YORK International Corporation (NYSE:YRK) today reported
an increase in net income to $45.9 million, or $1.08 per diluted
share, for the second quarter of 2005 as compared to $38.7 million, or
$0.92 per diluted share, for the second quarter of 2004.
C. David Myers, President and Chief Executive Officer, said, "We delivered solid results and exceeded our guidance. Our results reflect improvement in execution and strong performance in key markets."
Net sales increased 6.4% from the second quarter of 2004 to $1.3 billion. Americas and Asia delivered double-digit increases; EMEA and UPG delivered better-than-market increases and Bristol sales declined substantially from the second quarter of 2004. Income from operations improved 47.8% to $72.0 million as compared to $48.7 million in 2004. Included in the 2004 results was a charge of $20.0 million to cost of goods sold related to the UPG furnace remediation program. Americas, EMEA and UPG benefited from price increases and strength in service and parts, which offset increases in material costs, weakness in European markets and pricing pressure in Asia. Included in the second quarter results is $0.7 million of restructuring costs primarily associated with changes in the EMEA organization.
Effective April 1, 2005, the Company early adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" (SFAS123R). As a result, an expense was recorded in the second quarter of $1.5 million related to stock options and the employee stock purchase plan. The impact for the full year is $4.5 million.
Net interest expense in the second quarter of 2005 increased to $12.1 million as compared to $10.1 million in the second quarter of 2004 as a result of higher average borrowing rates and higher debt levels. The income tax rate was 27.4% in the second quarter of 2005 and the projected operating tax rate for the full year is 28%.
BUSINESS UNIT REVIEW
GLOBAL APPLIED
Sales for the Global Applied business grew 11.0% from the second quarter of 2004 to $979.7 million. Sales in the Americas were up 19.4% due to strong service growth, equipment volume growth and price increases across the region. Sales increased 6.8% in EMEA driven by strong growth in the Middle East, partially offset by lower equipment sales in Europe. Asia sales increased 13.9% primarily driven by service and parts growth throughout the region and equipment volume outside of China.
Income from operations in the second quarter was $65.4 million compared to $60.0 million in the prior year. 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 4.6% from the prior year to $1.2 billion.
UNITARY PRODUCTS
UPG delivered record sales of $270.1 million, an increase of 4.6% over the second quarter of 2004, reflecting market share gains and price increases.
Income from operations in the second quarter was $31.6 million as compared to $30.2 million in the second quarter of 2004. Price increases and lower selling expenses offset material and freight cost increases.
BRISTOL
Bristol's sales for the second quarter were $108.4 million compared to $139.0 million in the second quarter of 2004, primarily due to lower shipments to international customers.
Bristol's income from operations for the second quarter of 2005 was $4.0 million as compared to $4.2 million in the second quarter of 2004. Price increases, productivity improvements and lower selling, general and administrative expenses were offset by material cost increases and lower volume.
CORPORATE, ELIMINATIONS AND OTHER
Corporate, eliminations and other expenses were $29.0 million as compared to $45.7 million in the second quarter of 2004, which included a $20 million charge related to the UPG furnace remediation program. Excluding this charge from 2004, increases attributable to the LIFO impact resulting from escalating material costs, a higher level of inter-company profit eliminations and the expense associated with the adoption of SFAS123R were partially offset by lower corporate spending.
OUTLOOK
Mr. Myers said, "For the remainder of 2005, global markets are the largest factor impacting projections. Macroeconomic conditions in Europe have not improved. We expect strong growth in the Middle East and Asia; however, we have experienced further pricing pressure in China. We expect modest growth in the North American unitary industry. Within the Americas, the industrial refrigeration market is strong, the air conditioning middle market is showing growth and the domestic large tonnage market is flat."
Mr. Myers continued, "Price realization remains our main priority. We have met targeted price levels in the first half of the year and are confident that we will achieve our goal to offset the material cost increases for the full year."
