income $ 38,396 $ 19,206 $ 34,193 $ 5,570
============ ============ =========== ===========
15
JUNE 30, 2004 DEC. 31, 2003
------------- ------------
Total assets:
Global Applied:
Americas $ 782,789 $ 711,103
EMEA 965,991 937,981
Asia 425,933 389,456
Eliminations and other non-allocated
assets (102,615) (111,789)
------------- ------------
2,072,098 1,926,751
Unitary Products Group 476,120 384,355
Bristol Compressors 283,525 242,375
Eliminations and other non-allocated
assets 51,105 119,654
------------- ------------
$ 2,882,848 $ 2,673,135
============= ============
(14) CHARGES TO OPERATIONS
In 2003, we initiated actions to further reduce our overall cost structure
and support the implementation of our new geographic organization. In
addition to cost reductions associated with the consolidation of our
former Engineered Systems Group and York Refrigeration Group segments,
additional actions included the further reduction of manufacturing
capacity, the elimination of certain product lines, and the exiting of
several small, non-core businesses. All actions were substantially
completed by December 31, 2003.
In the three and six months ended June 30, 2003, we incurred costs by
segment as follows (in thousands):
THREE MONTHS SIX MONTHS
ENDED JUNE 30, 2003 ENDED JUNE 30, 2003
------------------- ---------------------
Global Applied:
Americas $ 3,144 $ 6,715
EMEA 22,910 35,255
Asia 696 2,766
-------- --------
26,750 44,736
Unitary Products Group 7,500 7,500
Bristol Compressors 28 28
-------- --------
Total charges to operations, net 34,278 52,264
Charges reflected in cost of goods sold (1,218) (3,110)
-------- --------
Restructuring and other charges, net $ 33,060 $ 49,154
======== ========
Charges included write-downs for the impairment of assets relating to
businesses or facilities to be closed or divested, severance and other
accruals relating to planned reductions in workforce throughout the
Company, and estimated costs related to the elimination of certain product
lines.
16
Detail of activity relating to the 2003 initiatives in the six months
ended June 30, 2004 is as follows (in thousands):
ACCRUALS
ESTABLISHED UTILIZED
IN SIX IN SIX
MONTHS MONTHS REMAINING
ACCRUALS AT ENDED ENDED ACCRUALS AT
DEC. 31, JUNE 30, JUNE 30, JUNE 30,
2003 2004 2004 2004
----------- ----------- -------- -----------
Severance 16,537 -- 9,353 7,184
Contractual obligations 6,156 -- 1,522 4,634
Other 1,220 -- 1,125 95
----------- ----------- -------- -----------
$ 23,913 $ -- $ 12,000 $ 11,913
=========== =========== ======== ===========
Substantially all of the severance accrual will be utilized in 2004.
(15) PROPOSED ACCOUNTING STANDARDS
In March 2004, the Financial Accounting Standards Board (FASB) issued
Proposed Statement of Financial Accounting Standards "Share-Based
Payment," an amendment of FASB Statements No. 123 and 95. This proposed
statement addresses the accounting for share-based compensation in which
we exchange employee services for (a) our equity instruments or (b)
liabilities that are based on the fair value of our equity instruments or
that may be settled by the issuance of our equity instruments. Under the
proposed statement, we will recognize compensation cost for share-based
compensation issued to or purchased by employees under our stock-based
compensation plans using a fair-value-based method effective January 1,
2005. The impact the proposed statement will have on our condensed
consolidated financial statements is not known at this time, however, it
may reduce net income and earnings per share similarly to the amounts
disclosed in note 2 to our condensed consolidated financial statements and
note 1 to our consolidated financial statements contained in the Annual
Financial Statements and Review of Operations filed as Exhibit 13 to our
Form 10-K/A for the year ended December 31, 2003.
In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (Act) became law. The Act provides for
prescription drug benefits to retirees and tax-free federal subsidies to
sponsors of certain retiree health-care plans. A final determination has
not been made as to whether our plans qualify for the subsidies.
Accordingly, any measurements of benefit obligations or costs do not
reflect the effects of the Act. In May 2004, the FASB issued Staff
Position No. FAS 106-2, "Accounting and Disclosure Requirements Related to
the Medicare Prescription Drug, Improvement and Modernization Act of
2003," effective for the third quarter of 2004. We believe the impact of
adoption will be immaterial to our results of operations.
17
PART I - FINANCIAL INFORMATION
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
CONSOLIDATED OPERATIONS
Net sales grew $137.3 million or 12.7% to $1,221.7 million in the second quarter
of 2004 compared to 2003 (including a benefit of $18.6 million due to the net
strengthening of foreign currencies mainly in Europe, Middle East and Africa).
