10-Q 1 w42120e10-q.txt FORM 10-Q YORK INTERNATIONAL 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 COMMISSION FILE NUMBER 1-10863 YORK INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3473472 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 631 SOUTH RICHLAND AVENUE, YORK, PA 17403 (717) 771-7890 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at November 8, 2000 ----- ------------------------------- Common Stock, par value $.005 38,027,277 shares
2 YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 INDEX
Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Operations - (Unaudited) Three Months and Nine Months Ended September 30, 2000 and 1999 3 Consolidated Condensed Balance Sheets - September 30, 2000 (Unaudited) and December 31, 1999 4 Consolidated Condensed Statements of Cash Flows - (Unaudited) Nine Months Ended September 30, 2000 and 1999 5 Supplemental Notes to Consolidated Condensed Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings 19 Item 2. Changes in Securities 19 Item 3. Defaults Upon Senior Securities 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19
2 3 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 1 FINANCIAL STATEMENTS Consolidated Condensed Statements of Operations (Unaudited) (thousands except per share data)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, ---------------------------- ------------------------------- 2000 1999 2000 1999 --------- --------- ----------- ----------- Net sales $ 946,703 $ 970,360 $ 2,905,577 $ 2,765,181 Cost of goods sold 744,516 781,288 2,265,490 2,179,113 --------- --------- ----------- ----------- Gross profit 202,187 189,072 640,087 586,068 Selling, general and administrative expenses 150,054 148,661 474,005 425,419 Acquisition, integration, restructuring and other charges 28,462 22,159 29,681 35,117 --------- --------- ----------- ----------- Income from operations 23,671 18,252 136,401 125,532 Gain on sale of businesses -- (9,627) (26,902) (9,627) Interest expense, net 20,548 19,063 60,779 41,735 Equity in earnings of affiliates (1,624) (1,132) (5,695) (4,174) --------- --------- ----------- ----------- Income before income taxes and cumulative effect of accounting change 4,747 9,948 108,219 97,598 Provision (benefit) for income taxes (10,509) 6,172 24,181 35,096 --------- --------- ----------- ----------- Income before cumulative effect of accounting change 15,256 3,776 84,038 62,502 Cumulative effect of accounting change: Write-off of start-up costs (net of tax of $442) -- -- -- 897 --------- --------- ----------- ----------- Net income $ 15,256 $ 3,776 $ 84,038 $ 61,605 ========= ========= =========== =========== Basic earnings per share: Income before cumulative effect of accounting change $ 0.40 $ 0.09 $ 2.21 $ 1.57 Accounting change -- -- -- (0.02) --------- --------- ----------- ----------- Net income $ 0.40 $ 0.09 $ 2.21 $ 1.55 ========= ========= =========== =========== Diluted earnings per share: Income before cumulative effect of accounting change $ 0.40 $ 0.09 $ 2.20 $ 1.56 Accounting change -- -- -- (0.02) --------- --------- ----------- ----------- Net income $ 0.40 $ 0.09 $ 2.20 $ 1.54 ========= ========= =========== =========== Cash dividends per share $ 0.15 $ 0.15 $ 0.45 $ 0.45 ========= ========= =========== =========== Weighted average common shares and common equivalents outstanding: Basic 38,034 39,893 38,076 39,853 Diluted 38,232 40,275 38,170 40,103
See accompanying supplemental notes to consolidated condensed financial statements. 3 4 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (thousands of dollars)
Sept. 30, 2000 December 31, (Unaudited) 1999 -------------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 56,430 $ 39,514 Receivables 694,436 720,022 Inventories: Raw materials 191,273 199,171 Work in process 151,313 112,669 Finished goods 313,350 287,206 ---------- ---------- Total inventories 655,936 599,046 Prepayments and other current assets 100,992 131,787 ---------- ---------- Total current assets 1,507,794 1,490,369 Deferred income taxes 39,584 13,207 Investments in affiliates 22,537 25,425 Property, plant and equipment, net 469,892 499,710 Unallocated excess of cost over net assets acquired 742,140 768,809 Deferred charges and other assets 60,318 77,019 ---------- ---------- Total assets $2,842,265 $2,874,539 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable and current portion of long-term debt $ 77,687 $ 102,864 Accounts payable and accrued expenses 795,614 860,264 Income taxes 37,479 42,007 ---------- ---------- Total current liabilities 910,780 1,005,135 Long-term warranties 42,637 39,607 Long-term debt 883,376 854,494 Postretirement benefit liabilities 152,777 154,066 Other long-term liabilities 79,737 89,307 ---------- ---------- Total liabilities 2,069,307 2,142,609 Stockholders' equity 772,958 731,930 ---------- ---------- Total liabilities and stockholders' equity $2,842,265 $2,874,539 ========== ==========
See accompanying supplemental notes to consolidated condensed financial statements. 4 5 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (thousands of dollars)
Nine Months Ended Sept. 30, --------------------------- 2000 1999 -------- --------- Cash flows from operating activities: Net income $ 84,038 $ 61,605 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 46,652 46,883 Amortization of deferred charges and unallocated excess of cost over net assets acquired 24,278 15,652 Provision for doubtful accounts receivable 4,774 7,862 Deferred income taxes (16,408) (6,808) Gain on sale of businesses (26,902) (9,627) Cumulative effect of accounting change -- 897 Effect of non-cash charges 32,649 38,503 Loss on sale of fixed assets and other 469 789 Change in assets and liabilities net of effects from purchase of other companies and sale of businesses: Receivables 8,846 2,517 Inventories (64,084) (33,336) Prepayments and other current assets 18,163 21,969 Other assets 9,084 (15,254) Accounts payable and accrued expenses (49,407) (88,975) Income taxes (4,465) (40,099) Long-term warranties 3,201 2,501 Postretirement benefit liabilities (1,289) 5,162 Other long-term liabilities (7,577) 3,309 -------- --------- Net cash provided by operating activities 62,022 13,550 -------- --------- Cash flows from investing activities: Proceeds from sale of businesses, net 41,826 35,512 Purchases of and investments in other companies, net of cash acquired (3,805) (405,226) Capital expenditures (67,595) (70,924) Proceeds from sale of fixed assets and other 5,525 393 -------- --------- Net cash used by investing activities (24,049) (440,245) -------- --------- Cash flows from financing activities: Net payments on short-term debt (25,445) (24,106) Proceeds from sale of accounts receivable -- 50,000 Net proceeds from issuance of bank loans 14,887 -- Net proceeds from commercial paper borrowings 46,454 435,113 Long-term debt payments (32,693) (5,091) Common stock issued 15 7,873 Treasury stock purchases (7,535) (7,610) Dividends paid (17,106) (17,956) -------- --------- Net cash (used) provided by financing activities (21,423) 438,223 -------- --------- Effect of exchange rate changes on cash 366 109 -------- --------- Net increase in cash and cash equivalents 16,916 11,637 -------- --------- Cash and cash equivalents at beginning of period 39,514 22,746 -------- --------- Cash and cash equivalents at end of period $ 56,430 $ 34,383 ======== =========
