YORK International Corporation (NYSE:YRK) today reported net income
of $14.8 million, or $0.34 per diluted share, for the third quarter
of 2005. Excluding the three items listed below, net income for the
third quarter of 2005 would have been $39.4 million, or $0.91 per
diluted share, an improvement of 25.8% on a revenue increase of
11.5%, as compared to $31.3 million, or $0.75 per diluted share,
for the third quarter of 2004. Third quarter results were reduced
by the following items: -- Pre-tax costs associated with the
restructuring program announced on September 20, 2005 of $13.7
million ($13.1 million after tax, or $0.30 per share). -- Pre-tax
expenses related to the proposed merger with Johnson Controls, Inc.
of $1.2 million ($0.9 million after tax, or $0.02 per share). -- A
tax charge of $10.6 million (or $0.25 per share) associated with
the Company's intention to remit approximately $220 million of
intercompany dividends under the American Jobs Creation Act (AJCA).
C. David Myers, President and Chief Executive Officer, said, "Our
performance exceeded our expectations and reflects solid execution
on key initiatives and exceptional performance at UPG." Net sales
increased 11.5% from the third quarter of 2004 to $1.3 billion. UPG
delivered very strong sales growth of 23.5%; Americas and Bristol
delivered double-digit increases while EMEA and Asia sales were
weak as compared to the third quarter of 2004. Income from
operations improved 6.1% to $52.1 million as compared to $49.1
million in 2004 despite $13.7 million in pre-tax restructuring and
other expenses and $1.2 million in pre-tax merger costs. Excluding
the restructuring and merger-related costs, income from operations
improved 36.5%. Strength in the Global Applied Service businesses
and the benefit from realized price increases in Americas, EMEA and
UPG more than offset increases in material costs, continued
weakness in European markets and continued pricing pressure in
Asia. Net interest expense in the third quarter of 2005 increased
to $12.5 million as compared to $10.9 million in the third quarter
of 2004 as a result of higher average borrowing rates. Income tax
expense was greater as a result of increased income in higher
tax-rate jurisdictions and the tax charge related to the AJCA
mentioned above. The operating income tax rate, which excludes the
impact of the tax effect of restructuring costs, merger expenses
and dividends under the AJCA, was 30.1% in the third quarter of
2005 and the projected operating tax rate for the full year is
29.5%. Cash flow in the third quarter also exceeded expectations
and resulted in an improvement in the debt (including the
receivables securitization) to capital ratio, to 42.9% as compared
to 49.7% at the end of the third quarter of 2004. BUSINESS UNIT
REVIEW GLOBAL APPLIED Sales for the Global Applied business grew
8.9% from the third quarter of 2004 to $956.0 million. Sales in the
Americas were up 19.5% due to strong service growth, equipment
volume growth and price increases across the region. Sales
increased 1.9% in EMEA driven by strong growth in the Middle East
and price increases in Europe, partially offset by lower equipment
volume in Europe. Asia sales decreased 1.8% due to lower equipment
volume and lower pricing in China. Revenue from the global service
businesses improved 14.3% as compared to the third quarter of 2004.
Year to date, global service revenue is up 14.2%. In the Americas,
service revenue growth has exceeded the overall company average,
demonstrating that earlier challenges related to the YorkConnect
implementation are complete and the Company is delivering on the
expected benefits. Income from operations in the third quarter
improved 33.7% to $59.3 million as compared to $44.4 million in the
prior year. Better execution, volume leverage, productivity gains
and pricing realization in certain markets offset higher material
costs globally and pricing pressure in Asia. The Global Applied
backlog at the end of the quarter increased 10.0% from the prior
year to $1.2 billion, driven by strength in Latin America and the
Middle East. UNITARY PRODUCTS UPG delivered record sales of $281.5
million, an increase of 23.5% over the third quarter of 2004,
reflecting price increases and a strong U.S. market. Income from
operations in the third quarter improved 49.4% to a record $37.1
million as compared to $24.9 million in the third quarter of 2004.
Price increases and volume leverage offset material and freight
cost increases. BRISTOL Bristol's sales for the third quarter were
$110.5 million compared to $100.5 million in the third quarter of
2004, primarily due to higher shipments to domestic customers,
which more than offset lower shipments to international customers.