In the first half of 2004, net sales grew $208.3 million or 10.7% to $2,161.1
million compared to 2003 (including a benefit of $60.5 million due to the net
strengthening of foreign currencies). Our revenue growth was mainly attributable
to increased Global Applied and Unitary Products Group equipment volume and
Global Applied service business (consisting of services, parts and replacement
equipment). Revenue growth in the first half of 2004 in Global Applied and
Unitary Products Group was partially offset by reduced equipment volume at
Bristol Compressors. (See further discussion below under Segment Analysis.) Net
sales in the United States increased 8.3% to $550.5 million and international
net sales increased 16.5% to $671.2 million in the second quarter of 2004
compared to 2003. In the first half of 2004, net sales in the United States
increased 6.2% to $976.4 million and international net sales increased 14.6% to
$1,184.7 million compared to 2003. International revenue grew at a faster rate
than domestic U.S. net sales due to a shift in volume at Bristol from domestic
original equipment manufacturers (OEM) to international customers and stronger
exports from our U.S. factories to international projects in the Middle East and
Asia. Order backlog increased to $1,312.9 million as of June 30, 2004 as
compared to $1,107.7 million as of June 30, 2003. Backlog in Global Applied
increased $161.5 million mainly due to projects in the Middle East, United
Kingdom, and Asia, as well as longer lead time in commercial marine markets.
Unitary Products Group and Bristol backlog increased $43.6 million reflecting
changes in ordering patterns of our customers, OEM and market activity levels.
As of December 31, 2003, order backlog was $1,026.6 million.
Gross profit declined $0.7 million or 0.3% to $225.7 million (18.5% of net
sales) in the second quarter of 2004 compared to $226.4 million (20.9% of net
sales) in 2003. In the first half of 2004, gross profit increased $10.3 million
or 2.7% to $396.7 million (18.4% of net sales) compared to $386.5 million (19.8%
of net sales) in 2003. The net strengthening of foreign currencies increased our
gross profit $3.2 million and $10.6 million in the second quarter and first half
of 2004, respectively. Overall, gross profit improved due to increased equipment
volume in Global Applied and Unitary Products Group and realization of
restructuring initiative benefits. These improvements were offset by the $20
million warranty charge for the Unitary Products Group furnace inspection and
remediation program (see further discussion below under Segment Analysis);
margin pricing pressure in EMEA and Asia; and higher raw material (principally
steel and copper) and component costs. In the second quarter and first half of
2004, raw material cost increases in excess of selling price increases were $9.6
million and $12.7 million, respectively. Worldwide demand for steel and copper
continued to increase our raw material cost and cost of components containing
these materials. While we hedge a portion of our copper and aluminum purchases
and have contracts for steel purchases, we experienced cost increases for
unhedged portions and components containing these commodities, as well as
surcharges on our steel purchases. We expect the cost of raw materials and
components to remain above 2003 levels for the remainder of 2004 and 2005. In
the second quarter and first half of 2003, we recorded inventory write-downs
related to strategic actions to rationalize our manufacturing capacity in Global
Applied of $1.2 million and $3.1 million, respectively.
Selling, general and administrative (SG&A) expenses increased $20.5 million or
13.1% to $177.3 million (14.5% of net sales) in the second quarter of 2004
compared to $156.8 million (14.5% of net sales) in 2003. In the first half of
2004, SG&A expenses increased $37.7 million or 12.3% to $343.5 million (15.9% of
net sales) compared to $305.8 million (15.7% of net sales) in 2003. The net
strengthening of foreign currencies increased our SG&A expenses $3 million and
$10.2 million in the second quarter and first half of 2004, respectively. Higher
selling expenses related to equipment volume gains and marketing of new
products, as well as the cost of our initiatives to improve our information
technology capabilities and develop products contributed to the increase. We
expect to benefit from improvement initiatives in 2005 and beyond.
In 2003, we initiated actions to further reduce our overall cost structure and
support the implementation of our new geographic organization. In addition to
cost reductions associated with the consolidation of our former Engineered
Systems Group and York Refrigeration Group segments, additional actions include
the further reduction of manufacturing capacity, elimination of certain product
lines, and exiting of several small, non-core businesses. In the second quarter
and first half of
18
2003, we recorded restructuring and other charges of $34.3 million and $52.3
million, respectively, related to these actions, including $1.2 million and $3.1
million, respectively, charged to cost of goods sold. The charges in the second
quarter and first half of 2003 included $16.0 million and $31.2 million,
respectively, in write-downs of various assets and $18.3 million and $21.1
million, respectively, in accruals for severance and other costs. Our 2003
restructuring initiatives resulted in savings of $9 million and $19 million in
the second quarter and first half of 2004, respectively, compared to 2003.
As a result of the above factors, income from operations increased $11.9 million
or 32.5% to $48.4 million (4% of net sales) in the second quarter of 2004
compared to $36.5 million (3.4% of net sales) in 2003. In the first half of
2004, income from operations grew $21.8 million or 69.1% to $53.2 million (2.5%
of net sales) compared to $31.5 million (1.6% of net sales) in 2003. (See
further discussion below under Segment Analysis.)