"Our earnings estimate for the third quarter is in the range of $0.80 to $0.90 per share, which reflects improvement in the operations of our business. For the full year, we are confident we will continue to deliver improvement in our businesses and are maintaining our full year outlook from operations. We communicated in our original 2005 guidance that there would be an impact from the adoption of SFAS123R, but the amount had not been determined. We are incorporating the full year incremental impact of early adoption of SFAS123R of $4.5 million pre-tax, or $0.08 per share, into our projections, resulting in earnings guidance at the low end of a range of $2.52 to $2.82 per share for the full year of 2005."
CONFERENCE CALL AND WEBCAST INFORMATION
YORK International will conduct a conference call to discuss second quarter performance and business outlook on Thursday, July 21, 2005, at 9:00 a.m. ET. The conference call will be available through a web broadcast on YORK International's web site at www.york.com.
If you are unable to connect to the company's web site you may listen via telephone. Please call 1-973-935-2401 (code not required) five minutes prior to the scheduled start time.
There will be a replay of the conference call beginning Thursday, July 21, 2005, at 11:00 a.m., continuing through until Monday, July 25, 2005, at 11:00 p.m. You may call 1-877-519-4471, code #6252667.
CAUTIONARY STATEMENTS
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 estimates used in determining the expected cost of the furnace remediation program, 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.
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- YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in thousands, 2005 2004 2005 2004 except per share data) ------------ ----------- ------------ ------------- Net sales $ 1,299,486 $1,221,708 $ 2,333,291 $ 2,161,075 Cost of goods sold (1,035,632) (996,033) (1,886,309) (1,764,344) ------------ ----------- ------------ ------------- Gross profit 263,854 225,675 446,982 396,731 Selling, general, and adminis- trative expenses (191,157) (176,975) (375,875) (342,828) Restructuring and other charges, net (703) -- (1,926) -- ------------ ----------- ------------ ------------- Income from operations 71,994 48,700 69,181 53,903 Interest expense, net (12,052) (10,072) (23,530) (20,933) Equity in earnings of affiliates 3,315 4,227 4,598 4,719 ------------ ----------- ------------ ------------- Income before income taxes 63,257 42,855 50,249 37,689 Provision for income taxes (17,351) (4,131) (13,570) (2,840) ------------ ----------- ------------ ------------- Net income $ 45,906 $ 38,724 $ 36,679 $ 34,849 ============ =========== ============ ============= Diluted earnings per share $ 1.08 $ 0.92 $ 0.87 $ 0.83 ============ =========== ============ ============= Cash dividends per share $ 0.20 $ 0.20 $ 0.40 $ 0.40 ============ =========== ============ ============= Diluted weighted average common shares and common equivalents outstanding 42,350 42,270 42,216 42,050 YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited) June 30, December 31, (in thousands) 2005 2004 ----------- ------------- ASSETS Current assets: Cash and cash equivalents $ 57,494 $ 42,881 Receivables, net 872,596 804,141 Inventories 667,740 615,131 Prepayments and other current assets 145,621 144,489 ----------- ------------- Total current assets 1,743,451 1,606,642 Deferred income taxes 146,077 152,259 Investments in affiliates 36,311 35,725 Property, plant, and equipment, net 526,120 556,629 Goodwill 527,156 542,851 Intangibles, net 34,930 39,357 Deferred charges and other assets 76,878 76,952 ----------- ------------- Total assets $3,090,923 $ 3,010,415 =========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 29,086 $ 19,539 Accounts payable and accrued expenses 1,130,535 1,144,464 Income taxes 45,825 40,829 ----------- ------------- Total current liabilities 1,205,446 1,204,832 Long-term warranties 45,929 49,379 Long-term debt 654,294 545,468 Postretirement and postemployment benefits 219,653 226,213 Other long-term liabilities 91,174 105,660 ----------- ------------- Total liabilities 2,216,496 2,131,552 Stockholders' equity 874,427 878,863 ----------- ------------- Total liabilities and stockholders' equity $3,090,923 $ 3,010,415 =========== ============= YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Supplemental Statement of Operations and Segment Information (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in thousands, 2005 2004 2005 2004 except per share data) ----------- ----------- ----------- ----------- Revenue: ----------------- Global Applied: Americas $ 470,787 $ 394,424 $ 855,785 $ 727,223 EMEA 410,569 384,403 728,865 682,824 Asia 186,286 163,485 318,357 266,269 Intragroup sales (87,945) (59,470) (149,674) (104,461) ----------- ----------- ----------- ----------- 979,697 882,842 1,753,333 1,571,855 Unitary Products Group 270,107 258,115 480,211 438,506 Bristol Compressors 108,355 138,965 209,510 252,443 Eliminations (58,673) (58,214) (109,763) (101,729) ----------- ----------- ----------- ----------- Total $1,299,486 $1,221,708 $2,333,291 $2,161,075 =========== =========== =========== =========== Income from Operations: ----------------- Global Applied: Americas $ 28,137 $ 23,313 $ 31,078 $ 24,999 EMEA 19,931 14,600 10,634 14,591 Asia 17,304 22,082 26,714 31,656 ----------- ----------- ----------- ----------- 65,372 59,995 68,426 71,246 Unitary Products Group 31,587 30,191 44,448 42,217 Bristol Compressors 4,048 4,242 12,218 8,320 Corporate, eliminations and other (29,013)A (45,728)B (55,911)A (67,880)B ----------- ----------- ----------- ----------- Total 71,994 48,700 69,181 53,903 Interest expense, net (12,052) (10,072) (23,530) (20,933) Equity in earnings of affiliates 3,315 4,227 4,598 4,719 ----------- ----------- ----------- ----------- Income before income taxes 63,257 42,855 50,249 37,689 Provision for income taxes (17,351) (4,131) (13,570) (2,840) ----------- ----------- ----------- ----------- Net income $ 45,906 $ 38,724 $ 36,679 $ 34,849 =========== =========== =========== =========== Diluted earnings per share: Net income $ 1.08 $ 0.92 $ 0.87 $ 0.83 =========== =========== =========== =========== Weighted average diluted shares 42,350 42,270 42,216 42,050 A -- Includes $1.5 million of stock option and employee stock purchase plan expense related to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" B -- Includes a charge of $20,000 to record the estimated liability associated with the UPG furnace remediation program
C. David Myers, President and Chief Executive Officer, said, "We delivered solid results and exceeded our guidance. Our results reflect improvement in execution and strong performance in key markets."
Net sales increased 6.4% from the second quarter of 2004 to $1.3 billion. Americas and Asia delivered double-digit increases; EMEA and UPG delivered better-than-market increases and Bristol sales declined substantially from the second quarter of 2004. Income from operations improved 47.8% to $72.0 million as compared to $48.7 million in 2004. Included in the 2004 results was a charge of $20.0 million to cost of goods sold related to the UPG furnace remediation program. Americas, EMEA and UPG benefited from price increases and strength in service and parts, which offset increases in material costs, weakness in European markets and pricing pressure in Asia. Included in the second quarter results is $0.7 million of restructuring costs primarily associated with changes in the EMEA organization.
Effective April 1, 2005, the Company early adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" (SFAS123R). As a result, an expense was recorded in the second quarter of $1.5 million related to stock options and the employee stock purchase plan. The impact for the full year is $4.5 million.
Net interest expense in the second quarter of 2005 increased to $12.1 million as compared to $10.1 million in the second quarter of 2004 as a result of higher average borrowing rates and higher debt levels. The income tax rate was 27.4% in the second quarter of 2005 and the projected operating tax rate for the full year is 28%.
BUSINESS UNIT REVIEW
GLOBAL APPLIED
Sales for the Global Applied business grew 11.0% from the second quarter of 2004 to $979.7 million. Sales in the Americas were up 19.4% due to strong service growth, equipment volume growth and price increases across the region. Sales increased 6.8% in EMEA driven by strong growth in the Middle East, partially offset by lower equipment sales in Europe. Asia sales increased 13.9% primarily driven by service and parts growth throughout the region and equipment volume outside of China.
Income from operations in the second quarter was $65.4 million compared to $60.0 million in the prior year. 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 4.6% from the prior year to $1.2 billion.