See accompanying supplemental notes to consolidated condensed financial statements. 5 6 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES Supplemental Notes To Consolidated Condensed Financial Statements (Unaudited) (1) The consolidated condensed financial statements included herein have been prepared by the registrant pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to applicable rules and regulations, although the registrant believes that the disclosures herein are adequate to make the information presented not misleading. In the opinion of the Company, the accompanying consolidated condensed financial statements contain all adjustments necessary to present fairly the financial position as of September 30, 2000 and December 31, 1999, the results of operations for the three and nine month periods ended September 30, 2000 and 1999, and cash flows for the nine months ended September 30, 2000 and 1999. The results of operations for interim periods are not necessarily indicative of the results expected for the full year. (2) The following tables summarize the indebtedness and capitalization of the Company at September 30, 2000 and at December 31, 1999 (in thousands):
September 30, 2000 December 31, 1999 ------------------------ ------------------------ Current Long-term Current Long-term Indebtedness: Bank loans $57,468 $ -- $ 81,145 $ -- Bank lines at an average rate of 6.71% in 2000 and 5.28% in 1999 1,629 56,699 -- 41,812 Commercial paper, 6.68% interest in 2000 and 6.08% in 1999 -- 443,301 -- 396,847 Senior notes, 6.75% interest, due March 2003 -- 100,000 -- 100,000 Senior notes, 6.70% interest, due June 2008 -- 200,000 -- 200,000 Term loans (foreign currency) at an average rate of 4.11%, due July 2004 12,386 37,569 14,299 57,196 Other, primarily foreign bank loans, at an average rate of 5.79% in 2000 and 5.91% in 1999 6,204 45,807 7,420 58,639 ------- -------- -------- -------- Total notes payable and long-term debt $77,687 $883,376 $102,864 $854,494 ======= ======== ======== ========
September 30, December 31, Stockholders' equity: 2000 1999 --------- --------- Common Stock $.005 par value; 200,000 shares authorized; issued 45,063 shares at September 30, 2000 and 45,062 at December 31, 1999 $ 225 $ 225 Additional paid in capital 713,808 715,322 Retained earnings 409,461 342,529 Accumulated other comprehensive losses (89,571) (71,146) Treasury stock, 7,036 shares at September 30, 2000 and 6,700 shares at December 31, 1999, at cost (260,809) (253,274) Unearned compensation (156) (1,726) --------- --------- Total stockholders' equity $ 772,958 $ 731,930 ========= =========
(continued) 6 7 As of October 4, 2000, the Company amended the $400 million 364-day Revolving Credit Agreement (the Revolver) expiring on May 31, 2001 and the $500 million Amended Credit Agreement (the Credit Agreement) expiring on July 31, 2002. The Revolver and the Credit Agreement provide for borrowings under the facilities at LIBOR plus 0.45%. If borrowings greater than 33% of either facility are utilized, the rate increases to LIBOR plus 0.55%. The Company pays an annual fee of 0.10% for each facility, and the Credit Agreement allows for borrowings at specified bid rates. At September 30, 2000 and December 31, 1999, the three-month LIBOR rate was 6.77% and 6.03%, respectively. The Revolver and the Credit Agreement, as amended, contain financial and operating covenants requiring the Company to maintain certain financial ratios and standard provisions limiting leverage, investments and liens. The Company was in compliance with these financial and operating covenants at September 30, 2000 and December 31, 1999. At September 30, 2000 and December 31, 1999, no amounts were outstanding under either of these agreements. The Company has additional short-term bank lines that provide for total borrowings of $175 million which are expected to be reborrowed in the ordinary course of business. At September 30, 2000 and December 31, 1999, the Company had $58.3 million and $41.8 million, respectively, outstanding under these bank lines. Commercial paper borrowings are expected to be reborrowed in the ordinary course of business on a long-term basis. Commercial paper borrowings were also the primary source of funds used to finance the acquisition of Sabroe A/S. Concerning bank loans and other, the Company's non-U.S. subsidiaries maintain bank credit facilities in various currencies that provided for available borrowings of $244.1 million and $385.1 million at September 30, 2000 and December 31, 1999, respectively, of which $189.9 million and $295.1 million, respectively, were unused. In some instances, borrowings against these credit facilities have been guaranteed by the Company to assure availability of funds at favorable rates. The Company also maintains other debt of $55.2 million and $57.2 million at September 30, 2000 and December 31, 1999, respectively. (3) The Company established a receivables sales agreement in 1992. Under an Amended and Restated Receivables Sales Agreement entered into on December 22, 1999 and amended October 20, 2000, the maximum amount of the purchasers' investment increased from $150 million to $175 million and is subject to decrease based on the level of eligible accounts receivable and restrictions on concentrations of receivables. The balance of the sold accounts receivable was $175 million at September 30, 2000 and at December 31, 1999. The sold accounts receivable are reflected as a reduction of receivables in the accompanying consolidated balance sheets. The discount rate on the receivables sold was approximately 6.62% and 6.22% at September 30, 2000 and December 31, 1999, respectively. (4) In the first half of 2000, the employment of several senior executives, including the Company's former chief executive officer and chief financial officer, was terminated. The Company has negotiated agreements with these