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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER: 1-10863
YORK INTERNATIONAL CORPORATION
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3473472
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
631 SOUTH RICHLAND AVENUE, YORK, PA 17403
(717) 771-7890
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
COMMON STOCK, $.005 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO _____
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[_]
As of March 14, 1997, there were 43,475,318 shares of the registrant's Common
Stock outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was $1,967,258,139 based on the closing price of the Common Stock
on the New York Stock Exchange Composite Transactions of such date. (Only
officers and directors of the registrant are assumed to be affiliates for
purposes of this calculation.)
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Annual Report to Stockholders for the year ended December 31,
1996 and the Notice of Annual Meeting of Stockholders and Proxy Statement
pertaining to the Annual Meeting are incorporated herein by reference into Parts
II, III and IV.
Exhibit Index is located on pages 21 and 22.
YORK INTERNATIONAL CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 1996
INDEX
PART 1
ITEM
NUMBER PAGE
- ------ ----
1. Business 1
2. Properties 15
3. Legal Proceedings 15
4. Submission of Matters to a Vote of Security Holders 16
PART II
5. Market for Registrant's Common Equity 16
and Related Stockholder Matters
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants on Accounting 16
and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant 17
11. Executive Compensation 17
12. Security Ownership of Certain Beneficial Owners and Management 17
13. Certain Relationships and Related Transactions 17
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 17
PART I
ITEM 1. BUSINESS
GENERAL
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The Company is a full-line, global manufacturer of heating, ventilating, air
conditioning and refrigeration ("HVAC&R") products. The Company believes it is
the third largest manufacturer and marketer of such products in the United
States and one of the leading companies in the HVAC&R industry internationally.
The Company's air conditioning systems range from a one ton* unit for a small
residence to the 59,000 ton system installed in the New York World Trade Center.
In 1996 the Company's products were sold in over 100 countries through over 750
sales and distribution facilities and are in use in such diverse locations as
the Kuala Lumpur City Centre in Malaysia, the British Houses of Parliament, the
Tokyo World Trade Center, the Pentagon, NASA's Vehicle Assembly Building at Cape
Canaveral, NASA's Johnson Space Center, the Los Angeles International Airport,
the Jeddah Airport, the Overseas Union Bank Centre in Singapore, the Sydney
Opera House, the National Library Complex in Beijing, the Atlantic City
Convention Center, the English Channel Eurotunnel, the Hong Kong Exposition
Centre and the Lantau Airport Railway System in Hong Kong.
The Company was founded in 1874 in York, Pennsylvania. From 1956 until 1986 the
Company was a part of Borg-Warner Corporation ("Borg-Warner"). In 1986 it was
spun off to Borg-Warner shareholders and became an independent, publicly held
company. In 1988 the Company was purchased in a leveraged buyout by a
corporation organized by affiliates of Citicorp Investments Inc. ("CII") and two
investors (the "Acquisition"). In October 1991, the Company completed an initial
public offering of its Common Stock and in 1992 CII and the other non-management
investors in the Acquisition sold their remaining shares in a public offering.
Headquartered in York, Pennsylvania, the Company has manufacturing facilities in
12 states and 11 foreign countries. As of December 31, 1996, the Company
employed approximately 20,100 people worldwide.
Unless the context otherwise requires, the terms "Company" and "York" refer to
the Company and its consolidated subsidiaries. The Company's principal executive
offices are located at 631 South Richland Avenue, York, Pennsylvania 17403, and
its telephone number is (717) 771-7890.
PRODUCTS AND MARKETS
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All of the Company's products are in the heating, ventilating, air conditioning
and refrigeration (HVAC&R) industry and the Company operates solely in this
industry. Within HVAC&R, the Company's products fall into three general
categories. The first is commercial products, consisting of heating, air
conditioning and thermal storage equipment designed for commercial applications
in retail stores, office buildings, shopping malls, manufacturing facilities,
hospitals, universities, airports and marine vessels. Commercial products
include both engineered products, which vary in design and function according to
the customer's needs and applications, and large capacity residential products.
The second is residential products, consisting of air conditioning and furnace
units and hermetic and scroll compressors designed for use in residential
applications. Residential air conditioners and furnaces are often described as
unitary products because all of their components are housed as units in one or
two cabinets. The third is refrigeration products including commercial and
industrial refrigeration and gas compression equipment designed for the food,
beverage, chemical and petrochemical processing industries. Like engineered
products, the Company's refrigeration and gas compression equipment is designed
specifically for the customer's needs and applications.
________________
* The cooling capacity of air conditioning units is measured in tons. One ton
of cooling capacity is equivalent to 12,000 BTUs and is generally adequate to
air condition approximately 500 square feet of residential space.
1
The following table sets forth revenue by product and geographic market:
(in thousands)
1996 1995 1994
------------ ------------ ------------
Commercial products $1,478,133 $1,342,355 $1,157,071
Residential products 1,031,798 953,554 795,357
Refrigeration products 708,603 634,039 469,436
---------- ---------- ----------
Total revenue $3,218,534 $2,929,948 $2,421,864
========== ========== ==========
U.S. 54% 55% 56%
International 46% 45% 44%
---------- ---------- ----------
100% 100% 100%
========== ========== ==========
COMMERCIAL PRODUCTS. The Company's commercial products consist of heating and
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air conditioning and thermal storage equipment for commercial and other
buildings ranging from fast food restaurants to large industrial complexes.
Commercial air conditioning products include air-cooled and water-cooled
chillers, central air-handling units, variable air volume units and control
equipment to monitor and control the entire system. Commercial buildings such as
retail stores, shopping malls and light industrial manufacturing facilities use
split unit or roof-top units manufactured by the Residential Products Group.
These units employ hermetic compressors manufactured by the Company's Bristol
Compressor Subsidiary or other vendors. Larger units for facilities such as
hospitals, office towers, hotels, airports and manufacturing operations are
custom designed and manufactured by the Company's Applied Systems Division. The
Applied Systems Division also supplies specially designed chilled water systems
for use on U.S., British, French and other naval vessels. The Company is
currently the major supplier of water chillers to the U.S. Navy for both surface
vessels and submarines.
The Company markets its commercial products under the "YORK", "MILLER-PICKING",
"TEMPMASTER", "SEVESO", "BRISTOL", and "IMECO" brands. In the United States and
Canada, distribution of commercial equipment is coordinated by 9 regional
offices and approximately 56 district offices. These district offices market
products directly to end users and contractors. The Company has approximately
120 direct sales representatives and 40 independent sales agents in the North
American market. In addition, certain light commercial equipment is sold
through the residential distribution network.
In addition to revenues from new construction sales, the Company derives
substantial revenues by selling replacement equipment and parts, and by
providing routine maintenance and emergency service for products manufactured by
the Company and its competitors through annual service contracts. The Company
has a national account sales program to service customers with multiple
locations throughout the world.
The Company has introduced a new line of standard indoor air handling equipment
incorporating the latest technologies for indoor air quality. The Company
markets a line of customized indoor and outdoor air handling products as a
result of the September 1992 acquisition of the Miller-Picking Company. York
manufactures the broadest line of air handling equipment of any manufacturer in
the industry.
RESIDENTIAL PRODUCTS. The Company's primary residential products are one to
- --------------------
five ton split unit central air conditioning and heating systems manufactured
and sold by the Company's Residential Products Group ("UPG") and one to five ton
hermetic compressors manufactured and sold by Bristol. Revenues from Bristol
compressors were approximately $368 million, $381 million and $448 million
during 1994, 1995 and 1996, respectively, and for split unit systems were
approximately $311 million, $374 million and $485 million during 1994, 1995 and
1996, respectively. No other residential product accounted for 10% or more of
the Company's revenues for the periods presented.