Net interest expense declined $2 million or 16.9% to $10.1 million in the second
quarter of 2004 compared to 2003. In the first half of 2004, net interest
expense decreased $3.2 million or 13.3% to $20.9 million compared to 2003. The
decline resulted from lower average borrowing rates.
Equity in earnings of affiliates grew $1.8 million or 70.6% to $4.2 million in
the second quarter of 2004 compared to 2003. In the first half of 2004, equity
in earnings of affiliates increased $1.2 million or 32.4% to $4.7 million
compared to 2003. The increase was primarily the result of improved performance
of Clima Roca and other affiliates.
The income tax provision of $4.1 million and $2.8 million in the second quarter
and first half of 2004, respectively, and $7.7 million and $5.3 million in the
second quarter and first half of 2003, respectively, relate to both U.S. and
non-U.S. operations. The effective tax rates were 9.7% and 28.5% in the second
quarter of 2004 and 2003, respectively, and 7.7% and 49% in the first half of
2004 and 2003, respectively. The 2004 income tax provisions were lower than the
U.S. statutory rate of 35% primarily due to pretax earnings in non-U.S.
jurisdictions where statutory rates are less than 35%; the favorable impact of
the settlement of prior years' tax returns (tax benefit of $8.2 million)
partially offset by deferred tax adjustments (tax expense of $5.6 million); and
a 39.8% tax benefit associated with the $20 million warranty charge for the
Unitary Products Group furnace inspection and remediation program. The income
tax provision in the second quarter of 2003 was lower than the U.S. statutory
rate of 35% mainly due to pre-tax earnings in non-U.S. jurisdictions where
statutory rates are less than 35%. The income tax provision in the first half of
2003 was higher than the U.S. statutory rate of 35% due to restructuring
charges, for which the tax benefits were recorded at a lower effective tax rate.
As a result of the above factors, net income increased $19.2 million to $38.4
million (3.1% of net sales) in the second quarter of 2004 as compared to $19.2
million (1.8% of net sales) in 2003. In the first half of 2004, net income grew
$28.6 million to $34.2 million (1.6% of net sales) as compared to $5.6 million
(0.3% of net sales) in 2003.
19
SEGMENT ANALYSIS
The following table sets forth net sales and income from operations by segment
(in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------ ------------ ----------- -----------
Net sales:
Global Applied:
Americas $ 394,424 $ 362,839 $ 727,223 $ 660,252
Europe, Middle East and Africa 384,403 335,702 682,824 597,754
Asia 163,485 131,987 266,269 222,106
Intragroup sales (59,470) (54,252) (104,461) (94,618)
------------ ------------ ----------- -----------
882,842 776,276 1,571,855 1,385,494
Unitary Products Group 258,115 222,949 438,506 386,491
Bristol Compressors 138,965 138,837 252,443 276,399
Eliminations (58,214) (53,645) (101,729) (95,610)
------------ ------------ ----------- -----------
Net sales $ 1,221,708 $ 1,084,417 $ 2,161,075 $ 1,952,774
============ ============ =========== ===========
Income from operations:
Global Applied:
Americas $ 23,313 $ 16,815 $ 24,999 $ 14,059
Europe, Middle East and Africa 14,600 12,451 14,591 13,040
Asia 22,082 22,423 31,656 32,116
------------ ------------ ----------- -----------
59,995 51,689 71,246 59,215
Unitary Products Group 30,191 24,049 42,217 32,269
Bristol Compressors 4,242 11,930 8,320 23,259
General corporate expenses, eliminations,
and other non-allocated items (46,056) (16,130) (68,536) (30,245)
Charges and other expenses -- (35,030) -- (53,016)
------------ ------------ ----------- -----------
Income from operations $ 48,372 $ 36,508 $ 53,247 $ 31,482
============ ============ =========== ===========
Global Applied
Global Applied net sales grew $106.6 million or 13.7% to $882.8 million in the
second quarter of 2004 compared to 2003. In the first half of 2004, net sales
increased $186.4 million or 13.5% to $1,571.9 million compared to 2003. The net
strengthening of global currencies increased net sales by $18.3 million in the
second quarter and by $59.2 million in the first half. Americas equipment growth
was driven by increased volume of commercial air conditioning, air handling and
refrigeration equipment, and improved market conditions in Latin America. EMEA
experienced volume increases throughout Europe, mainly for commercial air
conditioning equipment, air handling units, and in refrigeration contracting.