executives, resulting in severance costs of $6.7 million, of which $3.5 million and $3.2 million were charged to earnings in the first quarter and second quarter of 2000, respectively. (5) In February, 1998, the Company incurred damage to its Grantley manufacturing facility in York, PA, when tanks used for testing ruptured. The accident caused substantial damage to its facilities, which have been subsequently rebuilt. The Company obtained reimbursement under its insurance programs for both property damage and business interruption relating to the Grantley facility, and reached a final settlement in the third quarter of 2000. During the year ended December 31, 1999, the Company received payments of $27.5 million and in the quarter ended September 30, 2000, the Company received a final cash payment of $17.0 million. Pursuant to generally accepted accounting principles, the costs of reconstructing and replacing property damaged or destroyed in the accident were recorded in the applicable property accounts, and the difference between the net book value of the assets damaged or destroyed and the related insurance recovery was included in operations. During the first half of 1999 and during the third quarter of 2000, the Company recorded credits to cost of goods sold of $6.0 million and $9.1 million, respectively. (continued) 7 8 (6) Comprehensive income is determined as follows: Comprehensive Income (in thousands)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, --------------------------- --------------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Net income $15,256 $ 3,776 $84,038 $61,605 Other comprehensive loss (income): Foreign currency translation adjustment 8,294 (482) 18,425 9,130 ------- ------- ------- ------- Comprehensive income $ 6,962 $ 4,258 $65,613 $52,475 ======= ======= ======= =======
(7) The Company's basic earnings per share are based upon the weighted average common shares outstanding during the period. The Company's diluted earnings per share are based upon the weighted average outstanding common shares and common share equivalents. (8) Net income as set forth in the statements of operations is used in the computation of basic and diluted earnings per share information. Reconciliations of shares used in the computations of earnings per share are as follows (in thousands):
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, ---------------------------- --------------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Weighted average common shares outstanding used in the computation of basic earnings per share 38,034 39,893 38,076 39,853 Effect of dilutive securities: Non-vested restricted shares 7 77 7 77 Stock options 191 305 87 173 ------ ------ ------ ------ Weighted average common shares and equivalents used in the computation of diluted earnings per share 38,232 40,275 38,170 40,103 ====== ====== ====== ======
(continued) 8 9 (9) The table below represents the Company's operating results by segment:
(in thousands) Three Months Ended Sept. 30, Nine Months Ended Sept. 30, ----------------------------- ------------------------------ 2000 1999 2000 1999 --------- ----------- ----------- ----------- Net sales: Engineered Systems Group $ 376,971 $ 355,572 $ 1,112,592 $ 1,056,092 York Refrigeration Group 242,484 274,632 735,198 564,807 Unitary Products Group 264,932 274,010 786,187 826,186 Bristol Compressors 106,083 111,928 430,211 463,232 Eliminations (43,767) (45,782) (158,611) (145,136) --------- ----------- ----------- ----------- $ 946,703 $ 970,360 $ 2,905,577 $ 2,765,181 ========= =========== =========== =========== Eliminations include the following intersegment sales: Engineered Systems Group $ 9,021 $ 7,004 $ 32,645 $ 19,603 York Refrigeration Group 6,687 8,717 26,368 26,380 Unitary Products Group 250 583 1,354 1,716 Bristol Compressors 27,809 29,478 98,244 97,437 --------- ----------- ----------- ----------- Eliminations $ 43,767 $ 45,782 $ 158,611 $ 145,136 ========= =========== =========== =========== Income from operations: Engineered Systems Group $ 28,086 $ 26,445 $ 84,343 $ 76,189 York Refrigeration Group 16,582 16,108 45,167 28,313 Unitary Products Group 20,032 23,876 59,475 81,783 Bristol Compressors 3,751 11,436 44,916 52,248 Eliminations, general corporate expenses and other non-allocated items including acquisition, integration, restructuring, and other charges (44,780) (59,613) (97,500) (113,001) --------- ----------- ----------- ----------- $ 23,671 $ 18,252 $ 136,401 $ 125,532 Equity in earnings of affiliates: Engineered Systems Group $ (776) $ (232) $ (2,482) $ (1,127) York Refrigeration Group (103) (214) (604) (460) Unitary Products Group (327) (164) (1,251) (587) Bristol Compressors (418) (522) (1,358) (2,000) --------- ----------- ----------- ----------- $ (1,624) $ (1,132) $ (5,695) $ (4,174) Earnings before interest and taxes: Engineered Systems Group $ 28,862 $ 26,677 $ 86,825 $ 77,316 York Refrigeration Group 16,685 16,322 45,771 28,773 Unitary Products Group 20,359 24,040 60,726 82,370 Bristol Compressors 4,169 11,958 46,274 54,248 Eliminations, general corporate expenses and other non-allocated items including acquisition, integration, restructuring, and other charges (44,780) (59,613) (97,500) (113,001) --------- ----------- ----------- ----------- $ 25,295 $ 19,384 $ 142,096 $ 129,706 Gain on sale of businesses -- (9,627) (26,902) (9,627) Interest expense, net 20,548 19,063 60,779 41,735 --------- ----------- ----------- ----------- Income before income taxes and cumulative effect of accounting change $ 4,747 $ 9,948 $ 108,219 $ 97,598 Provision (benefit) for income taxes (10,509) 6,172 24,181 35,096 --------- ----------- ----------- ----------- Income before cumulative effect of accounting change $ 15,256 $ 3,776 $ 84,038 $ 62,502 ========= =========== =========== ===========
(continued) 9 10
September 30, 2000 December 31, 1999 ------------------ ----------------- Total assets: Engineered Systems Group $ 771,709 $ 712,119 York Refrigeration Group 631,848 680,453 Unitary Products Group 631,399 560,776 Bristol Compressors 224,410 217,792 Eliminations and other non-allocated assets 582,899 703,399 ---------- ------------ $ 2,842,265 $ 2,874,539 ============ ============
