-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SVcDFuhSw5Nrpe5jeWlOP6KKsSOZR6wGKFn2vchqttCcDN2oxB0u009JkUP9xxb+ ku0sUAaTmMjBAYinYEDSrA== 0000893220-04-000422.txt : 20040312 0000893220-04-000422.hdr.sgml : 20040312 20040312171427 ACCESSION NUMBER: 0000893220-04-000422 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YORK INTERNATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000842662 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 133473472 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10863 FILM NUMBER: 04666938 BUSINESS ADDRESS: STREET 1: 631 S RICHLAND AVE CITY: YORK STATE: PA ZIP: 17403 BUSINESS PHONE: 7177717890 MAIL ADDRESS: STREET 1: 631 SOUTH RICHLAND AVENUE CITY: YORK STATE: PA ZIP: 17403 FORMER COMPANY: FORMER CONFORMED NAME: YORK HOLDINGS CORP DATE OF NAME CHANGE: 19910930 10-K 1 w94715e10vk.txt FORM 10-K YORK INTERNATIONAL CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 COMMISSION FILE NUMBER: 1-10863 YORK INTERNATIONAL CORPORATION (EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3473472 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 631 SOUTH RICHLAND AVENUE, YORK, PA 17403 (717) 771-7890 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ------------------- COMMON STOCK, $.005 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES X NO ----- ----- As of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2003), the aggregate market value of the Common Stock held by non-affiliates was $918,060,718 based on the closing price of the Common Stock on the New York Stock Exchange Composite Transactions of such date. (Only officers and directors of the registrant are assumed to be affiliates for purposes of this calculation.) As of March 12, 2004, there were 41,001,707 shares of the registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Financial Statements and Review of Operations for the year ended December 31, 2003 are incorporated by reference into Parts I, II, and IV. Portions of the registrant's definitive Proxy Statement pertaining to the Annual Meeting, to be held May 20, 2004, are incorporated by reference into Part III. YORK INTERNATIONAL CORPORATION FORM 10-K YEAR ENDED DECEMBER 31, 2003 INDEX
ITEM NUMBER PAGE - ------ ---- PART I 1. Business 1 2. Properties 13 3. Legal Proceedings 13 4. Submission of Matters to a Vote of Security Holders 14 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 14 6. Selected Financial Data 15 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 7A. Quantitative and Qualitative Disclosure about Market Risk 15 8. Financial Statements and Supplementary Data. 15 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15 9A. Controls and Procedures 15 PART III 10. Directors and Executive Officers of the Registrant 15 11. Executive Compensation 16 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 16 13. Certain Relationships and Related Transactions 16 14. Principal Accountant Fees and Services 16 PART IV 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 16
PART I ITEM 1. BUSINESS GENERAL York International Corporation and its consolidated subsidiaries (the Company, which may be referred to as we, us, or our) are a full-line, global provider of heating, ventilating, air conditioning, and refrigeration (HVAC&R) products and services. We believe that we are the third largest supplier of such products in the United States and one of the leading companies in the HVAC&R industry internationally. Our air conditioning systems range from a one ton* unit for a small residence to large systems installed in high-rise residential and commercial buildings. Our products are sold in over 125 countries and are in use in such diverse locations as the Petronas Towers in Malaysia, the British Houses of Parliament, the Tokyo World Trade Center, Pudong International Airport in Shanghai, the Pentagon, NASA's Vehicle Assembly Building at Kennedy Space Center, NASA's Johnson Space Center, the Los Angeles International Airport, the Jeddah Airport, the Overseas Union Bank Centre in Singapore, the Sydney Opera House, the Atlantic City Convention Center, the English Channel Eurotunnel, the Hong Kong Convention and Exhibition Centre, and the Lantau Airport Railway in Hong Kong. We were founded in 1874 in York, Pennsylvania, and over the years we have undergone various ownership changes. Since 1991, we have been an independent, publicly held company. During the 1990s, we expanded our worldwide presence through growth and acquisitions. In 1999, we further expanded our refrigeration business by acquiring all of the outstanding capital stock of Sabroe A/S, a Danish company. Headquartered in York, Pennsylvania, we have manufacturing facilities in nine states and eight foreign countries. As of December 31, 2003, we employed approximately 22,300 people worldwide. Our principal executive offices are located at 631 South Richland Avenue, York, Pennsylvania 17403, and our telephone number is (717) 771-7890. STRATEGY Our strategy is to be the leading provider of products and services to the global heating, ventilation, air conditioning, and industrial refrigeration markets. We will remain focused solely within this industry. Our objectives are to deliver profitable growth, strong cash flows, and superior returns on invested capital. We are the largest services provider to the industry and have leading positions in several equipment segments. Primary areas of strategic focus include: expanding our leadership position in the global services markets, continued leadership position in the fast growing Chinese market, and growing revenue and increasing the operating margins in our core equipment segments. We have grown and expect to grow our service operations through the expansion of global coverage, service offerings, and market improvement. We are uniquely positioned in the market as we own and operate our service operations globally and have the broadest range of air conditioning and refrigeration skills in the industry. China has been a fast expanding market for our industry and we have built a leadership position in large equipment revenue by successfully executing our strategy of developing greenfield operations since entering the country in 1995. We expect the Chinese market to remain strong and for our market share to increase. Our equipment markets are expected to grow over the long-term horizon but the key elements for the Company's growth include: product development, improved distribution capability, an improved cost position, and the establishment of joint ventures. This will support market share gains in most segments, specifically the North American Unitary and middle markets, the global mini-split markets, and the global industrial and commercial air conditioning markets. - ---------- * The cooling capacity of air conditioning units is measured in tons. One ton of cooling capacity is equivalent to 12,000 BTUs and is generally adequate to air condition approximately 500 square feet of residential space. 1 We focus on maintaining a competitive cost structure by controlling manufacturing and operating expenses, maximizing the current capacity of our operations, developing more efficient manufacturing processes, and leveraging the global scale of our support structure. We continue to emphasize further improvement in the cost, quality, and services of our supply chain. We have also increased our investment in business systems that will allow us to automate, standardize, and leverage our ability to implement and achieve our strategic goals. We believe that our planning processes, capital allocation, investment choices, and management incentive compensation plans are aligned with our overall objectives and are key elements in the implementation of our strategies to contribute to the achievement of our financial goals. PRODUCTS AND MARKETS All of our products are in the HVAC&R industry, and we operate solely in this industry. Effective January 1, 2003, we consolidated our former York Refrigeration Group and Engineered Systems Group segments and reorganized management of the combined business. Our organization is now comprised of three groups, consisting of: Global Applied, Unitary Products Group, and Bristol Compressors. The Global Applied business is comprised of three geographic regions: the Americas; Europe, Middle East, and Africa (EMEA); and Asia. Global Applied designs, produces, services, and sells HVAC&R solutions worldwide. HVAC&R solutions are sold for both the new construction and the replacement markets for a full range of high-rise commercial buildings and industrial applications. Global Applied service businesses sell replacement parts, replacement equipment, and controls, and deliver various services and service solutions. Unitary Products Group (UPG) produces heating and air conditioning solutions designed for use in residential and light commercial applications and distributes proprietary and non-proprietary parts to the aftermarket. Bristol Compressors (Bristol) manufactures reciprocating and scroll compressors for our use and for sale to original equipment manufacturers and wholesale distributors. The following table provides net sales by segment and geographic market:
(in thousands) 2003 2002 2001 - --------------------------------- ----------- ----------- ----------- Global Applied: Americas $ 1,388,930 $ 1,335,392 $ 1,425,885 Europe, Middle East, and Africa 1,343,138 1,161,605 1,147,842 Asia 490,063 418,599 439,858 Intragroup sales (194,537) (165,443) (195,941) ----------- ----------- ----------- 3,027,594 2,750,153 2,817,644 Unitary Products Group 760,059 736,789 755,860 Bristol Compressors 451,241 515,372 509,706 Eliminations (162,840) (158,941) (163,114) ----------- ----------- ----------- Total net sales $ 4,076,054 $ 3,843,373 $ 3,920,096 ----------- ----------- -----------
Our net sales to U.S. and to non-U.S. countries are as follows:
2003 2002 2001 ---- ---- ---- U.S. 45% 48% 48% Non-U.S 55% 52% 52% -- -- --
Additional financial information about our segments, U.S. and non-U.S. operations, and export sales is incorporated herein by reference to Note 17 on pages 43 to 46 of the Annual Financial Statements and Review of Operations. 2 BACKLOG The following provides backlog by business segment:
DECEMBER 31, (in thousands) 2003 2002 - ---------------------------------- ---------- ---------- Global Applied: Americas $ 385,335 $ 356,040 Europe, Middle East and Africa 439,451 368,368 Asia 89,801 79,028 ---------- ---------- 914,587 803,436 Unitary Products Group 47,288 39,118 Bristol Compressors 64,718 85,945 ---------- ---------- Total backlog $1,026,593 $ 928,499 ---------- ----------
Substantially all orders are expected to be fulfilled within the next 12 months. GLOBAL APPLIED Global Applied designs, produces, services, and sells HVAC&R solutions worldwide. Our HVAC&R solutions are sold for both the new construction and the replacement markets for a full range of commercial buildings and various industrial applications, including the food and beverage industry, commercial marine, and the pharmaceutical, petrochemical, textile, and electronics industries' process cooling operations. Our products are also used in sporting venues, such as ice rinks, and we are the world leader in snowmaking equipment and snow inducers. The Global Applied business segment is comprised of three geographic regions: the Americas; Europe, Middle East, and Africa (EMEA); and Asia. Our products include air-cooled and water-cooled chillers, large packaged rooftop units, indoor and outdoor air handling and ventilating equipment, variable air volume units, underfloor air distribution systems, and mini-split and room air conditioning units primarily for high-rise residential and commercial buildings. Our screw and reciprocating compressors, condensers, evaporators, heat exchangers, industrial and marine chillers, ice makers, process refrigeration systems, and gas compression systems are primarily for industrial applications. Many of our products are engineered and manufactured to unique customer specifications. They are operated by control systems that are designed for an individual unit, that automate plant control systems, or that provide advanced control systems for refrigerated containers. Current products utilize HCFC, HFC, HC, and natural refrigerants such as carbon dioxide and ammonia, which meet the requirements of applicable international environmental protocols. Our services business provides maintenance, repair services, and related products, including manufactured parts and equipment, purchased parts and equipment, controls, remanufactured reciprocating compressors, and product commissioning. Our service organizations worldwide are owned and operated by us and utilize factory-trained technicians. Our global parts and service strategy is designed to meet demanding requirements, reduce customer down time, and leverage our national and global service capabilities to provide the best service to our customers. We market our products under the "YORK", "MILLER-PICKING", "PACE", "SABROE", "FRICK", "NOVENCO", "FRIGID COIL", "IMECO", "ACUAir", and "GRAM REFRIGERATION" brands. Service is marketed under the "YORK", "NATKIN", "UNITED MECHANICAL SERVICES", and "SABROE" brands and parts are marketed under the "YORK" and "SOURCE 1" brands. Remanufactured reciprocating compressors are marketed under the "GENERAL REFRIGERMETICS" brand. No single customer accounts for more than 10% of revenues of the Americas, EMEA, or Asia. 3 Historically, approximately 4% of the Americas' sales are related to contracts for the U.S. Navy, for equipment and research and development. Contracts vary in duration from less than one year to several years. If these contracts were to be terminated, we would be entitled to reimbursement of costs incurred and to a payment of a reasonable allowance for profit on work actually performed. We also sell equipment on standard commercial terms to contractors and others who incorporate our products into U.S. government projects. During 2003, our product development efforts emphasized improving energy efficiency, reducing operating noise levels, improving indoor air quality, achieving higher environmental standards, using natural refrigerants, lowering cost, and reducing product footprint. Nearly all products make use of the latest controls technology to enhance all areas of performance and we are developing our next generation of controls to meet global and regional market demands. We are committed to providing a line of products developed for regional markets that are aggressively positioned to meet local needs. In 2003, we enhanced our packaged centrifugal chiller line by focusing on improved compressors and chiller-energy efficiency. We added enhancements to allow for improved energy performance and lower noise at extreme operating conditions. Our semi-hermetic water-cooled screw chiller line was expanded to 450 tons. We simplified our packaging and reduced the costs of our steam turbine chiller line. In our packaged rooftop line, new features were added in the 45-95 ton range. Air handling equipment covers all the traditional applications, as well as an innovative underfloor air distribution system, FlexSys. An entirely new line of airhandling equipment, "Solution" airhandlers, was introduced and will be expanded in 2004. "Solution" airhandling units offer customization options, previously only available on high-end custom airhandlers, at prices more aligned to standard applications. "Solution" utilizes advanced specification and design software that feeds the manufacturing process and enables better flexibility, shorter lead times, and reduced costs at a given feature level. Innovative enhancements to our screw compressor technologies continue to improve operating performance for the food and beverage equipment market, as well as natural gas gathering and air conditioning applications. Screw compressors are a reliable alternative to reciprocating compressors, requiring less maintenance and featuring lower overall operating costs. The Rotatune range of variable speed screw compressors is complete with the introduction of the SAB 110R series. Market acceptance of the PowerPAC ammonia chiller continues to be strong, with year-over-year increases in demand since introduction. PowerPAC chillers utilize environmentally friendly refrigerants such as ammonia that do not deplete the ozone layer, feature high efficiency and use negligible refrigerant charges. In the service business, strong efforts to expand our position in the low-rise commercial market continued with particular emphasis on multi-site owners and the related replacement equipment. We expanded our presence in the rental chiller business in 2003 with emphasis on meeting the temporary cooling needs of our existing customer base. Our remote monitoring and management capabilities will allow us to monitor system performance and control plant rooms remotely. The global equipment markets are driven by new construction and replacement sales in almost equal proportions. Commercial construction tends to move in the general direction of the global economies. Replacements are strongest in those areas of the world where the installed base of equipment is largest, such as North America. Replacement sales are driven by the age of the equipment, the trade-off economics of repair versus replacement (with increasing emphasis on energy costs efficiency), global economics driving capital investment, the likelihood of increased energy efficiency, and greater environmental acceptance of replacing old with new equipment. Demand for replacement products, repair parts, and services generally increases during summer months. The overall effect of seasonality is partially mitigated by sales of new equipment for which demand is less seasonal. All of the markets in which Global Applied participates are very competitive. Our products compete on the basis of product design, reliability, quality, price, efficiency, acoustics, and post-installation service. Architects and engineers play an important part in determining which manufacturer's products will be specified and ultimately used in an application. In the domestic U.S. market, we compete primarily with Carrier, a United Technologies Corporation company, Trane Company, a division of American Standard Companies Inc., GEA-Grasso, 4 Evapco, Krack Corp., and Mycom. In the international market, we compete primarily with the above manufacturers, other local manufacturers in Europe, and a number of Asian HVAC manufacturers. Our service business competes in a very large but fragmented market, where individual market shares are typically in the single digit range. Most of our competition consists of thousands of independent mechanical contracting companies delivering services and purchased products. Other competitors include manufacturers such as Trane and Carrier and some non-manufacturing national companies such as Johnson Controls. Our products are distributed globally through a combination of our sales and service offices, sales agents, and independent distributors. Our sales engineers operating out of our sales and service offices around the world account for the majority of equipment sales, with the remaining portion coming from sales agents and independent distributors. In addition to new equipment sales, "aftermarket" products and services represent an important portion of Global Applied. Parts are sold from all of our offices, as well as from major regional distribution centers in Baltimore, Maryland; Shanghai, China; Dubai, U.A.E.; Aarhus, Denmark; and Basildon, England. We believe that developing countries offer opportunities for increasing sales of our equipment. Our products are principally manufactured in York and Waynesboro, Pennsylvania; San Antonio, Texas; Roanoke, Virginia; Albany, Missouri; Hattiesburg, Mississippi; Dixon, Illinois; Santa Fe Springs, California; Durango and Monterrey, Mexico; Sao Paulo and Curitiba, Brazil; Basildon, England; Carquefou and Nantes, France; Johannesburg, South Africa; Aarhus, Naestved, and Hornslet, Denmark; Wuxi and Guanghzou, China; and Laem Chabang, Thailand. Many of the components of our products, such as motors, control elements, and castings, are purchased from outside suppliers. The other components are custom manufactured by us. Using these components and based upon design specifications, our products are machined, assembled, tested, and shipped from the above locations. UNITARY PRODUCTS GROUP Our Unitary Products Group (UPG) produces and sells residential and light commercial heating and air conditioning solutions, primarily in the U.S. These include ducted central air conditioning and heating systems (air conditioners, heat pumps, and furnaces), and light commercial heating and cooling equipment. Our products consist of split systems and packaged products. A split system consists of an outdoor unit containing a compressor and condenser; a connected indoor unit containing a heat exchanger; an electric, gas, or oil heating section; an indoor blower system; and associated controls. A packaged product is a single, self-contained unit with compressor; condenser; heat exchanger; electric, gas, or oil heating section; blower; and associated controls. These units are typically installed on rooftops or beside a structure. Ducted products distribute conditioned air throughout building structures with ductwork connected to the system's blower, whereas ductless installations provide conditioned air directly from indoor blowers. In 2003, innovative new products included the UPG Stealth Hot Heat Pump, a residential cooling and heating product that utilizes the Twin Single (TS), a high efficiency compressor technology from Bristol Compressors, and the Sunline MagnaDry, a high efficiency light commercial rooftop product with an advanced dehumidification system that allows maximum dehumidification independent of the cooling load. The focus on new product development will continue in 2004 when UPG plans to market a completely new residential product line of air conditioners, heat pumps, and gas furnaces targeted for the large and growing add-on replacement market. The line of new products will achieve exceptional performance in the areas of sound, efficiency, and capacity. In addition to these operational qualities, the next generation residential product offering will introduce to the marketplace a line of products that captures the essential elements of today's trends in consumer product design. Currently under design is a new, upscale air conditioner that will incorporate alternate refrigerant technology with lower sound ratings to capitalize on the upscale custom home market. 5 We continue to redesign our product line for lower sound ratings and greater energy efficiency on our premium product line, and manufacturing cost effectiveness on our entry-level value line. The new Millennium commercial split system and Magnum rooftop lines are industry leaders in efficiency and feature set value. An entirely new high efficiency gas furnace, designed specifically for the growing residential new construction housing market, will make the York, Luxaire, and Coleman brands even more competitive in the new home market. We market our UPG products under the "YORK", "LUXAIRE", "FRASER-JOHNSON", and "COLEMAN" brands. Service parts are sold under the "SOURCE 1" brand. "YORK" is our full line brand, which is sold through our company-owned distribution centers and exclusive independent distributors. The "YORK" brand is sold with a high level of customer service and sales support. Our other brands are sold through more than 200 non-exclusive distributors primarily for resale to contractors. We also sell unitary products in the manufactured housing industry in North America on an original equipment manufacturer basis through an exclusive distributor. No single customer accounts for more than 10% of our UPG revenues. Our UPG sales include both new installations and replacement systems. We estimate that more than half of UPG revenues in North America are attributable to the replacement market. The replacement market is not affected by levels of new home construction and therefore tends to be less cyclical. The replacement market is significantly affected by ambient temperature. Hot weather in the spring season causes existing older units to fail earlier in the season, leading customers to accelerate replacement of a unit that might otherwise be deferred in the case of a late season failure. All of the markets in which UPG participates are very competitive. Unitary product manufacturers compete on the basis of price, reliability, delivery, efficiency, acoustics, and maximum market coverage. Price competition and maximum market coverage are of particular importance in residential product lines as there is often relatively little perceived differentiation. In the U.S. market, we compete with three large worldwide manufacturers, Carrier, Trane, and Lennox, in addition to numerous national manufacturers such as Goodman, Rheem, and Nordyne. Unitary and light commercial products are manufactured principally in plants located in Norman, Oklahoma; Wichita, Kansas; and Monterrey, Mexico. Our manufacturing process relies on the purchase of certain components (including hermetic compressors, copper tube, fan motors, fan blades, and control elements) from outside suppliers, and in-house fabrication of sheet metal cabinets and refrigerant coils. The various unitary products are then assembled and tested before shipment. BRISTOL COMPRESSORS Bristol Compressors manufactures reciprocating compressors from 1 to 25 tons and, through our joint venture in Scroll Technologies, scroll compressors from 2 to 7 -1/2 tons. These compressors are used in our products and are sold to original equipment manufacturers and wholesale distributors. A compressor is an essential part of a heat pump and/or air conditioning system. Our Unitary Products Group uses compressors manufactured by Bristol and Scroll Technologies as well as those purchased from other suppliers. Approximately 75% of Bristol's revenues are attributable to sales of products to other air conditioning equipment manufacturers or wholesale distributors. Both Carrier and Goodman accounted for more than 10% of Bristol's revenue in 2003. During late 2003, Bristol and Goodman were unable to negotiate mutually acceptable trading terms for 2004. Consequently, Goodman is not expected to be a major customer of Bristol's in 2004. We market our Bristol products under the "BRISTOL" brand. Sales of Bristol products are directly correlated to the factors affecting demand for unitary products discussed previously in the Unitary Products Group section. Bristol introduced the "BENCHMARK" compressor line in 2003. "BENCHMARK" compression solutions meet or exceed efficiency and sound performance of any competitive technology. "BENCHMARK" is offered with R-22, R-407C, and R-410A refrigerants. Bristol developed a modulating reciprocating compressor known as "TS Technology" in 1999. 6 Bristol competes directly with two United States manufacturers, Copeland Corporation, a subsidiary of Emerson Electric Inc., and Tecumseh, a division of Tecumseh Corporation. International competitors include L.G. Electronics, Matsushita Electric Industrial Co., Ltd., and SANYO Electric Co., Ltd. Bristol products are currently manufactured at our factory in Bristol, Virginia, and by Scroll Technologies in Arkadelphia, Arkansas. As with our other products, Bristol products are assembled using purchased parts (including motors, castings, forgings, and electronic components) as well as parts manufactured by us. Bristol relies on a single vendor for certain components used in its compressors. Due to consolidation in the vendor's industry, there are limited alternate sources of supply. We believe an alternate source of supply is attainable in the event the current vendor is unable to supply the component. However, a change in vendors would cause a delay in production and loss of sales, which would adversely impact the results of operations of Bristol and our consolidated results of operations. RAW MATERIALS AND PURCHASED COMPONENTS We purchase compressors, steel, copper, aluminum, electric motors, castings, forgings, heat exchangers, electric panels, condensers, evaporators, oil and pumps, stampings, fabricated copper tubes, electronic starters and controls, aluminum fins, fan blades, capacitors, transformers, refrigerant gases, valves, fittings, and other components from many outside suppliers. Except for certain components purchased by Bristol for use in its compressors, alternate sources of supply are available for all raw materials and components for which we use a single supplier. In order to hedge against certain raw material price increases, we enter into commodity forward contracts for the purchase of certain raw materials, principally copper. However, we are exposed to raw material price increases related to compressors, electric motors, and other components purchased from suppliers that may not hedge raw material prices. Additional information about our commodity forward contracts contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations, Market Risk" on pages 14 to 16 of the Annual Financial Statements and Review of Operations is incorporated herein by reference. PATENTS AND TRADEMARKS We hold numerous patents that relate to the design and use of our products that we consider important, but not essential, to the overall conduct of our business. It is our policy to obtain patent protection for as many of our new and developmental products as possible, and to enforce such patent rights as appropriate. No patents which we consider material will expire within the next five years. We own several trademarks that we consider important in the marketing of our products as discussed in each of the business sections. We believe that our rights in these trademarks are adequately protected and of unlimited duration. 7 JOINT VENTURES IN U.S. AND NON-U.S. MARKETS In addition to our wholly-owned and majority-owned production and distribution facilities, we produce, distribute, and service products through our participation in several joint ventures, which are described in the following table:
JOINT VENTURE PRINCIPAL JOINT VENTURE (PERCENT OWNED BY PRINCIPAL LOCATION PARTNER THE COMPANY) PRODUCTS/SERVICES MARKETS SERVED - ----------------------------------------------------------------------------------------------------------------------------- Spain Compania Roca Clima Roca-York S.L. Manufacture unitary Europe Radiadores S.A. (50%) products Denmark Three Danish Jernst Oberiet Dania A/S Castings Europe pension funds (40%) Morocco IFU A/S, Denmark York Refrigeration Sales and service of North Africa Individual Moroccan Morocco S.A. (20%) refrigeration products shareholder South Africa Spoormakers & Shared Energy Management Energy management South Africa Partners Inc. (Pty) Ltd. (50%) services Saudi Arabia Al Salem United Al Salem-York Services Service and repair of Saudi Arabia Contracting Co. Ltd. (50%) air conditioning equipment Saudi Arabia Al Salem United Al Salem York Produce central air Saudi Arabia Contracting Co. Manufacturing Co. conditioning units, split Ltd. (50%) air conditioning units, fan coils, and air handling units Malaysia OYL Industries OYL-Condair Industries Manufacture unitary Asia Pacific BHD. SDN.BHD. (49%) and applied products Malaysia OYL Industries York (Malaysia) Service Sales and service of air Malaysia BHD. SDN.BHD. (30%) conditioning equipment Malaysia Kumpulan Nametech Airvenco Sdn. Bhd. (21%) Sales and service of Malaysia Sdn. Bhd. air handling equipment Japan (Flakt) Nissin Refrigeration & Stal Nissin Corp. Sales and service of Japan Engineering Ltd. (50%) refrigeration products Japan (Novenco) Individual Japanese Novenco Nippon Ltd. Sales and service of Japan shareholder (23%) air handling equipment Korea Individual Korean Hi-Pres Korea Co. Ltd. Sales and service of Korea shareholder (20%) air handling equipment U.S. Carrier Corporation Scroll Technologies Manufacture scroll U.S. (50%) compressors