Asia revenue increased primarily due to China's economic expansion and overall
stronger demand for commercial air conditioning equipment in other Asian
countries. Service business sales grew $22.1 million or 8.1% to $296.4 million
in the second quarter of 2004 compared to 2003. In the first half of 2004,
service business revenue increased $50.8 million or 10.2% to $550.7 million
compared to 2003. Our service business (consisting of services, parts and
replacement equipment) continued to expand as demand for repair and replacement
work and multi-site commercial service arrangements remained strong.
Global Applied income from operations increased $8.3 million to $60 million
(6.8% of net sales) in the second quarter of 2004 compared to $51.7 million
(6.7% of net sales) in 2003. In the first half of 2004, income from operations
increased $12 million to $71.2 million (4.5% of net sales) compared to $59.2
million (4.3% net sales) in 2003. Equipment volume increases and 2003
restructuring initiative benefits were partially offset by rising raw material
and component costs. In addition, EMEA experienced margin-pricing pressure
mainly in Europe due to general economic conditions. Improved Asian commercial
equipment volume was more than offset by increased material costs and
margin-pricing pressure for mini-split product.
Unitary Products Group (UPG)
UPG net sales grew $35.2 million or 15.8% to $258.1 million in the second
quarter of 2004 compared to 2003. In the first half of 2004, net sales grew $52
million or 13.5% to $438.5 million compared to 2003. Residential, light
commercial and
20
manufactured housing equipment volume improved due to overall growth in the
North American unitary air conditioning and heating market. Overall market share
remained relatively flat. Net sales of the new "Affinity" product line continued
to increase since market introduction in the first quarter of 2004. General
selling price increases enacted in the second quarter of 2004 partially
contributed to net sales growth. We expect new product introductions, price
increases, and improvements in construction markets to increase net sales for
the remainder of 2004 above 2003 levels.
UPG income from operations grew $6.1 million or 25.5% to $30.2 million (11.7% of
net sales) in the second quarter of 2004 compared to $24 million (10.8% of net
sales) in 2003. In the first half of 2004, income from operations increased $9.9
million or 30.8% to $42.2 million (9.6% of net sales) compared to $32.3 million
(8.4% of net sales) in 2003. Improved results are mainly attributable to higher
equipment volume, production efficiencies, and a favorable product mix partially
offset by increased raw material and component costs and advertising expenses.
Bristol Compressors (Bristol)
Bristol net sales increased $0.1 million or 0.1% to $139 million in the second
quarter of 2004 compared to 2003. In the first half of 2004, net sales declined
$24 million or 8.7% to $252.4 million compared to 2003. Revenue has declined in
the first half due to lower shipments to domestic OEMs mainly as a result of the
loss of a customer in the fourth quarter of 2003. Higher shipments to
international customers offset reduced domestic volume in the second quarter of
2004 compared to 2003. Shipments to domestic customers in 2004 are expected to
remain below 2003 levels. Net sales of the "Benchmark" compressor continued to
improve since market introduction in the first quarter of 2004.
Bristol income from operations decreased $7.7 million or 64.4% to $4.2 million
(3.1% of net sales) in the second quarter of 2004 compared to $11.9 million
(8.6% of net sales) in 2003. In the first half of 2004, income from operations
declined $14.9 million or 64.2% to $8.3 million (3.3% of net sales) compared to
$23.3 million (8.4% of net sales) in 2003. Reduced results are mainly
attributable to domestic shipment declines, product mix, and increased raw
material and component costs. The successful introduction and market acceptance
of the "Benchmark" compressor is expected to improve Bristol's results beyond
2004.
Other
General corporate expenses, eliminations, and other non-allocated items
increased $29.9 million or 185.5% to $46.1 million in the second quarter of 2004
compared to 2003. In the first half of 2004, general corporate expenses,
eliminations, and other non-allocated items increased $38.3 million or 126.6% to
$68.5 million compared to 2003. The increase was primarily due to the $20
million warranty charge for the UPG furnace inspection and remediation program
discussed below; increased costs related to improving our information technology
capabilities in both applications and infrastructure of $4.9 million ($9.4
million in the first half of 2004); and increased costs related to other
non-allocated items of $5 million ($8.9 million in the first half of 2004). The
year-over-year cost increases for information technology investments are
expected to continue, to a lesser extent, for the remainder of the year.
During the second quarter of 2004, we finalized field and factory testing to
investigate failures found in heat exchangers of certain sealed combustion gas
furnaces used in the manufactured housing industry. We found that installation
and application factors combined with component part variation can result in
excessive heat exchanger temperatures, which may contribute to failures in
certain furnace models manufactured in the years 1995 to 2000. We no longer
produce these furnace models. As a result, we recorded a $20 million warranty
charge for the UPG furnace inspection and remediation program during the second
quarter of 2004. The $20 million warranty charge represents our best estimate of
repair costs within a reasonable estimated range between $13 million and $30
million. Repair cost estimates are mainly comprised of the expected cost of
repair kits or new heat exchangers and installation labor. Our estimates are
based upon the projected number of furnace units to be serviced (find rate),
current repair costs, and the estimated number of furnace units requiring
repair. Differences between estimated and actual find rate, costs to manufacture
and install repair kits or heat exchangers, and number of furnace units that
require repair could have a significant impact on our consolidated results of
operations. We expect to begin repairs in the third quarter of 2004 and complete
repairs by the end of 2006.