A split unit system consists of an outdoor unit containing a compressor and
condenser, and a connected indoor unit containing a heat exchanger, an electric,
gas or oil heating section, an indoor blower system and associated controls. A
hermetic compressor is an integral part of the residential air conditioning
system. The Company's products use compressors manufactured by Bristol as well
as those purchased from other vendors. In 1994, approximately 84% and in 1995,
approximately 83%, and in 1996, approximately 82% of Bristol's revenues were
attributable to sales of products to other air conditioning equipment
manufacturers. During 1995, Bristol entered
2
into a joint venture, Scroll Technologies, to design and manufacture scroll
compressors. This allows Bristol to expand its product offering to include
scroll compressor capabilities.
The Company's 1995 acquisition of Evcon Holdings expands UPG's capabilities and
distribution network in the domestic residential market. Evcon's distribution
process is similar to UPG's and allows both organizations to expand product
offerings. Evcon sells residential systems under the "COLEMAN EVCON", "RED T",
"GUARDIAN" and "AIRPRO" brands. The Company also markets its residential
systems under the "YORK", "LUXAIRE", "FRASER-JOHNSTON", "MONCRIEF", "HOMEAIR"
and "SEVESO" brands. "YORK" is the Company's premium brand, which is sold
through 11 Company-owned distribution centers and 40 exclusive independent
distributors. The "YORK" brand is sold with a high level of customer service
and sales support. Other brands are sold through more than 200 non-exclusive
distributors primarily for resale to contractors. In 1995 and 1996,
respectively, the Company derived approximately 54% and 50% of its split unit
revenues from sales of "YORK" brand products.
Sales of residential systems and Bristol compressors include both new
installations and replacement systems. The Company believes that two recent
market trends have caused new installation sales to outperform the new home
construction market. The Company believes that the percentage of new homes
installing air conditioning systems has been increasing in recent years as air
conditioning has come to be considered by many to be a standard fixture in the
home. In addition, the trend to use multiple zones for maximum energy
efficiency has led to an increasing number of units per home. The Company
estimates that more than half of its residential revenues are attributable to
the replacement market. The replacement market is not affected by levels of new
home construction and therefore tends to be less cyclical. On the other hand,
the replacement market is significantly affected by temperatures. Hot spring
weather causes existing older units to fail earlier in the season, leading
customers to accelerate replacement of a unit which might otherwise be deferred
in the case of a late season failure.
All outdoor residential split system products have been redesigned to meet the
seasonal energy efficiency requirements (SEER) of the National Appliance Energy
Conservation Act of 1987, as amended, which was implemented on January 1, 1992.
The new products cover a wide range of efficiencies and may be able to qualify
for rebates offered by local utility companies for high efficiency equipment.
These new outdoor products will also operate at low sound levels to meet the
growing demand for quiet operation. Bristol markets an "Inertia" reciprocating
compressor that directly competes against other more expensive technologies in
meeting the energy efficiency requirements that were mandated in January 1992
and continues to upgrade the efficiency of the Inertia compressor. Scroll
Technologies continues to upgrade the scroll compressor technology and
performance.
REFRIGERATION PRODUCTS. Using patented improvements to Frick Division's
- ----------------------
licensed screw compressor technology, the Company has developed a successful
line of industrial and commercial refrigeration products. Screw compressors
enable the Company to produce a highly reliable, ammonia refrigeration system
required for commercial and industrial applications in the food, beverage,
chemical and petrochemical industries. The Company believes that screw
compressors are the most reliable and energy efficient compressors available for
ammonia refrigeration systems. Food processing equipment produced by the
Company includes spiral and tunnel freezers for York Food Systems' and
Northfield Freezing Systems' applications in the poultry, frozen vegetable and
prepared food businesses. In addition, the Company manufactures packaged
refrigeration systems to cool chemical and petrochemical products during their
production processes. The 1995 acquisition of Gram Refrigeration and Gram
Contractors provides similar capabilities in manufacturing in Europe and
increases distribution and the availability of advanced technology. The Gram
acquisition also makes available the reciprocating compressor for refrigeration
applications. The Company's refrigeration and gas compression equipment is
engineered and manufactured to customer specifications. The Company's revenues
from sales of refrigeration and gas compression products were $708.6 million and
$634 million in 1996 and 1995, respectively.
The Company markets its refrigeration and gas compression equipment under the
"YORK", "YORK FOOD SYSTEMS", "FRICK", "FRIGID COIL", "IMECO", "RECO", "RITE
COIL", "RECOLD", "NORTHFIELD", "ACUAIRE" and "GRAM REFRIGERATION" brands. The
products are sold by the Company's sales engineers located in 14 offices and a
national network of more than 40 independent agents in the United States and
nine offices and 20 independent distributors and two licensees elsewhere in the
world. In addition, the Company believes that developing third world countries
offer opportunities for increasing sales of refrigeration equipment.
Approximately 62% of the Company's annual production of these products are sold
in foreign markets.
3
The Company's Food Systems Group develops commercial food freezing and
processing machinery in the domestic and international markets. Customers of
this group include Tyson Foods, H. J. Heinz, Cargill, Unilever and Nestle.
Installations have been completed in Russia, Poland, China, Western Europe,
North America, Australia, India, New Zealand and Africa. The Food Systems Group
pulls through sales of refrigeration products from the refrigeration products
group.
The Company's new products in this area include smaller capacity packaged
commercial freezing machines down-sized to meet the needs of the developing new
markets, and a growing capability to design and deliver turn-key food processing
lines which include a broad spectrum of York products.
AFTERMARKET The Company believes its reputation for service and repair is
- -----------
excellent. The Company's more than 3500 service technicians in offices
throughout the world generate substantial revenues through the sale of
replacement parts and by providing routine and emergency service for air
conditioning and refrigeration systems manufactured by the Company and its
competitors. In 1996 on a worldwide basis, the higher margin service, repair
and replacement business accounted for an estimated 49% of the Company's total
sales. The Company believes that its emphasis on service and repair, combined
with the growth in and aging of the installed base of air conditioning and
refrigeration equipment, have been key factors in increasing the percentage of
the Company's revenues derived from the service, repair and replacement market.
INTERNATIONAL. The Company's International operations manufacture and market
-------------
a complete line of residential and commercial air conditioning equipment,
refrigeration equipment and compressors. The Company exports products
manufactured in the U.S. and manufactures products in the United Kingdom, Italy,
Australia, Denmark, France, Germany, Uruguay, and Mexico and through joint
ventures located in Colombia, Egypt, Thailand, Spain, China, and Malaysia.
The Company manufactures commercial air conditioning equipment in England.
These products are marketed primarily in Europe, the Middle East, and the Asia
Pacific Region. York fabricates refrigeration equipment in France, Germany, and
Denmark. Equipment manufactured in France and Germany is sold primarily in
Europe, whereas the Denmark facility produces products sold throughout the
world. York also designs and sells snow making systems worldwide through York
Neige based in France. York Neige has installed snow making equipment on the
sites of the 1992 Winter Olympics in France and the 1994 Winter Olympics in
Norway, as well as in over 100 ski resorts throughout Europe and North America.
York produces residential and commercial air conditioning equipment near Milan,
Italy, for distribution within Italy and through York sales offices worldwide.