We received dividends from affiliates of $2.2 million, $2.1 million, and $2.9 million in 2003, 2002, and 2001, respectively. Our total investments in affiliates were $28.2 million and $29.4 million as of December 31, 2003 and 2002, respectively. Our sales to affiliates are less than 1% of our net sales, and our purchases from affiliates are less than 1% of our total purchases. 8 RESEARCH AND DEVELOPMENT Our product development activities include ongoing research and development programs to redesign existing products to reduce manufacturing costs and to increase product efficiencies, develop electronic controls for current product offerings, and create a wide range of new products. During 2003, 2002, and 2001, we spent $42.3 million, $42.2 million, and $46.2 million, respectively, for all product development activities. EMPLOYEES As of December 31, 2003, we employed approximately 22,300 persons worldwide. Approximately 10,000 persons are employed in the U.S. and 12,300 persons are employed in foreign countries. Approximately 3,500 U.S. employees are covered by collective bargaining agreements that expire at various dates and generally range from three to five years. REGULATIONS AND ENVIRONMENTAL MATTERS Environmental laws that affect or could affect our U.S. operations include, among others, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, any regulations associated with these acts, and various other Federal, state, and local laws and regulations governing environmental matters. We have remediation activities ongoing at certain of our U.S. facilities as a result of releases that occurred in the past. From time to time, we have received notice that we are a potentially responsible party, along with other potentially responsible parties, in Superfund proceedings under the Comprehensive Environmental Response, Compensation and Liability Act for the cleanup of hazardous substances at certain sites to which potentially responsible parties are alleged to have sent waste. On the basis of our historical experience and other information currently available to us, we do not believe that either our remediation activities or any Superfund proceedings will have a material adverse effect on our financial condition or results of ongoing operations. Our non-U.S. operations are also subject to various environmental statutes and regulations. Generally, these requirements tend to be no more restrictive than those in effect in the U.S. In 1993, the Council of European Communities agreed on European Community regulation number 1836/93 that recommended that each company voluntarily complete an ECO-Audit. We have completed these audits at our European facilities. In September 1987, the U.S. became a signatory to an international agreement titled the Montreal Protocol on Substances that Deplete the Ozone Layer, or the Montreal Protocol. The Montreal Protocol requires its signatories to reduce production and consumption of CFCs and halons, some of which are utilized in air conditioning and refrigeration equipment. In 1988, the Environmental Protection Agency (EPA) issued regulations under the Clean Air Act implementing the Montreal Protocol in the U.S. Many other countries have also become signatories to the Montreal Protocol. The manner in which these countries implement the Montreal Protocol and regulate CFCs could differ from the approach taken in the U.S. The Clean Air Act allows the EPA to accelerate the statutory phase-out schedule for any Class I (CFC) or Class II (HCFC) substance. In November 1992, the parties to the Montreal Protocol agreed to amend the Protocol to require the complete phase-out of CFC production by the beginning of 1996. Further, the parties agreed to a 1996 production cap on HCFCs and a complete phase-out of HCFC production by 2030. In May 1995, EPA published a final rule requiring accelerated phase-out of the production of all CFCs by 1996 and of all HCFCs by 2030. None of our manufactured products contains Class I substances. Class I substances previously used by us have been substituted with Class II substances or substances that are currently unregulated. We continue to expect revenues from servicing, updating, and repairing existing equipment that uses Class I substances. These activities are regulated by the EPA, which imposes guidelines affecting service and maintenance of equipment that uses Class I and Class II substances. We train and license our service technicians in service and maintenance procedures that comply with the regulations. Therefore, we believe that the regulations will not have a material adverse effect on our operations. The phase-out of Class I substances will require modifications to existing air conditioning equipment as availability of recycled Class I substances 9 decreases. Since our technology enables us to modify existing equipment for use with Class II substances, we believe that this will continue to generate additional opportunities. While we expect to derive substantial revenue from the sale of products utilizing Class II substances, it is not expected that any phase-out will have a significant impact on the sales of such products since new products that use unregulated refrigerants such as HFCs are now readily available. Nonetheless, as the supply of virgin and recycled Class II substances falls, it will be necessary to address the need to substitute permitted substances for Class II substances. We, in conjunction with major chemical manufacturers, are continually in the process of reviewing and addressing the impact of refrigerant regulations on our products. We believe that the combination of those products that presently utilize Class II substances and those products in the field that can be retrofitted to such refrigerants provides a complete line of commercial and industrial products. Therefore, we do not foresee any material adverse impact on our business or competitive position as a result of the Montreal Protocol, the 1990 Clean Air Act amendments, or their implementing regulations. However, we believe that the implementation of severe restrictions on the production, importation, or use of refrigerants employed in larger quantities by us could have such an impact. We believe that the applied systems products that we have produced will be well positioned to utilize the next generation of refrigerants without substantial modification. If the next generation of refrigerants is incompatible with the hermetic compressors used by us and all of our competitors for unitary products, design modifications would be required. We are also subject to regulations promulgated under the National Appliance Energy Conservation Act of 1987, as amended, and various state regulations concerning the energy efficiency of our products. We have developed and continue to develop products that will comply with these regulations, and do not believe that such regulations will have a material adverse effect on our business. 10 EXECUTIVE OFFICERS As of March 12, 2004, our executive officers are as follows:
NAME AGE POSITION ---- --- -------- C. David Myers 40 President and Chief Executive Officer Iain A. Campbell 42 Vice President and President of York Americas Thomas F. Huntington 51 Vice President and President of Unitary Products Group, North America Wayne J. Kennedy 61 Vice President and President of Bristol Compressors Kam S. Leong 49 Vice President and President of York Asia Pacific Peter C. Spellar 59 Vice President and President of York Europe, Middle East, and Africa M. David Kornblatt 44 Vice President and Chief Financial Officer James P. Corcoran 58 Vice President and Treasurer Jane G. Davis 54 Vice President, Secretary and General Counsel Jeffrey D. Gard 49 Vice President, Human Resources David C. Elder 35 Controller David R. Heck 49 Chief Governance Officer and Director, Internal Audit
Mr. Myers has been President and Chief Executive Officer of the Company since February 2004. Prior thereto, he was President of the Company from June 2003 to February 2004, Executive Vice President and Chief Financial Officer of the Company from January to June 2003, Vice President and Chief Financial Officer of the Company from 2000 to 2002, Vice President Finance, Engineered Systems Group from 1998 to 2000, Corporate Controller from 1995 to 1998, Director of Finance for the Airside Products Group from 1994 to 1995, and Director of Financial Planning and Controls in 1994. Prior to joining the Company, he was with KPMG LLP. Mr. Campbell has been Vice President of the Company and President of York Americas since January 2003. Prior thereto, he was Vice President, North America Sales and Service from June 2002 to December 2002, Vice President, Finance, Engineered Systems Group from 2000 to 2002, Director, Finance, Europe from 1997 to 2000, and Assistant Treasurer from 1994 to 1997. Mr. Huntington has been Vice President of the Company and President of Unitary Products Group, North America since October 2000. Prior thereto, he was Senior Vice President, Engineering, Bristol Compressors from 1999 to 2000, Vice President, Sales and Distribution, Unitary Products Group North America from 1997 to 1999, Vice President and General Manager, Evcon Coleman Division from 1996 to 1997, and Vice President, Sales and Marketing, Evcon Industries from 1992 to 1996. 11 Mr. Kennedy has been Vice President of the Company and President of Bristol Compressors since March 2000. Prior thereto, he was Vice President, Human Resources from 1993 to 2000. Prior to joining the Company, he was Vice President of Human Resources for the Millipore Corporation. Mr. Leong has been President of York Asia Pacific since March 2000 and Vice President of the Company since January 2003. Prior thereto, he was Vice President, Asia Pacific from 1998 to 2000, Vice President, Northeast Asia from 1994 to 1998, General Manager, OYL - Condair, York Malaysia from 1991 to 1994, General Manager, Sales and Service, York Malaysia 1988 to 1991, and held several prior positions with the Company since 1982. Mr. Spellar has been Vice President of the Company and President of York Europe, Middle East, and Africa since January 2003. Prior thereto, he was Vice President of the Company and President, Engineered Systems Group from 2000 to 2002, Vice President, Marketing and Strategic Accounts from 1999 to 2000, Vice President of the Company and President, Applied Systems Worldwide from 1995 to 1999, Vice President of the Company and Vice President, European Operations from 1992 to 1995, President, Frick Division from 1987 to 1992, and President of the Frick Company from 1979 to 1987. Mr. Kornblatt has been Vice President and Chief Financial Officer since June 2003. Prior thereto, he was Vice President, Finance, York Americas from June 2002 to June 2003. Prior to re-joining the Company, he was Director, Taxes, Europe for The Gillette Company from December 1998 to June 2002. He was previously Tax Director of the Company, January 1993 to December 1998. Prior to joining the Company originally, he was with KPMG LLP and Ernst & Whinney. Mr. Corcoran has been Vice President and Treasurer of the Company since March 2001. Prior thereto, he was Treasurer of the Company from 1992 to 2001. Prior to joining the Company, he was with Griffith Laboratories, AM International, and Borg-Warner Corporation. Ms. Davis has been Vice President, Secretary and General Counsel of the Company since March 1995. Prior to joining the Company, she was Vice President, General Counsel and Secretary of Joy Technologies Inc. from 1988 to 1995. Mr. Gard has been Vice President, Human Resources since June 2003. Prior thereto, he was Director, Corporate Compensation, Benefits and Human Resource Information Systems from February 1999 to June 2003. Prior to joining the Company, he was with Millipore Corporation. Mr. Elder has been Controller since December 2003. Prior thereto, he was the Director, Financial Planning and Analysis from August 2000 to December 2003 and Manager, Financial Reporting from May 1997 to August 2000. Prior to joining the Company, he was with Hershey Foods Corporation and KPMG LLP. Mr. Heck has been Chief Governance Officer and Director, Internal Audit since December 2003. Prior thereto, he was Controller from January 2000 to December 2003. Prior to joining the Company, he held various financial and audit related positions with Superior Group, Inc., LFC Financial Corp., and Deloitte, Haskins, & Sells. WEBSITE ACCESS TO INFORMATION We make available free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission. Our website address is: www.york.com. 12 ITEM 2. PROPERTIES Our principal offices are located in York, Pennsylvania on an approximately 71 acre site owned by us. The following table lists our principal manufacturing facilities:
APPROXIMATE LOCATION SEGMENT ENCLOSED AREA (SQ. FT.) - -------- ------- ----------------------- OWNED Wichita, KS Unitary Products Group 1,456,000 York, PA Americas 1,300,000 Bristol, VA Bristol Compressors 672,000 Norman, OK Unitary Products Group 539,000 Waynesboro, PA Americas 438,000 Aarhus, Denmark Europe, Middle East, and Africa 372,000 Naestved, Denmark Europe, Middle East, and Africa 292,000 Basildon, England Europe, Middle East, and Africa 254,000 Guangzhou, China Asia 200,000 Wuxi, China Asia 176,000 San Antonio, TX Americas 145,000 Sao Paulo, Brazil Americas 123,000 Monterrey, Mexico Americas 118,000 Dixon, IL Americas 108,000 Durango, Mexico Americas 102,000 Roanoke, VA Americas 72,000 Carquefou, France Europe, Middle East, and Africa 32,000 LEASED Laem Chabang, Thailand Asia 215,000 Monterrey, Mexico Unitary Products Group 165,000 Albany, MO Americas 135,000 York, PA Americas 120,000 Johannesburg, South Africa Europe, Middle East, and Africa 109,000 Hattiesburg, MS Americas 84,000 Santa Fe Springs, CA Americas 82,000 Curitiba, Brazil Americas 57,000 Nantes, France Europe, Middle East, and Africa 34,000
At the York, Pennsylvania location that we own, approximately 500,000 square feet are currently unused. In addition to the properties described above, we lease facilities worldwide for use as sales and service offices and regional warehouses. In the ordinary course of business, we monitor the condition of our facilities to ensure that they remain adequate to meet our long-term sales goals and production plans. We believe that our properties are in good condition and adequate for our requirements. We make capital expenditures intended to upgrade existing facilities and equipment to increase production efficiency and, when appropriate, to adapt them to the requirements of manufacturing new product lines. ITEM 3. LEGAL PROCEEDINGS As discussed in our Form 10-Q filed October 31, 2003, on September 11, 2003, the City of Elyria, Ohio, the Lorain County Board of Commissioners, the Lorain County Auditor, the Lorain County Treasurer and two school districts filed suit against 13 us in the Court of Common Pleas for Lorain County, Ohio. The plaintiffs allege that we breached two incentive agreements entered into with the City of Elyria in 1991 and 1993, respectively, by closing our plant in Elyria in 2001. The plaintiffs assert that they would have collected additional taxes had the plant remained open and are seeking approximately $3 million in allegedly lost taxes and $200 million in punitive damages. We have removed the suit to the United States District Court for the District of Ohio and intend to defend it vigorously. We believe the suit is without merit. As is the case with many other companies, we have been named as one of many defendants in lawsuits alleging personal injury to one or more individuals as a result of exposure to asbestos contained in products previously manufactured by us or by companies from which we bought product lines. The majority of these cases are covered by insurance or by indemnification obligations of the parties from whom we purchased the product lines. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of our security holders during the fourth quarter of 2003. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock trades on the New York Stock Exchange under the symbol "YRK." On March 12, 2004, we had 5,067 holders of record of our common stock. TRADING AND DIVIDEND INFORMATION The high and low sales prices for which our common stock traded and the dividends declared in each quarterly period within 2003 and 2002 are as follows:
DIVIDENDS HIGH LOW DECLARED ---- --- -------- 2003 Fourth quarter $ 40.74 $ 33.65 $ 0.15 Third quarter 36.00 23.31 0.15 Second quarter 26.72 21.00 0.15 First quarter 26.04 18.82 0.15 2002 Fourth quarter $ 29.66 $ 21.35 $ 0.15 Third quarter 34.84 27.18 0.15 Second quarter 39.08 32.60 0.15 First quarter 38.68 31.35 0.15
On March 5, 2004, the Board of Directors increased the quarterly dividend to shareholders from fifteen cents per share to twenty cents per share. 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 our profitability, financial condition, cash requirements, future prospects, and limitations imposed by our credit agreements. 14 ITEM 6. SELECTED FINANCIAL DATA Information contained under the caption "Five Year Summary of Selected Financial Data" on page 2 of the Annual Financial Statements and Review of Operations is incorporated herein by reference in response to this item. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 3 to 18 of the Annual Financial Statements and Review of Operations is incorporated herein by reference in response to this item. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Information contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations, Market Risk," on pages 14 to 16 of the Annual Financial Statements and Review of Operations is incorporated herein by reference in response to this item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements for York International Corporation and Subsidiaries are contained on pages 20 to 47 of the Annual Financial Statements and Review of Operations, and a Summary of Quarterly Results (unaudited) is contained on page 48 of the Annual Financial Statements and Review of Operations. These items are incorporated herein by reference in response to this item. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures As of December 31, 2003, we carried out an evaluation, under the supervision and with the participation of company management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective. (b) Changes in Internal Controls There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information contained under the caption "Election of Directors" in our definitive 2004 Proxy Statement is incorporated herein by reference in response to this item. See Item 1 above for information concerning executive officers. 15 Our Employee Code of Conduct, which applies to all employees, including our principal executive officer, principal financial officer, and principal accounting officer, is posted on our website at www.york.com. The Employee Code of Conduct is compliant with Item 406 of Regulation S-K as required by the SEC. We intend to disclose any amendments to or waivers of any provisions of the Employee Code of Conduct granted to our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions, on our company website. The Board of Directors has adopted charters for its Nominating and Governance Committee, Compensation Committee, and Audit Committee. The Board of Directors also adopted Corporate Governance Guidelines. The Corporate Governance Guidelines and each of the charters are available on our website at www.york.com. These items are also available upon request to the Vice President, Secretary and General Counsel at York International Corporation, 631 South Richland Avenue, York, PA 17403, or telephone (717) 771-7890. ITEM 11. EXECUTIVE COMPENSATION Information contained under the caption "Executive Compensation" in our definitive 2004 Proxy Statement is incorporated herein by reference in response to this item. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information contained under the captions "Election of Directors", "Executive Compensation", and "Ownership of Common Stock" in our definitive 2004 Proxy Statement is incorporated herein by reference in response to this item. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information contained under the caption "Ownership of Common Stock" in our definitive 2004 Proxy Statement is incorporated herein by reference in response to this item. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information contained under the caption "Independent Accountants" in our definitive 2004 Proxy Statement is incorporated herein by reference in response to this item. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) The following financial statements of York International Corporation and subsidiaries are incorporated herein by reference to pages 20 to 47 of the Annual Financial Statements and Review of Operations: Consolidated Balance Sheets - as of December 31, 2003 and 2002 Consolidated Statements of Operations - years ended December 31, 2003, 2002, and 2001 Consolidated Statements of Comprehensive Income (Loss) - years ended December 31, 2003, 2002, and 2001 Consolidated Statements of Cash Flows - years ended December 31, 2003, 2002, and 2001 Consolidated Statements of Stockholders' Equity - years ended December 31, 2003, 2002, and 2001 Notes to Consolidated Financial Statements (2) The following financial statement schedule for York International Corporation and subsidiaries is included herein: II Valuation and Qualifying Accounts - years ended December 31, 2003, 2002, and 2001; 16 (Page 24 of Form 10-K) All other schedules are omitted as they are not applicable. Independent Auditors' Report Covering Financial Statement Schedule; (Page 23 of Form 10-K) (3) The exhibits filed in response to Item 601 of Regulation S-K are as follows:
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation of Registrant (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-3, File No. 33-91292, filed on June 7, 1995) 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated May 3, 1996 (Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-10863) 3.3 By-Laws of Registrant, restated as of December 17, 1996 (Incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-10863) 4.1 Indenture effective as of June 1, 1998 between the Registrant and State Street Bank and Trust Company, a Massachusetts chartered trust company, as Trustee (Incorporated by reference to Exhibit 4 to the Registrant's Form 8-K, File No. 1-10863, filed on May 28, 1998) 4.2 Senior Indenture dated as of August 9, 2001 between the Registrant and the Bank of New York, as Trustee (Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement filed on Form S-3, File No. 333-59678, filed on April 27, 2001) 4.3 364-DAY CREDIT agreement, dated as of March 14, 2003, among YORK INTERNATIONAL CORPORATION, as borrower, the initial lenders named therein, as initial lenders, CITIBANK, N.A., as administrative agent, JPMORGAN CHASE BANK, as syndication agent, BANK OF TOKYO-MITSUBISHI TRUST COMPANY, FLEET NATIONAL BANK, and NORDEA BANK FINLAND PLC, as documentation agents, and SALOMON SMITH BARNEY INC. and J.P. MORGAN SECURITIES, INC., as joint lead arrangers and joint bookrunners (Incorporated by reference to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 1-10863) 4.4 Five Year Credit Agreement, dated as of May 29, 2001, among York International Corporation, as borrower, the initial lenders and initial issuing bank named therein, as initial lenders and initial issuing bank, Citibank, N.A., as administrative agent, The Chase Manhattan Bank, as syndication agent, Bank of Tokyo-Mitsubishi, First Union National Bank, and Fleet National Bank, as documentation agents, and JP Morgan Securities, Inc. and Salomon Smith Barney Inc., as joint lead arrangers and joint bookrunners. (Incorporated by reference to Exhibit 4.3 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File No. 1-10863) 4.5 Amendment No. 1 to the Five Year Credit Agreement, dated as of May 29, 2002, among York International Corporation, the lenders named therein, as lenders, and Citibank, N.A., as administrative agent for the lenders. (Incorporated by reference to Exhibit 4.2 to Registrant's Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863)
17 4.6 AMENDMENT NO. 2 TO THE FIVE YEAR CREDIT AGREEMENT, dated as of March 14, 2003, among York International Corporation, the lenders named therein, as lenders, and Citibank, N.A., as administrative agent for the lenders (Incorporated by reference to Exhibit 4.2 to Registrant's Form 10-Q for the quarter ended March 31, 2003, File No. 1-10863) 4.7 Receivables Purchase Agreement, dated as of December 21, 2001, among York Receivables Funding LLC, York International Corporation, as Servicer, The Members of Various Purchaser Groups From Time to Time Party Hereto and PNC Bank, National Association, as Administrator (Incorporated by reference to Exhibit 4.6 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-10863) 4.8 AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT, dated as of April 21, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as servicer, THE MEMBERS OF VARIOUS PURCHASE GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (Incorporated by reference to Exhibit 4.3 to Registrant's Form 10-Q for the quarter ended March 31, 2003, File No. 1-10863) 4.9 AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT, dated as of May 19, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.10 AMENDMENT NO. 3 TO RECEIVABLES PURCHASE AGREEMENT, dated as of June 26, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.11 AMENDMENT NO. 4 TO RECEIVABLES PURCHASE AGREEMENT, dated as of October 15, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.12 AMENDMENT NO. 5 TO RECEIVABLES PURCHASE AGREEMENT, dated as of November 26, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.13 Purchase and Sale Agreement, dated as of December 21, 2001, between York International Corporation and Bristol Compressors, Inc., as originators, and York Receivables Funding LLC (Incorporated by reference to Exhibit 4.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-10863) 4.14 Terms and Conditions of DKK 200 million, 2 percent bonds with Danske Bank, dated October 29, 2003 (filed herewith) 4.15 Terms and Conditions of DKK 50 million, 2 percent bonds with Danske Bank, dated December 16, 2003 (filed herewith) *10.1 Registrant's Amended and Restated 1992 Omnibus Stock Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-Q for the quarter ended March 31, 1997, File No. 1-10863)
18 *10.2 Amendment No. 1 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, dated February 16, 1999 (Incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-10863) *10.3 Amendment No. 2 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, dated February 9, 2000 (Incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-10863) *10.4 Amendment No. 3 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, effective July 27, 2000 (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 1-10863) *10.5 York International Corporation Amended and Restated 2002 Omnibus Stock Plan, effective as of May 23, 2002, as amended and restated May 31, 2002 (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.6 York International Corporation Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.12 to Registrant's Annual Report on form 10-K for the year ended December 31, 1993, File No. 1-10863) *10.7 Amendment No. 1 to the York International Corporation Supplemental Executive Retirement Plan, effective January 1, 1997 (filed herewith) *10.8 Amendment No. 2 to the York International Corporation Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003) *10.9 York International Corporation 2002 Incentive Compensation Plan, effective as of January 1, 2002 (Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.10 York International Corporation Amended and Restated Executive Deferred Compensation Plan, effective July 1, 2001 (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-10863) *10.11 First Amendment to the York International Corporation Executive Deferred Compensation Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 1-10863) *10.12 Second Amendment to the York International Corporation Executive Deferred Compensation Plan, dated December 3, 2003 (filed herewith) *10.13 York International Corporation Management Stock Purchase Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, File No. 1-10863) *10.14 Form of Restricted Stock Agreement by and between Registrant and certain of its employees, dated March 26, 2003 (filed herewith) *10.15 Form of Severance Agreement entered into between the Registrant and certain of its Officers and Employees (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-10863)
19 *10.16 Form of Amendment No. 1 to Severance Agreement between the Registrant and certain of its key executives. (Incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.17 Employment Agreement between York International Corporation and Michael R. Young, dated December 29, 1999 (Incorporated by reference to Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-10863) *10.18 Employment Agreement between York International Corporation and C. David Myers, dated March 23, 2000 (Incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-10863) *10.19 Employment Agreement between York International Corporation and Peter C. Spellar, dated July 27, 2000 (Incorporated by reference to Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-10863) *10.20 Employment Agreement between York International Corporation and Kam Leong, dated December 29, 1999 (Incorporated by reference to Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-10863). *10.21 Employment Agreement between York International Corporation and Thomas F. Huntington, dated September 27, 2001 (filed herewith) *10.22 Retirement Agreement between York International Corporation and Michael R. Young, dated October 6, 2003 (filed herewith) *10.23 Form of Employment Agreement between York International Corporation and certain other Key Executive Employees (Incorporated by reference to Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-10863) *10.24 Form of Amendment No. 1 to Employment Agreement between the Registrant and certain of its key executives. (Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.25 Employment Agreement between York International Corporation and C. David Myers, dated December 31, 2003 (filed herewith) *10.26 Employment Agreement between York International Corporation and Thomas F. Huntington, dated December 31, 2003 (filed herewith) *10.27 Employment Agreement between York International Corporation and Kam S. Leong, dated December 31, 2003 (filed herewith) *10.28 Employment Agreement between York International Corporation and Peter C. Spellar, dated December 31, 2003 (filed herewith) *10.29 Form of Employment Agreement between York International Corporation and certain other key executives, dated December 31, 2003 (filed herewith)
20 12 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed herewith) 13 Annual Financial Statements and Review of Operations with Accountants' Certificate (filed herewith) 21 Subsidiaries of the Registrant (filed herewith) 23 Accountants' Consent (filed herewith) 24 Power of Attorney (filed herewith) 31.1 Certification of the Chief Executive Officer of York International Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certification of the Chief Financial Officer of York International Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.1 Certification of the Chief Executive Officer and Chief Financial Officer of York International Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) * Required to be filed as management contracts, compensatory plans, or arrangements required to be identified pursuant to Item 14(c) of the registrant's report on Form 10-K.
(b) Reports on Form 8-K Current Report on Form 8-K dated September 26, 2003, containing a press release, dated September 26, 2003, announcing the election of a new director to the Board of Directors. Current Report on Form 8-K dated October 21, 2003, containing a press release, dated October 21, 2003, announcing the retirement of Michael R. Young, Chief Executive Officer of York, from that position and from the Board of Directors on February 9, 2004 and announcing that he will be succeeded as Chief Executive Officer by C. David Myers, President, and also containing a press release, dated October 22, 2003, setting forth our third quarter 2003 results (Such press release is not incorporated by reference herein or deemed "filed" within the meaning of Section 18 of the Securities Act of 1933). Current Report on Form 8-K dated December 8, 2003, containing a press release, dated December 8, 2003, announcing the appointment of a new Chief Governance Officer and Director of Internal Audit and a new controller. Current Report on Form 8-K dated December 16, 2003, containing a press release, dated December 16, 2003, giving guidance concerning our expectations for 2004 earnings. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. YORK INTERNATIONAL CORPORATION /S/ C. David Myers ------------------------------------- C. DAVID MYERS PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: March 12, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 12th day of March 2004.