21
Charges and other expenses in 2003 are as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2003 JUNE 30, 2003
------------------ ----------------
By segment:
Global Applied:
Americas $ 3,896 $ 7,467
EMEA 22,910 35,255
Asia 696 2,766
------- -------
27,502 45,488
Unitary Products Group 7,500 7,500
Bristol Compressors 28 28
------- -------
$35,030 $53,016
======= =======
By type:
Restructuring and other charges, net $33,060 $49,154
Restructuring and other charges reflected in cost of goods sold 1,218 3,110
Related operating expenses included in cost of goods sold 752 752
------- -------
$35,030 $53,016
======= =======
No similar charges were incurred in 2004.
LIQUIDITY AND CAPITAL RESOURCES
Our significant liquidity and capital funding needs are working capital,
operating expenses, capital expenditures, debt repayments, restructuring costs,
dividends to our shareholders, contractual obligations, and commercial
commitments. Liquidity and capital resource needs are met through cash flows
from operations, borrowings under our credit agreements and bank lines of
credit, financing of trade receivables, and credit terms from suppliers, which
approximate receivable terms to our customers. Additional sources of cash
include customer deposits and progress payments.
We believe that we will be able to satisfy our principal and interest payment
obligations and our working capital and capital expenditure requirements from
operating cash flows together with the availability under the uncommitted credit
lines and committed bank lines of credit. Uncommitted credit lines and committed
bank lines of credit support seasonal working capital needs and are available
for general corporate purposes. Since certain of our long-term debt obligations
and our revolving trade receivables facility bear interest at floating rates,
our interest costs are sensitive to changes in prevailing interest rates.
WORKING CAPITAL
Our working capital is mainly comprised of inventories, net receivables, and
accounts payable and accrued expenses. Working capital increased $122.5 million
to $485 million as of June 30, 2004 compared to $362.5 million as of December
31, 2003. The increase resulted from higher net receivables and inventories
partially offset by an increase in accounts payable and accrued expenses.
Net Receivables
Net receivables increased $158.6 million in the first half of 2004 primarily due
to overall revenue growth and seasonal demand for UPG and Bristol products, as
well as a greater mix of receivables from international customers with longer
payment terms at Bristol. Overall, days sales outstanding decreased to 49 days
at June 30, 2004 from 50 days at December 31, 2003.
Inventories
Inventories increased $59.7 million in the first half of 2004 mainly as a result
of the seasonal nature of our business. Our inventories increase during the
first half of the year as we manufacture inventory to support demand in the
second half of the year.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses grew $119.7 million primarily due to an
increase in raw material and component purchases; the timing of payment cycles
in relation to quarter end; an increase in warranty accruals primarily related
to the current portion of the warranty charge for the UPG furnace inspection and
remediation program; and increases in accruals for value-added tax, customer
deposits and employee compensation and benefits. These increases were partially
offset by payment of 2003 incentive compensation and restructuring accruals and
net weakening of foreign currencies since December 31, 2003.
22
CASH FLOWS
Operating Activities
We used $39.2 million of cash for operating activities in the first half of
2004. Net cash flows of $111.3 million were used by the change in assets and
liabilities net of effects from acquisitions and divestitures, mainly due to the
increases in net receivables, inventory, and accounts payable and accrued
expenses, as discussed above. Cash flows of $72.1 million were generated from
operations. Our operating cash flows in the first half of 2004 reflect the
seasonal nature of our business. During the first half of 2003, our operating
activities provided $34.8 million mainly due to lower working capital
requirements for net receivables and inventories offset by accounts payable and
accrued expenses to support lower sales in the first half of 2003 and backlog as
of June 30, 2003.
Investing Activities
Cash used in investing activities of $36.9 million was mainly comprised of
capital expenditures for manufacturing equipment and information technology
systems consistent with 2003.
Financing Activities
Cash provided by financing activities of $77.3 million included proceeds of
$78.9 million from net borrowings and $15 million from issuance of common stock
partially offset by common stock dividend payments of $16.5 million. Net
borrowings are consistent with the typical seasonality of our businesses to
finance increasing working capital needs during the first half of the year.
Proceeds from issuance of common stock represent cash received from employee
stock purchases and exercise of stock options under our employee stock plans. We
paid cash dividends of $0.40 per share in the first half of 2004 representing a
33% increase compared to 2003. In 2003, our financing activities used cash of
$47.2 million mainly due to net debt repayments as a result of cash provided by
operating activities.