Additional sales and service companies are located in Austria, Switzerland,
Bulgaria, Russia, other former CIS countries, the Czech Republic, Hungary,
Poland, Slovakia and Romania. The Company's European operations have supplied
equipment for such locations as the Kremlin, Pompidou Center in Paris, La Scala
Opera House in Milan, English Channel Eurotunnel and Frankfurt Airport.
The Company markets its equipment and service in the Middle East and India
through offices in Dubai, Abu Dhabi, Kuwait, Istanbul, New Delhi, Mumbai, Cairo,
Karachi, and through numerous distributors throughout the region. The Company
has sales and service joint ventures throughout the Kingdom of Saudi Arabia.
The Company's ability to manufacture large tonnage air-cooled air conditioning
equipment capable of operating under extreme conditions has resulted in winning
a substantial number of large contracts in the water short Middle East. The
Company has installed systems throughout the region, including equipment in the
Jeddah Airport, Prophet's Mosque in Medina, U.S. Embassy in New Delhi, Cairo
Airport, Abu Dhabi National Oil Company, stock exchanges in Kuwait and Istanbul,
and numerous office and hotel installations.
The Company markets and services its products in the Pacific Rim region through
offices in Hong Kong, China (7 offices), Singapore, Korea, Australia, Indonesia,
and Thailand, joint ventures in Taiwan and Malaysia, and various distributors
throughout the region. The Company manufactures products through joint ventures
in China, Thailand, and Malaysia, and wholly owned facilities in Australia. The
Company has installed systems throughout the region, including equipment in the
Shanghai Opera House, Shenzhen Railway Station, Hong Kong Exposition Centre,
Overseas Union Bank Centre in Singapore, Grand Hotel in Taipei, Sydney Opera
House, and the Kuala Lumpur City Centre in Malaysia, the world's tallest
building.
Sales through Latin America are handled through offices in Mexico, Argentina,
Brazil, Chile, Colombia, Miami, (USA), Puerto Rico, Argentina and Venezuela,
sales representatives and independent distributors located throughout Latin
America. In Brazil, products are marketed through a recently formed joint
venture. The
4
Company has two manufacturing facilities in Mexico producing both residential
and commercial air conditioning equipment for domestic sale and export. A
manufacturing facility in Uruguay provides the Company with commercial air
conditioning and refrigeration products to support sales in the Mercosur trading
countries. The Company also operates a small manufacturing facility in Bogota,
Colombia that produces unitary products and fan coil units. Installations
include World Trade Centers in Mexico, Colombia, and Chile, Sao Market Place in
Brazil, Mexican Stock Exchange, and Hotel Intercontinental in Argentina.
STRATEGY
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The Company's strategy is to continue to focus on the global air conditioning
equipment and worldwide service, repair and replacement markets and increase its
presence in the worldwide refrigeration and gas compression market,
complementing its sales in the domestic residential and commercial new
construction markets. The Company has grown, and expects to continue to grow,
through expansion of its current product lines, acquisitions of businesses,
establishment of joint ventures and licensing of technology in the HVAC&R
industry.
The Company intends to continue its strategy of increasing its market share by
broadening its product range to offer a complete line of environmentally
acceptable and energy efficient products. The Company seeks to take advantage
of regulatory changes by developing products that comply with tightening
environmental and energy efficiency requirements and regulations before they
become effective. The Company has implemented its environmental strategy by
developing product lines that utilize its screw, centrifugal, reciprocating,
hermetic and inertia compressor technology employing HCFC-123, HCFC-22, R-407C,
R-410A, R-404A, R-507, R-717 (ammonia) and HFC-134a as a refrigerant. The screw
and centrifugal compressor utilize designs which separate the refrigerant from
the motor housing. See "Environmental Matters" below. The Company has
increased the overall efficiency of its product offerings by employing
internally developed advanced heat transfer and compressor technology and
introducing large air conditioning systems that utilize advanced thermal storage
and absorption technologies.
The Company is also seeking to expand into new markets. The Company intends to
expand its sales of residential equipment throughout the international markets
by broadening its product line, expanding its distribution capabilities and
pursuing acquisitions.
The Company also focuses on controlling manufacturing and operating expenses and
thus improving its operating margins by redesigning products, acquiring more
efficient manufacturing equipment and processes and reducing costs not directly
associated with the manufacturing process. In addition, the Company has
implemented a continuous planning process to enable it to carefully monitor the
amount of capital used in its business and to reposition its business units in
light of changing conditions throughout the year. The Company believes that its
management stock ownership plans and management incentive compensation plan,
which rewards the management team of each operating unit for achieving the
planned objectives of that unit, have been key elements in implementing its
strategies and achieving its financial objectives.
ACQUISITIONS
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On December 31, 1996, the Company acquired assets of SNOMAX located in
Rochester, New York. Snomax develops, manufacturers and sells ice-nucleating
molecules which are catalysts in the snow making process.
On December 30, 1996, the Company formed a joint venture with a partner in Wuxi
of the People's Republic of China (P.R.C.) for the manufacture of certain
commercial air conditioning products in the P.R.C.
On October 31, 1996, the Company acquired the assets of Natkin Service Company
(Natkin) located in Denver, Colorado. Natkin is a HVAC service company which
complements the Company's current commercial service business in the U.S. The
addition of Natkin expands the Company's service capabilities primarily in the
Southwestern U.S.
On July 31, 1996, the Company acquired all of the outstanding shares of
Northfield Equipment and Manufacturing Company (NEMCO) located in Northfield,
Minnesota. NEMCO designs and manufacturers food processing freezing equipment.
5
On July 29, 1995, the Company acquired the outstanding shares of Northfield
Freezing Systems, Inc. (NFS), located in Northfield, Minnesota. NFS develops,
designs, sells and services food processing freezing equipment.
On July 5, 1995, the Company and a Thai partner formed a manufacturing joint
venture in Thailand. The Company has a 67% interest in this joint venture which
acquired the operating assets of the partner's existing facility. The venture
produces residential air conditioning products for distribution primarily in
markets outside of North America.
On May 31, 1995, the Company acquired two divisions of Gram A/S, Gram
Refrigeration and Gram Contractors, headquartered in Vojens, Denmark (Gram
Divisions). The Gram divisions develop, manufacture, sell and service
components for industrial refrigeration worldwide. Gram's principal product
offering includes screw and reciprocating compressors, plate freezers, flake ice
machines and refrigerant valves. Gram Contractors installs Gram equipment and
components in Denmark. The addition of these two divisions has expanded the
Company's presence in the global industrial refrigeration market and provides
additional manufacturing capacity and engineering expertise to the Company's
screw compressor and industrial refrigeration product lines.
On May 25, 1995, the Company purchased an additional 20% interest in Taiwan-YORK
Company, Inc. raising the Company's ownership from 40% to 60%. As a result, the
Company has a controlling interest in this joint venture which sells and
services HVAC&R equipment in the Republic of China (Taiwan).
On May 3, 1995, Bristol Compressors, Inc., a subsidiary of York International
Corporation, formed a partnership to operate a new joint venture for the
development and production of scroll compressors. The joint venture, called
Scroll Technologies, owns and operates a scroll compressor plant. The Company
believes that this venture is beneficial to both companies because it combines
scroll technology developed by the partner and the manufacturing expertise of
Bristol. Each Company markets the product produced by the venture through its
own independent distribution channels.
On April 19, 1995, the Company formed a joint venture with a partner in the
People's Republic of China ("P.R.C.") for the manufacture of certain commercial
air conditioning products in the P.R.C.