SIGNATURE TITLE --------- ----- /S/ C. David Myers President and Chief Executive Officer - --------------------------------- (Principal Executive Officer) C. DAVID MYERS /S/ M. David Kornblatt Vice President and Chief Financial Officer - --------------------------------- (Principal Financial Officer) M. DAVID KORNBLATT /S/ David C. Elder Controller - --------------------------------- (Principal Accounting Officer) DAVID C. ELDER DIRECTORS * - --------------------------------- GERALD C. MCDONOUGH * - --------------------------------- W. MICHAEL CLEVY * - --------------------------------- J. RODERICK HELLER, III * - --------------------------------- ROBERT F. B. LOGAN * - --------------------------------- PAUL J. POWERS * - --------------------------------- DONALD M. ROBERTS * - --------------------------------- JAMES A. URRY /S/ C. David Myers - --------------------------------- C. DAVID MYERS * By /S/ Jane G. Davis ---------------------------- JANE G. DAVIS ATTORNEY-IN-FACT
22 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders York International Corporation: Under date of February 13, 2004, we reported on the consolidated balance sheets of York International Corporation and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2003, as contained in the 2003 Annual Financial Statements and Review of Operations. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 2003. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the financial statement schedule, Valuation and Qualifying Accounts. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP KPMG LLP Harrisburg, Pennsylvania February 13, 2004 23 SCHEDULE II YORK INTERNATIONAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (in thousands)
Column A: Column B: Column C: Column D: Column E: Balance at Additions Balance at Beginning Costs and Close of Description of Period Expenses Deductions Period ----------- --------- -------- ---------- ------ 2003 Allowance for doubtful receivables $ 27,946 11,862 10,428 $ 29,380 Warranties $ 87,940 80,199 66,464 $ 101,675 2002 Allowance for doubtful receivables $ 25,675 18,587 16,316 $ 27,946 Warranties $ 87,883 64,887 64,830 $ 87,940 2001 Allowance for doubtful receivables $ 24,551 7,847 6,723 $ 25,675 Warranties $ 86,710 74,254 73,081 $ 87,883
24 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation of Registrant (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-3, File No. 33-91292, filed on June 7, 1995) 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated May 3, 1996 (Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-10863) 3.3 By-Laws of Registrant, restated as of December 17, 1996 (Incorporated by reference to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-10863) 4.1 Indenture effective as of June 1, 1998 between the Registrant and State Street Bank and Trust Company, a Massachusetts chartered trust company, as Trustee (Incorporated by reference to Exhibit 4 to the Registrant's Form 8-K, File No. 1-10863, filed on May 28, 1998) 4.2 Senior Indenture dated as of August 9, 2001 between the Registrant and the Bank of New York, as Trustee (Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement filed on Form S-3, File No. 333-59678, filed on April 27, 2001) 4.3 364-DAY CREDIT agreement, dated as of March 14, 2003, among YORK INTERNATIONAL CORPORATION, as borrower, the initial lenders named therein, as initial lenders, CITIBANK, N.A., as administrative agent, JPMORGAN CHASE BANK, as syndication agent, BANK OF TOKYO-MITSUBISHI TRUST COMPANY, FLEET NATIONAL BANK, and NORDEA BANK FINLAND PLC, as documentation agents, and SALOMON SMITH BARNEY INC. and J.P. MORGAN SECURITIES, INC., as joint lead arrangers and joint bookrunners (Incorporated by reference to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 1-10863) 4.4 Five Year Credit Agreement, dated as of May 29, 2001, among York International Corporation, as borrower, the initial lenders and initial issuing bank named therein, as initial lenders and initial issuing bank, Citibank, N.A., as administrative agent, The Chase Manhattan Bank, as syndication agent, Bank of Tokyo-Mitsubishi, First Union National Bank, and Fleet National Bank, as documentation agents, and JP Morgan Securities, Inc. and Salomon Smith Barney Inc., as joint lead arrangers and joint bookrunners. (Incorporated by reference to Exhibit 4.3 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File No. 1-10863) 4.5 Amendment No. 1 to the Five Year Credit Agreement, dated as of May 29, 2002, among York International Corporation, the lenders named therein, as lenders, and Citibank, N.A., as administrative agent for the lenders. (Incorporated by reference to Exhibit 4.2 to Registrant's Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) 4.6 AMENDMENT NO. 2 TO THE FIVE YEAR CREDIT AGREEMENT, dated as of March 14, 2003, among York International Corporation, the lenders named therein, as lenders, and Citibank, N.A., as administrative agent for the lenders (Incorporated by reference to Exhibit 4.2 to Registrant's Form 10-Q for the quarter ended March 31, 2003, File No. 1-10863)
25 4.7 Receivables Purchase Agreement, dated as of December 21, 2001, among York Receivables Funding LLC, York International Corporation, as Servicer, The Members of Various Purchaser Groups From Time to Time Party Hereto and PNC Bank, National Association, as Administrator (Incorporated by reference to Exhibit 4.6 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-10863) 4.8 AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT, dated as of April 21, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as servicer, THE MEMBERS OF VARIOUS PURCHASE GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (Incorporated by reference to Exhibit 4.3 to Registrant's Form 10-Q for the quarter ended March 31, 2003, File No. 1-10863) 4.9 AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT, dated as of May 19, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.10 AMENDMENT NO. 3 TO RECEIVABLES PURCHASE AGREEMENT, dated as of June 26, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.11 AMENDMENT NO. 4 TO RECEIVABLES PURCHASE AGREEMENT, dated as of October 15, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.12 AMENDMENT NO. 5 TO RECEIVABLES PURCHASE AGREEMENT, dated as of November 26, 2003, among YORK RECEIVABLES FUNDING LLC, YORK INTERNATIONAL CORPORATION, as initial servicer, THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO, and PNC BANK, NATIONAL ASSOCIATION, as administrator (filed herewith) 4.13 Purchase and Sale Agreement, dated as of December 21, 2001, between York International Corporation and Bristol Compressors, Inc., as originators, and York Receivables Funding LLC (Incorporated by reference to Exhibit 4.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2001, File No. 1-10863) 4.14 Terms and Conditions of DKK 200 million, 2 percent bonds with Danske Bank, dated October 29, 2003 (filed herewith) 4.15 Terms and Conditions of DKK 50 million, 2 percent bonds with Danske Bank, dated December 16, 2003 (filed herewith) *10.1 Registrant's Amended and Restated 1992 Omnibus Stock Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-Q for the quarter ended March 31, 1997, File No. 1-10863) *10.2 Amendment No. 1 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, dated February 16, 1999 (Incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-10863)
26 *10.3 Amendment No. 2 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, dated February 9, 2000 (Incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-10863) *10.4 Amendment No. 3 to the York International Corporation Amended and Restated 1992 Omnibus Stock Plan, effective July 27, 2000 (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, File No. 1-10863) *10.5 York International Corporation Amended and Restated 2002 Omnibus Stock Plan, effective as of May 23, 2002, as amended and restated May 31, 2002 (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.6 York International Corporation Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.12 to Registrant's Annual Report on form 10-K for the year ended December 31, 1993, File No. 1-10863) *10.7 Amendment No. 1 to the York International Corporation Supplemental Executive Retirement Plan, effective January 1, 1997 (filed herewith) *10.8 Amendment No. 2 to the York International Corporation Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003) *10.9 York International Corporation 2002 Incentive Compensation Plan, effective as of January 1, 2002 (Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.10 York International Corporation Amended and Restated Executive Deferred Compensation Plan, effective July 1, 2001 (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, File No. 1-10863) *10.11 First Amendment to the York International Corporation Executive Deferred Compensation Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File No. 1-10863) *10.12 Second Amendment to the York International Corporation Executive Deferred Compensation Plan, dated December 3, 2003 (filed herewith) *10.13 York International Corporation Management Stock Purchase Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, File No. 1-10863) *10.14 Form of Restricted Stock Agreement by and between Registrant and certain of its employees, dated March 26, 2003 (filed herewith) *10.15 Form of Severance Agreement entered into between the Registrant and certain of its Officers and Employees (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-10863) *10.16 Form of Amendment No. 1 to Severance Agreement between the Registrant and certain of its key executives. (Incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter
27 ended June 30, 2002, File No. 1-10863) *10.17 Employment Agreement between York International Corporation and Michael R. Young, dated December 29, 1999 (Incorporated by reference to Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-10863) *10.18 Employment Agreement between York International Corporation and C. David Myers, dated March 23, 2000 (Incorporated by reference to Exhibit 10.15 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-10863) *10.19 Employment Agreement between York International Corporation and Peter C. Spellar, dated July 27, 2000 (Incorporated by reference to Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2000, File No. 1-10863) *10.20 Employment Agreement between York International Corporation and Kam Leong, dated December 29, 1999 (Incorporated by reference to Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-10863). *10.21 Employment Agreement between York International Corporation and Thomas F. Huntington, dated September 27, 2001 (filed herewith) *10.22 Retirement Agreement between York International Corporation and Michael R. Young, dated October 6, 2003 (filed herewith) *10.23 Form of Employment Agreement between York International Corporation and certain other Key Executive Employees (Incorporated by reference to Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999, File No. 1-10863) *10.24 Form of Amendment No. 1 to Employment Agreement between the Registrant and certain of its key executives. (Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-10863) *10.25 Employment Agreement between York International Corporation and C. David Myers, dated December 31, 2003 (filed herewith) *10.26 Employment Agreement between York International Corporation and Thomas F. Huntington, dated December 31, 2003 (filed herewith) *10.27 Employment Agreement between York International Corporation and Kam S. Leong, dated December 31, 2003 (filed herewith) *10.28 Employment Agreement between York International Corporation and Peter C. Spellar, dated December 31, 2003 (filed herewith) *10.29 Form of Employment Agreement between York International Corporation and certain other key executives, dated December 31, 2003 (filed herewith) 12 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed herewith)
28 13 Annual Financial Statements and Review of Operations with Accountants' Certificate (filed herewith) 21 Subsidiaries of the Registrant (filed herewith) 23 Accountants' Consent (filed herewith) 24 Power of Attorney (filed herewith) 31.1 Certification of the Chief Executive Officer of York International Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 31.2 Certification of the Chief Financial Officer of York International Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.1 Certification of the Chief Executive Officer and Chief Financial Officer of York International Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) * Required to be filed as management contracts, compensatory plans, or arrangements required to be identified pursuant to Item 14(c) of the registrant's report on Form 10-K.
29 EX-4.9 3 w94715exv4w9.txt AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT EXHIBIT 4.9 AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT THIS AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT (this "Amendment") dated as of May 19, 2003, is entered into among YORK RECEIVABLES FUNDING LLC (the "Seller"), YORK INTERNATIONAL CORPORATION, as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "Servicer"), THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO (the "Purchaser Groups"), and PNC BANK, NATIONAL ASSOCIATION, as Administrator (the "Administrator"). RECITALS The Seller, the Servicer, the Purchaser Groups and Administrator are parties to the Receivables Purchase Agreement dated as of December 21, 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Agreement"); and The parties hereto desire to amend the Agreement as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined. 2. Amendments to the Agreement. 2.1 Section 1.7 is hereby amended and restated in its entirety as the following: (a) If any Purchaser Agent, Purchaser, Liquidity Provider, the Administrator or any other Program Support Provider or any of their respective Affiliates (each an "Affected Person") reasonably determines that the existence of or compliance with: (i) any law or regulation or generally accepted accounting standard or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Affected Person, and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of (or otherwise to maintain the investment in) Pool Receivables related to this Agreement or any related liquidity facility, credit enhancement facility or other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Administrator), the Seller shall promptly pay to the Administrator, for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for both increased costs and maintenance of bargained for yield in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either: (i) the introduction of or any change in or in the interpretation of any law, regulation or generally accepted accounting standard or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of, the Purchased Interest or any portion thereof in respect of which Discount is computed by reference to the Euro-Rate, then, upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for both increased costs and maintenance of bargained for yield. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (c) If such increased costs affect the related Affected Person's portfolio of financing transactions, such Affected Person shall use reasonable averaging and attribution methods to allocate such increased costs to the transactions contemplated by this Agreement. (d) Each Affected Person will notify Seller and the applicable Purchaser Agent promptly after it has received official notice of any event which will entitle such Affected Person to such additional amounts as compensation pursuant to this Section 1.7. Such additional amounts shall accrue from the date as to which such Affected Person becomes subject to such additional costs as a result of such event (or if such notice of such event is not given to Seller by such Affected Person within 90 days after such Affected Person received such official notice of such event, from the date which is 90 days prior to the date such notice is given to Seller by such Affected Person). For avoidance of doubt any increase in cost and/or reduction in yield caused by regulatory capital allocation adjustments due to Financial Accounting Standards Board's Interpretation 46 (or any future statement or interpretation issued by the Financial Accounting Standards Board or any successor thereto) shall be covered by this Section 1.7. 2 2.2 Section 6.5 of the Agreement is hereby amended by labeling the existing paragraph as "(a)" and adding the following clause (b) in its entirety as follows: (b) Notwithstanding any provisions contained in this Agreement to the contrary, no Conduit Purchaser shall or shall be obligated to, pay any amount, if any, payable by it pursuant to this Agreement or any other Transaction Document unless (i) such Conduit Purchaser has received funds which may be used to make such payment and which funds are not required to repay the Notes when due and (ii) after giving effect to such payment, either (x) such Conduit Purchaser could issue Notes to refinance all outstanding Notes (assuming such outstanding Notes matured at such time) in accordance with the program documents governing such Conduit Purchaser's securitization program or (y) all Notes are paid in full. Any amount which such Conduit Purchaser does not pay pursuant to the operation of the preceding sentence shall not constitute a claim (as defined in Section 101 of the Bankruptcy Code) against or company obligation of such Conduit Purchaser for any such insufficiency unless and until such Conduit Purchaser satisfies the provisions of clauses (i) and (ii) above. The provisions of this paragraph shall survive any termination of this Agreement. 2.3 The following defined terms are hereby added to Exhibit I to the Agreement, as alphabetically appropriate. "UPG Cash Discount Reserve" means, at any time, the greater of (a) the balance as of the end of the most recent Fiscal Month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, cash discounts affecting the Receivables; or (b) the highest amount of credits issued in any Fiscal Month over the immediately preceding three Fiscal Months related to such cash discounts credits. "UPG Price Discount Matrix Reserve" means, at any time, the greater of (a) the balance as of the end of the most recent Fiscal Month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, price discounts affecting the Receivables; or (b) the actual amount of credits issued against Receivables in the most recent Fiscal Month related to such pricing discounts. "UPG Co-op Advertising Reserve" means, at any time, the greater of (a) the balance as of the beginning of the most recent Fiscal Month of reserves or liabilities maintained on the books and records of the Unitary 3 Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, co-op advertising programs affecting the Receivables; or (b) the amount of credits issued in the most recent Fiscal Month related to such co-op advertising programs. "UPG Volume Rebates Reserve" means, at any time, an amount equal to the sum of (A) an amount equal to the product of (x) 0.50 and (y) the balance as of the beginning of the most recent Fiscal Month of reserves or liabilities maintained on the books and records of the Unitary Products Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, volume rebates affecting the Receivables; and (B) the amount of credits issued in the most recent Fiscal Month related to such volume rebates (if current month credits are less than or equal to $0, then credits issued in the Fiscal Month that is one month prior to the current Fiscal Month). "York Refrigeration Group Rebate Reserve" means, at any time, the greater of (a) the balance as of the beginning of the most recent Fiscal Month of reserves or liabilities maintained on the books and records of the York Refrigeration Group segment of York or the Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, rebate programs affecting the Receivables; or (b) the amount of credits issued in the most recent Fiscal Month related to such rebate programs. 2.4 The definition of "Adverse Claim" set forth in Exhibit I to the Agreement is hereby amended by adding the phrase "or the federal government with respect to any Receivable described in clause (a)(ii)(B) of the definition of "Eligible Receivable." 2.5 Clause (d) of the definition of "Concentration Percentage" set forth in Exhibit I to the Agreement is hereby amended by deleting the percentage "4.0%" therein and substituting the percentage "5.0%" therefor. 2.6 Clause (a) of the definition of "Default Ratio" set forth in Exhibit I to the Agreement is hereby amended by inserting the phrase "(other than any Receivable the Obligor of which is an Affiliate of any Originator)" immediately following the phrase "Defaulted Receivables" therein. 2.7 Clause (b)(i) and (b)(ii) of the definition of "Default Ratio" set forth in Exhibit I to the Agreement is hereby amended by inserting the phrase "(other than any sales made to an Obligor which is an Affiliate of any Originator)" immediately following the phrase "the Originators" therein. 2.8 Clause (a) of the definition of "Delinquency Ratio" set forth in Exhibit I to the Agreement is hereby amended by inserting the phrase "(other than any Receivable the 4 Obligor of which is an Affiliate of any Originator)" immediately following the phrase "Delinquent Receivables" therein. 2.9 Clause (b) of the definition of "Delinquency Ratio" set forth in Exhibit I to the Agreement is hereby amended by inserting the phrase "(other than any Receivable the Obligor of which is an Affiliate of any Originator)" immediately following the phrase "Pool Receivables" therein. 2.10 The definition of "Dilution Ratio" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows: "Dilution Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward), computed as of the last day of each Fiscal Month by dividing: (a) the aggregate amount of payments made or owed by the Seller pursuant to Section 1.4(e)(i) of the Agreement during such Fiscal Month excluding payments related to Ineligible Elimination Amounts, Specifically Reserved Dilution Amount and amounts reported as non-dilutive credits and rebills on the Information Package, by (b) (i) if such Fiscal Month is March, June, September or December, the aggregate credit sales made by the Originators during the Fiscal Month that is one month prior to such Fiscal Month plus 0.25 times the aggregate credit sales made by the Originators during the Fiscal Month that is two months prior to such Fiscal Month, (ii) if such Fiscal Month is January, April, July or October, the aggregate credit sales made by the Originators during the Fiscal Month that is one month prior to such Fiscal Month times 0.80, and (iii) if such Fiscal Month is February, May, August or November, the aggregate credit sales made by the Originators during the Fiscal Month that is one month prior to such Fiscal Month. 2.11 Clause (a) of the definition of "Dilution Reserve Percentage" set forth in Exhibit I to the Agreement is hereby amended by deleting the percentage "6.0%" therein and substituting the percentage "10.0%" therefor. 2.12 The definition of "DHR" set forth in the definition of "Dilution Reserve Percentage" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows: DHR = the "Dilution Horizon Ratio," which shall be equal to the aggregate credit sales made by the Originators (other than sales to Obligors which are Affiliates of any Originator) during the two preceding Fiscal Months divided by the Net Receivables Pool Balance as of the last day of most recent Fiscal Month; provided, however, if the Servicer has a rating of at least BBB- from Standard & Poor's and Baa3 from Moody's, the "Dilution Horizon Ratio" shall be equal to (i) the aggregate credit sales made by the Originators 5 (other than sales to Obligors which are Affiliates of any Originator) during the preceding Fiscal Month plus (ii) 50% of the aggregate credit sales made by the Originators (other than sales to Obligors which are Affiliates of any Originator) during the penultimate Fiscal Month. 2.13 Clause (a) of the definition of "Eligible Receivable" set forth in Exhibit I to the Agreement is hereby amended in its entirety to read as follows: (a) the Obligor of which is (i) a United States resident; provided, however, if (A) the Obligor of such Receivable is an Eligible Foreign Obligor, (B) such Receivable results from goods and services sold in and performed in and/or shipped from the United States by the applicable Originator and (C) payment for such goods and services is denominated and payable only in U.S. dollars in the United States and payable to such Originator at a Lock-Box Bank and subject to a Lock-Box Agreement, such Receivable shall be deemed to satisfy the requirements of this clause (a)(i) to the extent that the sum of the Outstanding Balance of such Receivables satisfying the requirements set forth in clauses (a)(i)(A) through (C) does not exceed 5.00% of the aggregate Outstanding Balance of all other Eligible Receivables; (ii) not a government or a governmental subdivision, affiliate or agency; provided, however, that if the Obligor of such Receivable is (A) a state or local government or a governmental subdivision, affiliate or agency thereof as to which the Seller shall have provided evidence (including opinions or memorandum of counsel) satisfactory to the Administrator that the Receivables of such state or local government Obligor are not subject to any limitations on assignment similar in any respect to the Federal Assignment of Claims Act, such Receivable shall be deemed to satisfy the requirements of this clause (a)(ii)(A) to the extent that the sum of the Outstanding Balance of such Receivables is less than or equal to 5.00% of the aggregate Outstanding Balance of all other Eligible Receivables, at such time as determined, without giving effect to this proviso or the proviso to clause (a)(i); or (B) a federal government or a governmental subdivision, affiliate or agency thereof, such Receivable shall be deemed to satisfy the requirements of this clause (a)(ii) to the extent that the sum of the aggregate Outstanding Balance of such Receivables is less than or equal to 2.50% of all other Eligible Receivables at such time as determined, without giving effect to this proviso or the proviso to clause (a)(i); (iii) not subject to any action of the type described in paragraph (f) of Exhibit V to the Agreement; and (iv) not an Affiliate of York, 2.14 The following definition is hereby added to Exhibit I to the Agreement as alphabetically appropriate: "Eligible Foreign Obligor" means an Obligor which is a resident of Canada; provided, however, that Canada shall be a member of the 6 Organisation for Economic Co-operation and Development (or any successor organization) and have a short-term foreign currency rating (or, if such Obligor does not have such a short-term rating, a long-term foreign currency rating) of at least "A-1" (or "A+") by Standard & Poor's and "P-1" (or "A1") by Moody's. 2.15 Clauses (a)(i) and (a)(ii) of the definition of "Loss Horizon" set forth in Exhibit I to the Agreement are hereby amended by adding the phrase "(other than sales made to an Obligor which is an Affiliate of any Originator)" immediately following the phrase "credit sales" therein. 2.16 The definition of "Specifically Reserved Dilution Amount" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows: "Specifically Reserved Dilution Amount" means, at any time, the sum of (A) the greater of (i) the UPG Cash Discount Reserve and (ii) an amount equal to the product of (x) 0.008 and (y) the aggregate credit sales made by the Unitary Products Group segment of York in the most recent Fiscal Month; (B) the greater of (i) the UPG Co-op Advertising Reserve and (ii) an amount equal to the product of (x) 0.01 and (y) the aggregate credit sales made by the Unitary Products Group segment of York in the most recent Fiscal Month; (C) the greater of (i) the UPG Volume Rebates Reserve and (ii) an amount equal to the product of (x) .002 and (y) the aggregate credit sales made by the Unitary Products Group segment of York in the most recent Fiscal Month; (D) the greater of (i) the York Refrigeration Group Rebate Reserve and (ii) an amount equal to the product of (x) 0.0225 and (y) the aggregate credit sales made by the York Refrigeration Group segment of York in the most recent Fiscal Month; and (E) the UPG Price Discount Matrix Reserve; it being understood that in each case, such other factor as reasonably determined by York with the consent of the Purchasers, the Purchaser Agents and the Administrator may be used in lieu of the specific factor stated herein. 2.17 Paragraph (g) of Exhibit V to the Agreement is hereby amended by deleting the percentage "4.75%" therein and substituting the percentage "7.25%" therefor. 2.18 Schedule II to the Agreement is hereby amended and restated in its entirety as set forth in Annex A attached hereto. 3. Representations and Warranties. Each of the Seller and the Servicer hereby represents and warrants to the Administrator and each member of the various Purchaser Groups from time to time party thereto as follows: (a) Representations and Warranties. Except as expressly disclosed in the waiver letter dated as of the date hereof, the representations and warranties contained in Exhibit III of the Agreement are true and correct as of the date hereof (unless stated to 7 relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date); provided, that the Seller and the Servicer are hereby confirming only their own respective representations and warranties contained in Exhibit III of the Agreement. (b) Enforceability. The execution and delivery by each of the Seller and the Servicer of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary organizational action on each of its parts. This Amendment and the Agreement, as amended hereby, are each of the Seller's and the Servicer's valid and legally binding obligations, enforceable in accordance with its terms. (c) No Default. Except as expressly disclosed in the waiver letter dated as of the date hereof, both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist. 4. Effect of Amendment. All provisions of the Agreement, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to "this Agreement", "hereof", "herein" or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein. 5. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Administrator of counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the other parties hereto, in form and substance satisfactory to the Administrator in its sole discretion. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law). 8. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. YORK RECEIVABLES FUNDING LLC By: _______________________________ Name: _____________________________ Title: ____________________________ YORK INTERNATIONAL CORPORATION, as Servicer By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 2 to RPA (York) S-1 PNC BANK, NATIONAL ASSOCIATION, as Administrator By: _______________________________ Name: _____________________________ Title: ____________________________ MARKET STREET FUNDING CORPORATION, as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 2 to RPA (York) S-2 LIBERTY STREET FUNDING CORP., as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 2 to RPA (York) S-3 PNC BANK, NATIONAL ASSOCIATION, as Market Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 2 to RPA (York) S-4 THE BANK OF NOVA SCOTIA, as Liberty Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 2 to RPA (York) S-5 EX-4.10 4 w94715exv4w10.txt AMENDMENT NO.3 TO RECEIVABLES PURCHASE AGREEMENT EXHIBIT 4.10 AMENDMENT NO. 3 TO RECEIVABLES PURCHASE AGREEMENT THIS AMENDMENT NO. 3 TO RECEIVABLES PURCHASE AGREEMENT (this "Amendment") dated as of June 26, 2003, is entered into among YORK RECEIVABLES FUNDING LLC (the "Seller"), YORK INTERNATIONAL CORPORATION, as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "Servicer"), THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO (the "Purchaser Groups"), and PNC BANK, NATIONAL ASSOCIATION, as Administrator (the "Administrator"). RECITALS The Seller, the Servicer, the Purchaser Groups and Administrator are parties to the Receivables Purchase Agreement dated as of December 21, 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Agreement"); and The parties hereto desire to amend the Agreement as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined. 2. Amendments to the Agreement. 2.1 Schedule II to the Agreement is hereby amended and restated in its entirety as set forth in Annex A attached hereto. 3. Representations and Warranties. Each of the Seller and the Servicer hereby represents and warrants to the Administrator and each member of the various Purchaser Groups from time to time party thereto as follows: (a) Representations and Warranties. Except as expressly disclosed in the waiver letter dated as of May 19, 2003, the representations and warranties contained in Exhibit III of the Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date); provided, that the Seller and the Servicer are hereby confirming only their own respective representations and warranties contained in Exhibit III of the Agreement. (b) Enforceability. The execution and delivery by each of the Seller and the Servicer of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary organizational action on each of its parts. This Amendment and the Agreement, as amended hereby, are each of the Seller's and the Servicer's valid and legally binding obligations, enforceable in accordance with its terms. (c) No Default. Except as expressly disclosed in the waiver letter dated as of the date hereof, both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist. 4. Effect of Amendment. All provisions of the Agreement, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to "this Agreement", "hereof", "herein" or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein. 5. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Administrator of counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the other parties hereto, in form and substance satisfactory to the Administrator in its sole discretion. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law). 8. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. YORK RECEIVABLES FUNDING LLC By: _______________________________ Name: _____________________________ Title: ____________________________ YORK INTERNATIONAL CORPORATION, as Servicer By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 3 to RPA (York) S-1 PNC BANK, NATIONAL ASSOCIATION, as Administrator By: _______________________________ Name: _____________________________ Title: ____________________________ MARKET STREET FUNDING CORPORATION, as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 3 to RPA (York) S-2 LIBERTY STREET FUNDING CORP., as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 3 to RPA (York) S-3 PNC BANK, NATIONAL ASSOCIATION, as Market Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 3 to RPA (York) S-4 THE BANK OF NOVA SCOTIA, as Liberty Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 3 to RPA (York) S-5 EX-4.11 5 w94715exv4w11.txt AMENDMENT NO.4 TO RECEIVABLES PURCHASE AGREEMENT EXHIBIT 4.11 AMENDMENT NO. 4 TO RECEIVABLES PURCHASE AGREEMENT THIS AMENDMENT NO. 4 TO RECEIVABLES PURCHASE AGREEMENT (this "Amendment") dated as of October 15, 2003, is entered into among YORK RECEIVABLES FUNDING LLC (the "Seller"), YORK INTERNATIONAL CORPORATION, as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "Servicer"), THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO (the "Purchaser Groups"), and PNC BANK, NATIONAL ASSOCIATION, as Administrator (the "Administrator"). RECITALS The Seller, the Servicer, the Purchaser Groups and Administrator are parties to the Receivables Purchase Agreement dated as of December 21, 2001, as amended by Amendment No. 1 dated as of April 21, 2003, Amendment No. 2 dated as of May 19, 2003 and Amendment No. 3 dated as of June 26, 2003 (and as further amended, amended and restated, supplemented or otherwise modified from time to time, the "Agreement"); and The parties hereto desire to amend the Agreement as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined. 2. Amendments to the Agreement. 2.1 Clause a(i) of the definition of "Eligible Receivable" as set forth in Exhibit I to the Agreement is hereby amended by adding the following at the end thereof: "provided, further that if the Obligor of such Receivable is not a United States resident and the Receivables of such Obligor are not Eligible Receivables pursuant to the first proviso of this clause (a)(i), such Receivables shall be deemed to satisfy the requirements of this clause (a)(i) to the extent that the sum of the Outstanding Balance of such Receivable and the aggregate Outstanding Balance of all other Eligible Receivables the Obligors of which are not United States residents and which are not Eligible Receivables pursuant to the first proviso of this clause (a)(i) does not exceed $5,000,000 and credit enhancement satisfactory to each Purchaser Agent has been provided for such Obligor;" 3. Representations and Warranties. Each of the Seller and the Servicer hereby represents and warrants to the Administrator and each member of the various Purchaser Groups from time to time party thereto as follows: (a) Representations and Warranties. Except as expressly disclosed in the waiver letter dated as of May 19, 2003, the representations and warranties contained in Exhibit III of the Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date); provided, that the Seller and the Servicer are hereby confirming only their own respective representations and warranties contained in Exhibit III of the Agreement. (b) Enforceability. The execution and delivery by each of the Seller and the Servicer of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary organizational action on each of its parts. This Amendment and the Agreement, as amended hereby, are each of the Seller's and the Servicer's valid and legally binding obligations, enforceable in accordance with its terms. (c) No Default. Except as expressly disclosed in the waiver letter dated as of the date hereof, both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist. 4. Effect of Amendment. All provisions of the Agreement, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to "this Agreement", "hereof", "herein" or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein. 5. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Administrator of counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the other parties hereto, in form and substance satisfactory to the Administrator in its sole discretion. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law). 8. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. YORK RECEIVABLES FUNDING LLC By: _______________________________ Name: _____________________________ Title: ____________________________ YORK INTERNATIONAL CORPORATION, as Servicer By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 4 to RPA (York) S-1 PNC BANK, NATIONAL ASSOCIATION, as Administrator By: _______________________________ Name: _____________________________ Title: ____________________________ MARKET STREET FUNDING CORPORATION, as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 4 to RPA (York) S-2 LIBERTY STREET FUNDING CORP., as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 4 to RPA (York) S-3 PNC BANK, NATIONAL ASSOCIATION, as Market Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 4 to RPA (York) S-4 THE BANK OF NOVA SCOTIA, as Liberty Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 4 to RPA (York) S-5 EX-4.12 6 w94715exv4w12.txt AMENDMENT NO.5 TO RECEIVABLES PURCHASE AGREEMENT EXHIBIT 4.12 AMENDMENT NO. 5 TO RECEIVABLES PURCHASE AGREEMENT THIS AMENDMENT NO. 5 TO RECEIVABLES PURCHASE AGREEMENT (this "Amendment") dated as of November 26, 2003, is entered into among YORK RECEIVABLES FUNDING LLC (the "Seller"), YORK INTERNATIONAL CORPORATION, as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "Servicer"), THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY THERETO (the "Purchaser Groups"), and PNC BANK, NATIONAL ASSOCIATION, as Administrator (the "Administrator"). RECITALS The Seller, the Servicer, the Purchaser Groups and Administrator are parties to the Receivables Purchase Agreement dated as of December 21, 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Agreement"); and The parties hereto desire to amend the Agreement as hereinafter set forth. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined. 2. Amendments to the Agreement. 2.1 Schedule II to the Agreement is hereby amended and restated in its entirety as set forth in Annex A attached hereto. 3. Representations and Warranties. Each of the Seller and the Servicer hereby represents and warrants to the Administrator and each member of the various Purchaser Groups from time to time party thereto as follows: (a) Representations and Warranties. Except as expressly disclosed in the waiver letters dated as of May 19, 2003 and November 10, 2003, the representations and warranties contained in Exhibit III of the Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date); provided, that the Seller and the Servicer are hereby confirming only their own respective representations and warranties contained in Exhibit III of the Agreement. (b) Enforceability. The execution and delivery by each of the Seller and the Servicer of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary organizational action on each of its parts. This Amendment and the Agreement, as amended hereby, are each of the Seller's and the Servicer's valid and legally binding obligations, enforceable in accordance with its terms. (c) No Default. Except as expressly disclosed in the waiver letter dated as of the date hereof, both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist. 4. Effect of Amendment. All provisions of the Agreement, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to "this Agreement", "hereof", "herein" or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein. 5. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Administrator of counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the other parties hereto, in form and substance satisfactory to the Administrator in its sole discretion. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law). 8. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. YORK RECEIVABLES FUNDING LLC By: _______________________________ Name: _____________________________ Title: ____________________________ YORK INTERNATIONAL CORPORATION, as Servicer By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 5 to RPA (York) S-1 PNC BANK, NATIONAL ASSOCIATION, as Administrator By: _______________________________ Name: _____________________________ Title: ____________________________ MARKET STREET FUNDING CORPORATION, as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 5 to RPA (York) S-2 LIBERTY STREET FUNDING CORP., as a Conduit Purchaser and a Related Committed Purchaser By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 5 to RPA (York) S-3 PNC BANK, NATIONAL ASSOCIATION, as Market Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 5 to RPA (York) S-4 THE BANK OF NOVA SCOTIA, as Liberty Street Purchaser Agent By: _______________________________ Name: _____________________________ Title: ____________________________ Amendment No. 5 to RPA (York) S-5 EX-4.14 7 w94715exv4w14.txt TERMS AND CONDITIONS OF DKK 200 MILLION EXHIBIT 4.14 DKK 200 MILLION, 2 PER CENT BONDS TERMS & CONDITIONS FOR THE BONDS ISSUER York International Corporation, York, Pennsylvania, United States. NOMINAL AMOUNT AND CURRENCY The initial issue will be for DKK 200 million. Further bonds may be issued without a maximum nominal amount. Additional bonds may be issued up to October 1, 2004. PRICE The bonds have been acquired by Danske Bank with the purpose of resale to investors at market value. PAYMENT DATE October 31, 2003 LISTING It is not the intention to list the bonds at the Copenhagen Stock Exchange. DENOMINATION AND REGISTRATION The bonds will be registered with the VP Securities Services in denominations of DKK 10,000. No bond certificates will be issued. TYPE OF BOND 2 Bullet loan. TERM AND COUPON RATE The term of the bonds is 364 days from October 31, 2003 - October 29, 2004. During the term period the bonds carry a fixed coupon rate of 2 per cent per annum. The calculation of interest takes place on the basis of the actual amount of days of the term period (364 days) divided by the actual amount of days of the full, relevant year (366 days). MATURITY DATE The bonds fall due for redemption in full on October 29, 2004. INTEREST PAYMENT AND REDEMPTION Payment of interest and principal is made via transfers on the Maturity Date to the accounts with Danish banks and securities firms specified to the VP Securities Services. If the Maturity Date is not a business day payment will be made on the nearest following business day. The bond holders will not be entitled to interest or other amounts due to such postponement of payment. A business day means a day on which Danish banks are open. STATUS OF THE BONDS The bonds constitute direct, unsecured and unsubordinated claims against York and rank pari passu with other direct, unsecured and unsubordinated claims against York. ISIN CODE DK 000036528-9 TAXATION The bonds are issued with a coupon rate that fulfils the conditions for tax exemption for gains on securities in Section 7 in the Danish Gains on Securities Act. Private investors are usually not liable to pay tax on gains on securities and any losses are not deductible. Companies, 3 foundations and associations are liable to pay tax on gains on securities and any losses are deductible. Under current legislation, tax at source (withholding tax) of bond interest will not be withheld in Denmark. In the event that withholding tax should be introduced in Denmark, such tax will be withheld from payments to the bond holders. Interest due as well as ownership, redemption and assignment of the bonds will be reported to the Danish tax authorities in accordance with current legislation. CALLABILITY The bonds are non-callable by both York and bond holders throughout the maturity of the bonds except as provided in these Terms and Conditions, see the Events of Default clause. OBLIGATIONS OF YORK So long as any of the Bonds remains outstanding York shall a) ensure that the obligations of York under these Terms and Conditions will at all times rank at least equally with York's other unsecured obligations, including third party and other guarantees made by York, with the exception of obligations which are preferred pursuant to mandatory rules of law; b) abstain from creating, assuming or incurring any mortgage, lien, pledge, charge or other encumbrance (the "Encumbrance") upon any of its present or future assets (with the exception of (i) Encumbrances in existence at the Payment Date or created, assumed or incurred in connection with any extension, renewal or replacement of such existing Encumbrance, (ii) Encumbrances created, assumed or incurred in connection with acquisitions made by York in the ordinary course of its business, including any kind of sale and lease-back, (iii) mortgages in real estate, (iv) Encumbrances, other than Encumbrances permitted under this provision, that do not in total exceed 15 per cent of the shareholders' equity as per the latest consolidated accounts, (v) Encumbrances acquired in connection with a merger, and (vi) Encumbrances arising by operation of law or regulation, or Encumbrances undertaken by York due to demand from public authorities, including national banks) without making effective provision whereby the bonds shall be secured equally and ratably with the other obligations thereby secured; and c) abstain from discontinuing its present business, materially alter its present business or 4 sell all or material parts of its assets, including undertaking de-mergers or mergers, except mergers where York is the continuing company and where the continuing company subrogates in all rights and obligations of York in respect of the Bonds. EVENTS OF DEFAULT In any of the events of default mentioned below, the bond holders shall, through the accounts registered with the VP Securities Services, be entitled to immediately declare that the debenture loan shall be due and shall be redeemed at par value and that the interest accrued, but not yet paid, as of the due date shall be payable: a) in the event that York defaults in the payment of interest or principal on the Bonds on the due date and such default continues for a period of more than 14 days after written notice from any bond holder in respect hereof has been received by York; b) in the event that York defaults in the performance or observance of any obligation under these Terms and Conditions and such default continues for 30 days after written notice from any bondholder in respect hereof has been received by York; c) in the event that any other indebtedness for borrowed money (meaning present or future debt obligations, including third party and other guarantees, (be it principal, interest or other amounts) with respect to (a) borrowed money, (b) debt under credit facilities or (c) bonds, debt instruments or similar) of York or any group company is not paid when due or rightly declared due or within any grace period applicable under prior agreement, law or custom; in the event that York or any group company defaults under such indebtedness and thereby giving the creditor a right to declare the debt due prior to its scheduled maturity; or in the event that York or any group company does not honour any guarantee in respect of borrowed money when due and called upon provided that any such event shall not constitute an event of default unless the obligations in respect of the indebtedness for borrowed money exceeds USD 10,000,000 in aggregate; or d) in the event that York stops payment, comes under bankruptcy or liquidation, or makes a general composition with its creditors. NEGOTIABILITY OF THE BONDS No restrictions as to the negotiability of the bonds shall apply. With respect to investors subject to or with affiliations with jurisdictions other than Denmark, 5 reservations are made for the laws governing such jurisdictions. The bonds constitute negotiable bearer securities. The bonds cannot be registered in the name of the holder. SECURITY York will not provide any security for the bonds. LIMITATION OF ACTIONS Applicable limitation periods are 20 year for the principal and 5 years for interest payments. LIABILITY FOR DAMAGES OF THE ISSUER AND THE ARRANGER The issuer and/or the Arranger (the relevant party hereinafter defined as the "Party") are liable if the Party fulfils its obligations under these Terms and Conditions in an untimely or negligent manner. A Party shall not be liable, even if the Party's liability does not require negligence, for losses due to: - - breakdown of/lack of access to IT systems or damage to the data of these systems which can be attributed to the events mentioned below regardless of whether the Party itself or an external supplier is responsible for the operations of the systems - - failure in the Party's power supply or telecommunications, statutory intervention or administrative acts, natural disasters, war, insurrections, civil riots, sabotage, terror or vandalism (including computer viruses and hacking) - - strike, lockout, boycott or blockade regardless of whether the conflict is directed at or initiated by the Party itself or its organisation and regardless of the reason for the conflict. This shall also apply where the conflict only affects parts of the Party - - other circumstances beyond the control of a Party. The exemption from liability shall not apply if: 6 - - the Party should have anticipated the factor that caused the loss at the time when these Terms and Conditions first came into force or should have avoided or overcome the reason for the loss - - if pursuant to current legislation the Party is liable for the factor causing the loss. BOND HOLDERS' MEETING York may at any time convene a bond holders' meeting. The purpose of such such meetings may be to make binding resolutions as well as to provide information only. York shall convene a bond holders' meeting, if a request in this respect is made by bond holders representing at least 25 per cent of all bonds issued under these Terms and Conditions. The request from the bond holders must be made in writing to York and must specify a proposed agenda. The meeting must be convened at the latest 14 days after York's receipt of such request from bond holders. The notice of a bond holders' meeting shall contain information as to time and venue for the meeting, an agenda and must specify whether resolutions are to be made at the meeting or whether the meeting shall be for information purposes only. If resolutions are to be made at the meeting, the full wording of the proposed resolutions must be stated. At a meeting for information purposes no resolutions may be made. The notice must state that bond holders wishing to participate in a meeting must be able to produce evidence of their title to bonds by means of a transcript from an account controller. The details of the necessary evidence of title to bonds must be specified in the notice. The notice of bond holders' meeting must be given with minimum 8 days' and maximum 4 weeks' notice in the manner stipulated under Notices. The venue of bond holders' meetings shall be Copenhagen in the place specified by York. Costs in connection with the bond holders' meeting shall be paid by York. At a bond holders' meeting at which resolutions are to be made, resolutions may be made in respect of all issues regarding the terms for the bonds. The principal, interest rate or maturity date of the bonds may not be amended, however. Proposals for other amendments to the terms for the bonds shall not be deemed to be accepted unless made or endorsed by York. The proceedings at a bond holders' meeting shall be conducted by a chairman appointed by 7 York. The chairman shall be competent to make decisions in respect of the rules of procedure, voting and the results of votings. Minutes shall be made of the proceedings at a bond holders' meeting. The minutes shall be signed by the chairman. A bond holder has one vote for each bond of DKK 10,000 to which the holder may document his title. York shall have no voting rights for own bonds. Resolutions to amend the terms for the bonds shall not be valid unless adopted with at least two-thirds of both the votes cast and the votes of bond holders present at the meeting who are entitled to vote. A resolution adopted in accordance with this provision shall be binding for all bond holders. Immediately after a bond holders' meeting, York shall inform the bond holders of resolutions made in accordance with the provisions under Notices. NOTICES All notices in connection with the bonds will be submitted to the bond holders registered with the VP Securities Services. In addition, notices of bond holders' meetings shall be published in at least one national newspaper. EURO CONVERSION In the event that the Danish krone is converted to euro, this shall not affect the terms of bonds issued under these Terms and Conditions. In such event the redemption amount and interest shall be converted at the conversion rate fixed between the Danish krone and the euro at the time of conversion. GOVERNING LAW AND VENUE The bonds are to be governed by and construed in accordance with Danish law. Any legal actions arising out of or relating to the bonds shall be settled by the Copenhagen Maritime and Commercial Court. 8 Information regarding sale of bonds, etc. AUTHORITY The bonds are issued pursuant to the resolution of the Board of Directors of York adopted on September 24, 2003. USE OF PROCEEDS The proceeds from the bond issue will be used to fund York's general operations. BOND UNITS DKK 10,000. PURCHASE OF BONDS The bonds are sold at current market rates. PLACE OF SALE Branches of Danske Bank A/S SETTLEMENT The bonds will be settled after 3 trading days against registration with the VP Securities Services. The first issue will be settled on October 31, 2003, however. BOND ISSUING AGENT Danske Bank A/S Holmens Kanal 2-12 1092 Copenhagen K ANNUAL ACCOUNTS AND CERTIFICATE OF INCORPORATION York's Annual Accounts for 2000, 2001 and 2002 and York's Certificate of Incorporation may be obtained from Danske Bank (please see address and telephone number under Place of 9 Sale). Also, the Annual Accounts, Half Year Accounts and Quarterly Account are available on York's homepage www.york.com/ invest/AnnualReport.asp SALES RESTRICTIONS The bonds are governed by the applicable law and regulations at any time on supply, marketing and trading of securities under the laws of each relevant jurisdiction. York accepts no liability in this connection. ARRANGER Danske Bank A/S Holmens Kanal 2-12 1092 Copenhagen K PAYING AGENT Danske Bank A/S Holmens Kanal 2-12 1092 Copenhagen K INFORMATION ABOUT YORK REGISTERED OFFICE York International Corporation is a Delaware company with the registered agent: The Corporation Trust Company and with registered office at: Corporation Trust Center 1209 Orange Street City of Wilmington County of New Castle 19801 United States STREET ADDRESS 10 631 South Richland Avenue York, PA 17403 United States MAILING ADDRESS P.O. Box 1592 York, PA 17405-1592 United States HOMEPAGE www.york.com TELEPHONE +1 (717) 771 7890 FAX +1 (717) 771 7381 DOMICILE Pennsylvania, United States RATING York's long-term debt rating is Baa1 (negative outlook) by Moody's Investor Service Ltd. and BBB- (stable outlook) by Standard & Poor's. ANNUAL AND INTERIM ACCOUNTS AND CERTIFICATE OF INCORPORATION York's annual and interim accounts are available at www.york.com. The latest accounts and copies of York's Certificate of Incorporation are also available from Danske Bank. AUDITORS 11 KPMG LLP Harrisburg, Pennsylvania United States LITIGATION On the date of issue of these Terms & Conditions, neither York nor its subsidiaries are involved in any legal dispute or arbitration which may materially affect York's ability to fulfil its obligations in respect of the bonds. Furthermore, York has no knowledge of any such cases being contemplated. RECENT EVENTS Since the presentation of the Annual Accounts for 2002, no events have occured which may materially affect York's ability to fulfill its obligations in respect of the bonds. Please refer to York's latest annual and interim accounts. OUTLOOK FOR 2003 Please refer to York's latest annual and interim accounts and other financial information available at www.york.com. EX-4.15 8 w94715exv4w15.txt TERMS AND CONDITIONS OF DKK 50 MILLION EXHIBIT 4.15 ADDITIONAL ISSUE OF DKK 50 MILLION, 2 PER CENT BONDS UDSTEDER ISSUER York International Corporation York International Corporation FORHOJELSE AF 2% OBLIGATIONSLAN INCREASE OF 2% BONDS LOAN 2003/2004 2003/2004 OPRINDELIGT DKK 200.000.000 INITIALLY DKK 200,000,000 TO DKK TIL DKK 250.000.000. 250,000,000. ARRANGOR ARRANGER Danske Bank Danske Bank BETINGELSER FOR ALLONGE TIL OBLIGATIONS- TERMS AND CONDITIONS FOR ANNEX BETINGELSER Naervaerende allonge skal laeses og This annex is to be read and construed fortolkes i sammenhaeng med in connection with the terms and obligationsbetingelser dateret 28. conditions for the bonds, dated oktober 2003 (Appendix 1), sammen October 28, 2003 (Appendix 1), herefter betegnet together hereinafter termed "the terms "obligationsbetingelserne", som skal and conditions for the bonds", that gaelde for det oprindelige lan samt apply to the initial loan and the Forhojelsen som naermere beskrevet Increase as described below. nedenfor. Med virkning fra Indbetalingsdag for From the Payment Date for additional forhojelsen, som beskrevet nedenfor, bonds, as described below, the terms aendres obligationsbetingelserne som and conditions for the bonds are folger: amended as follows: FORHOJELSEN THE INCREASE Den initiale udstedelse pa nominelt The initial issue for DKK 200 million danske kroner ("DKK") 200 mio. is increased with DKK 50 million to a forhojes med total 2 nominelt DKK 50 mio. til i alt issue of DKK 250 million. nominelt DKK 250 mio. KURS RATE Obligationer i relation til Bonds in relation to the Increase (in Forhojelsen (i naervaerende allonge this annex termed "the additional benaevnt "tillaegsobligationerne", bonds", which in relation to the terms som i relation til and conditions for the bonds are obligationsbetingelserne indgar i included in the term "the bonds") are betegnelsen "obligationer") er acquired by Danske Bank for the erhvervet af Danske Bank med henblik purpose of resale to investors at pa videresalg til investorer til current market values. gaeldende markedskurser. INDBETALINGSDAG FOR TILLAEGSOBLIGATION- PAYMENT DATE FOR THE ADDITIONAL BONDS ERNE 23. december 2003 December 23, 2003 LOBETID OG KUPONRENTE TERM AND COUPON RATE Lobetiden for tillaegsobligationerne The additional bonds shall have a term er fra Indbetalingsdagen for from the Payment Date for additional tillaegsobligationerne til 29. bonds until October 29, 2004. oktober 2004. Tillaegsobligationerne forrentes dog However, during the term for the bonds i lobetiden for de oprindeligt initially issued, which is 364 days udstedte obligationer, som er 364 from October 31, 2003, to October 29, dage fra 31. oktober 2003 til 29. 2004, the additional bonds carry a oktober 2004, med en fast kuponrente fixed coupon rate of 2 per cent per pa 2% p.a. annum. Renteberegningen sker pa basis af The calculation of interests is to be lobetidens faktiske antal dage (364 done on the basis of the actual number dage) divideret med det faktiske of days within the period of maturity antal dage i det fulde relevante ar (364 days) divided by the actual (366 dage). number of days within the full relevant year (366 days). FONDSKODE ISIN CODE 3 DK 000036528-9 DK 000036528-9 LOVVALG OG VAERNETING GOVERNING LAW AND VENUE Obligationerne er underlagt dansk ret The bonds are to be governed by and og eventuelle sogsmal med relation construed in accordance with Danish til obligationerne skal anlaegges ved law. Any legal actions arising out of So-og Handelsretten i Kobenhavn. or relating to the bonds shall be settled by the Copenhagen Maritime and Commercial Court. UDSTEDERS TILTRAEDELSE AF ALLONGE TIL ISSUERS ACCEPTANCE OF ANNEX TO TERMS OBLIGATIONSBETINGELSER AND CONDITIONS FOR BONDS Naervaerende allonge til This annex to terms and conditions for obligationsbetingelser tiltraedes bonds is hereby accepted: herved: [underskrift] [signature] York, Pennsylvania, den 17. December York, Pennsylvania, December 17, 2003 2003 York International Corporation York International Corporation ("York") ("York") EX-10.7 9 w94715exv10w7.txt AMENDMENT NO. 1 TO SUPPLEMENTAL EXEC. RETIREMENT EXHIBIT 10.7 AMENDMENT NUMBER 1 TO YORK INTERNATIONAL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) York International Corporation (the "Employer") wishes to amend the York International Corporation Supplemental Executive Retirement Plan (SERP) (the "Plan"). Accordingly, the Plan hereby is amended, as permitted under Section 7.04 of the Plan, as follows: Effective January 1, 1997, Section 2.06 of the Plan is amended to read as follows: 2.06 "Compensation" shall mean the regular or base salary or wages received by a Member from the Employer during a calendar year for personal services rendered plus the lesser of (a) or (b), defined as: a) Base "EV" bonus award percentage for the calendar year times the Member's annual base salary as December 31 of such calendar year, or b) Total bonus earned for the calendar year; and excluding: (i) contributions, credits or benefits paid or accrued under this Plan or any other qualified or non-qualified retirement plan, deferred compensation plan, welfare benefit plan or fringe benefit plan of the Employer, (ii) compensation resulting from grant (if the value of such grant would otherwise be excludable from the Member's gross income), exercise or cancellation of or vesting or lapse of restrictions with respect to stock options or stock awards or disposition of the underlying stock, (iii) reimbursement for expenses, or other expense allowances, (iv) moving expenses, (v) severance payments, and (vi) expatriation payments. In all cases, however, not withstanding any exclusion specified above, Compensation shall include any amount which would otherwise be deemed Compensation under this Section 2.06 but for the fact that it is deferred pursuant to a salary reduction agreement under any plan described in Section 401 (k), 402(h) or 125 of the Internal Revenue Code of 1986, as amended, or under any non-qualified deferred compensation plan or agreement. In all other respects, the Plan hereby is ratified and affirmed. IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed effective January 1, 1997. WITNESS/ATTEST: YORK INTERNATIONAL CORPORATION /s/ R. A. King By: /s/ Jane G. Davis - -------------------------- ------------------------------- Print Name: R. A. King Print Name: Jane G. Davis Title: Vice President, Secretary & General Counsel Date: June 30, 1997 EX-10.12 10 w94715exv10w12.txt 2ND AMEND. TO EXEC. DEFERRED COMPENSATION PLAN EXHIBIT 10.12 SECOND AMENDMENT TO THE YORK INTERNATIONAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (AS AMENDED AND RESTATED EFFECTIVE JULY 1, 2001) Pursuant to the powers of amendment reserved to the Compensation Committee under Article X of the York International Corporation Executive Deferred Compensation Plan (the "Plan"), the Plan is hereby amended, effective as of January 1, 2004, as follows: 1. Section 4.3(a) is hereby amended and restated in its entirety to read as follows: 4.3(a) MATCHING CONTRIBUTIONS (a) For each calendar year, the Administrative Committee shall allocate to each Participant's Account an amount equal to fifty percent (50%) of the Participant's Salary Deferrals for such calendar year; provided, however, that such Matching Contributions shall not exceed four percent (4%) of any Participant's base salary for the calendar year. Subject to the foregoing limit, Matching Contributions shall be allocated to Participant's account ratably as such Participant's Salary Deferrals are allocated to his or her Account pursuant to Section 4.2(c). IN WITNESS WHEREOF, the Compensation Committee has caused this Second Amendment to be executed as of the 3rd day of December, 2003. The Compensation Committee of the Board of Directors of York International Corporation By: __________________________________________ Attest: ________________________________________ EX-10.14 11 w94715exv10w14.txt FORM OF RESTRICTED STOCK AGREEMENT EXHIBIT 10.14 RESTRICTED STOCK AGREEMENT This Agreement, dated as of March 26, 2003 by and between YORK INTERNATIONAL CORPORATION, a Delaware corporation (the "Company") and <> ("Grantee"). WITNESSETH: WHEREAS, Grantee is an employee of the Company as of the date of this Agreement; and WHEREAS, the Company desires to award Grantee restricted shares of the Company's Common Stock, par value $.005 per share (the "Common Stock"), pursuant to the Company's Amended and Restated 2002 Omnibus Stock Plan, and the Grantee desires to accept such grant. NOW THEREFORE, in consideration of these premises and the mutual covenants herein contained, the parties hereto, intending to be legally bound, agree as follows: EMPLOYEE STOCK PROVISIONS 1. GRANT OF RESTRICTED STOCK AWARD Company hereby grants to the Grantee <> (<>) restricted shares of Common StoCk (the "Grantee stock"), subject to the restrictions set forth in this Agreement, and subject to receipt of the Grantee's check for <> as consideration for the issuance of the Grantee Stock. This Agreement shall become effective only upon receipt of the check by the Company. The Company will issue the Grantee Stock in the name of the Grantee upon effectiveness of this Agreement and receipt by the Company of a stock power for the Grantee Stock duly executed in blank. The Company will hold the Grantee Stock until such time as restrictions on the respective shares of Grantee Stock have lapsed pursuant to the terms of this Agreement. The Grantee shall have all the rights of a stockholder of the Company with respect to the Grantee Stock, including the right to vote and to receive dividends, subject to the terms and conditions of this Agreement. Shares of Grantee Stock as to which restrictions have not lapsed in accordance with the terms of this Agreement shall not be transferable by the Grantee. 