BORROWINGS AND AVAILABILITY
Total indebtedness was $691.5 million as of June 30, 2004, primarily consisting
of $500 million of senior notes, $117.2 million outstanding under domestic bank
lines, and $41 million of Danish retail notes. The senior notes mature at dates
ranging from 2006 to 2012 and carry fixed rates ranging from 5.8% to 6.7%. The
Danish retail notes are due in October 2004 and have a coupon rate of 2%. Our
ability to issue commercial paper is limited due to our credit ratings.
The following table summarizes the terms of our lines of credit (in thousands):
LIMIT AVAILABILITY (a)
JUNE 30, DEC. 31, JUNE 30, DEC. 31, BORROWING ANNUAL
2004 2003 2004 2003 EXPIRES RATE (b) FEE
-------- -------- -------- -------- --------- --------- ------
Five Year
Credit May 29, LIBOR +
Agreement $400,000 $400,000 $400,000 $400,000 2006 1.175% 0.2%
364-Day
Credit March 11, LIBOR +
Agreement (c) 200,000 200,000 200,000 200,000 2005 0.85% 0.15%
Domestic Uncom-
bank lines 150,000 135,000 32,800 110,000 mitted Various --
Non-U.S
bank credit Uncom-
facilities 386,100 355,246 251,072 246,298 mitted Various --
(a) Availability is reduced for outstanding borrowings and bank guarantee and
letters of credit usage.
(b) The one-month LIBOR (London Interbank Offering Rate) rate was 1.37% and
1.12% as of June 30, 2004 and December 31, 2003, respectively.
(c) We renewed our 364-Day Credit Agreement in March 2004.
The Five Year Credit Agreement and 364-Day Credit Agreement (collectively, the
Agreements) contain financial covenants requiring us to maintain certain
financial ratios and standard provisions limiting leverage and liens. We were in
compliance
23
with these financial covenants as of June 30, 2004 and December 31, 2003. We
have access to bank lines of credit and have the ability to borrow under the
Agreements as long as we continue to meet the financial covenants or until
expiration of these arrangements. The primary financial covenants are the
earnings before interest, taxes, depreciation, and amortization (EBITDA)
interest coverage and the debt to capital ratio, as defined under the
Agreements. As of June 30, 2004, our EBITDA interest coverage was 4.4 times,
exceeding the minimum requirement of 3.5 times. As of June 30, 2004, our debt to
capital ratio, as defined in the Agreements, was 45%, below the maximum allowed
of 50%.
We also maintain an annually renewable revolving facility under which we sell
certain trade receivables - see "Off-Balance Sheet Arrangements" section below.
OFF-BALANCE SHEET ARRANGEMENTS
Our off-balance sheet arrangements are comprised of a trade receivable revolving
facility and operating leases.
Trade Receivable Revolving Facility
Pursuant to the terms of an annually renewable revolving facility, we sell
certain of our trade receivables to a wholly owned consolidated subsidiary, York
Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis,
an undivided ownership interest in the trade receivables to bank-administered
asset-backed commercial paper vehicles. In May 2004, we amended the facility,
increasing the availability from $150 million to $200 million. We continue to
service sold trade receivables. No servicing asset or liability has been
recognized as our cost to service sold trade receivables approximates the
servicing income.
In accordance with the facility, YRFLLC has sold $150 million of an undivided
interest in trade receivables as of June 30, 2004 and December 31, 2003,
resulting in a reduction of net receivables reflected in our condensed
consolidated balance sheets. The discount rate on trade receivables sold was
1.26% and 1.12% as of June 30, 2004 and December 31, 2003, respectively. The
program fee on trade receivables sold was 0.4% and 0.5% as of June 30, 2004 and
December 31, 2003, respectively.
Operating Leases
Operating leases provide us with the flexibility to use property, plant and
equipment without assuming ownership and related debt. Operating leases reduce
our risk associated with disposal and residual fair value of property, plant and
equipment at the end of the lease.
OUTLOOK
Overall, we expect improved net sales and net income in fiscal year 2004 as
compared to 2003. We anticipate equipment growth within Global Applied
specifically for commercial air conditioning and refrigeration products as we
are seeing some improvements in global economies; increased sales of large
commercial equipment in our Asian business; and the benefit of new commercial
air conditioning products. We anticipate continued strength in our service
businesses' (services, parts, and replacement equipment) sales within Global
Applied. We also anticipate growth in our UPG equipment business due to
continued strength of U.S. residential housing markets (both new construction
and replacement) and our new product introductions. Further savings from our
2003 cost reduction actions are expected to be realized throughout 2004. Overall
growth and savings are expected to be partially offset by a decline in Bristol
sales; increased costs for copper, steel, and components containing copper and
steel net of price increases; and continued investments in new products and
information technology projects.