UNITARY PRODUCTS
UPG delivered record sales of $270.1 million, an increase of 4.6% over the second quarter of 2004, reflecting market share gains and price increases.
Income from operations in the second quarter was $31.6 million as compared to $30.2 million in the second quarter of 2004. Price increases and lower selling expenses offset material and freight cost increases.
BRISTOL
Bristol's sales for the second quarter were $108.4 million compared to $139.0 million in the second quarter of 2004, primarily due to lower shipments to international customers.
Bristol's income from operations for the second quarter of 2005 was $4.0 million as compared to $4.2 million in the second quarter of 2004. Price increases, productivity improvements and lower selling, general and administrative expenses were offset by material cost increases and lower volume.
CORPORATE, ELIMINATIONS AND OTHER
Corporate, eliminations and other expenses were $29.0 million as compared to $45.7 million in the second quarter of 2004, which included a $20 million charge related to the UPG furnace remediation program. Excluding this charge from 2004, increases attributable to the LIFO impact resulting from escalating material costs, a higher level of inter-company profit eliminations and the expense associated with the adoption of SFAS123R were partially offset by lower corporate spending.
OUTLOOK
Mr. Myers said, "For the remainder of 2005, global markets are the largest factor impacting projections. Macroeconomic conditions in Europe have not improved. We expect strong growth in the Middle East and Asia; however, we have experienced further pricing pressure in China. We expect modest growth in the North American unitary industry. Within the Americas, the industrial refrigeration market is strong, the air conditioning middle market is showing growth and the domestic large tonnage market is flat."
Mr. Myers continued, "Price realization remains our main priority. We have met targeted price levels in the first half of the year and are confident that we will achieve our goal to offset the material cost increases for the full year."
"Our earnings estimate for the third quarter is in the range of $0.80 to $0.90 per share, which reflects improvement in the operations of our business. For the full year, we are confident we will continue to deliver improvement in our businesses and are maintaining our full year outlook from operations. We communicated in our original 2005 guidance that there would be an impact from the adoption of SFAS123R, but the amount had not been determined. We are incorporating the full year incremental impact of early adoption of SFAS123R of $4.5 million pre-tax, or $0.08 per share, into our projections, resulting in earnings guidance at the low end of a range of $2.52 to $2.82 per share for the full year of 2005."
CONFERENCE CALL AND WEBCAST INFORMATION
YORK International will conduct a conference call to discuss second quarter performance and business outlook on Thursday, July 21, 2005, at 9:00 a.m. ET. The conference call will be available through a web broadcast on YORK International's web site at www.york.com.
If you are unable to connect to the company's web site you may listen via telephone. Please call 1-973-935-2401 (code not required) five minutes prior to the scheduled start time.
There will be a replay of the conference call beginning Thursday, July 21, 2005, at 11:00 a.m., continuing through until Monday, July 25, 2005, at 11:00 p.m. You may call 1-877-519-4471, code #6252667.
CAUTIONARY STATEMENTS
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 estimates used in determining the expected cost of the furnace remediation program, 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.