2. DEFINITIONS The following terms shall have the definitions set forth below: "CAUSE" means the termination of employment of an employee for (i) providing the Company with materially false representations relied upon by the Company in furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company, (iii) misconduct causing a serious violation by the Company of state or federal laws, (iv) theft of Company funds or assets, or (v) conviction of a crime involving moral turpitude. "CHANGE OF CONTROL." For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board; or -2- (c) Consummation of a reorganization, merger or consolidation involving the Company or any subsidiary of the Company or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, either (A)(i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transactions owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock or (ii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or at the time of the action of the Board, providing for such Business Combination and (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; or (d) A complete liquidation or dissolution of the Company. "DISABILITY" means the inability to perform the duties assigned by the Company to the participant by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. -3- 3. VESTING OF SHARES (a) Shares of Grantee Stock will be subject to restrictions until the shares are either deemed vested or forfeited in accordance with the following: (i) in the event of death of the Grantee while employed by the Company, or after retirement but before all shares have vested under subsection (vi) below, all shares shall immediately be deemed vested and the restrictions on such shares shall lapse; (ii) in the event of Disability of the Grantee while employed by the Company, all shares shall immediately be deemed vested and the restrictions on such shares shall lapse; (iii) in the event the Grantee is terminated for Just Cause, any shares which remain subject to restrictions shall immediately be forfeited by the Grantee; (iv) in the event the Grantee voluntarily terminates employment with the Company, any shares which remain subject to restrictions shall immediately be forfeited by the Grantee; (v) in the event the Grantee is terminated after a Change of Control has occurred other than for Just Cause, all shares shall immediately be deemed vested and the restrictions on all such shares shall lapse; (vi) in the event the Grantee retires in accordance with the Company's retirement policy, unvested shares shall continue to vest in accordance with the schedule in subsection (vii) below; (vii) while Grantee remains in the employ of the Company, restricted shares which have not otherwise vested shall vest and the restrictions on such shares shall lapse on the following anniversary dates of this Agreement: Vesting Date Percentage of Grantee Stock ----------------- --------------------------- Third Anniversary 100% -4- provided that if the Company determines, in its sole discretion, that at any time the Grantee has breached the obligations under any Confidentiality Agreement with the Company, shares that are not deemed vested as of the time of such breach shall immediately be forfeited by the Grantee. 4. REPURCHASE OF THE GRANTEE STOCK. If, pursuant to Section 3, certain shares of Grantee Stock which remain unvested are forfeited to the Company, the Company shall pay the Grantee the cash consideration paid for such shares set forth in Section 1 of this Agreement, without interest. If any of the shares are forfeited, the Grantee authorizes the Company to cancel the shares and the certificates for such shares and irrevocably appoints the Company as his attorney-in-fact for this purpose. 5. STOCK CERTIFICATES. Certificates representing the Grantee Stock will be held by the Company until the Grantee Stock has vested in accordance with the terms of Section 3. Upon vesting, the Company will deliver to the Grantee a certificate representing that portion of the shares of Grantee Stock which have vested. Certificates delivered to the Grantee evidencing shares of Grantee Stock may bear a legend to the effect that they may be sold, pledged or otherwise transferred only in accordance with applicable federal and state securities laws. The Grantee agrees to sell or transfer such shares only in accordance with applicable laws. 6. STOCK DIVIDENDS AND STOCK SPLITS. Grantee Stock will also include shares of the Company's capital stock issued with respect to shares of Grantee Stock by way of a stock split, stock dividend or other recapitalization. 7. WITHHOLDING TAXES. The Grantee agrees to pay to the Company all federal, state and local withholding taxes and other amounts required by law to be withheld. Such payment shall be made in cash or, if in accordance with Rule 16b-3 of the Securities and Exchange Commission or any successor rule and permitted by the Compensation Committee, by delivery of Company Common Stock, including shares subject to this Agreement which are no longer restricted. The Company may withhold any taxes required to be withheld as required by law. -5- MISCELLANEOUS PROVISIONS 8. NOTICES. Any notice provided for in this Agreement must be in writing. Such notice will have been properly sent if it is mailed by first class mail with adequate postage affixed thereto and addressed to the recipient as below indicated: To the Company: York International Corporation 631 South Richland Avenue York, PA 17403 Attention: Corporate Secretary To the Grantee: <> <
> <>, <> <> or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been delivered to the recipient three days after it has been properly sent. 9. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 10. COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and certain other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. -6- 11. COUNTERPARTS. This Agreement may be executed on separate counterparts, each of which is deemed to be an original, and all of which taken together constitute one and the same agreement. 12. SUCCESSORS AND ASSIGNS. The Grantee's rights under this Agreement may not be transferred other than by will or the laws of descent and distribution. This Agreement is intended to bind and inure to the benefit of and be enforceable by Grantee and the Company and their respective heirs, executors, successors and assigns. 13. CHOICE OF LAW. The corporate law of the State of Delaware will govern all questions concerning the relative rights of the Company and its shareholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by the internal law, and not the law of conflicts, of the Commonwealth of Pennsylvania. 14. REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Any action brought in connection with this Agreement or the breach thereof, whether in law or equity, may only be brought within the Commonwealth of Pennsylvania. -7- 15. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be amended or waived only with the prior written consent of the Company and Grantee. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. YORK INTERNATIONAL CORPORATION GRANTEE: By: /s/ Dale L. Bennett - ------------------------------ ---------------------- Dale L. Bennett <> Vice President, Human Resources & Corporate Development 41940 (04/10/03) -8- EX-10.21 12 w94715exv10w21.txt EMPLOYMENT AGREEMENT, THOMAS F. HUNTINGTON EXHIBIT 10.21 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and Thomas F. Huntington (the "Executive") dated as of the 27th day of September, 2001. The Board of Directors of the Company has determined that it is in its best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean September 27, 2001. 2. Employment Period. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to enter into the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary thereof (the "Employment Period") provided, however, that the Employment Period shall be automatically extended without action by either party for an additional one month period on the 16th day of each month unless, not later than the 15th day of any month, either party shall give notice to the other in writing that such party does not intend to extend the Employment Period. 3. Terms of Employment. (a) Position and Duties. (A) During the Employment Period, the Executive shall serve as President, UPG with such authority, duties and responsibilities as are commensurate with such position and (B) the Executive's services shall be performed in Norman, OK. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $375,000 ("Annual Base Salary"), which shall be paid in accordance with the Company's payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Incentive Compensation. During the Employment Period, the Executive shall have an annual cash bonus and a mid-term performance bonus opportunity based on a percentage of his Annual Base Salary (determined annually by the Company's Board in accordance with the provisions of the 1996 Incentive Compensation Plan) and shall otherwise be eligible for incentive compensation awards on the same basis as similarly situated executives. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, employee benefit, retirement, welfare and other plans, practices, policies and programs applicable to senior executives of the Company. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the Company's policies. (v) Perquisite Benefits. During the Employment Period, the Executive shall be provided with perquisite benefits as are provided to other senior executives of the Company. (vi) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the plans, policies, programs and practices of the Company and its affiliated companies as in effect with respect to the senior executives of the Company. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 11(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company with materially false representations relied upon by the Company in furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company, or (iii) willful misconduct causing serious violation by the Company of state or federal laws, or (iv) theft of Company funds or assets, or (v) conviction of a crime involving moral turpitude. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. (c) Good Reason. In the event that the Executive's employment with the Company is voluntarily terminated by the Executive with "Good Reason", the Executive shall be entitled to a lump sum payment representing the remaining balance of his or her employment agreement as calculated in accordance with Section 5 (a). For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Executive's Employment Period: (i) a substantial and adverse change in the Executive's responsibilities, job description, status or position as a key employee of the Company, when compared to the Executive's prior responsibilities, job description, status or position as a key employee of the Company as contemplated by Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt or notice thereof given by the Executive; (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(i)(B) hereof; (iv) a material breach by the Company of any terms of this Agreement, or any failure by the Company to comply with and satisfy Section 9 of this Agreement, or any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 5. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (this amount shall be hereinafter referred to as the "Accrued Obligations"); and B. An amount equal to the Executive's Annual Base Salary plus Annual Cash Bonus (based on the adjusted EV bonus amount for the Fiscal Year in which the Date of Termination occurs, the "Adjusted EV Bonus") for the remaining Employment Period; and C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), and any excess or supplemental retirement plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued until the end of the Employment Period assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the periods is that required by Section 3(b) and that the Executive's Annual Cash Bonus for such years is the Adjusted EV Bonus, over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; (ii) the Company shall continue to provide welfare benefits to the Executive and his dependants until the end of the Employment Period on the same basis that such benefits were provided to him immediately prior to the Date of Termination; and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include death benefits as in effect on the date of the Executive's death with respect to senior executives of the Company and his beneficiaries. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits as in effect at any time thereafter generally with respect to the senior executives of the Company. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Annual Base Salary through the Date of Termination, and Other Benefits, in each case to the extent theretofore unpaid. 6. Non-exclusivity of Rights. Except as specifically provided, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 11(e), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 7. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 8. Confidential Information. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (b) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8 or Section 9 below. 9. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in material competition with the business conducted by the Company or its affiliates. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person, solicit for employment any person employed by the Company or its affiliates as of the date hereof or known by the Executive at the time to be employed by the Company or its affiliates. (c) (i) Executive acknowledges and agrees that the restrictions contained in this Section 9 and in Section 8 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 9 are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 9 and Section 8 cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 9, which rights shall be cumulative and in addition to any other fights or remedies to which the Company may be entitled. In the event that any of the provisions of this Section 9 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 9 and Section 8, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waive any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 9. (d) In exchange for the covenants set forth in this Section 9, the Company agrees to make to the Executive a lump sum payment equal to two years of the Executive's then-current Annual Base Salary plus then-current Adjusted EV Bonus, payable within 30 days after the Date of Termination. 10. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 11. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. Thomas F. Huntington 1508 S.W. 38th Street Moore, OK 73160 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Thomas F. Huntington 10/08/01 ------------------------------------------ Thomas F. Huntington YORK INTERNATIONAL CORPORATION By: /s/ Michael R. Young 10/04/01 -------------------------------------- EX-10.22 13 w94715exv10w22.txt RETIREMENT AGREEMENT, MICHAEL R. YOUNG EXHIBIT 10.22 October 6, 2003 Mr. Michael R. Young Dear Mike: Pursuant to our discussion at the September 25th Board meeting, the Board hereby acknowledges your plan to retire on February 9, 2004. As of that date, you will be resigning as an Officer and Director of the Company. On behalf of the Board, I want to convey our utmost gratitude for the contributions that you have made to York International as its CEO over the past 4 years. This letter will confirm the compensation, benefits and other provisions related to your retirement. Through your retirement date, you will continue in your capacity as Chief Executive Officer of the Company and your compensation and benefits will continue unchanged. As of your retirement date, you will retire and your employment with the company will be deemed terminated. From and after your retirement date, you will not be entitled to receive any compensation, perquisites or benefits from the Company other than as specifically set forth in this letter. Nothing in this paragraph is intended to affect any benefits to which you may be entitled under any of the Company's qualified plans or your right under Federal or state law to continue certain benefit coverage at your own expense after your retirement. 1. From and after your retirement date, you will be entitled to receive the following compensation and benefits: (a) You will receive payment for any vacation time accrued and unused as of your retirement date, subject to legally required tax withholding. (b) You will receive an award payment, if at least your Entry Level Target has been reached, under the 2003 Senior Management Incentive Plan (annual bonus) in the First Quarter 2004 when payments are made to other executives; the results of such plan are subject to final approval by the Compensation Committee of the Company's Board of Directors. (c) You will receive an award payment, if at least your Entry Level Target has been reached, under the 2001 Performance Unit Plan in the First Quarter 2004 when payments are made to other executives; as well as a pro-rata award payment, if at least your Entry Level Target has been reached, under the 2002 and 2003 Mid-Term Plans when provided for under such Plans and paid to other executives; the results of such plans are subject to final approval by the Compensation Committee of the Company's Board of Directors. (d) You understand that as of your retirement date, you will not be eligible for continued participation in the Company's Retirement Plan, its Investment Plan, its Employee Stock Purchase Plan or its Supplemental Executive Retirement Plan. You may elect distribution Michael R. Young October 6, 2003 Page 2 of your assets in the Company's Investment Plan and the Bristol Thrift and Retirement Plan in accordance with the terms of such Plans. (e) You will be eligible for Retiree Group Health Insurance and Life coverage for retirees under the generally applicable terms of those plans as they exist now or as they may be amended in the future. To continue coverage, the Company will require you to pay a monthly premium based on full calendar years of service, the Company's post-1993 retiree health premium schedule and the level of benefits you select. Your length of service for retiree health premium purposes is 18 years as of December 31, 2003. Life insurance, accident and disability, dental and vision benefits will cease as of your retirement date. You will be offered the opportunity to continue coverage for dental and vision under COBRA. (f) You will be entitled to a distribution from your accrued SERP benefits as of your retirement date. The Board confirms that you have elected a lump sum distribution from the Supplemental Executive Retirement Plan, the value of which is determined using the formula specified in the Plan, your years of SERP service and the government-specified lump sum conversion factors. The distribution will be in a lump sum payment on February 9, 2004. (g) You have accrued, vested benefits in the York International Corporation Pension Plan #1 that you have elected to receive in a lump sum payment on February 9, 2004. (h) You have accrued, vested benefits in the York International Corporation Pension Plan #18 (Evcon salary pension plan) and will begin to receive a monthly annuity payment effective on the 1st of March, 2004. (i) You may exercise stock options, pursuant to the terms of your Stock Option Agreements for retirement, that are vested or that will vest by contacting Jane G. Davis, Vice President, Secretary and General Counsel of the Company in York, Pennsylvania. The stock option grants that provide for a three (3) year exercise period following the date of retirement are numbers 5592, 5342, 4902, 2524, 2216 and 1695. You may also exercise Performance Accelerated Stock Options (PASO's) granted to you on March 16, 1999, November 8, 1999 and February 9, 2000 for the life of the grant by contacting Jane G. Davis. The PASO's that can be exercised through the remainder of the ten-year life are numbers 4678, 3719 and 3303. Restricted stock granted to you will vest consistent with the provisions of your restricted stock agreement. 2. You understand and agree that the Employment Agreement dated December 29, 1999 entered into by you and the Company expires on your retirement date. 3. You understand that the Company will discontinue your monthly allowance for property maintenance and upkeep associated with your Wichita, KS residence as of your retirement date. 42564 Michael R. Young October 6, 2003 Page 3 4. The Company agrees to provide for the use of the Company-owned 1998 Lexus through not later than December 31, 2004, under the same terms and conditions as your use during your employment. You will pay for all fuel. 5. The Company agrees to provide the Executive Financial Planning program, up to $5,500, for calendar year 2004. 6. The Company agrees to provide for the continued use of the Company-owned condominium in York, PA through not later than December 31, 2006. The Company is responsible for property taxes and condo association dues. You agree to pay a Fair Market Value rent of $2,500.00 to York each month that you continue to occupy the residence, as well as pay for utilities and phone. You will retain, and move out when you no longer use the condo, any furniture that you own in the condo. You have determined that you will keep all furniture brought to the condo from your Bristol, Virginia residence currently valued at $2,500.00. The Company will provide this furniture to you at no cost and impute the value in your 2004 income. In addition, the Company agrees to provide you the agreed-upon furnishings that the Company purchased for the condo upon your arrival in York, PA at no cost. The value of these furnishings is $2,000.00 and this value will also be imputed in your 2004 income. 7. You agree to return any Company keys, credit cards or other property (other than otherwise specified in this letter) to an employee designated by the Company on or before your retirement date. 8. You agree that you remain bound by the terms of all confidentiality obligations to the Company in effect as of your retirement date. 9. This letter constitutes the entire agreement between the parties relating to the subject matter hereof and may not be amended or modified other than in writing, executed by both parties. YORK INTERNATIONAL CORPORATION By: ___________________________________ Agreed and accepted: Gerald C. McDonough Chairman, Board of Directors _______________________________ Michael R. Young Date: _________________ 42564 EX-10.25 14 w94715exv10w25.txt EMPLOYMENT AGREEMENT, C. DAVID MYERS EXHIBIT 10.25 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and C. David Myers (the "Executive") dated as of the 31st day of December, 2003. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean December 31, 2003. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as President and Chief Executive Officer, or in such other position as the Company and Executive shall agree, with authority and responsibilities for all operations of York International; (ii) Executive shall report to the Board of Directors; and (iii) the Executive's services shall be performed in York, Pennsylvania or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $700,000 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the - 2 - Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; - 3 - (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within - 4 - 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one and one half times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and - 5 - C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of - 6 - Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the - 7 - Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the - 8 - provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. - 9 - 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. C. David Myers 1826 New Holland Pike Lancaster, PA 17601 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Employment Agreement between the Company and the Executive dated March 23, 2000 and the Severance Agreement dated August 18, 1997 between the Company and the Executive. - 10 - (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ____________________________________ C. David Myers YORK INTERNATIONAL CORPORATION By:_________________________________ - 11 - SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Retirement Savings Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 31st day of December, 2003, (the "Employment Agreement") by and between C. David Myers (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ______________________________ C. David Myers Dated:________________________ NOTARIZATION State of____________________________________ ) County of___________________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. ______________________________ Notary Public - 2 - EX-10.26 15 w94715exv10w26.txt EMPLOYMENT AGREEMENT, THOMAS F.HUNTINGTON,12/31/03 EXHIBIT 10.26 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and Thomas F. Huntington (the "Executive") dated as of the 31st day of December, 2003. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean December 31, 2003. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as President, Unitary Products Group or in such other position as the Company and Executive shall agree with authority and responsibilities for operations of UPG; (ii) Executive shall report to the President, York International and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in Norman, Oklahoma or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $386,000 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the - 2 - Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; - 3 - (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within - 4 - 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and - 5 - C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of - 6 - Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the - 7 - Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the - 8 - provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. - 9 - 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. Thomas F. Huntington 1508 SW 38th Street Moore, OK 73160 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Employment Agreement between the Company and the Executive dated September 27, 2001 and the Severance Agreement dated August 18, 1997 between the Company and the Executive. - 10 - (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ________________________________________ Thomas F. Huntington YORK INTERNATIONAL CORPORATION By:_____________________________________ - 11 - SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Bristol Thrift and Retirement Plan - Pension Plan Number Eighteen - Retirement Savings Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical - Country Club Membership EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 31st day of December, 2003, (the "Employment Agreement") by and between Thomas F. Huntington (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ______________________________ Thomas F. Huntington Dated:________________________ NOTARIZATION State of____________________________________ ) County of___________________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. ______________________________ Notary Public - 2 - VOTERS REGISTRATION OFFICE 771-9604 VOTERS REGISTRATION OFFICE 771-9604 EX-10.27 16 w94715exv10w27.txt EMPLOYMENT AGREEMENT, KAM S. LEONG, 12/31/2003 EXHIBIT 10.27 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and Kam Son Leong (the "Executive") dated as of the 31st day of December, 2003. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean December 31, 2003. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as President, Asia Pacific or in such other position as the Company and Executive shall agree with authority and responsibilities for operations of the Company's Asia Pacific region; (ii) Executive shall report to the President, York International and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in Hong Kong, China or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $386,000 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the - 2 - Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; - 3 - (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within - 4 - 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and - 5 - C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of - 6 - Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the - 7 - Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the - 8 - provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. - 9 - 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. Kam Son Leong c/o YI (North Asia) Ltd. Unit 1008, 15/F, Tower II World Trade Square, 123 Hoi Bun Road Kwun Tong, Kowloon Hong Kong If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Employment Agreement between the Company and the Executive dated December 29, 1999 and the Severance Agreement dated August 18, 1997 between the Company and the Executive. - 10 - (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ______________________________________ Kam Son Leong YORK INTERNATIONAL CORPORATION By:___________________________________ - 11 - SCHEDULE A - - RETIREMENT BENEFITS - Non-Qualified Pension Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical - Country Club Membership - Car Allowance EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 31st day of December, 2003, (the "Employment Agreement") by and between Kam Son Leong (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ______________________________ Kam Son Leong Dated:________________________ NOTARIZATION State of_________________________________ ) County of________________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. ______________________________ Notary Public - 2 - EX-10.28 17 w94715exv10w28.txt EMPLOYMENT AGREEMENT, PETER C. SPELLAR, 12/31/2003 EXHIBIT 10.28 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and Peter C. Spellar (the "Executive") dated as of the 31st day of December, 2003. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean December 31, 2003. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as President, Europe, Middle East and Africa or in such other position as the Company and Executive shall agree with authority and responsibilities for operations of EMEA; (ii) Executive shall report to the President, York International and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in London, England or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $464,000 ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the - 2 - Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; - 3 - (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within - 4 - 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to one times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and - 5 - C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of - 6 - Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the - 7 - Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the - 8 - provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to two times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. - 9 - 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Mr. Peter C. Spellar 13024 Gordon Circle Hagerstown, MD 21742 If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Employment Agreement between the Company and the Executive dated July 27, 2000 and the Severance Agreement dated August 18, 1997 between the Company and the Executive. - 10 - (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. _____________________________________ Peter C. Spellar YORK INTERNATIONAL CORPORATION By:__________________________________ - 11 - SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Frick Plan - Retirement Savings Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical - Country Club Membership - Company Car EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the 31st day of December, 2003, (the "Employment Agreement") by and between Peter C. Spellar (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims, includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: _____________________________________ Peter C. Spellar Dated:_______________________________ NOTARIZATION State of________________________________ ) County of_______________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. _____________________________________ Notary Public - 2 - EX-10.29 18 w94715exv10w29.txt FORM OF EMPLOYMENT AGREEMENT, OTHER KEY EXECUTIVES EXHIBIT 10.29 EMPLOYMENT AGREEMENT AGREEMENT by and between York International Corporation, a Delaware corporation (the "Company") and _____ (the "Executive") dated as of the 31st day of December, 2003. The Board of Directors of the Company (the "Board") has determined that it is in the Company's best interests and that of its shareholders to employ the Executive in the capacity described below and the Executive wishes to serve in such capacity. NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, IT IS HEREBY AGREED AS FOLLOWS: 1. Effective Date. The "Effective Date" shall mean December 31, 2003. 2. Employment Period. The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to continue in the employment of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the _____________________ anniversary thereof (the "Initial Period"). Notwithstanding the foregoing, Executive's employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions, for an additional period of one year (each, an "Additional Period"), in each such case commencing upon the expiration of the Initial Period or the then current Additional Period, as the case may be, unless, at least 30 days prior to the expiration of the Initial Period or such Additional Period, either party shall give written notice to the other (a "Non-Extension Notice") of its intention not to extend the term hereof. A Non-Extension Notice by the Company shall constitute a Notice of Termination (as defined in Section 4(e)) by the Company of the Executive's employment without "Cause" (as defined in Section 4(b)). A Non-Extension Notice by the Executive shall constitute a Notice of Termination by the Executive of the Executive's employment without "Good Reason" (as defined in Section 4(c)). The entire period during which the Executive is employed pursuant to this Agreement shall be referred to as the "Employment Period." 3. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, the Executive shall serve as [Title] or in such other position as the Company and Executive shall agree with authority and responsibilities for_______________; (ii) Executive shall report to the___________________ and/or such other officers as the Board may designate from time to time; and (iii) the Executive's services shall be performed in [York, Pennsylvania] or such other location as the Company and Executive shall agree, except for occasional travel which may be required for the Executive to perform his duties under this Agreement. During the Employment Period, the Executive shall devote all of his business time, attention and energies to the performance of his duties under this Agreement and shall not, without the prior written consent of the Board, be engaged in any other business activity whether or not such activity is pursued for gain, profit or other pecuniary advantage; provided, however, that the Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by the Executive of his duties and responsibilities hereunder, (a) to manage the Executive's personal, financial and legal affairs, and (b) serve on civic or charitable boards or committees. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary of $_____ ("Annual Base Salary"), which shall be paid in accordance with the Company's normal payroll practices. During the Employment Period, the Annual Base Salary shall be reviewed at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Incentive Compensation. During the Employment Period, the Executive shall be eligible (1) for annual performance bonuses (the "Annual Bonus") and for mid-term performance bonuses in accordance with the provisions of the Company's 2002 Incentive Compensation Plan or its successor (the "Incentive Plan"), as the Incentive Plan may be in effect from time to time, (2) for awards under the Company's 2002 Amended and Restated Omnibus Stock Plan or its successor (the "Stock Plan"), as the Stock Plan may be in effect from time to time, and (3) to participate in the Company's Management Stock Purchase Plan or its successor (the "Purchase Plan") as the Purchase Plan may be in effect from time to time. (iii) Employee Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in the retirement, health, welfare and miscellaneous executive benefit plans and programs set forth on Schedule A, as such plans and programs may be in effect from time to time. (iv) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by the Executive in accordance with the Company's policies, as such policies may be in effect from time to time. 4. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Board determines in good faith that the "Disability" of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the Executive's inability to perform his full duties with the Company for 180 calendar days in any twelve month period as a result of incapacity due to mental or physical illness. In the event of a dispute under this Section 4(a), the - 2 - Executive shall submit to an examination by a physician selected by the Company or its insurers and reasonably acceptable to the Executive or the Executive's legal representative, and the determination of such physician shall be determinative. (b) Cause. The Company may terminate the Executive's employment at any time during the Employment Period for "Cause." For purposes of this Agreement, "Cause" shall mean: (i) knowingly providing the Company or its affiliates with materially false representations relied upon by the Company or its affiliates including, but not limited to furnishing information to stockholders, a stock exchange or the Securities and Exchange Commission, or (ii) maintaining an undisclosed, unauthorized and material conflict of interest in the discharge of duties owed to the Company or its affiliates, or (iii) willful misconduct or gross negligence which is or may be demonstrably and materially injurious to the Company or its affiliates, or (iv) theft or misappropriation of the funds or assets of the Company or its affiliates, or (v) conviction of or pleading nolo contendere to a crime involving moral turpitude or any felony, or (vi) a willful and material breach by the Executive of this Agreement. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interest of the Company. As used in this Agreement, the term "affiliates" shall mean any company controlled by, controlling or under common control with the Company. (c) Good Reason. The Executive may terminate his employment with the Company at any time during the Employment Period for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean, in the absence of a written consent of the Executive, any of the following which occurs before the expiration of the Employment Period: (i) a substantial and adverse change in the Executive's authority or responsibilities as specified in Section 3(a) of this Agreement, excluding for this purpose an isolated, insubstantial or inadvertent action not taken in bad faith, and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; - 3 - (ii) any material failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, unless initiated by the Executive, other than a failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iii) the requiring that the Executive travel on the Company's business to an extent materially greater than the Executive's normal business travel, or the Company requiring the Executive to be based at any office or location more than 35 miles from that provided in Section 3(a)(iii) hereof, unless these requirements are remedied by the Company promptly after receipt of written notice thereof given by the Executive; (iv) a material breach by the Company of this Agreement; or (v) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, any action or inaction shall constitute Good Reason only for the 90 day period from the date on which such action or inaction first occurs. (d) Termination Without Cause or Good Reason. The Company may terminate the Executive's employment without Cause, and the Executive may terminate his employment without Good Reason, at any time during the Employment Period. (e) Notice of Termination. Any termination of the Executive's employment during the Employment Period by the Company or by the Executive, shall be communicated by "Notice of Termination" to the other party hereto given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall, (A) in all cases other than a voluntary termination by the Executive for other than Good Reason, be not more than thirty days after the giving of such notice, and (B) in the case of a voluntary termination by the Executive for other than Good Reason, thirty days after the Company receives such notice; provided that in a termination described in either (A) or (B), during the notice period, the Board, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (f) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within - 4 - 30 days of such notice, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, or any later date specified therein within 30 days of such notice, as the case may be, (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive's employment is voluntarily terminated by the Executive for other than Good Reason, 30 days following the date of receipt of the Notice of Termination. 5. Obligations of the Company upon Termination. (a) Good Reason or Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, then (i) the Company shall pay to the Executive, the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, and any accrued but unused vacation pay (this amount shall be hereinafter referred to as the "Accrued Obligations"), in accordance with the Company's normal payroll practices, and (ii) to the extent not already paid or provided, the Company shall pay or provide to the Executive (in accordance with the terms of the applicable plan or program) any other amounts or benefits previously earned and vested or which the Executive is eligible to receive for his service prior to the Date of Termination under any retirement, incentive, health, welfare or miscellaneous executive benefit plan or program specified on Schedule A (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"), and (iii) subject to Section 5(e), the Company shall pay to the Executive in a cash lump sum within 30 days after the Date of Termination the aggregate of the following amounts: A. an amount equal to ______ times the sum of (i) Executive's Annual Base Salary plus (ii) the Executive's target Annual Bonus for the year in which the Date of Termination occurs (the "Bonus Amount"); and B. an amount equal to the Company contribution (other than matching contributions) that would be made under any Company tax-qualified defined contribution retirement plan (the "DC Plan") with respect to the Executive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming for this purpose that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount; and - 5 - C. an amount equal to the excess of (a) the sum of the actuarial equivalent of the benefit under any Company tax-qualified defined benefit retirement plan (the "DB Plan") and any Company non-qualified retirement plan (the "Non-Qualified Plan") (utilizing the actuarial assumptions as in effect under the DB Plan at the time such payment is made) which the Executive would receive if the Executive's employment continued for a period of 36 months from the Date of Termination assuming solely for purposes of this calculation that all accrued benefits are fully vested, and, assuming that the Executive's Annual Base Salary continues for such period at the same level as it existed on the Date of Termination and that the Executive receives a bonus for each 12 month period in such period (and an appropriately adjusted bonus for any period of less than 12 months) equal to the Bonus Amount, over (b) the actuarial equivalent of the Executive's actual benefits, if any, which have been paid or that would be payable under the DB Plan and Non-Qualified Plan as of the Date of Termination, assuming solely for purposes of this calculation that the Executive is vested in his benefits under the DB Plan and the Non-Qualified Plan; provided, however, that nothing in this Agreement shall cause the Executive to become vested in any benefits under the DB Plan or Non-Qualified Plan; and (iv) subject to Section 5(e), the Company shall continue to provide health benefits (as specified on Schedule A) to the Executive and his eligible dependants for a period of 36 months from the Date of Termination on the same basis that such benefits were provided to him immediately prior to the Date of Termination; provided, however, that if the Company modifies, reduces or eliminates a health benefit or changes the employee contribution for similarly situated executives who remain employed by the Company then the Company may apply such change to the Executive; and (v) subject to Section 5(e), if the Executive would have become entitled to benefits under the Company's post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive's continued employment during the period of 36 months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive's eligible dependents on the same terms applicable to such coverage for similarly-situated retirees of the Company commencing on the date on which benefits described in Section 5(a)(iv) terminate, if the Executive elects such coverage; (vi) all other benefits (not described in paragraphs (i) through (v) of this Section) shall cease as of the Date of Termination. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of - 6 - Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include life insurance benefits as in effect with respect to the Executive on the date of the Executive's death. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a cash lump sum within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include disability benefits as in effect with respect to the Executive on the Executive's Disability Effective Date. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause or the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. (e) General Release. Notwithstanding anything in this Section 5 to the contrary, no payments shall be made or benefits provided by the Company under Sections 5(a)(iii), 5(a)(iv) or 5(a)(v) prior to the execution by the Executive at the time of termination of a general release in favor of the Company and its affiliates, and their officers, employees, and directors, substantially in the form attached hereto as Exhibit I. 6. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be reduced by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others, regarding the validity or enforceability of, or liability under, any provision of this Agreement (including any contest by the Executive about the amount of any payment pursuant to this Agreement), provided that the Executive substantially prevails in such contest by reason of litigation, arbitration or settlement. 7. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliates and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the - 7 - Company and those designated by it. Upon termination of the Executive's employment, the Executive shall immediately return to the Company all confidential information in his possession as well as any other documents or property of the Company. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 7. 8. Noncompetition/Nonsolicitation. (a) For two years after the Date of Termination, Executive will not directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as an officer, employee, partner, director, consultant or otherwise with, or have any financial interest in, any business which is in competition with the business conducted by the Company or its affiliates anywhere in the world where the Company or its affiliates does business. Ownership for personal investment purposes only of less than 2% of the voting stock of any publicly held corporation shall not constitute a violation hereof. (b) For two years after the Date of Termination, the Executive will not, directly or indirectly, on behalf of the Executive or any other person or entity, solicit for employment or other commercial engagement any person employed by the Company or its affiliates as of the date of the solicitation or for the preceding six months. (c) During the Employment Period and at any time thereafter, Executive shall not, directly or indirectly, engage in any conduct or make any statement, whether in commercial or noncommercial speech, disparaging or criticizing in any way the Company or its affiliates, or any products or services offered by any of these, nor shall he engage in any other conduct or make any other statement that could be reasonably expected to impair the goodwill of any of them. (d) (i) Executive acknowledges and agrees that the restrictions contained in this Section 8 and in Section 7 above are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of this Section 8 or Section 7 above. Executive represents and acknowledges that (1) Executive has been advised by the Company to consult Executive's own legal counsel in respect of this Agreement, (2) Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive's counsel, and (3) the provisions of this Section 8 and Section 7 above are reasonable and these restrictions do not prevent Executive from earning a reasonable livelihood. (ii) Executive further acknowledges and agrees that a breach of any of the restrictions in this Section 8 or Section 7 above cannot be adequately compensated by monetary damages. Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as provable damages and an equitable accounting of all earnings, profits and other benefits arising from any violation of this Section 8, or Section 7 above which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the - 8 - provisions of this Section 8 should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law. The time periods set forth above shall be tolled during any period of violation by the Executive. (iii) Executive irrevocably and unconditionally (1) agrees that any suit, action or other legal proceeding arising out of this Section 8 or Section 7 above, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the Court of Common Pleas of York County, Pennsylvania or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Pennsylvania, (2) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (3) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any process, pleadings, notices or other papers in a manner permitted by the notice provisions of this Section 8. (e) In exchange for the covenants set forth in this Section 8, and provided the Executive is not terminated for Cause and does not leave other than for Good Reason, the Company agrees to pay to the Executive a lump sum amount equal to ________ times the Executive's Annual Base Salary plus the Bonus Amount, within 30 days after the Date of Termination. (f) Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 8, and the Company shall be permitted to assign its rights under this Section 9. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive' s legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean York International Corporation and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. - 9 - 10. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: [Executive] [Address] If to the Company: York International Corporation 631 S. Richland Avenue York, PA 17403 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, shall not be deemed to be a waiver of any other provision or right under this Agreement. (f) This Agreement supersedes and terminates the prior Employment Agreement between the Company and the Executive dated ___________ and the Severance Agreement dated ___________ between the Company and the Executive. (g) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. - 10 - (h) Except for claims arising under Sections 7 or 8 , any controversy or claim arising out of or relating to this Agreement or the breach thereof, and any other disputes arising between the Executive and the Company or its affiliates including without limitation claims arising under any employment discrimination laws, shall be settled exclusively through binding arbitration in accordance with the then applicable rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court having jurisdiction thereof. Any arbitration shall be conducted in York, Pennsylvania or such other location as mutually agreed by the parties. The arbitration provisions of this section shall be interpreted according to, and governed by, the Federal Arbitration Act, 9 U.S.C. Section 1 et seq. The costs of the arbitration shall be borne by the Company. The Executive shall be entitled to recover his legal fees and expenses in accordance with the provisions of Section 6 of this Agreement, or applicable law to the extent it provides for a greater recovery. (i) In the event that any language, section, clause, phrase or word used in this Agreement is determined to be ambiguous, no presumption shall arise against or in favor of either party and that no rule of strict construction shall be applied against either party with respect to such ambiguity. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Boards of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ________________________________________________ [Executive] YORK INTERNATIONAL CORPORATION By:_____________________________________________ - 11 - SCHEDULE A - - RETIREMENT BENEFITS - Pension Plan Number One - Investment Plan - Supplemental Executive Retirement Plan - Executive Deferred Compensation Plan - - INCENTIVE COMPENSATION - 2002 Incentive Compensation Plan - 2002 Amended and Restated Omnibus Stock Plan - Management Stock Purchase Plan - - HEALTH BENEFITS - Medical - Dental - Vision - Prescription Drug - - WELFARE BENEFITS - Short-Term Disability - Long-Term Disability - Life - Vacation - - MISCELLANEOUS EXECUTIVE BENEFITS - Financial Planning - Executive Physical - Country Club Membership - Car Allowance EXHIBIT I GENERAL RELEASE IN CONSIDERATION OF the terms and conditions contained in the Executive Employment Agreement, dated as of the ____ day of ___________, 2004, (the "Employment Agreement") by and between ______________ (the "Executive") and York International Corporation (the "Company"), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges the Company and its subsidiaries, divisions, affiliates and parents, and their respective past, current and future officers, directors, employees, agents, and/or owners, and their respective successors, and assigns and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (collectively the "Released Parties") from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever ("Claims ") which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have, against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof. This General Release of Claims , includes without limitation, any and all matters relating to the Executive's employment by the Company and the cessation thereof, and any and all matters arising under any federal, state, or local statute, rule, or regulation, or principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. Sections 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sections 2000 et seq., the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Sections 621 et seq. (the "ADEA"), the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. Sections 12101 et seq., the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. Sections 2101 et seq., the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 et seq. ("ERISA"), the Pennsylvania Human Relations Act, as amended, 43 P.S. Sections 955 et. seq., and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from (i) any of the Company's obligations to him under the Employment Agreement, and (ii) any vested benefits to which he may be entitled under any employee benefit plan or program subject to ERISA. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied. The Executive represents and warrants that he fully understands the terms of this General Release, that he is hereby advised to consult with legal counsel before signing, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise. The Executive further represents and warrants that he has not filed, and will not initiate, or cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the Released Parties before any federal, state, or local agency, court, or other body relating to any claims barred or released in this General Release thereof, and will not voluntarily participate in such a proceeding. However, nothing in this general release shall preclude or prevent the Executive from filing a claim, which challenges the validity of this general release solely with respect to the Executive's waiver of any Losses arising under the ADEA. The Executive shall not accept any relief obtained on his behalf by any government agency, private party, class, or otherwise with respect to any claims covered by this General Release. The Executive may take twenty-one (21) days to consider whether to execute this General Release. Upon the Executive's execution of this General Release, the Executive will have seven (7) days after such execution in which he may revoke such execution. In the event of revocation, the Executive must present written notice of such revocation to the Company's Chief Executive Officer. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective on the eighth (8th) day after the execution hereof (the "Effective Date"). INTENDING TO BE LEGALLY BOUND, I hereby set my hand below: ____________________________ [Executive] Dated:______________________ NOTARIZATION State of__________________________ ) County of_________________________ ) ss. On this ______ day of ______________ in the year 2004 before me, the undersigned, personally appeared __________________________________; personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity as an individual, and that by his signature on the instrument he executed such instrument, and that such individual made such appearance before the undersigned. ___________________________ Notary Public - 2 - EX-12 19 w94715exv12.txt STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS . . . EXHIBIT 12 YORK INTERNATIONAL CORPORATION STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollar amounts in thousands) 2003 2002 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- Income before income taxes and cumulative effect of changes in accounting principles $ 14,068 $ 106,891 $ 36,965 $ 120,969 $ 118,082 Distributed income of equity affiliates 2,212 2,089 2,939 4,782 1,035 Interest expense, net 47,535 48,485 67,150 81,587 61,150 Interest component of rental expense 17,043 15,070 14,455 13,454 13,513 Less: equity in earnings of affiliates (5,582) (4,180) (2,444) (6,368) (5,660) - ----------------------------------------------------------------------------------------------------------------------- $ 75,276 $ 168,355 $ 119,065 $ 214,424 $ 188,120 - ----------------------------------------------------------------------------------------------------------------------- Interest expense, net $ 47,535 $ 48,485 $ 67,150 $ 81,587 $ 61,150 Interest component of rental expense 17,043 15,070 14,455 13,454 13,513 - ----------------------------------------------------------------------------------------------------------------------- $ 64,578 $ 63,555 $ 81,605 $ 95,041 $ 74,663 - ----------------------------------------------------------------------------------------------------------------------- Fixed charge coverage ratio 1.2 2.6 1.5 2.3 2.5 - -----------------------------------------------------------------------------------------------------------------------
EX-13 20 w94715exv13.txt ANNUAL FINANCIAL STATEMENT & REVIEW OF OPERATIONS EXHIBIT 13 York International Corporation Annual Financial Statements and Review of Operations 2003 CONTENTS DESCRIPTION OF BUSINESS 1 FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3 INDEPENDENT AUDITORS' REPORT 19 CONSOLIDATED FINANCIAL STATEMENTS 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24 SUMMARY OF QUARTERLY RESULTS 48 TRADING AND DIVIDEND INFORMATION 48
DESCRIPTION OF BUSINESS York International Corporation and its consolidated subsidiaries (the Company, which may be referred to as we, us, or our) are a full-line, global provider of heating, ventilating, air conditioning, and refrigeration (HVAC&R) products and services. We believe that we are the third largest supplier of such products in the United States and one of the leading companies in the HVAC&R industry internationally. Our air conditioning systems range from a one ton* unit for a small residence to large systems installed in high-rise residential and commercial buildings. Our products are sold in over 125 countries and are in use in such diverse locations as the Petronas Towers in Malaysia, the British Houses of Parliament, the Tokyo World Trade Center, Pudong International Airport in Shanghai, the Pentagon, NASA's Vehicle Assembly Building at Kennedy Space Center, NASA's Johnson Space Center, the Los Angeles International Airport, the Jeddah Airport, the Overseas Union Bank Centre in Singapore, the Sydney Opera House, the Atlantic City Convention Center, the English Channel Eurotunnel, the Hong Kong Convention and Exhibition Centre, and the Lantau Airport Railway in Hong Kong. We were founded in 1874 in York, Pennsylvania, and over the years we have undergone various ownership changes. Since 1991, we have been an independent, publicly held company. During the 1990s, we expanded our worldwide presence through growth and acquisitions. In 1999, we further expanded our refrigeration business by acquiring all of the outstanding capital stock of Sabroe A/S, a Danish company. Headquartered in York, Pennsylvania, we have manufacturing facilities in nine states and eight foreign countries. As of December 31, 2003, we employed approximately 22,300 people worldwide. Our principal executive offices are located at 631 South Richland Avenue, York, Pennsylvania 17403, and our telephone number is (717) 771-7890. PRODUCTS AND MARKETS All of our products are in the HVAC&R industry, and we operate solely in this industry. Effective January 1, 2003, we consolidated our former York Refrigeration Group and Engineered Systems Group segments and reorganized management of the combined business. Our organization is now comprised of three groups, consisting of: Global Applied, Unitary Products Group, and Bristol Compressors. The Global Applied business is comprised of three geographic regions: the Americas; Europe, Middle East, and Africa (EMEA); and Asia. Global Applied designs, produces, services, and sells HVAC&R solutions worldwide. HVAC&R solutions are sold for both the new construction and the replacement markets for a full range of high-rise residential and commercial buildings and industrial applications. Global Applied service businesses sell replacement parts, replacement equipment, and controls and deliver various services and service solutions. Unitary Products Group (UPG) produces heating and air conditioning solutions designed for use in residential and light commercial applications and distributes proprietary and non-proprietary parts to the aftermarket. Bristol Compressors (Bristol) manufactures reciprocating and scroll compressors for our use and for sale to original equipment manufacturers and wholesale distributors. * The cooling capacity of air conditioning units is measured in tons. One ton of cooling capacity is equivalent to 12,000 BTUs and is generally adequate to air condition approximately 500 square feet of residential space. 1 York International Corporation 2003 Annual Report FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(in thousands, except per share data and other information) 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- Statements of Operations Data: Net sales $ 4,076,054 $ 3,843,373 $ 3,920,096 $ 3,883,207 $ 3,862,062 Gross profit 783,250 727,752 740,205 811,753 772,661 Restructuring and other charges, net (a) (91,395) 111 (70,504) (49,679) (54,532) Gain (loss) on divestiture 345 (10,319) -- 26,902 9,627 Income from operations (b) 56,021 151,196 101,671 196,188 173,572 Interest expense, net (47,535) (48,485) (67,150) (81,587) (61,150) Income before income taxes and cumulative effect of changes in accounting principles (b)(d) 14,068 106,891 36,965 120,969 118,082 (Provision) benefit for income taxes (2,653) (25,715) 9,024 (14,362) (41,303) Income before cumulative effect of changes in accounting principles (b)(d) 11,415 81,176 45,989 106,607 76,779 Net (loss) income (b)(c)(d) (3,998) (98,260) 45,989 106,607 75,882 Basic earnings (loss) per share (b): Income before cumulative effect of changes in accounting principles 0.29 2.06 1.19 2.80 1.93 Net (loss) income(c)(d) (0.10) (2.50) 1.19 2.80 1.91 Diluted earnings (loss) per share (b): Income before cumulative effect of changes in accounting principles 0.28 2.04 1.17 2.78 1.93 Net (loss) income (c)(d) $ (0.10) $ (2.47) $ 1.17 $ 2.78 $ 1.91 Weighted average common shares and common equivalents outstanding: Basic 39,684 39,351 38,626 38,107 39,637 Diluted 40,206 39,770 39,147 38,281 39,832 Cash dividends per share $ 0.60 $ 0.60 $ 0.60 $ 0.60 $ 0.60 Capital expenditures 84,704 69,562 98,126 93,971 104,065 Depreciation and amortization of property, plant, and equipment 69,990 62,167 59,655 63,115 64,171 Amortization of deferred charges, intangibles, and goodwill (b) 3,966 2,768 27,024 28,443 24,119 Balance Sheet Data (d): Working capital 362,494 436,588 472,830 548,801 485,234 Total assets (c) 2,673,135 2,506,122 2,572,509 2,812,056 2,905,407 Long-term debt 582,027 618,224 724,378 831,354 854,494 Stockholders' equity (c) $ 776,400 $ 682,814 $ 739,434 $ 748,976 $ 731,930 Other information: Employees 22,300 22,800 23,600 24,600 25,000 Backlog (in thousands) $ 1,026,593 $ 928,499 $ 873,359 $ 1,018,464 $ 1,065,096 Total debt as a percent of total capital 44.1% 48.8% 50.7% 54.5% 56.7% Current ratio 1.37 1.52 1.61 1.60 1.48 Book value per share (c)(d) $ 19.02 $ 17.22 $ 18.85 $ 19.52 $ 19.08