On March 1, 1995, the Company acquired all of the capital stock of Evcon
Holdings, Inc. (Evcon), a Delaware corporation. In connection with the
transaction, Evcon's outstanding bank indebtness was repaid, and its temporary
capital (comprised of preferred stock and warrants) was repurchased and
cancelled, out of the purchase price. The Company financed the acquisition
through existing credit commitments. Evcon designs, manufactures and supplies
air conditioning, heating and air handling equipment for the residential,
manufactured housing and light commercial markets. Evcon is based in Wichita,
Kansas and maintains manufacturing facilities there. The cost of the
acquisition was allocated on the basis of estimated fair values. This
allocation resulted in approximately $98.7 million of cost in excess of net
assets acquired. Such excess is being amortized on a straight-line basis over
forty years. Evcon's results of operations have been included in the Company's
consolidated results of operations since the acquisition date.
The unaudited consolidated results of operations of the Company for 1995 and
1994 on a pro forma basis assuming Evcon was acquired as of the beginning of the
respective periods are as follows (in thousands, except per share data):
6
Year ended December 31,
-----------------------
1995 1994
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Net sales $2,950,249 $2,602,789
Net income (loss) $ (96,315) $ 93,876
Earnings (loss) per share $ (2.37) $ 2.51
In January 1995, the Company acquired the assets of Mining and Industrial Air
Conditioning (Pty) Ltd. ("MIAC"), based in Johannesburg, South Africa. MIAC is
a design engineering, supplier and service company to the mining and process
refrigeration industries, as well as a supplier to air conditioning contractors.
The Company also acquired a 50% interest in a joint venture with Compania Roca
Radiadores S.A., located in Sabadell, Spain and known as Clima Roca York
("Roca"). Roca manufactures residential and commercial air conditioning
products in Spain and distributes air conditioning products throughout Western
Europe.
During the first quarter of 1994, the Company's wholly-owned Italian subsidiary
acquired certain assets of Seveso Clima SpA (Seveso), an Italian corporation.
Seveso, based in Barlassina, Italy, designs, manufactures and supplies air
conditioning, heating and air-handling equipment to the commercial and
residential markets throughout Europe. Seveso's principal product offerings
include air cooled and water cooled chillers and heat pumps, fan coils, air
handling units, portable air conditioners and commercial and residential split
systems. Also during 1994, the Company acquired a 40,000 square foot
manufacturing facility in Bogota, Colombia, which produces unitary air
conditioners and fan coils. Also acquired during 1994 was a line of energy-
efficient thermal transfer products from Rite Coils, Inc. The manufacturing
line for this product was moved to the manufacturing facility in Polo, Illinois.
Except for the acquisition of Holdings, as to which proforma information is set
forth above, the effect on the Company's results of operations and financial
position of the acquisitions and investments described in the preceding
paragraphs is not significant.
MANUFACTURING
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Residential and light commercial products up to 100 tons, often called unitary
products, are manufactured principally in plants located in Elyria, Ohio;
Norman, Oklahoma; Wichita, Kansas; Barlassina, Italy; Bogota, Colombia;
Monterrey, Mexico; Perth, Australia, Coffs Harbor, Australia; and Bangkok,
Thailand. The Company's manufacturing process relies on the purchase of certain
components (including hermetic compressors, copper tube, fan motors, fan blades
and control elements) from outside suppliers, and in-house fabrication of sheet
metal cabinets and refrigerant coils. The various unitary products are then
assembled and tested before shipment. Bristol compressors are manufactured at
the Company's factories in Bristol, Virginia and Sparta, North Carolina, and by
Scroll Technologies in Arkadelphia, Arkansas. As with other Company products,
Bristol compressors are assembled using purchased parts (including motors,
castings, forgings and electronic components) as well as parts manufactured by
the Company. Bristol built the manufacturing assembly plant in Sparta, North
Carolina during 1994 and started production in the first quarter of 1995. The
Scroll Technologies joint venture was established in 1995.
The Company's commercial products, which range from 50 to 8,500 tons, often
called engineered air conditioning products, are principally manufactured in the
United States in York, Pennsylvania as well as Albany, Missouri; Hattiesburg,
Mississippi; and San Antonio, Texas. Additional manufacturing facilities are
located in the United Kingdom, Italy, France, Germany, Australia, Uruguay, China
and Mexico.
Many of the components of the Company's engineered products, such as motors,
control elements and castings, are purchased from outside suppliers. The other
components are custom manufactured by the Company. Using these components and
custom-designed specifications, the engineered products are machined, assembled,
tested, shipped and installed. Following installation, the Company assists in
the start-up of the system, and supplies ongoing maintenance, service and
replacement parts.
7
Refrigeration equipment is manufactured at Company-owned facilities in Dixon,
Illinois; Polo, Illinois; Waynesboro, Pennsylvania; Northfield, Minnesota;
Smithville, Ohio; San Antonio, Texas and Denmark, and at a leased facility in
Santa Fe Springs, California, with additional facilities in the Company's plants
in France, Germany and Mexico.
RAW MATERIALS AND PURCHASED COMPONENTS
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The Company purchases compressors, steel, copper, aluminum, electric motors,
castings, forgings, stampings, fabricated copper tubes, electronic starters and
controls, aluminum fin, fan blades, capacitors, transformers, refrigerant gases,
valves, fittings and other components from many outside suppliers. Alternate
sources of supply are available for all raw materials and components for which
the Company uses a single supplier. The Company believes that it has adequate
sources of supplies of raw materials and component parts for its manufacturing
requirements. In order to hedge against certain raw material price increases,
from time to time the Company enters into forward contracts for the purchase of
certain raw materials, principally copper and aluminum.
JOINT VENTURES IN FOREIGN MARKETS
- ---------------------------------
In addition to its wholly-owned domestic and European production and
distribution facilities, the Company produces, distributes and services
residential and commercial products in foreign markets through its participation
in several foreign joint ventures, which are described in the following table:
Joint Venture
(Percent Owned by Principal
Principal Location Joint Venture Partner the Company) Products/Services Markets Served
- ------------------ --------------------- ---------------------------- ----------------------- --------------
Egypt Publicly held Egyptian Miraco (15%) Manufacture residential Egypt
Corporation and light commercial
equipment
Malaysia OYL Industries OYL-Condair Industries Manufacture residential Asia Pacific
BHD. SDN.BHD. (49%) and light commercial Middle East
equipment
Malaysia OYL Industries York (Malaysia) Service Sales and service of air Malaysia
BHD. SDN.BHD. (30%) conditioning equipment
Thailand Individual Thai Aeromaster Industry Manufacture residential Asia Pacific
Shareholders Co. Ltd. (67%) equipment Europe
Peoples Republic Guangzhou Sinro Air York Ghuangzhou Air Manufacture light China
of China Conditioning Mechanical Conditioning and commercial equipment
and Electrical Equipment Refrigeration Co. Ltd.