PROPOSED ACCOUNTING STANDARDS
In March 2004, the Financial Accounting Standards Board issued Proposed
Statement of Financial Accounting Standards "Share-Based Payment," an amendment
of FASB Statements No. 123 and 95. This proposed statement addresses the
accounting for share-based compensation in which we exchange employee services
for (a) our equity instruments or (b) liabilities that are based on the fair
value of our equity instruments or that may be settled by the issuance of our
equity instruments. Under the proposed statement, we will recognize compensation
cost for share-based compensation issued to or purchased by employees under our
stock-based compensation plans using a fair-value-based method effective January
1, 2005. The impact the proposed statement will have on our condensed
consolidated financial statements is not known at this time, however, it may
reduce net income and earnings per share similarly to the amounts disclosed in
note 2 to our condensed
24
consolidated financial statements and note 1 to our consolidated financial
statements contained in the Annual Financial Statements and Review of Operations
filed as Exhibit 13 to our Form 10-K/A for the year ended December 31, 2003.
In December 2003, the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 (Act) became law. The Act provides for prescription drug benefits to
retirees and tax-free federal subsidies to sponsors of certain retiree
health-care plans. A final determination has not been made as to whether our
plans qualify for the subsidies. Accordingly, any measurements of benefit
obligations or costs do not reflect the effects of the Act. In May 2004, the
FASB issued Staff Position No. FAS 106-2, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003," effective for the third quarter of 2004. We believe
the impact of adoption will be immaterial to our results of operations.
FORWARD-LOOKING INFORMATION - RISK FACTORS
This document contains statements which, to the extent they are not statements
of historical or present fact, constitute "forward-looking statements" under the
securities laws. From time to time, oral or written forward-looking statements
may also be included in other materials released to the public. These
forward-looking statements are intended to provide our current expectations or
plans for future operating and financial performance based on assumptions
currently believed to be valid.
To the extent we have made "forward-looking statements," certain risk factors
could cause actual results to differ materially from those anticipated in such
forward-looking statements including, but not limited to:
- Changes in competition within specific markets or geographies
- Introduction of new competitive products
- Changes in government regulation, including environmental and tax
laws
- Legal actions, including pending and unasserted claims
- Loss of patented technology
- Events that create a negative image for our trademarks
- Work stoppages
- Price and availability of raw materials and components
- Realization of benefits from our cost reduction initiatives
- Changes in individual country economics, including but not limited
to: Argentina; Brazil; China; Mexico; Saudi Arabia; United Arab
Emirates; and Venezuela
- Acts of war or terrorism
- Changes in commercial and residential construction markets
- Significant changes in customer orders
- Significant product defects or failures
- Failure to successfully implement information technology systems
- Unfavorable outcome of our UPG furnace inspection and remediation
program including, but not limited to review and approval by the
United States Consumer Product Safety Commission and significant
changes in assumptions used to estimate our repair costs
Unseasonably cool weather in various parts of the world could adversely affect
our UPG and Global Applied air conditioning businesses and, similarly, the
Bristol compressor business. Bristol and UPG are also impacted by the successful
development, introduction, and customer acceptance of new products. The Global
Applied air conditioning business could also be affected by a further slowdown
in the large chiller market and by the acceptance of new product introductions.
Global Applied could be negatively impacted by reductions in commercial
construction. Our ability to effectively implement price increases to offset
higher costs is dependent on market conditions and the competitive environment.
The financial position and financial results of our foreign locations could be
negatively impacted by the translation effect of currency fluctuations and by
political
25
changes including nationalization or expropriation of assets. In addition, our
overall performance could be affected by declining worldwide economic conditions
or slowdowns resulting from world events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information responsive to this item as of December 31, 2003 appears under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations, Market Risk," on pages 14 to 16 of the Annual Financial
Statements and Review of Operations filed as Exhibit 13 to our Form 10-K/A for
the year ended December 31, 2003. There was no material change in such
information as of June 30, 2004.
ITEM 4. CONTROLS AND PROCEDURES
As of June 30, 2004, we carried out an evaluation, under the supervision and
with the participation of company management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective.
There were no changes in our internal control over financial reporting that
occurred during the quarter ended June 30, 2004 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
26
PART II - OTHER INFORMATION
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table provides information about purchases of registered
equity securities by the Company during the quarter ended June 30, 2004:
TOTAL NUMBER OF
SHARES PURCHASED MAXIMUM NUMBER OF
TOTAL NUMBER AVERAGE AS PART OF PUBLICLY SHARES THAT MAY YET BE
OF SHARES PRICE PAID ANNOUNCED PLANS PURCHASED UNDER THE
PERIOD PURCHASED PER SHARE OR PROGRAMS (2) PLANS OR PROGRAMS (2)
- ---------------- ------------ ---------- ------------------- ----------------------
April 1, 2004 -
April 30, 2004 1,723 (1) $42.95 (1) -- --
May 1, 2004 -
May 31, 2004 -- -- -- --
June 1, 2004 -
June 30, 2004 -- -- -- --
(1) Not purchased through a publicly announced plan or program. An
affiliated purchaser delivered back to the issuer shares of stock
already issued to him in payment of the exercise price of stock
options.