(a) In all years presented, we recorded charges to operations for restructuring and other cost reduction initiatives. Also, in 2000 and 1999, we recorded charges for acquisition, integration, and restructuring activities related to the 1999 Sabroe acquisition. See note 16 to our consolidated financial statements. (b) Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142. Under the Statement, we no longer amortize goodwill. Goodwill amortization expense was $24.4 million, $25.6 million, and $20.3 million in 2001, 2000, and 1999, respectively. See note 1 to our consolidated financial statements. (c) In 2002, we recorded a transitional goodwill impairment charge of $179.4 million as a cumulative effect of a change in accounting principle. See note 7 to our consolidated financial statements. (d) In 2003, we recorded approximately $82.4 million of incremental debt, $23.9 million of incremental net machinery and equipment, $10.7 million of incremental deferred tax assets, a $15.4 million reduction to stockholders' equity, and a $32.4 million reduction to other long-term liabilities. The reduction in stockholders' equity was recorded as a cumulative effect of a change in accounting principle adjustment. See note 1 to our consolidated financial statements. 2 York International Corporation 2003 Annual Report MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS RESULTS OF OPERATIONS 2003 AS COMPARED TO 2002 Consolidated Operations Net Sales Net sales in 2003 increased 6.1% to $4,076.1 million from $3,843.4 million in 2002. The net strengthening of global currencies increased net sales by $177.1 million or 4.5%. Global Applied service business sales (services, parts, and replacement equipment) were up 15% and equipment sales were flat. Higher commercial equipment sales in Asia were offset by lower commercial equipment sales in the Americas and EMEA. An increase in UPG sales of $23.3 million was offset by a reduction in Bristol sales of $64.1 million. Our UPG sales increase was aided by continued strong residential new construction markets, and Bristol sales were down due to lower sales to international original equipment manufacturers (OEM) and the loss of certain applications at U.S. OEMs. (See further discussion below under Segment Analysis.) In 2003, net sales in the United States of America (U.S.) decreased 0.1% to $1,836.3 million, and non-U.S. net sales increased 11.7% to $2,239.8 million. The strengthening of global currencies, primarily those in our EMEA region, resulted in 8.8% of the increase in non-U.S. sales. The long-term strength of European currencies may impact the level of capital investment in the region causing further declines in our equipment markets and create a competitive disadvantage on products exported from our EMEA equipment business. Order backlog Order backlog, as of December 31, 2003, was $1,027 million compared to $928 million as of December 31, 2002. The 10.6% increase is 6.7% related to currency, 5.3% related to Global Applied, and offset by a net 1.4% decrease in our UPG and Bristol businesses, which typically are not backlog driven businesses. The improvement in Global Applied backlog is the result of continued strong orders in Asia, mainly China, and some improvement in North America commercial equipment markets. We are encouraged by increased order inquiries and other related activities; however, we are only seeing modest signs of a market recovery in our backlog. Gross profit Gross profit increased 7.6% to $783.3 million (19.2% of net sales) in 2003 as compared to $727.8 million (18.9% of net sales) in 2002. The net strengthening of global currencies increased the translation of local currency gross profits by $34 million or 4.6%. Increased profits also resulted from continued sales growth in the Global Applied Asia equipment business due primarily to economic growth in China, sales increases in service businesses, and UPG sales growth and factory efficiencies resulting from prior restructuring actions. These improvements were offset by lower commercial equipment sales and competitive margin pressures in the Global Applied EMEA equipment businesses due to continued market softness; lower volume in Bristol, resulting in less absorption of fixed costs; and significant increases in the cost of steel. In 2003, cost of goods sold included $8.8 million resulting from manufacturing overhead duplication and $5.5 million of inventory write-downs related to strategic actions to rationalize our manufacturing capacity in Global Applied. In 2002, cost of goods sold included $0.1 million of restructuring charges, $6.8 million of costs related to cost reduction actions, and $0.8 million related to a discontinued product line. The strategic actions taken in 2000 through 2003 have already yielded gross margin improvement and will continue to provide a basis for us to improve gross margins at the current equipment volume levels and leverage improvement when commercial equipment markets improve. Selling, general and administrative (SG&A) expenses SG&A expenses were $636.2 million (15.6% of net sales) in 2003 compared to $566.3 million (14.7% of net sales) in 2002. The net strengthening of global currencies increased SG&A expense $26 million or 4.5%. In 2003, SG&A expense included $14.0 million of curtailment costs related to the transition of certain U.S. defined benefit pension plans to defined contribution plans. These curtailment losses represent acceleration of pension expenses that would have been amortized to expense over a longer period of time. This change is not expected to significantly alter pension expense or funding requirements in the short-term; however, we expect to benefit by reducing volatility in our pension expense and future funding requirements. Other increases include higher compensation expense, pension, medical and insurances costs, and continued investment in information technology (IT) to improve our overall business systems and infrastructure. Changes to health care plans will help mitigate the continued increase in medical expenses. At this time, we believe insurance markets are stabilizing and along with policy changes, we expect only moderate increases in insurance costs in 2004. In 2004, we plan to continue to invest in new products at historical levels and invest an additional $20 million in business systems and IT infrastructure. These IT investments will leverage our cost structure, assist in achieving operational efficiencies, and enhance supply chain capabilities. These investments are necessary to standardize our global processes and enable growth in 2005 and beyond. 3 York International Corporation 2003 Annual Report Restructuring and other charges, net In 2003, we initiated actions to further reduce our overall cost structure and support the implementation of our new geographic organization. These actions included the further reduction of manufacturing capacity, the elimination of certain product lines, the exiting of several small, non-core businesses, and the write-down of assets associated with a European joint venture, as well as cost reductions associated with the consolidation of our former Engineered Systems Group (ESG) and York Refrigeration Group (YRG) segments. In 2003, we recorded restructuring and other charges of $91.4 million, consisting of $91.9 million related to the 2003 actions and $0.5 million of cost reversals related to our prior years' restructuring actions. Included in the $91.4 million are $35.8 million of asset write-downs, $28.0 million of severance costs, $14.1 million of contractual and other obligation costs of which $9.7 million relates to a product liability settlement associated with a discontinued product line, and $13.5 million of other costs. Other charges to operations included $5.5 million charged to cost of goods sold as discussed above. As of December 31, 2003, the 2003 actions were substantially complete. These charges are more fully discussed in note 16 to our consolidated financial statements. In 2000, we initiated a cost reduction process, which included plant closures and divestitures, product line and facility rationalizations, SG&A expense reductions, and other actions. In 2001, we expanded the scope of the cost reduction process to include additional plant closings and staff reductions. In 2002, we recorded a credit of $0.1 million related to these cost reduction actions. In 2003, we had operational improvements related to our restructuring programs. In 2004 and beyond, we believe the actions taken will position us for greater profitability by leveraging our manufacturing capacity, in addition to the savings resulting from integrating our former ESG and YRG businesses worldwide into Global Applied. As a result, in 2004, we expect to realize $25 million of incremental savings from cost reduction actions initiated in 2003. Gain (loss) on divestiture In 2002, we sold our air conditioning operations in Australia for $12.1 million. The sale resulted in a loss of $10.3 million. There was no similar transaction in 2003 and finalization of the Australia sale resulted in a gain of $0.3 million. Income from operations As a result of the above items, income from operations in 2003 was $56.0 million (1.4% of net sales) compared to $151.2 million (3.9% of net sales) in 2002. Interest expense, net In 2003, net interest expense decreased 2.0% to $47.5 million compared to $48.5 million in 2002 due to lower average debt levels and a shift of debt from fixed to floating as a result of paying off $100 million of senior notes (interest rate of 6.75%) in March 2003. Lower average debt levels were somewhat offset by slightly higher average borrowing rates mainly due to higher interest rates in some non-U.S. markets and the increase in debt associated with the termination of our 1999 equipment sale-leaseback. Over the last three years, we have focused our efforts to reduce our overall debt levels and reduce working capital. Cash flow from operations has been positive and we maintain our commitment to pay down debt in 2004. Equity in earnings of affiliates Equity in earnings of affiliates was $5.6 million in 2003 as compared to $4.2 million in 2002. The increase was primarily the result of improved performance of our Scroll Technologies joint venture. Provision for income taxes Our income tax provision of $2.7 million or effective rate of 18.9% in 2003 relates to both U.S. and non-U.S. operations. The 2003 income tax provision was lower than the U.S. statutory rate of 35% primarily due to the benefits of tax holidays in certain jurisdictions of $15.4 million, export incentives claimed of $7.8 million, other favorable foreign rate differences of $2.4 million, and R&D credits of $2.3 million. These benefits were partially offset by restructuring actions for which the tax benefit was less than the U.S. statutory rate of $14.7 million, operating losses in jurisdictions where no tax benefit was recognized of $3.6 million, and the unfavorable tax impact of deemed and actual distributions of $6.1 million. Our effective tax rate decreased to 18.9% in 2003 compared to 24.1% in 2002. The decline in the effective tax rate was primarily due to the impact of export incentive benefits of $7.8 million on income before income taxes and cumulative effect of changes in accounting principles of $14.1 million in 2003 as compared to export incentive benefits of $3.0 million on income before income taxes and cumulative effect of changes in accounting principles of $106.9 million in 2002. The impact of export incentive benefits was partially offset by an increase in taxes on foreign earnings in 2003. It is anticipated that the effective tax rate will gradually increase in future years, primarily due to the phase-out of certain tax holidays, and a different geographic distribution of earnings. Net deferred tax assets increased $49.9 million in 2003, primarily attributable to benefits associated with certain U.S. carryforward items, including U.S. foreign tax credits of $14 million; U.S. federal and state tax losses of $8.3 million; and U.S. research and development (R&D) credits of $3.9 million; increases in deferred tax assets of $6.9 million and $5.6 million relating to inventories and warranties, respectively; and a decrease in deferred tax liabilities of $10.7 million 4 York International Corporation 2003 Annual Report associated with adoption of Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities," an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements" (FIN 46). Income before cumulative effect of changes in accounting principles As a result of the above factors, income before the cumulative effect of changes in accounting principles, was $11.4 million in 2003 as compared to $81.2 million in 2002. Cumulative effect of changes in accounting principles On July 1, 2003 we adopted FIN 46. Upon adoption we consolidated the variable interest entity used to transact our December 1999 sale-leaseback. As a result, we recorded a $15.4 million reduction to stockholder's equity. The reduction in stockholders' equity represents a reduction in retained earnings recorded as a cumulative-effect adjustment as of July 1, 2003. The retained earnings reduction represents the cumulative differences between our prior accounting of the transaction as a lease of property and the consolidation, which resulted in the reflection of the assets as owned depreciable equipment with a related debt obligation. The obligation relating to the sale-leaseback was repaid in full during the third quarter of 2003. Segment Analysis The following table sets forth net sales and income from operations by segment:
(in thousands) 2003 2002 2001 ---- ---- ---- Net sales: Global Applied: Americas $ 1,388,930 $ 1,335,392 $ 1,425,885 Europe, Middle East, and Africa 1,343,138 1,161,605 1,147,842 Asia 490,063 418,599 439,858 Intragroup sales (194,537) (165,443) (195,941) --------------- -------------- --------------- 3,027,594 2,750,153 2,817,644 Unitary Products Group 760,059 736,789 755,860 Bristol Compressors 451,241 515,372 509,706 Eliminations (162,840) (158,941) (163,114) --------------- -------------- --------------- Net sales $ 4,076,054 $ 3,843,373 $ 3,920,096 --------------- -------------- --------------- Income from operations: Global Applied: Americas $ 54,855 $ 39,710 $ 82,575 Europe, Middle East, and Africa 44,691 50,550 49,025 Asia 69,634 55,945 54,560 --------------- -------------- --------------- 169,180 146,205 186,160 Unitary Products Group 60,698 40,262 59,083 Bristol Compressors 25,405 29,002 39,684 General corporate expenses, eliminations, and other non-allocated items. (79,858) (44,037) (54,314) Charges and other expenses (119,749) (9,917) (128,942) Gain (loss) on divestiture 345 (10,319) -- --------------- -------------- --------------- Income from operations $ 56,021 $ 151,196 $ 101,671 --------------- -------------- ---------------
Global Applied Global Applied net sales increased 10.1% to $3,027.6 million in 2003 from $2,750.2 million in 2002. The net strengthening of global currencies, almost entirely in EMEA, increased net sales by $172 million or 6.0%. Our service business sales (service, parts, and replacement equipment) increased 15% to $1,057 million, of which 6% was due to currency. Commercial equipment sales were flat with higher sales levels in Asia offset by lower sales in the Americas and EMEA. We intend to continue to grow our service business as we change our business model to expand commercial service activities, offer new solutions to our customers, and improve our parts distribution. Additionally, the new business model is enabling us to successfully capture multi-site service contracts, which allow us to pull through our equipment as replacement of YORK and non-YORK equipment occurs. Our pricing for large commercial equipment in the U.S. stabilized during 2003 and is expected to remain consistent in 2004. Growth in Asia is mainly the result of the growing Chinese economy and to a lesser extent a mild recovery in other Asian economies. We expect equipment growth in Asia to continue in 2004 and the Americas markets to remain relatively stable. This activity will be partially offset by volume and pricing pressures in large commercial equipment markets in EMEA. European commercial equipment markets declined in 2003 and are expected to continue to decline in 2004 due to reduced commercial construction activity. Global Applied income from operations increased 15.7% to $169.2 million (5.6% of net sales) in 2003 from $146.2 million (5.3% of net sales) in 2002. The net strengthening of global currencies increased the translation of local currency income from operations by $8.2 million, almost entirely in EMEA. In the Americas, the increase of $15.1 million is directly related to improved performance in Latin American countries where significant actions were taken to reduce operating costs by combining our former ESG and YRG businesses and improvement in markets, mainly Argentina. Additionally, improved 5 York International Corporation 2003 Annual Report equipment performance in Americas resulted from higher refrigeration product sales mainly to the food and beverage industry and cost reductions resulting from the relocation of assembly of large tonnage products, somewhat offset by continued large tonnage volume declines. In Asia, the increase of $13.7 million resulted from continued sales growth of equipment due mainly to China's economic growth and our strong market share in China. These increases were offset by an EMEA decrease of $5.9 million. Our EMEA decrease is primarily in the UK, Italy, Sweden and Germany, and is a direct result of lower equipment sales and competitive margin pressures in product and service markets. In Global Applied, we expect to grow our income from operations in 2004 as we benefit from the cost reduction actions taken in 2003, leverage our established position in China in the large commercial equipment markets, and benefit from growth in our service business. In 2004, we also expect commercial building and capital spending in EMEA will remain weak resulting in continued difficult markets. Unitary Products Group (UPG) UPG net sales increased 3.2% to $760.1 million in 2003 from $736.8 million in 2002. Residential product sales improved, aided by the strength of the new home construction markets, and our light commercial sales were flat following spending patterns in commercial building. In 2003, we experienced an additional decline in sales of manufactured housing products. The manufactured housing market has declined steadily over the past three years and at this time we do not expect this market to improve in 2004. Overall, our air conditioning market share was generally flat compared to 2002. In 2004, we expect to continue to grow sales at or above market levels driven by improvements in the U.S. light commercial market and stability in the strong U.S. residential market. UPG income from operations increased 50.8% to $60.7 million (8.0% of net sales) in 2003 from $40.3 million (5.5% of net sales) in 2002. The increase was primarily due to $7.8 million related to improvements in production and logistics efficiencies in our Wichita factory and $20 million due to a more positive product mix, volume, and better pricing versus 2002. These increases were somewhat offset by $13.3 million of increased costs for steel and other operating expenses. Also included in the improvement is a 2002 write-off of a $5.9 million receivable related to a distributor that became insolvent. In 2004, we expect to see continued improvement in income from operations but not at the improvement level of 2003, as most of the production efficiencies have been realized. Improvement will come from continued new product introductions and slight improvements in light commercial markets. In 2004, we will continue to face the challenge of steel surcharges and raising prices to our customers to cover those costs. Bristol Compressors (Bristol) Bristol net sales decreased 12.4% to $451.2 million in 2003 from $515.4 million in 2002. The decline in sales is primarily related to a 18% decrease in sales to international OEM customers and to a lesser extent, lower shipments to U.S. OEM manufacturers. In 2004, we expect Bristol sales will decrease approximately 15% as a result of losing a customer and continued competitive pressure. In 2003, our new Benchmark compressor was introduced, and we expect it will improve our outlook beyond 2004. Bristol income from operations decreased 12.4% to $25.4 million (5.6% of net sales) in 2003 from $29.0 million (5.6% of net sales) in 2002. In 2003, price increases were offset by steel cost increases, continued decreases in larger applications and reductions in sales volume. In 2004, we expect income from operations at Bristol to be lower by approximately $13 million as a direct result of lost volume and severe pricing pressure in the OEM markets where Bristol competes. In 2004, we will continue to face the challenge of steel surcharges and our ability to pass on those costs to our customers. Beyond 2004, we expect the introduction of new products and higher sales volume should raise income from operations. Other General corporate expenses, eliminations, and other non-allocated items increased to $79.9 million in 2003 as compared to $44.0 million in 2002. The increase was primarily due to $13.3 million for post retirement medical expenses, $10.5 million for incentive compensation expense, $6.4 million for IT project spending, and a net $5.7 million increase in corporate for other corporate and non-allocated costs including pension, insurances, minority interest, and corporate departments. 6 York International Corporation 2003 Annual Report Charges and other expenses are as follows:
(in thousands) 2003 2002 2001 - ----------------------------------------------------------------------------------------------- By segment: Global Applied: Americas $ 31,640 $ 205 $ 25,729 EMEA 56,581 1,248 39,608 Asia 2,989 209 3,742 ------------- ----------- -------------- 91,210 1,662 69,079 Unitary Products Group 9,654 6,771 44,283 Bristol Compressors 2,135 1,466 15,378 Corporate 16,750 18 202 ------------- ----------- -------------- $ 119,749 $ 9,917 $ 128,942 ------------- ----------- -------------- By type: Restructuring and other charges, net $ 91,395 $ (111) $ 70,504 Restructuring and other charges reflected in cost of goods sold 5,484 88 14,418 Related operating expenses included in cost of goods sold 8,828 7,658 44,020 Selling, general, and administrative expenses 14,042 2,282 -- ------------- ----------- -------------- $ 119,749 $ 9,917 $ 128,942 ------------- ----------- --------------
Restructuring and other charges related to the 2003 initiatives and the 2001 and 2000 initiatives are discussed in the Consolidated Operations section above. Operating expenses in 2003 related to the Americas' cost reduction actions and consisted of costs related to the relocation of certain product lines. Operating expenses in 2002 related to the UPG and Bristol plant consolidations and a previously discontinued UPG product line. SG&A expenses in 2003 included a non-cash curtailment loss of $14.0 million related to the decision to replace our defined benefit pension plans for U.S. salaried non-bargaining and certain U.S. salaried bargaining employees with a new defined contribution plan, effective January 1, 2004. In 2002, SG&A expenses included executive retirement costs of $2.3 million. RESULTS OF OPERATIONS 2002 AS COMPARED TO 2001 Consolidated Operations Net sales Net sales in 2002 decreased 2.0% to $3,843.4 million from $3,920.1 million in 2001. Service business sales growth was more than offset by the decline in equipment sales which was attributable to virtually all markets except for China and was primarily related to large commercial equipment, which declined approximately 17%. The equipment declines were partially offset by a net increase of $38.6 million resulting from translating local currencies at higher rates which was due to strengthening currencies in EMEA partially offset by weakening currencies in Latin America. (See further discussion below under Segment Analysis.) In 2002, net sales in the United States decreased 1.2% to $1,838.7 million, and non-U.S. net sales decreased 2.7% to $2,004.7 million. Order backlog Order backlog as of December 31, 2002 was $928.5 million compared to $873.4 million as of December 31, 2001. Gross profit Gross profit decreased 1.7% to $727.8 million (18.9% of net sales) in 2002 as compared to $740.2 million (18.9% of net sales) in 2001. The state of global economies depressed commercial construction and capital replacement budgets and resulted in a decrease in equipment sales and competitive margin pressures for available contracts. Other factors causing the reduction included our plant consolidation actions that resulted in lower than expected productivity, production cost overruns, and inventory variances. These decreases were partially offset by increased service business margins, and reduced costs for restructuring and cost reduction actions. Included in cost of goods sold in 2002 were $0.1 million of restructuring charges, $6.8 million of costs related to cost reduction actions, and $0.8 million related to a discontinued product line. In 2001, we recorded $14.4 million of restructuring charges related to inventory write-downs and warranty accruals, $30.0 million of costs related to cost reduction actions, $8.2 million related to a discontinued product line, and a $5.8 million write-off of a supplier advance in cost of goods sold. Selling, general, and administrative expenses SG&A expenses were $566.3 million (14.7% of net sales) in 2002 compared to $568.0 million (14.5% of net sales) in 2001. Staff reductions and other cost reduction efforts and the elimination of goodwill amortization in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" were offset by increases from 7 York International Corporation 2003 Annual Report higher legal, pension, benefit, insurance, and information technology costs, the effect of strengthening European currencies, the write-off of a $5.9 million receivable related to a UPG distributor that became insolvent, and executive retirement costs of $2.3 million. Restructuring and other charges, net In 2000, we initiated a cost reduction process, which included plant closures and divestitures, product line and facility rationalizations, SG&A expense reductions, and other actions. In 2001, we expanded the scope of the cost reduction process to include additional plant closings and staff reductions. In 2002 and 2001, we recorded restructuring and other (credits) charges of $(0.1) million and $70.5 million, respectively, related to these cost reduction actions, exclusive of the $0.1 million and $14.4 million, respectively, charged to cost of goods sold as discussed above. Total charges to operations in 2002 included $1.6 million in write-downs of various assets, a net credit of $0.2 million for severance and other costs, and a $1.4 million gain on the sale of fixed assets. Total charges to operations in 2001 included $28.7 million in write-downs of various assets and $56.2 million in accruals for severance and other costs. As of December 31, 2002, all of the actions were substantially complete. These charges are more fully discussed in note 16 to our consolidated financial statements. Gain (loss) on divestiture In 2002, we sold our air conditioning operations in Australia for $12.1 million. The sale resulted in a loss of $10.3 million. There was no similar transaction in 2001. Income from operations As a result of the above items, income from operations in 2002 increased 48.7% to $151.2 million (3.9% of net sales) from $101.7 million (2.6% of net sales) in 2001. Interest expense, net In 2002, net interest expense decreased 27.8% to $48.5 million compared to $67.2 million in 2001 due to lower average debt levels and lower interest rates. The decrease is directly related to lower average borrowing levels and a reduction in average borrowing rates. Equity in earnings of affiliates Equity in earnings of affiliates was $4.2 million in 2002 as compared to $2.4 million in 2001. The increase was primarily the result of improved performance of Scroll Technologies. Provision for income taxes Our income tax provision of $25.7 million, or effective rate of 24.1%, in 2002 relates to both U.S. and non-U.S. operations. The 2002 income tax provision was lower than the U.S. statutory rate of 35% primarily due to the benefits of tax holidays in certain jurisdictions of $16.2 million, other favorable foreign tax rate differences of $3.5 million, and export incentives claimed of $3 million. Benefits were partially offset by the unfavorable tax impact of deemed and actual distributions of $6.0 million and a loss on disposition of a foreign operation that yielded no tax benefit of $3.7 million. Our effective tax rate increased to 24.1% in 2002 compared to a benefit of 24.4% in 2001. The increase in the effective tax rate was primarily due to the impact of a tax benefit of $20 million in 2001 recognized in connection with a restructuring action involving the disposition of foreign operations on income before income taxes and cumulative effect of changes in accounting principles of $37 million. Offsetting the increase in the 2002 effective tax rate resulting from this 2001 tax benefit was the impact of the 2002 adoption of SFAS No. 142, and greater losses in 2001 where no tax benefit was recognized. Income before cumulative effect of changes in accounting principles As a result of the above factors, income before the cumulative effect of changes in accounting principles was $81.2 million in 2002 as compared to $46.0 million in 2001. Cumulative effect of changes in accounting principles Upon adoption of SFAS No. 142 we were required to perform a transitional goodwill impairment test. The transitional goodwill impairment test was completed during the second quarter of 2002. As a result, we recognized a non-cash transitional goodwill impairment charge of $179.4 million with no tax benefit in our former YRG reporting unit. The projected financial performance of the YRG, which includes the entities acquired in the Sabroe acquisition, was insufficient to support the related goodwill. As required, the transitional goodwill impairment charge was recorded as a cumulative effect of a change in accounting principle as of January 1, 2002. Segment Analysis Global Applied Global Applied net sales decreased 2.4% to $2,750.2 million in 2002 from $2,817.6 million in 2001. A net increase of $40 million resulting from translating local currency sales at higher rates was due to strengthening currencies in EMEA partially 8 York International Corporation 2003 Annual Report offset by weakening currencies in Latin American countries. This increase and increases in service business sales were more than offset by declines in equipment shipments in the Americas and EMEA due to a reduction in commercial construction and capital investment and reduced shipments for petrochemical and cruise ship markets. Service business sales increased 7.0%, including a 2.5% decline due to the elimination of net sales as a result of the sale of our air conditioning equipment and service operations in Australia. Global Applied income from operations decreased 21.5% to $146.2 million (5.3% of net sales) in 2002 from $186.2 million (6.6% of net sales) in 2001. Income from operations was impacted by lower equipment volumes, pricing pressures, higher legal costs, and continued investment in service business infrastructure. In addition, a $3.8 million charge relating to differences in a plant's inventory records was recorded in 2002. The reduction in income from operations was primarily attributed to lower volume and European job cost overruns on specific large industrial contracts, partially offset by increased gross margin as a result of aftermarket growth and strengthening currencies. Included in income from operations is approximately $7 million of income due to currency translation. Unitary Products Group UPG net sales decreased 2.5% to $736.8 million in 2002 from $755.9 million in 2001. The sales reduction was directly related to continued softness in commercial construction that caused a reduction in our light commercial equipment sales, reduced export volume to Mexico, and continued sharp declines in the manufactured housing industry. The manufactured housing declines were due to the availability of credit for such homes and the attractiveness of traditional new home construction. These declines were partially offset by higher sales in the U.S. residential market supported by the new home building activity. UPG income from operations decreased 31.9% to $40.3 million (5.5% of net sales) in 2002 from $59.1 million (7.8% of net sales) in 2001. The decrease was due to an unfavorable product mix, manufacturing inefficiencies, and a write-off of a $5.9 million receivable related to a distributor that became insolvent in the first quarter of 2002. The unfavorable product mix is the result of decreased demand for higher-margin light commercial products. Manufacturing inefficiencies resulted from reduced productivity and higher logistics and warehousing costs at the Wichita facility during the first half of 2002. Bristol Compressors Bristol net sales increased 1.1% to $515.4 million in 2002 from $509.7 million in 2001. Increased sales of smaller residential compressors were partially offset by reduced shipments of larger light commercial compressors. Bristol income from operations decreased 26.9% to $29.0 million (5.6% of net sales) in 2002 from $39.7 million (7.8% of net sales) in 2001. Margins decreased due to the continued decreases in larger applications, pricing pressure in the market place, and manufacturing inefficiencies relating to the closure of the Sparta facility. Bristol was negatively impacted by order mix as high-margin large compressors used in light commercial applications were down significantly, while the volume of lower-margin smaller units increased. Other General corporate expenses, eliminations, and other non-allocated items decreased 18.9% to $44.0 million in 2002 as compared to $54.3 million in 2001. The decrease was primarily due to the reduction of goodwill amortization resulting from the adoption of SFAS 142, offset by cost increases for insurance, pensions, and IT investments. Restructuring and other charges related to the 2001 and 2000 initiatives are discussed in the Consolidated Operations section above. Operating expenses in 2002 related to the UPG and Bristol plant consolidations and a previously discontinued UPG product line. In 2001, we recorded $30 million of costs related to cost reduction actions, $8.2 million related to a discontinued product line, and a $5.8 million write-off of a supplier advance. LIQUIDITY AND CAPITAL RESOURCES Our significant liquidity and capital funding needs are working capital, operating expenses, capital expenditures, debt repayments, restructuring costs, dividends to our shareholders, contractual obligations, and commercial commitments. Liquidity and capital resource needs are met through cash flows from operations, borrowings under our credit agreements and bank lines of credit, financing of trade receivables, and credit terms from suppliers, which approximate receivable terms to our customers. Additional sources of cash include customer deposits and progress payments. We believe that we will be able to satisfy our principal and interest payment obligations and our working capital and capital expenditure requirements from operating cash flows together with the availability under the uncommitted credit lines and committed bank lines of credit. Uncommitted credit lines and committed bank lines of credit support seasonal working capital needs and are available for general corporate purposes. Since certain of our long-term debt obligations and our revolving trade receivables purchase facility bear interest at floating rates, our interest costs are sensitive to changes in prevailing interest rates. In the ordinary course of business, we enter into various types of transactions that involve contracts and financial instruments. We enter into these financial instruments to manage financial market risk, including foreign exchange, commodity price, and 9 York International Corporation 2003 Annual Report interest rate risk. Financial instruments are more fully discussed in note 11 to our consolidated financial statements and under the caption "Market Risk" below. The following tables summarize our contractual obligations and other commercial commitments as of December 31, 2003: PAYMENTS DUE BY PERIOD