(10) In January 1999, the Company recorded a charge of $0.9 million, net of $0.4 million in related income taxes, to write-off start-up activities in accordance with AICPA Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities." (11) On June 10, 1999, the Company acquired all of the outstanding capital stock of Sabroe A/S (Sabroe), a Danish company, for $407.1 million in cash and assumed debt of $216.0 million. Sabroe is a world leader in supplying refrigeration systems and products. In connection with the acquisition and subsequent restructuring, the following were considered in the allocation of the purchase price: acquisition expenses of $7.3 million; deferred taxes of $30.4 million; non-cash write-downs of $4.4 million and other accruals of $11.8 million. During the execution of the integration plan, additional costs were incurred and accrued, resulting in an increase to the unallocated excess of cost over net assets acquired. These costs were $5.2 million for fixed asset write-downs, primarily at the Norrkoping and Retech plants, and additional accruals of $3.2 million primarily for severance costs for workforce reductions. During the third quarter of 2000, additional deferred tax assets were recognized relating to pre-acquisition loss carryforwards resulting in a decrease to the unallocated excess of cost over net assets acquired of $9.0 million. The Company has nearly completed executing the plan for integrating Sabroe into the York Refrigeration Group. The Sabroe portion of the plan included closing two plants, closing certain duplicate sales and service offices in Europe and Asia, rationalizing products, workforce reductions and other costs. The Retech and Norrkoping manufacturing plants in Denmark and Sweden, respectively, are closed and have no remaining production. The table below details the activities in the first three quarters of 2000.
Additional Accruals Remaining Established in 2000 Utilized in Remaining Accruals at to Finalize Nine Months Ended Accruals at (in thousands) December 31, 1999 Integration September 30, 2000 September 30, 2000 ------------ ----------------- ----------- ------------------ ------------------ Severance costs $5,897 $2,928 $5,187 $3,638 Contractual obligations 1,575 - 327 1,248 Other 356 241 489 108 ------ ------ ------ ------ $7,828 $3,169 $6,003 $4,994 ===== ====== ====== ======
The acquisition has been accounted for under the purchase method of accounting and the Sabroe assets, liabilities and results of operations, since acquisition, have been included in the consolidated financial statements. The allocation of the purchase price and other costs as discussed above resulted in the following components of intangible assets, based on independent appraisals and other information, and related straight-line amortization periods:
(in thousands) Intangible Assets Amortization period ------------ ----------------- ------------------- Unallocated excess of cost over net assets acquired $442,537 30 years Trademark and tradenames 35,480 30 years Proprietary technology and patents 2,050 15 years -------- Total intangibles $480,067 ========
The following unaudited pro forma summary combines the consolidated results of operations of the Company and Sabroe as if the acquisition had occurred at the beginning of 1999. The pro forma summary includes adjustments for amortization expense as a result of unallocated excess of cost over net assets acquired and other intangible assets as presented above, interest expense on acquisition debt issued to finance the purchase, adjusted depreciation expense as a result of new fixed assets bases, and estimated (continued) 10 11 income tax effect of the pro forma adjustments. The pro forma summary is for informational purposes only and may not necessarily reflect the results of operations of the Company had Sabroe operated as part of the Company for the periods presented.
Nine Months Ended September 30, 2000 1999 1999 (thousands, except per share data) Historical Historical Pro forma -------------------------------- ---------- ---------- --------- Net sales $2,905,577 $2,765,181 $2,998,753 Income before cumulative effect of accounting change 84,038 62,502 53,488 Net income 84,038 61,605 52,591 Diluted earnings per share: Income before cumulative effect of accounting change $ 2.20 $ 1.56 $ 1.33 Net income $ 2.20 $ 1.54 $ 1.31
(12) In February 2000, the Company sold Northfield Freezing Systems, a supplier to the food processing industry, to FMC Corporation for $39.4 million. In April 2000, the Company sold another small business for $2.4 million. The sale of the two businesses resulted in a net pretax gain of $26.9 million in the first half of 2000. (13) In the third quarter of 2000, the Company recorded $28.7 million in charges related to cost reduction actions. The actions include closures and divestitures, product line and facility rationalizations, and selling, general and administrative expense reductions. The charges included $16.7 million for the impairment of fixed assets and the unallocated excess of cost over net assets acquired relating to facilities to be closed or divested, write-downs of other assets of $6.9 million, accruals for severance related costs of $2.8 million, and other accruals of $2.3 million. Also, the Company recorded charges in cost of goods sold of $4.5 million relating to inventory write-downs and warranty accruals related to these cost reduction activities. (14) During the last three quarters of 1999, the Company recorded charges to operations of $54.5 million in acquisition, integration, restructuring and other charges. York Refrigeration Group charges of $35.0 million related to acquisition, integration and restructuring cost for integrating Sabroe into the York Refrigeration business and, in accordance with applicable accounting rules, were not allocated as part of the purchase price. This portion of the integration plan included closing York's Gram manufacturing plant in Denmark, closing or downsizing certain duplicate sales and service offices in Europe, product rationalizations, and workforce reductions. Other Company charges of $19.5 million, not impacted by the Sabroe acquisition, related to restructuring, downsizing and other costs. The following provides details on activities in the first three quarters of 2000. YORK REFRIGERATION GROUP CHARGES
Remaining Utilized in Remaining Accruals at Nine Months Ended Accruals at (In thousands) December 31, 1999 September 30, 2000 September 30, 2000 ------------ ----------------- ------------------ ------------------ Severance costs $1,426 $ 811 $ 615 Contractual obligations 554 11 543 Other 50 17 33 ------ ------- -------- $2,030 $ 839 $ 1,191 ====== ======= ========
The Company recorded a net credit of $0.2 million and net expenses of $1.0 million in the third quarter and the first three quarters of 2000, respectively, for York Refrigeration Group integration activities. (continued) 11 12 OTHER COMPANY CHARGES