Company Ltd. (80%)
Republic of China Taipei Engineering York Taiwan Company, Inc. Service and repair of air Taiwan
(Taiwan) Taiwan York Service Co. (60%) conditioning equipment
Spain Compania Roca Clima Roca-York S.L. Manufacture residential Spain
Radiadores S.A. (50%) equipment
Cyprus Sabinco Ltd. KROY Ltd. (50%) Sales of air conditioning Middle East
equipment and parts
Colombia Inversiones Lopez York International S.A. Manufacture light Colombia
Imbett y cias en. cia (Colombia) (67%) commercial equipment
Peoples Republic Wuxi Boiler Group York-Wuxi Air Conditioning Manufacture commercial China
of China and Refrigeration Co. Ltd. equipment
(80%)
8
Brazil Mayside Participacues York International Sales of air conditioning Brazil
Administracao e Commercial Ltda. equipment
Comercio Ltda (80%)
Saudi Arabia Al Salem United Al Salem-York Services Service and repair of Saudi Arabia
Contracting Co. Ltd. (49%) air conditioning
equipment
Dividends received by the Company from foreign joint ventures were $1.0 million
in 1994, $0.6 million in 1995 and $1.5 million in 1996. Total Company
investments in foreign joint ventures were $6.4 million, $16.7 million and $22.2
million at December 31, 1994, 1995 and 1996, respectively. Total sales by the
Company to foreign joint ventures are less than 1% of the Company's total
revenues.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company's ongoing research and development program involves redesigning
existing products to reduce manufacturing costs and to increase product
efficiencies, developing electronic controls for existing products and creating
new products. During the years 1994, 1995 and 1996, the Company spent $22.6
million, $26.9 million and $28.0 million, respectively, for all product
development activities.
Product development activities in 1995 and 1996 encompassed a wide range of
products. The Company's centrifugal chiller line was expanded for use with
HCFC-22, R-407C, R-410A and HFC-134a, all considered environmentally acceptable
replacements for CFC's. The Company also offers screw compressors which use
R-717 (ammonia). The product line now extends from 300 to 2,000 tons for these
refrigerants. The Company also completed development of a new custom air
handling product line in the range of 2,000 to 50,000 cubic feet per minute
(CFM). The new products include the latest technologies to insure indoor air
quality. The combination of air handling product development and existing
product lines gives York the broadest line of air handling products of any
single manufacturer in the industry. The Company announced a new line of
centrifugal chillers ranging from 400 to 2,000 tons, incorporating natural gas
engine drives supplied by Caterpillar Inc. The product line boasts the highest
efficiency of any gas-powered air conditioning system on the market.
Development of a prototype twin-screw chiller for surface vessels continued
under a U.S. Navy contract. This chiller, targeted for introduction in the
fleet in 1997, will employ refrigerant HFC-134a to allow the Navy to begin its
transition away from the use of CFC refrigerants. In 1995 the Company
introduced more efficient centrifugal chillers utilizing HCFC-123, HCFC-22 and
HFC-134a. The efficiency levels of .50 to .52 kw/ton are expected to be one of
the best in the industry. The Company will also introduce a new line of
variable speed drives for centrifugal chillers to 600 tons. This product will
be compact enough to mount directly on the chiller and will be applicable to the
retrofitting of any centrifugal chiller on the market and almost all existing
machines regardless of refrigerant or manufacturer.
In 1994, the Company introduced a natural gas fueled heat pump split system
marketed under the trademark "TRIATHLON". Research and development for this
product was subsidized by the Gas Research Institute which is also cooperating
with the Company in its marketing and sales initiatives. In early 1995, 16 SEER
ultra-efficiency split systems were also introduced.
Bristol developed its 1.5 - 5 ton "Inertia" reciprocating compressor and put it
into production in 1991. Bristol continues to improve on the efficiency level
of the "Inertia" and a higher efficiency version was developed and put into
production during 1994. The "Inertia" compressor is being sold in the
residential equipment market for high energy efficiency air conditioning and
heat pump applications. It is also sold in the light commercial air
conditioning market. Scroll compressor technology and capability are expanding
through the joint venture in 1995.
COMPETITION
- -----------
All of the markets in which the Company does business are extremely competitive.
Participants compete on the basis of service and the price, quality, reliability
and efficiency of products. Several of the Company's competitors have greater
financial resources than the Company.
9
In the domestic market for commercial air conditioning equipment, the Company
competes primarily with two large United States manufacturers, Carrier
Corporation, a subsidiary of United Technologies Corporation, and Trane Company,
a division of American Standard Inc. Commercial product manufacturers compete
on the basis of product design, reliability and post-installment service.
Architects and engineers play an important part in determining which
manufacturer's products will be used in an application.
In the residential products market, the Company competes with numerous national
and regional manufacturers. In this market, price competition and maximum
market coverage are particularly important, as there is relatively little
perceived differentiation among competing product lines.
In the hermetic compressors market, the Company competes directly with two
United States manufacturers, Copeland Corporation, a subsidiary of Emerson
Electric Inc., and Tecumseh, a division of Tecumseh Corporation. In this
market, the Company competes primarily on the basis of reliability and price as
well as delivery, service and product efficiency.
In the domestic market for engineered refrigeration equipment, the Company
competes primarily with FES, BAC, Evapco and Krack Corp. In international
markets for air conditioning equipment, the Company competes primarily with
Carrier Corporation, Trane Company and several Japanese manufacturers, including
Matsushita, Hitachi, Mitsubishi Electric and Toshiba.
PATENTS AND TRADEMARKS
- ----------------------
The Company holds numerous patents that relate to the design and use of its
products that it considers important, but not essential, to the overall conduct
of its business. It is the Company's policy to obtain patent protection for as
many of its new and developmental products as possible, and to enforce such
patent rights as appropriate. No patents which the Company considers material
will expire within the next five years.
The Company owns several trademarks that it considers important in the marketing
of its products, including "YORK". "LUXAIRE", "FRASER-JOHNSTON", "MONCRIEF",
"HOMEAIR", "RECOLD", "FRICK", "FRIGID COIL", "BRISTOL", "IMECO", "MILLER
PICKING", "RECO", "COLEMAN(R) EVCON", "AIRPRO", "RED-T", "YORK FOOD SYSTEMS",
"RITE COIL", "NORTHFIELD FREEZING SYSTEMS", "SEVESO", "GRAM", "AEROMASTER" and
"TEMPMASTER". The Company believes that its rights in these trademarks are
adequately protected and of unlimited duration.
MAJOR CUSTOMERS
- ---------------
During 1996, no customer, distributor, dealer or licensee accounted for more
than 10% of the Company's revenues. The loss of a few customers, distributors,
dealers or licensees would not have a materially adverse effect on the Company's
business.
BACKLOG
- -------
As of December 31, 1996, the Company's backlog was $845.1 million as compared to
$898.6 million as of December 31, 1995. Substantially all of the orders are
expected to be fulfilled within the next 12 months.
GOVERNMENT CONTRACTS
- --------------------
In 1996, approximately 1% of the Company's sales were related to ongoing United
States Government projects. The Company expects that substantially all work
will be completed during fiscal year 1997 in connection with all of these
contracts. The Company's existing contracts with the United States Government
may be terminated at any time at the option of the Government and are subject to
continued availability of government appropriations. If these contracts were
terminated, the Company would only be entitled to reimbursement of costs
incurred and to payment of a reasonable allowance for profit on work actually
performed.
10
EMPLOYEES
- ---------
As of December 31, 1996, the Company employed approximately 20,100 persons
worldwide. Approximately 12,600 persons are employed in the United States and
7,500 persons are employed in foreign countries. Approximately 4,700 domestic
employees are covered by collective bargaining agreements which expire between
January 31, 1997 and October 31, 2002. The Company considers its relations with
its employees to be satisfactory.
ENVIRONMENTAL MATTERS
- ---------------------
Environmental laws that affect or could affect the Company's domestic operations
include, among others, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Occupational Safety and Health Act, the
National Environmental Policy Act, the Toxic Substances Control Act, any
regulations promulgated under these acts, and various other Federal, state and
local laws and regulations governing environmental matters. The Company
believes it is in substantial compliance with such existing environmental laws
and regulations.