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- YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in thousands, 2005 2004 2005 2004 except per share data) ------------ ----------- ------------ ------------- Net sales $ 1,299,486 $1,221,708 $ 2,333,291 $ 2,161,075 Cost of goods sold (1,035,632) (996,033) (1,886,309) (1,764,344) ------------ ----------- ------------ ------------- Gross profit 263,854 225,675 446,982 396,731 Selling, general, and adminis- trative expenses (191,157) (176,975) (375,875) (342,828) Restructuring and other charges, net (703) -- (1,926) -- ------------ ----------- ------------ ------------- Income from operations 71,994 48,700 69,181 53,903 Interest expense, net (12,052) (10,072) (23,530) (20,933) Equity in earnings of affiliates 3,315 4,227 4,598 4,719 ------------ ----------- ------------ ------------- Income before income taxes 63,257 42,855 50,249 37,689 Provision for income taxes (17,351) (4,131) (13,570) (2,840) ------------ ----------- ------------ ------------- Net income $ 45,906 $ 38,724 $ 36,679 $ 34,849 ============ =========== ============ ============= Diluted earnings per share $ 1.08 $ 0.92 $ 0.87 $ 0.83 ============ =========== ============ ============= Cash dividends per share $ 0.20 $ 0.20 $ 0.40 $ 0.40 ============ =========== ============ ============= Diluted weighted average common shares and common equivalents outstanding 42,350 42,270 42,216 42,050 YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited) June 30, December 31, (in thousands) 2005 2004 ----------- ------------- ASSETS Current assets: Cash and cash equivalents $ 57,494 $ 42,881 Receivables, net 872,596 804,141 Inventories 667,740 615,131 Prepayments and other current assets 145,621 144,489 ----------- ------------- Total current assets 1,743,451 1,606,642 Deferred income taxes 146,077 152,259 Investments in affiliates 36,311 35,725 Property, plant, and equipment, net 526,120 556,629 Goodwill 527,156 542,851 Intangibles, net 34,930 39,357 Deferred charges and other assets 76,878 76,952 ----------- ------------- Total assets $3,090,923 $ 3,010,415 =========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 29,086 $ 19,539 Accounts payable and accrued expenses 1,130,535 1,144,464 Income taxes 45,825 40,829 ----------- ------------- Total current liabilities 1,205,446 1,204,832 Long-term warranties 45,929 49,379 Long-term debt 654,294 545,468 Postretirement and postemployment benefits 219,653 226,213 Other long-term liabilities 91,174 105,660 ----------- ------------- Total liabilities 2,216,496 2,131,552 Stockholders' equity 874,427 878,863 ----------- ------------- Total liabilities and stockholders' equity $3,090,923 $ 3,010,415 =========== ============= YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Supplemental Statement of Operations and Segment Information (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in thousands, 2005 2004 2005 2004 except per share data) ----------- ----------- ----------- ----------- Revenue: ----------------- Global Applied: Americas $ 470,787 $ 394,424 $ 855,785 $ 727,223 EMEA 410,569 384,403 728,865 682,824 Asia 186,286 163,485 318,357 266,269 Intragroup sales (87,945) (59,470) (149,674) (104,461) ----------- ----------- ----------- ----------- 979,697 882,842 1,753,333 1,571,855 Unitary Products Group 270,107 258,115 480,211 438,506 Bristol Compressors 108,355 138,965 209,510 252,443 Eliminations (58,673) (58,214) (109,763) (101,729) ----------- ----------- ----------- ----------- Total $1,299,486 $1,221,708 $2,333,291 $2,161,075 =========== =========== =========== =========== Income from Operations: ----------------- Global Applied: Americas $ 28,137 $ 23,313 $ 31,078 $ 24,999 EMEA 19,931 14,600 10,634 14,591 Asia 17,304 22,082 26,714 31,656 ----------- ----------- ----------- ----------- 65,372 59,995 68,426 71,246 Unitary Products Group 31,587 30,191 44,448 42,217 Bristol Compressors 4,048 4,242 12,218 8,320 Corporate, eliminations and other (29,013)A (45,728)B (55,911)A (67,880)B ----------- ----------- ----------- ----------- Total 71,994 48,700 69,181 53,903 Interest expense, net (12,052) (10,072) (23,530) (20,933) Equity in earnings of affiliates 3,315 4,227 4,598 4,719 ----------- ----------- ----------- ----------- Income before income taxes 63,257 42,855 50,249 37,689 Provision for income taxes (17,351) (4,131) (13,570) (2,840) ----------- ----------- ----------- ----------- Net income $ 45,906 $ 38,724 $ 36,679 $ 34,849 =========== =========== =========== =========== Diluted earnings per share: Net income $ 1.08 $ 0.92 $ 0.87 $ 0.83 =========== =========== =========== =========== Weighted average diluted shares 42,350 42,270 42,216 42,050 A -- Includes $1.5 million of stock option and employee stock purchase plan expense related to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" B -- Includes a charge of $20,000 to record the estimated liability associated with the UPG furnace remediation program
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