Remaining Utilized in Remaining Accruals at Nine Months Ended Accruals at (in thousands) December 31, 1999 September 30, 2000 September 30, 2000 ------------ ----------------- ------------------ ------------------ Severance costs $4,318 $3,974 $ 344 Contractual obligations 1,535 591 944 ------ ------ ------- $5,853 $4,565 $ 1,288 ====== ====== =======
In the third quarter of 1999, the Company recorded a charge in cost of goods sold of $17.5 million to write-down inventory to the lower of cost or market. Integration of the Refrigeration business, principally discontinuation of Gram product lines resulted in $6.1 million of the inventory write-down. Deteriorating economic conditions in Latin America and Eastern Europe resulted in inventory write-downs of $3.5 million and $4.1 million, respectively. Faulty gas engines in a UPG unit accounted for additional inventory write-downs of $2.8 million. The remaining $1.0 million of inventory write-downs related to ESG operations in the U.S. and Australia. The Company recorded a net credit of $0.9 million during the third quarter of 2000 relating to these prior charges. (15) The benefit for income taxes for the three months ended September 30, 2000 was $10.5 million. The benefit arose primarily from the recognition of certain deferred tax benefits resulting from the integration of the Sabroe acquisition and the utilization of certain foreign net operating loss carryforwards. The provision for income taxes for the nine months ended September 30, 2000 was $24.2 million. The effective rate was 22.3% for the first nine months of 2000 compared to 36.0% for the same period of 1999. The lower effective tax rate resulted from the third quarter events described above, offset in part by the tax effect of the gain on the Northfield sale. The tax rate from normal operations was 31% for the nine months ended September 30, 2000. (16) Reference is made to Registrant's 1999 Annual Report on Form 10-K for more detailed financial statements and footnotes. 12 13 PART I - FINANCIAL INFORMATION YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations
Net Sales (in thousands) Three Months Ended Sept. 30, Nine Months Ended Sept. 30, ---------------------------- ------------------------------- 2000 1999 2000 1999 --------- --------- ----------- ----------- Engineered Systems Group $ 376,971 $ 355,572 $ 1,112,592 $ 1,056,092 York Refrigeration Group 242,484 274,632 735,198 564,807 Unitary Products Group 264,932 274,010 786,187 826,186 Bristol Compressors 106,083 111,928 430,211 463,232 Eliminations (43,767) (45,782) (158,611) (145,136) --------- --------- ----------- ----------- Net Sales $ 946,703 $ 970,360 $ 2,905,577 $ 2,765,181 ========= ========= =========== =========== U.S. 52% 51% 50% 55% Non-U.S 48% 49% 50% 45% --------- --------- ----------- ----------- Total 100% 100% 100% 100% ========= ========= =========== ===========
Net sales for the three months ended September 30, 2000 decreased 2.4% to $946.7 million from $970.4 million for the same period in 1999. Net sales for the nine months ended September 30, 2000 increased 5.1% to $2,905.6 million as compared to $2,765.2 million for the nine months ended September 30, 1999. From a geographic perspective, for the three months ended September 30, 2000, U.S. sales decreased 1.6% to $489.2 million and non-U.S sales decreased 3.3% to $457.5 million. Order backlog at September 30, 2000 was $1,057.2 million compared to $1,149.0 million as of September 30, 1999 and $1,065.1 million as of December 31, 1999. Engineered Systems Group (ESG) sales for the three months ended September 30, 2000 increased 6.0% to $377.0 million from $355.6 million for the same period in 1999. Year-to-date sales increased 5.3% to $1,112.6 million. The increase in sales was primarily the result of strength in the global service business and increased equipment sales in North America, partially offset by the sale of Viron in the third quarter of 1999. York Refrigeration Group (YRG) sales for the three months ended September 30, 2000 decreased 11.7% to $242.5 million from $274.6 million for the same period in 1999. The decrease was the result of negative currency translation effects and the divestiture of Northfield Freezing Systems. Year-to-date sales increased 30.2% to $735.2 million. The increase was due to the acquisition of Sabroe, partially offset by the divestiture of Northfield and negative currency translation effects. Unitary Products Group (UPG) sales for the three months ended September 30, 2000 decreased 3.3% to $264.9 million from $274.0 million for the same period in 1999. Year-to-date sales decreased 4.8% to $786.2 million. The sales decrease was a result of a decline in the domestic unitary market, weakness in the manufactured housing business, and the impact of higher than normal levels of inventory in the distribution channels. Bristol Compressors sales for the three months ended September 30, 2000 decreased 5.2% to $106.1 million from $111.9 million for the same period in 1999. Year-to-date sales decreased 7.1% to $430.2 million. The decline was due to a reduction in room air conditioner compressor sales and a weaker domestic unitary market. In the third quarter of 2000, the Company settled an insurance claim relating to the Grantley accident, and recorded a $9.1 million benefit to cost of goods sold. This benefit is partially offset by an unrelated settlement of $2.8 million (continued) 13 14 due to a claim from a 1991 project. In 1999, the Company recorded credits to cost of goods sold of $6.0 million relating to the Grantley insurance claim. In the third quarter of 2000, the Company recorded charges in cost of goods sold of $4.5 million relating to inventory write-downs and warranty accruals for cost reduction activities. In the third quarter of 1999, the Company recorded a charge in cost of goods sold of $17.5 million to write-down inventory to the lower of cost or market. Integration of the Refrigeration business, principally discontinuation of Gram product lines resulted in $6.1 million of the inventory write-down. Deteriorating economic conditions in Latin America and Eastern Europe resulted in inventory write-downs of $3.5 million and $4.1 million, respectively. Faulty gas engines in a UPG unit accounted for additional inventory write-downs of $2.8 million. The remaining $1.0 million of inventory write-downs related to ESG operations in the U.S. and Australia. The Company recorded a net credit of $0.9 million during the third quarter of 2000 relating to these prior charges. Excluding all charges discussed above and $0.5 million of operating costs related to the current year cost reduction initiatives, gross profit during the third quarter ended September 30, 2000 decreased 3.2% to $199.9 million (21.1% of sales) from $206.6 million (21.3% of sales) during the third quarter ended September 30, 1999. The decrease is primarily due to Bristol's reduction in production volume due to order cancellations for the fourth quarter of 2000. Gross profit for the nine months ended September 30, 2000 increased 5.7% to $637.8 million (22.0% of sales) from $603.6 million (21.8% of sales) during the same nine months of 1999. The increase is primarily due to the impact of the acquisition of Sabroe, partially offset by negative currency translation effects. Selling, general and administrative expense (SG&A), exclusive of $0.6 million relating to the current year cost reduction actions, increased 0.5% to $149.4 million (15.8% of sales) in the third quarter ended September 30, 2000 from $148.7 million (15.3% of sales) in the third quarter ended September 30, 1999. For the nine months ended September 30, 2000, SG&A expense increased to $473.4 million (16.3% of sales) compared to $425.4 million (15.4% of sales) for the nine months ended September 30, 1999. The increase in dollars and percentage is primarily due to increased goodwill amortization, the full impact of the Sabroe acquisition, and increased spending in engineering and marketing at UPG. Included in SG&A for the first two quarters of 2000 are executive severance costs of $6.7 million. In September 2000, the Company announced initiation of a cost reduction process designed to result in savings of $25 million to $30 million in 2001, and continuing annual savings of $50 million to $60 million thereafter. Total pre-tax charges to implement the cost reduction program are estimated to approximate $120 million through the second quarter of 2001, of which $70 million will require cash payments. In the third quarter of 2000, the Company recorded $33.2 million in charges related to these cost reduction actions, including the $4.5 million charged to cost of goods sold as discussed above. The actions include closures and divestitures, product line and facility rationalizations, and selling, general and administrative expense reductions. The charges included $16.7 million for the impairment of fixed assets and the unallocated excess of cost over net assets acquired relating to facilities to be closed or divested, write-downs of other assets of $6.9 million, accruals for severance related costs of $2.8 million, and other accruals of $2.3 million. The Company also recorded a net credit of $0.2 million and net expenses of $1.0 million in the third quarter and the first three quarters of 2000, respectively, for York Refrigeration Group integration activities. In the third quarter of 1999, the Company recorded charges of $10.0 million related to the integration of Sabroe into the York Refrigeration business and $12.2 million for restructuring and downsizing other Company operations. In the second quarter of 1999, the Company recorded acquisition and integration charges of approximately $13.0 million. Equity in earnings of affiliates was $1.6 million during the third quarter of 2000 as compared to $1.1 million during the third quarter of 1999. Year-to-date equity in earnings of affiliates was $5.7 million in 2000 compared to $4.2 million in 1999. This improvement is primarily attributable to better performance of the Company's joint ventures in Malaysia. During the third quarter of 2000, earnings before interest and taxes (EBIT), excluding restructuring charges, integration expenses, certain one-time settlements, and the inventory write-downs, decreased to $52.1 million (5.5% of sales) from $59.1 million (6.1% of sales) in 1999. EBIT, excluding special charges, for the nine months ended (continued) 14 15 September 30, 2000 was $176.9 million (6.1% of sales) compared to $182.4 million (6.6% of sales) for the same nine months of 1999. The discussion below of each business unit's EBIT excludes the restructuring charges, integration expenses, charges for executive severance, certain one-time settlements, and the inventory write-downs as discussed above. ESG EBIT for the three months ended September 30, 2000 increased 8.2% to $28.9 million (7.7% of sales) from $26.7 million (7.5% of sales) for the same period in 1999. EBIT for the nine months ended September 30, 2000 was $86.8 million compared to $77.3 million in 1999. The improvement was the result of the performance of the global service business, strong North American equipment sales, the successful introduction of new products, and improved factory performance. YRG EBIT for the three months ended September 30, 2000 increased to $16.7 million (6.9% of sales) from $16.3 million (5.9% of sales) for the same period in 1999. EBIT for the nine months ended September 30, 2000 was $45.8 million compared to $28.8 million in 1999. The improvement was primarily due to the acquisition of Sabroe and resulting cost synergies, partially offset by negative currency translations effects. UPG EBIT for the three months ended September 30, 2000 decreased to $20.4 million (7.7% of sales) from $24.0 million (8.8% of sales) for the same period in 1999. EBIT for the nine months ended September 30, 2000 was $60.7 million compared to $82.4 million in 1999. EBIT decreased as a result of lower volume, increased investments in engineering, product development and marketing, and lower margins in European unitary operations. Bristol Compressors EBIT for the three months ended September 30, 2000 decreased to $4.2 million (3.9% of sales) from $12.0 million (10.7% of sales) for the same period in 1999. EBIT for the nine months ended September 30, 2000 was $46.3 million compared to $54.2 million in 1999. The decrease reflected volume effects of a significant decline in production versus 1999 due to the cancellation of orders for the fourth quarter of 2000 and reduced margins. In February 2000, the Company sold Northfield Freezing Systems, a supplier to the food processing industry, to FMC Corporation for $39.4 million. In April 2000, the Company sold another small business for $2.4 million. The sale of the two businesses resulted in a net pretax gain of $26.9 million in the first half of 2000. Net interest expense increased to $20.5 million for the third quarter of 2000. Interest expense was $60.8 million for the nine months ended September 30, 2000 compared to $41.7 million for the nine months ended September 30, 1999. The increase is due to higher interest rates and higher debt levels related to the acquisition of Sabroe. In January of 1999, the Company recorded a $0.9 million charge, net of a $0.4 million tax benefit, to write-off start-up activities in accordance with AICPA Statement of Position 98-5, "Reporting on The Costs