Bristol's loss from operations for the third quarter of 2005 was
$1.8 million as compared to income from operations of $0.2 million
in the third quarter of 2004. Material cost increases more than
offset price increases, volume leverage and lower selling, general
and administrative expenses. CORPORATE, ELIMINATIONS AND OTHER
Corporate, eliminations and other expenses were $42.6 million
(including $13.0 million in restructuring and other costs) as
compared to $20.3 million in the third quarter of 2004. Increases
attributable to the LIFO impact resulting from escalating material
costs and higher incentive compensation expense (including the
impact of the adoption of SFAS123R) were partially offset by lower
corporate spending and favorable changes in intercompany profit
eliminations. OUTLOOK Mr. Myers said, "Overall, our global markets
are in good shape. The unitary market in the U.S., particularly the
residential market, continues to be very strong. Within the
Americas, the industrial refrigeration market and Latin America are
strong, the air conditioning middle market is showing growth, the
domestic large tonnage market is flat and service growth is
accelerating. Within EMEA, strong growth continues in the Middle
East; however, macroeconomic conditions in Europe have not
improved. Within Asia, the 2005 Chinese market for large commercial
and industrial equipment is flat, and the service market is
growing. Macroeconomic conditions, rising commodity costs and a
weaker residential market have resulted in increased competition
and severe pricing pressure in China. We have a strong, profitable
position in this market and remain optimistic about the long-term
prospects for this region. We are accelerating our investments in
local sourcing, product differentiation and the expansion of our
service capabilities." Mr. Myers continued, "In 2005, we have
delivered on key initiatives. We met targeted price levels and
delivered price increases of over $100 million to offset the
year-on-year material cost increases. Price realization continues
to be a major priority. During 2005, EMEA benefited from the
actions taken in the fourth quarter of 2004 and the first half of
2005 to better align our European cost structure. With the
September, 2005 announcement of our restructuring actions in
Europe, we have higher expectations of our European business going
forward. Increased penetration into the middle market in the U.S.
continues and we delivered significant improvements in our service
businesses in the third quarter." "We believe the acquisition of
YORK by Johnson Controls is on track to close in December, 2005. We
are confident we will continue to deliver improvement in our
businesses. Earnings in the fourth quarter will be impacted by the
charges related to the merger activities, restructuring costs, and
the tax effect related to dividend payments associated with the
American Jobs Creation Act. Excluding these items, (and if YORK
would remain an independent company at year end), we expect
earnings per share to be approximately $2.60 per share for the full
year of 2005, which is an increase from our previous outlook. We
expect to exceed our full-year cash flow target of $55 million."
CAUTIONARY STATEMENTS This press release contains non-GAAP
financial measures that are reconciled to the most directly
comparable GAAP measures in the last two tables of this press
release. The Company believes that providing this additional
information provides a transparent view of core operational
performance with and without the impact of special items in 2005.
Management utilizes non-GAAP measures internally to assess
historical and expected future performance of the Company and as a
basis for certain compensation arrangements. Special items in 2005
include restructuring and related costs, costs related to the
Company's proposed merger with Johnson Controls, Inc., and a tax
charge associated with the Company's intention to remit dividend
payments under the American Jobs Creation Act. Special items are
deducted from GAAP measures (income from operations, net income,
and diluted earnings per share) to allow users of the Company's
financial statements to identify the impact of these special items
on results. This release includes "forward-looking statements" that
involve risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements.
Factors that could affect results include business disruption as a
result of the proposed merger with Johnson Controls, Inc.,
estimates used in determining the expected cost of the 2004 furnace
remediation program, execution of announced restructuring actions,
rising material costs, economic and political environments,
climatic conditions, work stoppages, litigation, product liability,
currency, and regulatory and competitive pressures. Additional
information regarding these risk factors and uncertainties is
detailed in YORK's SEC filings. DEFINITIVE AGREEMENT WITH JOHNSON
CONTROLS On August 24, 2005, YORK and Johnson Controls, Inc.