The Company's foreign operations are also subject to various environmental
statutes and regulations. Generally, these requirements tend to be no more
restrictive than those in effect in the United States. The Company believes it
is in substantial compliance with such existing environmental statutes and
regulations. In 1993, the Council of European Communities agreed on EC
regulation number 1836/93 which recommended that each company voluntarily
complete an ECO-Audit. The Company has completed these audits at several of its
European facilities.
In September 1987, the United States became a signatory to an international
agreement titled the Montreal Protocol on Substances that Deplete the Ozone
Layer (the "Montreal Protocol"). The Montreal Protocol requires its signatories
to reduce production and consumption of CFCs and Halons, some of which are
utilized in air conditioning and refrigeration equipment. In 1988, the EPA
issued regulations under the Clean Air Act implementing the Montreal Protocol in
the United States. Many other countries have also become signatories to the
Montreal Protocol. The manner in which these countries implement the Montreal
Protocol and regulate CFCs could differ from the approach taken in the United
States.
The 1990 Clean Air Act amendments implement the Montreal Protocol by
establishing a program for limiting the production, importation and use of
certain ozone depleting chemicals (including those governed by the Montreal
Protocol) some of which are refrigerants currently used by the Company. Under
the Act, the production and consumption of the refrigerants designated as "Class
I substances" including all CFCs must be phased out beginning in 1991 and are to
be banned completely by 2000. Certain other refrigerants, including all HCFCs,
are designated as "Class II substances", and must be phased out between 2015 and
2030.
The Clean Air Act allows the EPA to accelerate the statutory phase-out schedule
for any Class I or Class II substance. In November 1992, the parties to the
Montreal Protocol agreed to amend the Protocol to require the complete phase-out
of CFC production by the beginning of 1996. Further, the parties agreed to a
1996 production cap on HCFCs and a complete phase-out of HCFC production by
2030. The EPA has published a final rule requiring accelerated phase-out of all
CFCs by 1996 and of all HCFCs by 2030.
None of the Company's manufactured products uses Class I substances. Class I
substances previously used by the Company have been substituted for by Class II
substances or substances that are currently unregulated. The Company does,
however, believe that revenues from servicing and repairing existing equipment
that uses Class I substances are and will be significant. These activities are
regulated by the EPA which imposes guidelines affecting service and maintenance
of equipment that uses Class I and Class II substances. The Company trains its
service technicians in service and maintenance procedures that comply with the
new regulations. Therefore, the Company believes that the new regulations will
not have a material adverse effect on its operations. The phase-out of Class I
substances will require modifications to existing air conditioning equipment as
availability of recycled Class I substances decreases. Since the Company's
technology enables it to modify existing equipment for use with Class II
substances, it believes that this will continue to generate additional service
revenues. While the Company expects to derive substantial revenue from the sale
of products utilizing Class II substances, it is not expected that any phase-out
will have a significant impact on the sales of such products prior to the end of
the
11
decade. Nonetheless, as the supply of virgin and recycled Class II substances
falls, it will be necessary to address the need to substitute permitted
substances for Class II substances.
The Company, in conjunction with major chemical manufacturers, is continually in
the process of reviewing and addressing the impact of refrigerant regulations on
its products. The Company believes that the combination of those products which
presently utilize Class II substances and those products in the field which can
be retrofitted to such refrigerants provides a complete line of commercial and
industrial products. Therefore, the Company does not foresee any material
adverse impact on its business or competitive position as a result of the
Montreal Protocol, the 1990 Clean Air Act amendments or their implementing
regulations. However, the Company believes that the implementation of severe
restrictions on the production, importation or use of refrigerants employed in
larger quantities by the Company could have such an impact. The Company believes
that the commercial products that it has produced will be well positioned to
utilize the next generation of refrigerants without substantial modification.
If the next generation of refrigerants is incompatible with the hermetic
compressors used by the Company and all of its competitors for residential and
light commercial products, design modifications would be required.
GOVERNMENTAL REGULATIONS
- ------------------------
The Company is subject to regulations promulgated under the National Appliance
Energy Conservation Act of 1987, as amended, and various state regulations
concerning the energy efficiency of its products. The Company has developed and
is developing products which will comply with these regulations, and does not
believe that such regulations will have a material adverse effect on its
business.
12
EXECUTIVE OFFICERS
- ------------------
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Robert N. Pokelwaldt 60 Chairman of the Board of Directors,
President and Chief Executive Officer
Scott J. Boxer 46 Vice President, and President of Unitary
Products Group
Joseph D. Smith 43 Vice President, and President of Airside
Products Group
Peter J. Spellar 52 Vice President, and President of Applied
Systems
Thomas D. Washburne, Jr. 42 Vice President, and President of
International Business Group
Michael R. Young 52 Vice President, and President of Bristol
Compressors
Jane G. Davis 47 Vice President, Secretary and General
Counsel
Dean T. DuCray 56 Vice President and Chief Financial Officer
Wayne J. Kennedy 54 Vice President, Human Resources
Victor R. McCloskey 54 Vice President, Corporate Development
James P. Corcoran 51 Treasurer
C. David Myers 33 Controller
Mr. Pokelwaldt has been Chairman of the Company since January 1993. Prior
thereto he was President, Chief Executive Officer and Director of the Company
since June 1991, President and Chief Operating Officer from January 1990 to June
1991, Vice President of the Company and President of Applied Systems Worldwide
from September 1988 to January 1990 and Chairman and Chief Executive Officer of
Frick Company from June 1983 to September 1988.
Mr. Boxer has been Vice President of the Company and President of Unitary
Products Group since September 1992. Prior thereto he was Managing Director of
York International, Ltd. from March 1984 to September 1992. Mr. Boxer joined
the Company in 1972 and previously has held various senior manufacturing
positions with the Company.
Mr. Smith has been Vice President of the Company and General Manager of Airside
Products Group since October 1994. Prior thereto he was Vice President of
Special Projects of the Company from May 1994 to October 1994. Prior to joining
the Company, Mr. Smith was Vice President and General Manager of Spherical
Roller Bearing Division of SKF USA, Inc. since May 1992. Previous to this, Mr.
Smith held various positions with Harley Davidson and General Motors.
13
Mr. Spellar has been Vice President of the Company and President, Applied
Systems Worldwide since November 1995. Prior thereto, he was Vice President of
the Company and Vice President, European Operations from August 1992 to November
1995, President, Frick Division from May 1987 to August 1992 and President of
the Frick Company from May 1979 to May 1987.
Mr. Washburne has been Vice President of the Company and President of the
International Business Group since April 1994. Prior thereto, he was Vice
President of the Company and General Counsel of the Company from August 1992 to
April 1994. From January 1989 until joining the Company in 1992, Mr. Washburne
was a partner in the law firm of Venable, Baetjer and Howard and an associate at
such firm from 1984 until 1989.
Mr. Young has been Vice President of the Company, and Chief Executive Officer
and President of Bristol Compressors since October 1996. Prior thereto, he was
President, Chairman and Chief Executive Officer of Evcon Industries, Inc. from
1991-1995, President and Chief Operating Officer of York International Inc. from
1988-1989, and Chairman, President and Chief Executive Officer of Bristol
Compressors from 1983 to 1987.
Ms. Davis has been Vice President, Secretary and General Counsel of the Company
since March 1995. Prior thereto, she was Vice President, General Counsel and
Secretary of Joy Technologies Inc. from September 1988 to February 1995.