of Start-Up Activities. The benefit for income taxes for the three months ended September 30, 2000 was $10.5 million. The benefit arose primarily from the recognition of certain deferred tax benefits resulting from the integration of the Sabroe acquisition and the utilization of certain foreign net operating loss carryforwards. The provision for income taxes for the nine months ended September 30, 2000 was $24.2 million. The effective rate was 22.3% for the first nine months of 2000 compared to 36.0% for the same period of 1999. The lower effective tax rate resulted from the third quarter events described above, offset in part by the tax effect of the gain on the Northfield sale. The tax rate from normal operations was 31% for the nine months ended September 30, 2000. Net income, as a result of the above factors, was $15.3 million during the third quarter of 2000 as compared to $3.8 million during the third quarter of 1999. For the nine months ended September 30, 2000, net income increased to $84.0 million compared to $61.6 million in the first nine months of 1999. Liquidity and Capital Resources Working capital requirements are generally met through a combination of internally generated funds, bank lines of credit, commercial paper issuances, financing of trade receivables and credit terms from suppliers which approximate receivable terms to the Company's customers. The Company believes that these sources, including its $400 million 364-day Amended Revolver and its $500 million Amended Credit Agreement described below, will be (continued) 15 16 sufficient to meet foreseeable working capital needs. Additional sources of working capital include customer deposits and progress payments. Working capital was $597.0 million and $485.2 million as of September 30, 2000 and December 31, 1999, respectively. Inventory levels were higher at September 30, 2000, than at December 31, 1999, due to seasonal inventory builds and increased levels in anticipation of factory consolidations. Accounts payable and accrued expenses were lower at September 30, 2000, than at December 31, 1999, due to a decrease in accruals related to the Sabroe acquisition and other Company charges. The current ratio was 1.66 at September 30, 2000, as compared to 1.48 at December 31, 1999. Long-term indebtedness was $883.4 million at September 30, 2000, primarily consisting of borrowings of $443.3 million in commercial paper, $300.0 million of senior notes, $56.7 million in bank lines and $37.6 million in Danish term loans. At September 30, 2000, the Company had available a $400 million 364-day Amended Revolving Credit Agreement (the Revolver) expiring on May 31, 2001 and a $500 million Amended Credit Agreement (the Credit Agreement) expiring on July 31, 2002. The Revolver and the Credit Agreement were amended as of October 4, 2000 to provide for charges relating to the cost reduction process. The facilities provide for borrowings at LIBOR plus 0.45%. If borrowings greater than 33% of either facility are utilized, the rate increases to LIBOR plus 0.55%. The Company pays an annual fee of 0.10% for each facility and the Credit Agreement allows for borrowings at specified bid rates. At September 30, 2000, the three-month LIBOR rate was 6.77%. The Revolver and the Credit Agreement, as amended, contain financial and operating covenants requiring the Company to maintain certain financial ratios and standard provisions limiting leverage, investments and liens. The Company was in compliance with these financial and operating covenants at September 30, 2000. No amounts were outstanding under either of these agreements. The Company has additional short-term bank lines that provide for total borrowings of $175 million which are expected to be reborrowed in the ordinary course of business on a long-term basis. At September 30, 2000 and December 31, 1999, the Company had $58.3 million and $41.8 million, respectively, outstanding under these bank lines. Commercial paper borrowings are expected to be reborrowed in the ordinary course of business. Commercial paper borrowings were also the primary source of funds used to finance the acquisition of Sabroe A/S. The interest rate on the commercial paper was 6.68% as of September 30, 2000. At September 30, 2000 and December 31, 1999, the Company had $300 million of Senior Notes outstanding. On June 1, 1998, the Company issued $200 million of 6.70% fixed rate Senior Notes having a maturity of ten years from the date of issue. The remaining $100 million ten-year Senior Notes bear interest at a 6.75% fixed rate and are due March 2003. The Company maintains foreign currency term loans at September 30, 2000 of $50.0 million payable in semi-annual payments. These term loans are due July 2004 and bear interest at an average rate of 4.11%. Concerning bank loans and other, the Company's non-U.S. subsidiaries maintain bank credit facilities in various currencies that provided for available borrowings of $244.1 million and $385.1 million at September 30, 2000 and December 31, 1999, respectively, of which $189.9 million and $295.1 million, respectively, were unused. In some instances, borrowings against these credit facilities have been guaranteed by the Company to assure availability of funds at favorable rates. The Company also maintains other debt of $55.2 million and $57.2 million at September 30, 2000 and December 31, 1999, respectively. The Company established a receivables sales agreement in 1992. Under an Amended and Restated Receivables Sales Agreement entered into on December 22, 1999 and amended October 20, 2000, the maximum amount of the purchasers' investment increased from $150 million to $175 million and is subject to decrease based on the level of eligible accounts receivable and restrictions on concentrations of receivables. The balance of the sold accounts receivable was $175 million at September 30, 2000 and at December 31, 1999. The sold accounts receivable are reflected as a reduction of receivables in the accompanying consolidated balance sheets. The discount rate on the receivables sold was approximately 6.62% and 6.22% at September 30, 2000 and December 31, 1999, respectively. (continued) 16 17 Because the Company's obligations under the Amended and Restated Credit Agreement and Receivables Sales Agreement bear interest at floating rates, the Company's interest costs are sensitive to changes in prevailing interest rates. Based on historical cash flows, the Company believes that it will be able to satisfy its principal and interest payment obligations and its working capital and capital expenditure requirements from operating cash flows together with the