announced a definitive agreement whereby Johnson Controls will
acquire YORK in an all cash transaction of $56.50 per share. The
transaction, which is subject to customary closing conditions that
include regulatory approvals and YORK shareholder approval, is
anticipated to close in December 2005. ABOUT YORK YORK
International Corporation is a global provider of heating,
ventilating, air conditioning and refrigeration (HVAC&R)
products and services. YORK is the largest independent supplier of
HVAC&R equipment in the United States and a leading competitor
in the industry internationally. The company's products are sold in
more than 125 countries and YORK has approximately 24,000 employees
worldwide. -0- *T YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (unaudited) Three
Months Ended Nine Months Ended Sept. 30, Sept. 30, (in thousands,
except per share 2005 2004 2005 2004 data) ------------ -----------
------------ ------------ Net sales $ 1,292,805 $1,159,274 $
3,626,096 $ 3,320,349 Cost of goods sold (1,037,155) (938,460)
(2,923,464) (2,702,804) ------------ ----------- ------------
------------ Gross profit 255,650 220,814 702,632 617,545 Selling,
general, and administrative expenses (190,521) (171,720) (566,396)
(514,548) Restructuring and other charges, net (13,036) -- (14,962)
-- ------------ ----------- ------------ ------------ Income from
operations 52,093 49,094 121,274 102,997 Interest expense, net
(12,494) (10,947) (36,024) (31,880) Equity in earnings of
affiliates 1,877 2,826 6,475 7,545 ------------ -----------
------------ ------------ Income before income taxes 41,476 40,973
91,725 78,662 Provision for income taxes (26,687) (9,628) (40,257)
(12,468) ------------ ----------- ------------ ------------ Net
income $ 14,789 $ 31,345 $ 51,468 $ 66,194 ============ ===========
============ ============ Diluted earnings per share $ 0.34 $ 0.75
$ 1.21 $ 1.59 ============ =========== ============ ============
Cash dividends per share $ 0.20 $ 0.20 $ 0.60 $ 0.60 ============
=========== ============ ============ Diluted weighted average
common shares and common equivalents outstanding 43,101 41,680
42,527 41,594 YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (unaudited) September 30,
December 31, (in thousands) 2005 2004 ------------- -------------
ASSETS Current assets: Cash and cash equivalents $ 54,323 $ 42,881
Receivables, net 894,103 804,141 Inventories 626,732 615,131
Prepayments and other current assets 148,302 144,489 -------------
------------- Total current assets 1,723,460 1,606,642 Deferred
income taxes 137,617 152,259 Investments in affiliates 35,553
35,725 Property, plant, and equipment, net 525,534 556,629 Goodwill
527,575 542,851 Intangibles, net 34,230 39,357 Deferred charges and
other assets 62,829 76,952 ------------- ------------- Total assets
$ 3,046,798 $ 3,010,415 ============= ============= LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current
portion of long-term debt $ 25,938 $ 19,539 Accounts payable and
accrued expenses 1,182,192 1,144,464 Income taxes 49,136 40,829
------------- ------------- Total current liabilities 1,257,266
1,204,832 Long-term warranties 46,843 49,379 Long-term debt 521,745
545,468 Postretirement and postemployment benefits 202,822 226,213
Other long-term liabilities 90,508 105,660 -------------
------------- Total liabilities 2,119,184 2,131,552 Stockholders'
equity 927,614 878,863 ------------- ------------- Total
liabilities and stockholders' equity $ 3,046,798 $ 3,010,415
============= ============= YORK INTERNATIONAL CORPORATION AND
SUBSIDIARIES Supplemental Statement of Operations and Segment
Information (unaudited) Three Months Ended Nine Months Ended Sept.
30, Sept. 30, (in thousands, except per share 2005 2004 2005 2004
data) ----------- ----------- ----------- ----------- Revenue:
------------------- Global Applied: Americas $ 453,300 $ 379,335
$1,309,085 $1,106,558 EMEA 392,703 385,197 1,123,507 1,069,686 Asia
172,761 175,947 488,932 440,274 Intragroup sales (62,797) (62,981)
(212,224) (167,165) ----------- ----------- ----------- -----------
955,967 877,498 2,709,300 2,449,353 Unitary Products Group 281,509
227,878 761,720 666,384 Bristol Compressors 110,493 100,483 320,003
352,926 Eliminations (55,164) (46,585) (164,927) (148,314)
----------- ----------- ----------- ----------- Total $1,292,805
$1,159,274 $3,626,096 $3,320,349 =========== ===========
=========== =========== Income from Operations: -------------------
Global Applied: Americas $ 24,471 $ 11,457 $ 55,549 $ 36,456 EMEA
21,118 B 12,050 31,999 B 26,833 Asia 13,722 20,867 40,190 52,331
----------- ----------- ----------- ----------- 59,311 44,374
127,738 115,620 Unitary Products Group 37,141 24,859 81,589 67,076
Bristol Compressors (1,801) 187 10,417 8,507 Corporate,
eliminations and other (42,558)A (20,326) (98,470)A (88,206)
----------- ----------- ----------- ----------- Total 52,093 49,094
121,274 102,997 Interest expense, net (12,494) (10,947) (36,024)
(31,880) Equity in earnings of affiliates 1,877 2,826 6,475 7,545
----------- ----------- ----------- ----------- Income before
income taxes 41,476 40,973 91,725 78,662 Provision for income taxes
(26,687) (9,628) (40,257) (12,468) ----------- -----------
----------- ----------- Net income $ 14,789 $ 31,345 $ 51,468 $
66,194 =========== =========== =========== =========== Diluted
earnings per share: Net income $ 0.34 $ 0.75 $ 1.21 $ 1.59
=========== =========== =========== =========== Weighted average
diluted shares 43,101 41,680 42,527 41,594 Notes: A -- Includes
restructuring charges of $13,036 and $14,962 in the three and nine
months ended September 30, 2005, respectively. B -- Includes
restructuring charges of $651 (recorded as part of cost of goods
sold) in the three and nine months ended September 30, 2005. During
the quarter ended September 30, 2005, we moved a portion of our
operations within India from the Asia segment to the EMEA segment.