(2) The Company has no publicly announced repurchase plans or programs.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Our annual meeting of Stockholders was held on May 20, 2004.
(b) Proxies were solicited for the meeting. All nominees for Director
were elected and items (c) 2 through 5 (see below) were approved.
27
(c) The following votes were cast at the Annual Meeting for the matters
indicated below:
1. Election of Directors Votes For Votes Withheld
Gerald C. McDonough 35,817,581 1,545,036
C. David Myers 36,072,238 1,290,379
W. Michael Clevy 34,168,207 3,194,410
J. Roderick Heller, III 34,245,947 3,116,670
Robert F. B. Logan 35,725,555 1,637,062
Paul J. Powers 34,317,450 3,045,167
Donald M. Roberts 35,652,414 1,710,203
James A. Urry 35,725,094 1,637,523
2. Proposal to approve an amendment Votes For Votes Against Abstentions
to our Employee Stock Purchase Plan 34,610,157 445,933 24,055
3. Proposal to approve an amendment Votes For Votes Against Abstentions
to our Incentive Compensation Plan 26,050,393 8,989,626 40,126
4. Proposal to approve an amendment Votes For Votes Against Abstentions
to our Omnibus Stock Plan 32,015,015 3,039,397 25,733
5. The appointment of KPMG LLP Votes For Votes Against Abstentions
as independent auditors 36,658,339 689,241 15,037
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS
(a) Exhibits
Exhibit 4.1 - Amended and restated Receivables Purchase Agreement
dated as of May 17, 2004 among York Receivables Funding LLC, as
seller, York International Corporation, as initial servicer, Gotham
Funding Corporation, as a conduit purchaser, The Bank of
Tokyo-Mitsubishi, LTD., New York Branch, as agent for the Gotham
Purchaser Group, Liberty Street Funding Corp., as a conduit
purchaser, The Bank of Nova Scotia, as agent for the Liberty Street
Purchaser Group, and The Bank of Tokyo-Mitsubishi, LTD., New York
Branch as administrator*
Exhibit 10.1 - York International Corporation Amended and Restated
2002 Incentive Compensation Plan*
Exhibit 10.2 - York International Corporation Amended and Restated
2002 Omnibus Stock Plan*
Exhibit 31.1 - Certification of the Chief Executive Officer of York
International Corporation pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Exhibit 31.2 - Certification of the Chief Financial Officer of York
International Corporation pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Exhibit 32.1 - Certification of the Chief Executive Officer and
Chief Financial Officer of York International Corporation pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
* Submitted electronically herewith
(b) Reports on Form 8-K
28
Current Report on Form 8-K dated April 22, 2004, containing a press
release, dated April 22, 2004, setting forth our first quarter 2004
results (such press release is not incorporated by reference herein
or deemed "filed" within the meaning of Section 18 of the Securities
Act of 1933)
Current Report on Form 8-K dated May 4, 2004, containing a press
release, dated May 3, 2004, announcing the resignation of the Vice
President and President, York Asia Pacific
Current Report on Form 8-K dated May 4, 2004, containing a press
release, dated May 4, 2004, commenting on our 2004 expected
financial results (such press release is not incorporated by
reference herein or deemed "filed" within the meaning of Section 18
of the Securities Act of 1933)
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
YORK INTERNATIONAL CORPORATION
------------------------------
Registrant
Date August 4, 2004 /S/ M. David Kornblatt
------------------------------
M. David Kornblatt
Vice President and Chief Financial Officer
30
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Amended and restated Receivables Purchase Agreement dated as of May
17, 2004 among York Receivables Funding LLC, as seller, York
International Corporation, as initial servicer, Gotham Funding
Corporation, as a conduit purchaser, The Bank of Tokyo-Mitsubishi,
LTD., New York Branch, as agent for the Gotham Purchaser Group,
Liberty Street Funding Corp., as a conduit purchaser, The Bank of
Nova Scotia, as agent for the Liberty Street Purchaser Group, and
The Bank of Tokyo-Mitsubishi, LTD., New York Branch as
administrator*
10.1 York International Corporation Amended and Restated 2002 Incentive
Compensation Plan*
10.2 York International Corporation Amended and Restated 2002 Omnibus
Stock Plan*
31.1 Certification of the Chief Executive Officer of York International
Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 Certification of the Chief Financial Officer of York International
Corporation pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification of the Chief Executive Officer and Chief Financial
Officer of York International Corporation pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
* Submitted electronically herewith
31