availability under the revolving credit facility. In the ordinary course of business, the Company enters into various types of transactions that involve contracts and financial instruments with off-balance-sheet risk. The Company enters into these financial instruments to manage financial market risk, including foreign exchange, commodity price and interest rate risk. The Company enters into these financial instruments utilizing over-the-counter as opposed to exchange traded instruments. The Company mitigates the risk that counterparties to these over-the-counter agreements will fail to perform by only entering into agreements with major international financial institutions. Capital expenditures were $67.6 million for the nine months ended September 30, 2000 as compared to $70.9 million for the same period of 1999. Capital expenditures currently anticipated for expanded capacity, cost reductions and the introduction of new products during the next twelve months are expected to be in excess of depreciation and amortization. These expenditures will be funded from a combination of operating cash flows, availability under the revolving credit facility, and commercial paper borrowings. Cash dividends of $0.15 per share were paid on common stock in the third quarter of 2000. 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, future prospects and other factors deemed relevant by the Board of Directors. Acquisition of Sabroe and the Integration Plan In June 1999, the Company acquired all of the outstanding capital stock of Sabroe A/S (Sabroe), a Danish company, for $407.1 million in cash and assumed debt of $216.0 million. Sabroe is a world leader in supplying refrigeration systems and products. The Company financed the acquisition through issuance of commercial paper, supported by its credit facilities. The Company has nearly completed executing the plan for integrating Sabroe into the York Refrigeration Group. The Sabroe portion of the plan included closing two plants, closing certain duplicate sales and service offices in Europe and Asia, rationalizing products, workforce reductions and other costs. The Retech and Norrkoping manufacturing plants in Denmark and Sweden, respectively, are closed and have no remaining production. New Accounting Standards In 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Standard establishes comprehensive accounting and reporting standards for derivative instruments and hedging activities that require a company to record the derivative instrument at fair value in the balance sheet. Furthermore, the derivative instrument must meet specific criteria or the change in its fair value is to be recognized in earnings in the period of change. To achieve hedge accounting treatment the derivative instrument needs to be part of a well- documented hedging strategy that describes the exposure to be hedged, the objective of the hedge and a measurable definition of its effectiveness in hedging the exposure. In 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No. 133." SFAS No. 137 delays the Standard effective date to the beginning of the first quarter of the fiscal year beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" which amends SFAS No.133 in certain respects. Although the Company has not completed its analysis, adoption of these statements is not expected to have a material effect on the Company's financial statements. (continued) 17 18 In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The Standard replaces SFAS No. 125 and revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. The Standard is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The Company has not determined the effect, if any, adoption of this standard will have on the Company's financial statements. Forward-Looking Information - Risk Factors To the extent the Company has made "forward-looking statements," certain risk factors could cause actual results to differ materially from those anticipated in such forward-looking statements including, but not limited to, competition, government regulation, environmental considerations, weather, and the successful implementation of the Company's cost reduction actions. Unseasonably cool spring or summer weather could continue to adversely affect the Company's UPG residential air conditioning business. The ESG air conditioning business could be affected by a slowdown in the large chiller market and by the acceptance of new product introductions. YRG could continue to be adversely affected by the effects of declining European currencies. In addition, overall performance of the Company could be affected by any serious economic downturns in various world markets. 18 19 YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1 Legal Proceedings Not Applicable Item 2 Changes in Securities Not Applicable Item 3 Defaults Upon Senior Securities Not Applicable Item 4 Submission of Matters to a Vote of Security Holders Not Applicable Item 5 Other Information Not Applicable Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 4.1 - SECOND AMENDMENT, dated as of October 4, 2000, to the 364-Day Revolving Credit Agreement, among YORK INTERNATIONAL CORPORATION, the several banks and other financial institutions from time to time parties thereto and CANADIAN IMPERIAL BANK OF COMMERCE, acting through its New York Agency, as administrative agent for the Banks thereunder Exhibit 4.2 - FOURTH AMENDMENT, dated as of October 4, 2000, to the Amended and Restated Credit Agreement, among YORK INTERNATIONAL CORPORATION, the several banks and other financial institutions from time to time parties thereto and CANADIAN IMPERIAL BANK OF COMMERCE, acting through its New York Agency, as agent for the Banks thereunder Exhibit 4.3 - FIFTH AMENDMENT TO AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT, among York International Corporation, Asset Securitization Cooperative Corporation and Canadian Imperial Bank of Commerce Exhibit 10.1 - Amendment No. 3 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, effective July 27, 2000 Exhibit 10.2 - Settlement Agreement and General Release by and between John R. Tucker and York International Corporation, dated August 7, 2000 Exhibit 10.3 - Fourth Amendment to the York International Corporation Executive Deferred Compensation Plan, effective as of October 1, 2000 Exhibit 27 Financial Data Schedule (EDGAR only) (b) None 19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned unto duly authorized. YORK INTERNATIONAL CORPORATION Registrant Date November 8, 2000 /S/ C. David Myers ---------------- --------------------------------- C. David Myers Corporate Vice President and Chief Financial Officer 20