Mr. DuCray has been Vice President and Chief Financial Officer of the Company
since January 1987. Prior to joining the Company he was President and Chief
Executive Officer of Technical Oil Tool Corporation, a wholly-owned subsidiary
of Baker International Corporation, from July 1976 to January 1987.
Mr. Kennedy has been Vice President, Human Resources, of the Company since May
1993. Prior thereto he was the Vice President of Human Resources for the
Millipore Corporation from 1985 to 1993. Prior to that he was an independent
consultant focusing upon Executive Development and Labor Relations.
Mr. McCloskey has been Vice President, Corporate Development Worldwide since
November 1995. Prior thereto, he was Vice President of the Company and General
Manager of Applied Systems Division since February 1993. Prior thereto, he was
Vice President Sales and Marketing of Applied Systems North America from April
1984 to January 1993. Mr. McCloskey joined the Company in 1966 and has held
various sales and marketing positions with the Company.
Mr. Corcoran has been Treasurer of the Company since July 1992. Prior thereto
he was Treasurer of Griffith Laboratories from August 1990 to May 1992,
Treasurer of AM International from March 1987 to August 1990 and Director,
Treasury Operations of Borg-Warner Corporation from February 1977 to March 1987.
Mr. Myers has been Controller since July 1995. Prior thereto, he was Director
of Financial Planning and Controls from March 1994 to December 1994 and Director
of Finance, Airside Products Group to July 1995. Prior to joining the Company
in 1994, he was a Senior Manager and on the professional staff with the
accounting firm of KPMG Peat Marwick LLP from August 1986 to March 1994.
14
ITEM 2. PROPERTIES
The Company's principal offices are located in York, Pennsylvania on an
approximately 71 acre site owned by the Company. The following table lists the
principal manufacturing facilities owned by the Company:
APPROXIMATE
LOCATION PRIMARY PRODUCTS ENCLOSED AREA (SQ. FT.)
- -------- ---------------- -----------------------
York, PA Engineered products 1,500,000
Wichita, KS Unitary products 835,000
Elyria, OH Unitary products 636,000
Norman, OK Unitary products 549,000
Bristol, VA Hermetic compressors 520,000
Waynesboro, PA Industrial refrigeration products and compressors 400,000
Basildon, England Air and water cooled chillers for engineered products 370,000
Sparta, NC Hermetic compressors 180,000
San Antonio, TX Industrial refrigeration and engineered products 136,000
Durango, Mexico Engineered products 116,000
Vojens, Denmark Industrial refrigeration products and compressors 111,000
Sydney, Australia Engineered products 102,000
Monterrey, Mexico Engineered products, Unitary products 102,000
Bangkok, Thailand Unitary products 94,000
Carquefou, France Heat exchangers and compressors 92,000
Polo, IL Evaporative cooling products 78,000
Roanoke, VA Screw compressors 72,000
Dixon, IL Evaporative cooling products 62,000
Smithville, OH Freezer systems 44,000
Northfield, MN Freezer systems 44,000
Bogota, Colombia Unitary products and fan coils 40,000
Montevideo, Uruguay Air handling equipment 22,000
At the York, Pennsylvania location, approximately 220,000 square feet of
facilities are leased to tenants and approximately 100,000 square feet are
neither currently used by the Company nor leased to third parties. The Company
also leases for its own use a 163,000 square foot facility in Albany, Missouri ,
a 230,000 square foot manufacturing facility in Barlassina, Italy, a 60,000
square foot manufacturing facility in Mannheim, Germany, a 126,000 square foot
manufacturing facility in Perth, Australia, a 189,000 square foot manufacturing
facility in Houston, Texas, an 82,000 square foot facility in Santa Fe Springs,
California and an 84,000 square foot manufacturing facility in Hattiesburg,
Mississippi.
In addition to the properties described above, the Company leases approximately
95 facilities in the United States and over 40 additional facilities worldwide
for use as sales and service offices and regional warehouses. The Company
believes that its properties are in good condition and adequate for its
requirements. The Company believes that its principal plants are generally
adequate to meet its production plans pursuant to its long-term sales goals.
In the ordinary course of its business, the Company monitors the condition of
its facilities to ensure that they remain adequate to meet its long-term sales
goals and production plans. The Company makes capital expenditures intended to
upgrade existing facilities and equipment to increase production efficiency and,
when appropriate, to adapt them to the requirements of manufacturing new product
lines.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to lawsuits arising from time to time in the ordinary
course of business. The Company believes that no pending lawsuit will result in
any material adverse effect to the Company.
15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the Company's security holders during the
fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the New York Stock Exchange under the
symbol "YRK". On March 14, 1997, the Company had 4,657 holders of record of its
common stock.
TRADING AND DIVIDEND INFORMATION
- --------------------------------
DIVIDENDS
HIGH LOW DECLARED
---- --- --------
1996
----
Fourth quarter $56 1/4 $47 3/8 $.09
Third quarter 51 7/8 44 3/4 .09
Second quarter 53 5/8 46 3/4 .09
First quarter 49 44 .09
1995
----
Fourth quarter $47 1/8 $40 1/8 $.06
Third quarter 48 1/2 41 3/8 .06
Second quarter 45 1/4 38 1/8 .06
First quarter 39 3/4 34 1/8 .06
The declaration and payment of future dividends will be at the sole discretion
of the Board of Directors and will depend upon such factors as the Company's
profitability, financial condition, cash requirements and future prospects and
limitations imposed by the 1995 Amended and Restated Credit Agreement.
ITEM 6. SELECTED FINANCIAL DATA
Information contained under the caption "Five Year Summary of Selected Financial
Data" on page 5 of the Annual Financial Statements and Review of Operations is
incorporated herein by reference in response to this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information contained under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 6 to 11 of the Annual
Financial Statements and Review of Operations is incorporated herein by
reference in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements for York International Corporation and Subsidiaries are
contained on pages 12 to 28 of the Annual Financial Statements and Review of
Operations and the Summary of Quarterly Results (unaudited) are contained on
page 29 of the Annual Financial Statements and Review of Operations and are
incorporated herein by reference in response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
16
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information contained under the caption "Election of Directors" in the
Registrant's definitive 1997 Proxy Statement is incorporated herein by reference
in response to this item. See Item 1 above for information concerning executive
officers.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive Compensation" in the
Registrant's definitive 1997 Proxy Statement is incorporated herein by reference
in response to this item, other than the information under the subcaptions
"Report of the Compensation Committee" and "Stock Performance Graph" which are
not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information contained under the captions "Election of Directors" and "Ownership
of Common Stock" in the Registrant's definitive 1997 Proxy Statement is
incorporated herein by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements of York International Corporation
and subsidiaries are incorporated herein by reference to pages 12 to
28 of the Annual Financial Statements and Review of Operations:
Consolidated Balance Sheets - as of December 31, 1996 and 1995
Consolidated Statements of Operations - years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Cash Flows - years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Stockholders' Equity - years ended December
31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
(2) The following financial statement schedule for York International
Corporation and subsidiaries is included herein:
VIII Valuation and Qualifying Accounts - years ended December 31,
1996, 1995 and 1994; (Page 22 of Form 10-K)
All other schedules are omitted as they are not applicable.