Prior period amounts were reclassified to conform to the current
presentation. YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Reconciliation of GAAP Income from Operations, Net Income, and
Diluted Earnings Per Share to Income from Operations, Net Income,
and Diluted Earnings Per Share, Exclusive of Special Items Three
Months Ended Nine Months Ended September 30, 2005 September 30,
2005 ------------------------ ------------------------- Income from
Income from Operations Net Income Operations Net Income
------------ ----------- ------------ ------------ (in thousands,
except per share data) GAAP $ 52,093 $ 14,789 $ 121,274 $ 51,468
Impact of special items, net of tax: Restructuring costs 13,687
13,118 15,613 14,400 Merger costs 1,231 921 1,231 921 Dividends
under the AJCA -- 10,600 -- 10,600 ------------ -----------
------------ ------------ Exclusive of special items $ 67,011 $
39,428 $ 138,118 $ 77,389 ============ =========== ============
============ GAAP diluted earnings per share $ 0.34 $ 1.21 Impact
of special items 0.57 0.61 ----------- ------------ Diluted
earnings per share, exclusive of special items $ 0.91 $ 1.82
=========== ============ Diluted weighted average common shares and
common equivalents outstanding 43,101 42,527 Notes: This statement
reconciles GAAP income from operations, net income, and diluted
earnings per share to income from operations, net income, and
diluted earnings per share, exclusive of special items. Special
items include charges related to restructuring costs, merger
activities, and the tax effect related to expected dividend
payments associated with the American Jobs Creation Act. The
Company believes that income from operations, net income, and
diluted earnings per share, exclusive of special items, provide
increased transparency to the performance of the core operations.
The Company also reviews its results internally in this manner and
bases certain compensation arrangements on results, exclusive of
special items. YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES
Reconciliation of Forecasted 2005 GAAP Income from Operations, Net
Income, and Diluted Earnings Per Share to Forecasted 2005 Income
from Operations, Net Income, and Diluted Earnings Per Share,
Exclusive of Special Items As of October 26, 2005 Forecast for Year
Ended December 31, 2005 ------------------------ Income from
Operations Net Income ------------ ---------- (in thousands, except
per share data) GAAP $ 173,331 $ 80,337 Impact of special items,
net of tax: Restructuring and other related costs 20,450 19,163
Merger costs 1,858 1,389 Dividends under the AJCA -- 10,600
------------ ---------- Exclusive of special items $ 195,639 $
111,489 ============ ========== GAAP diluted earnings per share $
1.87 Impact of special items 0.73 ---------- Diluted earnings per
share, exclusive of special items $ 2.60 ========== Diluted
weighted average common shares and common equivalents outstanding
42,929 Notes: Above amounts are estimates. Actual results could
differ materially from forecasted amounts. This statement
reconciles forecasted GAAP income from operations, net income, and
diluted earnings per share to forecasted income from operations,
net income, and diluted earnings per share, exclusive of special
items. Special items include charges related to restructuring
costs, merger activities, and the tax effect related to expected
dividend payments associated with the American Jobs Creation Act.
The Company believes that income from operations, net income, and
diluted earnings per share, exclusive of special items, provide
increased transparency to the performance of the core operations.
The Company also reviews its results internally in this manner and
bases certain compensation arrangements on results, exclusive of
special items. *T
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