Independent Auditors' Report Covering Financial Statement Schedule;
(Page 21 of Form 10-K)
(3) The exhibits filed in response to Item 601 of Regulation S-K are as
follows:
17
EXHIBIT
NUMBER
-------
3.1 Amended and Restated Certificate of Incorporation of Registrant
(Incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-3, File No. 33-91292, filed on June
7, 1995)
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation dated May 3, 1996 (filed herewith)
3.3 By-Laws of Registrant, restated as of December 17, 1996 (filed
herewith)
4.1 Receivables Sale Agreement dated as of June 30, 1992, among
Registrant, as seller and collection agent, Asset Securitization
Cooperative Corporation, as purchaser, and Canadian Imperial Bank of
Commerce, as servicing agent for the purchaser (Incorporated by
reference to Exhibit 4.4 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992, File No. 1-10863)
4.2 Indenture dated as of March 1, 1993 between the Registrant and Morgan
Guaranty Trust Company of New York, as Trustee (Incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement
filed on Form S-3, File No. 33-57178, filed on January 19, 1993)
4.3 Share Transfer Agreement dated as of June 19, 1995 between the
Registrant and National Westminster Bank PLC (Incorporated by
reference to Exhibit 4.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-10863)
4.4 Dividend Rights Agreement dated as of June 19, 1995 between the
Registrant and National Westminster Bank PLC (Incorporated by
reference to Exhibit 4.4 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-10863)
4.5 Amended and Restated Credit Agreement, dated as of July 21, 1995 among
the Registrant, the several banks and the other financial institutions
from time to time parties to the Agreement and Canadian Imperial Bank
of Commerce, acting through its New York Agency, as Agent
(Incorporated by reference to Exhibit 10.17 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995, File No.
1-10863)
4.6 Warrant Transfer Agreement dated as of December 21, 1995 between
Registrant and National Westminster Bank PLC (Incorporated by
reference to Exhibit 4.6 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-10863)
4.7 Second Amendment to Receivables Sale Agreement, dated as of August 30,
1994 (Incorporated by reference to Exhibit 10.9 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995, File No. 1-
10863)
4.8 Third Amendment to Receivables Sale Agreement, dated as of March 28,
1995 (Incorporated by reference to Exhibit 10.10 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995, File
No. 1-10863)
4.9 Amendment to Share Transfer Agreement between Registrant and National
Westminster Bank PLC, dated December 10, 1996 (filed herewith)
4.10 Amendment to Dividend Rights Agreement between Registrant and National
Westminster Bank PLC, dated December 10, 1996 (filed herewith)
*10.1 Registrant's 1989 Employee Stock Option Plan (Incorporated by
reference to Exhibit 10.4 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1989, File No. 33-25440)
*10.2 Registrant's Amended and Restated 1992 Omnibus Stock Plan
(Incorporated by reference to Exhibit 10.16 to Registrant's Annual
Report on Form 10-Q for the quarter ended June 30, 1995, File No. 1-
10863)
18
*10.3 Registrant's 1996 Incentive Compensation Plan (filed herewith)
*10.4 Bristol Compressors, Inc. Officers Retirement/Salary Continuation Plan
(Incorporated by reference to Exhibit 10.4 to York International
Corporation's Registration Statement on Form S-1, File No. 33-30713,
filed on August 25, 1989)
*10.5 York International Corporation Supplemental Executive Retirement Plan
(Incorporated by reference to Exhibit 10.12 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993, File No. 1-
10863)
*10.6 York International Corporation Executive Deferred Compensation Plan
(Incorporated by reference to Exhibit 10.3 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993, File No. 1-
10863)
*10.7 Form of Restricted Stock Agreement by and between Registrant and
certain of its employees (Incorporated by reference to Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, File No. 1-10863)
*10.8 First Amendment to the York International Corporation Executive
Deferred Compensation Plan, dated as of December 2, 1994 (Incorporated
by reference to Exhibit 10.8 to Registrant's Annual Report on Form 10-
K for the year ended December 31, 1995, File No. 1-10863)
10.10 Second Amendment to the York International Corporation Executive
Deferred Compensation Plan, dated as of December 17, 1996 (filed
herewith)
11 Statement re: Computation of Per Share Earnings (filed herewith)
12 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed
herewith)
13 Annual Financial Statements and Review of Operations with Accountants'
Certificate (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
23 Accountants' Consent (filed herewith)
27 Financial Data Schedule (filed herewith)
* Required to be Filed as management contracts, compensatory plans or
arrangements required to be identified pursuant to Item 14(c) of the
registrant's report on Form 10-K.
(b) No reports on Form 8-K have been filed during the last quarter of fiscal
1996.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
YORK INTERNATIONAL CORPORATION
/s/ Robert N. Pokelwaldt
---------------------------------------
ROBERT N. POKELWALDT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: MARCH 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 21st day of March 1997.
SIGNATURE TITLE
--------- -----
/s/ Robert N. Pokelwaldt President and Chief Executive Officer
- ------------------------------
ROBERT N. POKELWALDT (Principal Executive Officer)
/s/ Dean T. DuCray Vice President and Chief Financial Officer
- ------------------------------
DEAN T. DUCRAY (Principal Financial Officer)
/s/ C. David Myers Controller
- ------------------------------
C. DAVID MYERS (Principal Accounting Officer)
DIRECTORS
---------
/s/ Robert N. Pokelwaldt
- ------------------------------
ROBERT N. POKELWALDT
/s/ Malcolm W. Gambill
- ------------------------------
MALCOLM W. GAMBILL
/s/ Robert F. B. Logan
- ------------------------------
ROBERT F. B. LOGAN
/s/ Gerald C. McDonough
- ------------------------------
GERALD C. MCDONOUGH
/s/ Donald M. Roberts
- ------------------------------
DONALD M. ROBERTS
/s/ John C. Welsh
- ------------------------------
JOHN E. WELSH III
/s/ James A. Urry
- ------------------------------
JAMES A. URRY
/s/ Walter B. Wriston
- ------------------------------
WALTER B. WRISTON
20
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
York International Corporation:
Under date of February 11, 1997, we reported on the consolidated balance sheets
of York International Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, cash flows and
stockholders' equity for each of the years in the three-year period ended
December 31, 1996, as contained in the 1996 annual report to stockholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1996. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
As discussed in Note 17 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" effective October 1, 1995.
KPMG PEAT MARWICK LLP
/s/ KPMG PEAT MARWICK LLP
Harrisburg, Pennsylvania
February 11, 1997
21
SCHEDULE VIII
YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
(thousands of dollars)
Column A Column B Column C Column C Column D Column E
-------- -------- -------- -------- -------- --------
Balance at Additions Additions Balance at
Beginning Costs and Other Close of
Description of Period Expenses Accounts(a) Deductions Period
----------- --------- -------- -------- ---------- ------
1996
Allowance Doubtful Accounts $ 17,229 $ 5,718 $ 425 $ 2,635 $ 20,737
Warrantie $ 27,943 $15,649 $ - $10,457 $ 33,135
Other Liabilities $173,551 $13,673 $ 396 $ 7,114 $180,506
1995
Allowance Doubtful Accounts $ 13,461 $ 5,774 $1,201 $ 3,207 $ 17,229
Warrantie $ 21,535 $10,610 $2,875 $ 7,077 $ 27,943
Other Liabilities $144,822 $29,228 $1,932 $ 2,431 $173,551
1994
Allowance Doubtful Accounts $ 9,076 $ 4,034 $3,799 $ 3,448 $ 13,461
Warrantie $ 18,899 $ 9,588 $ (298) $ 6,654 $ 21,535
Other Liabilities $133,511 $15,512 $ - $ 4,201 $144,822
___________
(a) Additions Charged to Other Accounts include liabilities of businesses
acquired in , 1995 and 1994.
22