CONTRACTUAL OBLIGATIONS LESS THAN AFTER 5 (in thousands) TOTAL 1 YEAR 1-3 YEARS 4-5 YEARS YEARS ----- --------- --------- --------- ------- Notes payable $ 612,782 $ 30,755 $ 278,519 $ 201,321 $ 102,187 Operating leases 113,731 37,808 49,753 18,957 7,213 Information technology service contracts (a) 435,377 46,332 105,001 94,221 189,823 Unconditional purchase obligations (b) 163,337 63,337 100,000 -- -- Purchase orders in normal course of business 253,468 247,821 4,925 722 -- --------------- ------------- ------------- ------------- ------------- Total contractual cash obligations $ 1,578,695 $ 426,053 $ 538,198 $ 315,221 $ 299,223 --------------- ------------- ------------- ------------- -------------
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
TOTAL OTHER COMMERCIAL COMMITMENTS AMOUNTS LESS THAN OVER 5 (in thousands) COMMITTED 1 YEAR 1-3 YEARS 4-5 YEARS YEARS --------- -------- --------- --------- ------ Standby letters of credit and surety bonds $ 107,311 $ 104,904 $ 2,190 $ 212 $ 5 Performance guarantees 167,916 149,604 15,746 2,547 19 Commercial letters of credit 34,214 34,214 -- -- -- Guarantee of affiliate debt (c) 30,000 -- -- -- 30,000 ----------- ----------- --------- -------- ---------- Total commercial commitments $ 339,441 $ 288,722 $ 17,936 $ 2,759 $ 30,024 ----------- ----------- --------- -------- ----------
(a) Unconditional payments of $33.6 million are included in information technology service contracts and have been excluded from the caption "Unconditional purchase obligations." (b) We own 50% of a small refrigeration company and are contingently obligated to purchase the remaining 50% no later than 2014. Our purchase commitment can be accelerated under certain circumstances. The purchase price will be determined based upon the profitability of the company but cannot be less than $5 million, which amount is included in the table. (c) We and another company participate in a manufacturing joint venture, Scroll Technologies (Scroll). We have guaranteed our share of the indebtedness of Scroll. In the event Scroll would default on its debt obligation, we are required to assume 50% of Scroll's outstanding debt. We have postretirement and postemployment benefit obligations to certain employees and former employees. We are obligated to make contributions to our pension plans and postretirement health and life insurance plans. We are unable to determine the amount of plan contributions due to the inherent uncertainties of obligations of this type, including timing and amounts of benefit payments. Consequently, contributions are not included in the contractual obligations table above. We expect to contribute $21.7 million to postretirement and postemployment plans in 2004. These plans and our estimates of future contributions and benefit payments are more fully described in note 12 of our consolidated financial statements. As of December 31, 2003, our postretirement and postemployment obligations were $253.9 million. In determining these obligations we make a number of estimates such as discount rate, rate of compensation increase, expected return on plan assets, and rate of increasing health care costs. Changes in our assumptions could have a significant impact on our financial position, results of operations, and liquidity. A one-percentage point change in the discount rate would impact postretirement and postemployment benefit expense by approximately $4.3 million. A one-percentage point change in the estimated rate of return on plan assets would impact postretirement and postemployment benefit expense by approximately $4.7 million. A one-percentage point increase in assumed health care cost trend rates would have increased our expense in 2003 $1.3 million and increased our postretirement benefit obligations $17.4 million. WORKING CAPITAL Our working capital is mainly comprised of inventories, receivables, net, and accounts payable and accrued expenses. Working capital decreased $74.1 million to $362.5 million as of December 31, 2003 as compared to $436.6 million as of December 31, 2002. The decrease resulted from lower cash and cash equivalents and increased accounts payable and accrued expenses offset by higher inventories and prepayments and other current assets. During 2003, the Euro and other European currencies appreciated significantly against the U.S. dollar. The impact of foreign currency appreciation on working capital is quantified within the respective captions below where significant. Cash and Cash Equivalents Cash and cash equivalents decreased $43.3 million mainly as a result of our initiative to reduce our overall debt obligations. 10 York International Corporation 2003 Annual Report Receivables Receivables increased $11.4 million, including an increase of $47.5 million from foreign currency translation offset by improved collection efforts in all businesses and a reduction in sales at Bristol. Overall, days sales outstanding decreased to 50 days from 53 days. Inventories Including an increase of $29 million from foreign currency translation, inventories increased $38.9 million. The rise in inventory levels was due to increases in raw materials and work-in-process of $42.2 million offset by reduced finished goods of $3.3 million. Raw materials and work-in-process increased due to purchases made in the fourth quarter to support increased production activity for current backlog. The reduction in finished goods is mainly attributable to reduced inventory levels at UPG. Demand for UPG residential equipment in the fourth quarter of 2003 and improved operational effectiveness and logistics activity reduced finished goods inventory at December 31, 2003. Inventory turns increased to 6.5 from 6.2 due to the above factors and factory consolidation efforts. Prepayments and Other Current Assets Prepayments and other current assets increased $48.5 million due to increased deferred tax assets, appreciation on our foreign currency forward and commodity swap contracts, and prepayments relating to our healthcare insurance trust. Our deferred tax assets increased due to tax benefits related to our December 1999 sale-leaseback transaction that are expected to be realized in 2004. The fair value of our foreign currency forward and commodity swap contracts increased due to changes in foreign currency and commodity market prices. Our financial instruments are more fully described in note 11 of our consolidated financial statements. Accounts Payable and Accrued Expenses Including an increase of $58.3 million from foreign currency translation, accounts payable and accrued expenses increased $130.3 million. The increase is due to higher restructuring accruals of $20 million; warranty liabilities of $11.6 million; inventory purchases of $30 million; and other payables and accruals of $68.7 million. Restructuring accruals were the direct result of the 2003 cost reduction actions and are mainly comprised of severance and contractual obligations, the majority of which will be paid in 2004. Increases in warranty liabilities are mainly attributable to longer standard warranty periods and new product introductions. Other payables and accruals increased due to increases in accruals for incentive compensation, IT infrastructure spending and freight costs. CASH FLOWS Our operating cash flows funded our liquidity and capital resource needs in 2003, 2002 and 2001. We expect 2004 operating cash flows to be slightly less than 2003. Seasonal working capital needs of approximately $100 million in the first half of 2004 are expected to be satisfied by a combination of uncommitted credit lines and committed bank lines of credit from our $400 million Five Year Credit Agreement. Positive net cash flow will be first applied to pay down committed lines of credit to ensure maximum availability of committed sources of capital. Operating Activities We generated $161 million of cash from operating activities in 2003. Net cash flows of $46 million were generated from the change in assets and liabilities net of effects from acquisitions and divestitures. Remaining cash flows of $115 million were generated from our results of operations. Operating cash flows were utilized to fund our investing and financing activities. We have generated cash flows from the change in assets and liabilities net of effects from acquisitions and divestitures of $46.3 million, $96.4 million, and $76.6 million, in 2003, 2002, and 2001, respectively. These cash flows are the result of initiatives employed to reduce our working capital. Due to diminishing returns expected from these types of initiatives, we do not expect to generate cash flows in 2004 from further reductions in our working capital and other long-term assets and liabilities. Furthermore, our working capital and other long-term assets and liabilities may increase as our businesses grow and economic conditions change. Investing Activities Cash used in investing activities of $86.6 million was mainly comprised of capital expenditures of $84.7 million for information technology systems, service business infrastructure, and replacement of manufacturing equipment. Capital expenditures are currently expected to slightly exceed depreciation and amortization in 2004 mainly due to increased investment in information technology. Financing Activities Cash used in financing activities of $119.8 million included $123.7 million of net debt payments and $24 million of common stock dividend payments partially offset by proceeds from issuance of common stock of $27.9 million. Net debt payments are consistent with our stated goals to reduce debt obligations. It is reasonably likely that we will issue additional Danish retail notes in 2004 as a hedge of our net investment in a Danish subsidiary; however, we expect to reduce net debt obligations by approximately $70 million in 2004. We paid annual cash dividends of $0.60 per share in 2003, 2002, and 11 York International Corporation 2003 Annual Report 2001. In February 2004, we announced our intent to increase our annual dividend to $0.80 per share for 2004. 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 our profitability, financial condition, cash requirements, future prospects, and other factors deemed relevant by the Board of Directors. Proceeds from issuance of common stock represents cash received from employee stock purchases and exercise of stock options under our employee stock plans. Employee stock plans include the 1992 Employee Stock Purchase Plan (ESPP), as amended, the 2002 Omnibus Stock Plan (2002 Plan), and the Amended and Restated 1992 Omnibus Stock Plan (1992 Plan). The ESPP authorizes employees to purchase up to 2.5 million shares of our common stock, inclusive of 0.5 million shares authorized by the stockholders in May 2001. The 2002 Plan was approved by shareholders in May 2002 and authorized the issuance of up to 2.0 million shares of our common stock as stock option or restricted stock awards. As of December 31, 2003, 0.1 million and 1.0 million shares remained available for purchase or grant under the ESPP and 2002 Plan, respectively. The 1992 Plan, which authorized the issuance of up to 8.4 million shares, expired in August 2002 and remaining shares of 0.9 million were cancelled. We do not anticipate the issuance of additional senior notes or purchase of our common stock during 2004. BORROWINGS AND AVAILABILITY Total indebtedness was $612.8 million as of December 31, 2003, primarily consisting of $500 million of senior notes, $41.8 million of Danish retail notes, and $25 million outstanding under domestic bank lines. The senior notes mature at dates ranging from 2006 to 2012 and carry fixed rates ranging from 5.8% to 6.75%. We have a $400 million Five Year Credit Agreement, which expires on May 29, 2006, and a $200 million 364-Day Credit Agreement, which expires on March 13, 2004 (collectively, the Agreements). As of December 31, 2002, we had the $400 million Five Year Credit Agreement and a $300 million 364-Day Credit Agreement. As of December 31, 2003 and 2002, no amounts were outstanding under our credit agreements. We renewed our $200 million 364-Day Credit Agreement in March 2004. The $400 million Five Year Credit Agreement provides for borrowings at the London InterBank Offering Rate (LIBOR) plus 1.175%, and the $200 million 364-Day Credit Agreement provides for borrowings at LIBOR plus 1.225%. We pay annual fees of 0.20% on the $400 million facility and 0.15% on the $200 million facility. The Agreements allow for borrowings at specified bid rates. As of December 31, 2003 and 2002, the three-month LIBOR rate was 1.14% and 1.38%, respectively. The Agreements contain financial covenants requiring us to maintain certain financial ratios and standard provisions limiting leverage and liens. We were in compliance with these financial covenants as of December 31, 2003 and 2002. In October and December 2003, we issued Danish denominated retail notes of DKK 200 million and DKK 50 million, respectively, aggregating $41.8 million. These notes are due in October 2004 and are at a rate of 2%. We have domestic bank lines that provide for total borrowings of up to $135 million and $50 million as of December 31, 2003 and 2002, respectively. The domestic bank lines are uncommitted and may be unavailable for renewal at maturity. As of December 31, 2003, $25 million was outstanding under the domestic bank lines. No amounts were outstanding as of December 31, 2002. Our non-U.S. subsidiaries maintain bank credit facilities in various currencies that provide for total borrowings of $355.2 million and $384.5 million as of December 31, 2003 and 2002, respectively. As of December 31, 2003 and 2002, $27.8 million and $28.4 million, respectively, were outstanding under the non-U.S. facilities, with remaining availability of $246.3 million and $282.5 million, respectively, after bank guarantees and letters of credit usage. We have access to bank lines of credit and have the ability to borrow under the Agreements as long as we continue to meet the financial covenants or until expiration of the Agreements. The primary financial covenants are the earnings before interest, taxes, depreciation, and amortization (EBITDA) interest coverage and the debt to capital ratio, as defined under the Agreements. As of December 31, 2003, our EBITDA interest coverage was 5.0 times, exceeding the minimum requirement of 3.5 times. As of December 31, 2003, our debt to capital ratio, as defined in the agreement, was 42%, below the maximum allowed of 52%. Our ability to issue commercial paper is limited due to our credit ratings. We also maintain an annually renewable revolving facility under which we sell certain trade receivables - see "Off-Balance Sheet Arrangements" section below. OFF-BALANCE SHEET ARRANGEMENTS Our off-balance sheet arrangements are comprised of a trade receivable revolving facility and operating leases. Trade Receivable Revolving Facility Pursuant to the terms of an annually renewable revolving facility, we sell certain of our trade receivables to a wholly owned consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, undivided ownership interest in the trade receivables to bank administered asset-backed commercial paper vehicles. In April 2003, we amended the facility, reducing it from $175 million to $150 million. We continue to service sold trade receivables. No servicing asset or liability has been recognized as our cost to service sold trade receivables approximates the servicing income. 12 York International Corporation 2003 Annual Report In accordance with the facility, YRFLLC has sold $150 million and $155 million of an undivided interest in trade receivables as of December 31, 2003 and 2002, respectively, resulting in a reduction of receivables reflected in our consolidated balance sheets. The discount rate on trade receivables sold was 1.12% and 1.40% as of December 31, 2003 and 2002, respectively. The program fee on trade receivables sold was 0.50% and 0.338% as of December 31, 2003 and 2002, respectively. The bank-administered commercial paper vehicles that purchase the YRFLLC trade receivables provide a lower cost of funds than the committed credit lines, and we expect to renew the revolving facility that sells receivables to YRFLLC. The facility is expected to be renewed at level equal to or greater than $150 million. The trade receivable balances reflect the seasonal nature of the business segments in which we are a competitor. Receivable balances reach a peak in the second quarter then continue to decline until the end of the first quarter. On a seasonal basis the total receivable balance has trended downward for the past two years and as a result we have reduced the agreement accordingly. We believe the trade receivable program is an effective source of financing at current competitive rates. While we do not anticipate making major changes to this agreement, changes would not have a significant impact on our liquidity. Operating Leases Operating leases provide us with the flexibility to use property, plant and equipment without assuming ownership and related debt. Operating leases reduce our risk associated with disposal and residual fair value of property, plant and equipment at the end of the lease. Our contractual obligations under operating leases are included in the summary of contractual obligations in the "Liquidity and Capital Resources" section above. OUTLOOK Overall, we expect improved net sales and net income in 2004 as compared to 2003. We anticipate continued strength in our service businesses (services, parts, and replacement equipment) sales within Global Applied; slight growth in our UPG light commercial equipment; and increased sales of large commercial equipment in our Asian business. Savings from our 2003 cost reduction actions are expected to be realized in 2004. Overall growth and savings are expected to be partially offset by declines in large commercial equipment in EMEA; a decline in Bristol sales; increased costs for pension, healthcare, insurance, steel, and IT projects; and continued investments in new products and information technology. Global Applied Our continued investments in global service infrastructure and newly acquired national multi-site service arrangements have positioned our service business for growth. Our service business sales are expected to grow 10% or more in 2004 as customers continue to seek services and preserve capital. Pricing for large commercial equipment in the United States stabilized during 2003 and is expected to remain consistent in 2004 based upon current backlog levels. Asia growth is mainly the result of the growing Chinese economy and to a lesser extent a mild recovery in other Asia economies. China's economic and commercial construction expansion has driven demand for large commercial equipment and as a result our sales growth rate in China is expected to be twice the growth rate of the Chinese economy in 2004. Growth will be partially offset by volume and pricing pressures in large commercial equipment markets in EMEA. European commercial equipment markets declined in 2003 and are expected to continue to decline in 2004 due to reduced commercial construction activity. Unitary Products Group UPG growth is expected from improvements in the U.S. light commercial market and stability in the U.S. residential market. Light commercial construction markets began to improve towards the end of 2003. Rising order levels indicate light commercial equipment sales should increase slightly in 2004. Residential construction was strong in 2003 and we expect our residential sales to be in line with market expectations. Bristol Bristol sales are expected to decline due to the loss of a customer and competitive pricing pressures in OEM markets. Consequently, Bristol revenue is expected to be lower in 2004 than in 2003. Bristol's 2004 income from operations is expected to be approximately $13 million below 2003, primarily affecting the first half of the year. Reduced Bristol sales are expected to be partially offset by new product introductions designed to lower our customers' applied costs and reduce noise levels. Incremental Savings and Costs We expect to realize $25 million of incremental company-wide savings in 2004 from cost reduction actions initiated in 2003. Savings are largely comprised of efficiencies gained from relocating assembly of certain product lines to lower cost manufacturing facilities in the Americas and elimination of general and administrative costs worldwide. Savings are expected to be offset by the continued trend of rising employee benefits, insurance and steel costs in 2004. We expect incremental costs for pension, medical and insurance between $7 and $10 million above 2003 levels. Steel suppliers began charging a surcharge in January 2004 due to increased global demand for steel and scrap steel exceeding supply. Increased surcharges could have a significant impact on our results of operations in 2004. In addition, we anticipate $10 million of incremental expense for further investments in business applications and $10 million expense for investments in 13 York International Corporation 2003 Annual Report our global IT infrastructure. These investments will leverage our cost structure, achieve operational efficiencies, and enhance supply chain capabilities. These investments are necessary to standardize global processes and enable growth in 2005 and beyond. Financing Costs and Income Taxes We expect slightly lower net interest expense due to reduced average debt levels offset by rising average interest rates. Our tax rate is expected to be 23.5% for 2004 based upon current estimated income levels and employed tax strategies. Cash Flow We anticipate reducing debt approximately $70 million in 2004 with cash flows from operations. We expect capital expenditures to be slightly higher than depreciation and amortization. In addition, we anticipate paying an annual dividend of $0.80 per share in 2004 as compared $0.60 per share paid in 2003. Other As a result of the appreciation of our common stock price over the last 12 months, we expect an increase in our average shares outstanding in 2004 due to the dilutive impact of stock options. INFLATION We believe inflation has not had a significant impact on our consolidated results of operations for the periods presented. We were able to substantially offset the effect of inflation through cost reduction programs in 2003. We do not anticipate inflation having a significant impact on our future consolidated results of operations. However, as we enter 2004, there has been a dramatic increase in steel and copper prices that represent inflationary risk. See discussion on commodity price risk in the Market Risk section. CYCLICALITY We are exposed to cyclicality, particularly as it relates to new construction. Generally, Global Applied is impacted by changes in commercial construction, while UPG and Bristol are impacted by residential construction. Exposure to cyclicality is partially mitigated by our emphasis on the service, repair, and replacement market. As the installed base of HVAC&R equipment has grown and aged, we derive a significant portion of our revenue from the service, repair, and replacement market. In 2003, 2002, and 2001 on a worldwide basis, service, repair, and replacement end-use application sales accounted for an estimated 48%, 46%, and 44%, respectively, of our net sales, while new construction revenue accounted for the remainder. SEASONALITY Sales of UPG equipment historically have been seasonal. Demand for residential air conditioning equipment in the new construction and replacement market varies according to the season, with increased demand generally in the summer months. Demand in the residential replacement market generally peaks in early summer for air conditioners and in the fall for furnaces. We provide incentives for distributors to purchase products in advance of seasonal sales. These incentives, together with advance production schedules, somewhat reduce the impact of seasonal fluctuations on our sales of residential equipment. Similarly, demand for hermetic compressors in the original equipment market generally increases from January through July as manufacturers increase production to meet anticipated seasonal demand. Requirements for service and repair parts for HVAC products and the refrigeration contracting business also increase during summer months. The overall effect of seasonality is partially mitigated by sales of our Global Applied equipment, for which demand is less seasonal. MARKET RISK We are exposed to market risk associated with changes in foreign currency exchange rates, certain commodity prices, and interest rates. We do not typically hedge our market risk exposures beyond three years and do not anticipate any material changes in our primary market risk exposures in 2004. We do not hold or issue derivative instruments for trading purposes. We mitigate the risk that the counter-party to currency, commodity, and interest rate financial instruments will fail to perform by only entering into financial instruments with major international financial institutions. Financial instruments are more fully discussed in note 11 to our consolidated financial statements. Currency Rate Risk We have manufacturing facilities in eight foreign countries and our products are sold in over 125 countries throughout the world. As a result, we are exposed to movements in various currencies against the U.S. dollar and against the currencies in which we manufacture. The major foreign currencies in which foreign currency risks exist are the Euro, Danish Krone, British Pound Sterling, Chinese Renminbi, Hong Kong Dollar, Canadian Dollar, Mexican Peso, and Brazilian Real. Based on a sensitivity analysis of our estimated 2004 foreign exchange currency exposures, a uniform 10% strengthening of the value of the U.S. dollar against these foreign exchange currency exposures is estimated to result in a $18.6 million 14 York International Corporation 2003 Annual Report reduction in 2004 forecasted income from operations when translated from functional currencies. In addition to its direct effect, changes in foreign currency exchange rates will also potentially affect future sales volumes, foreign currency sales prices, and hedging strategies. The sensitivity analysis described above does not reflect these potential changes. We manage our foreign currency risks by hedging our foreign currency exposure with foreign currency forward contracts and purchased option contracts. Through our foreign currency hedging activities, we seek to minimize the risk that cash flows resulting from the sale of products manufactured in a currency different from the currency used by the selling subsidiary will be affected by changes in foreign currency exchange rates. We do not, however, hedge foreign exposures that are considered immaterial or in highly correlated currencies. Foreign currency derivative instruments (forward contracts) are matched to the underlying foreign currency exposures and are executed to minimize foreign exchange transaction costs. The functional currency for the majority of our foreign operations is the applicable local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in currency translation adjustments in accumulated other comprehensive losses. We have issued Danish denominated, retail notes as a hedge to protect the value of a portion of our net investment in a Danish subsidiary. The gains and losses on a foreign denominated debt instrument designated as a hedge of a net investment are recorded in accumulated other comprehensive losses; therefore, the gains and losses of the Danish denominated retail notes offset a portion of the change in net assets of our investment in a Danish subsidiary. Based on a sensitivity analysis of our December 31, 2003 foreign functional currency balance sheets, a uniform 10% strengthening of the value of the U.S. dollar would increase other comprehensive losses by $77.3 million. Commodity Price Risk We purchase raw material commodities and are at risk for fluctuations in the market price of those commodities. In connection with the purchase of major commodities, principally copper for manufacturing requirements, from time to time we enter into commodity forward contracts to effectively fix our cost of the commodity. These contracts require each settlement between us and our counter-party to coincide with cash market purchases of the actual commodity. Interest Rate Risk We manage our interest rate risk by entering into both fixed and variable rate debt at the lowest possible costs. Short-term borrowings, typically bank loans, are entered into and renewed in the ordinary course of business and have maturity dates that support seasonal working capital needs. Our non-U.S. subsidiaries maintain bank credit facilities for borrowings in their functional currency. In addition, we enter into interest rate swap contracts in order to achieve a balanced mix of fixed and variable rate indebtedness. The following table provides information, as of December 31, 2003, concerning our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by contractual maturity dates. For interest rate swaps, the table presents notional principal amounts and weighted average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the interest rate swaps. Weighted average variable rates are generally based on LIBOR as of the reset dates. The cash flows of these instruments are denominated in a variety of currencies. The information is presented in U.S. dollar equivalents. 15 York International Corporation 2003 Annual Report PRINCIPAL PAYMENTS AND INTEREST RATE DETAIL BY CONTRACTUAL MATURITY DATES
FAIR VALUE (ASSETS)/ (in thousands) 2004 2005 2006 2007 2008 THEREAFTER TOTAL LIABILITIES ---- ---- ---- ---- ---- ---------- ----- ------------ Short-term debt Variable rate (U.S. dollars) $ 1,099 $ -- $ -- $ -- $ -- $ -- $ 1,099 $ 1,099 Average interest rate 1.70% -- -- -- -- -- Variable rate (other currencies) $ 26,685 $ -- $ -- $ -- $ -- $ -- $ 26,685 $ 26,685 Average interest rate 13.32% -- -- -- -- -- Long-term debt Fixed rate (U.S. dollars) $ 1,650 $ 245 $ 209,142 $ 280 $ 200,298 $ 100,195 $ 511,810 $ 551,920 Average interest rate 2.50% 6.34% 6.63% 6.36% 6.70% 5.80% Fixed rate (other currencies) $ 1,321 $ 1,230 $ 42,601 $ 434 $ 158 $ 1,992 $ 47,736 $ 47,297 Average interest rate 6.97% 5.97% 2.08% 6.80% 7.11% 6.92% Variable rate (U.S. dollars) $ -- $ 150 $ 25,151 $ 151 $ -- $ -- $ 25,452 $ 25,452 Average interest rate (a) -- 4.25% 1.60% 4.25% -- -- Interest Rate Derivatives Fixed to variable rate interest rate swaps (U.S. dollars) $ -- $ -- $ 100,000 $ -- $ -- $ -- $ 100,000 $ (8,880) Average pay rate (b) -- -- -- -- -- -- Average receive rate -- -- 6.63% -- -- --
(a) Variable rate specified is based upon LIBOR plus the specified margin over LIBOR. (b) The average pay rate is based upon the 6-month LIBOR rate and is reset biannually. The applicable LIBOR rate was 1.18% as of December 31, 2003. APPLICATION OF CRITICAL ACCOUNTING POLICIES Preparation of our consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. Many of the estimates require us to make significant judgments and assumptions. Actual results could differ from our estimates and could have a significant impact to our consolidated results of operations, financial position, and cash flows. We consider the estimates used to account for warranty, postretirement and postemployment benefits, income taxes, and the impairment of long-lived assets and goodwill our most significant judgments. We base many of our assumptions on our historical experience, recent trends, internal budgets, and forecasts. We develop our budgets and forecasts based upon current and historical operating performance, expected industry and market trends, and expected overall economic conditions. Our assumptions about future experience, cash flows, and profitability require significant judgment since actual results have fluctuated in the past and are expected to continue to do so. Warranty We sell equipment with standard and extended warranties. Warranties include extended warranty contracts sold to customers to increase the warranty period beyond the standard period. Our warranty policies require us to estimate warranty costs. Generally, estimated warranty costs are calculated as the ratio of historical warranty costs to historical actual sales from the most recent five fiscal years. When no warranty history is available for new or reengineered products, estimated warranty costs are based upon the warranty history of similar products. We estimate warranty costs for any known defects separately. Warranty costs include the cost of labor and parts to repair equipment under warranty. Differences between our estimates and actual cost of labor or parts, frequency of repairs, or defects could have a significant impact to our consolidated results of operations, financial position, and cash flows. Postretirement and Postemployment Benefits We provide postretirement and postemployment benefits to certain of our employees and former employees. Our postretirement and postemployment benefit plans provide pension, salary continuance, severance, life insurance, and health care. The actual amounts of benefits we pay are ultimately based upon each employee's years of service, total amount of compensation during employment, and medical services provided. We fund most of our pension plans by contributing assets to a trust that invests those assets in various stocks, bonds, and other investments. We accrue estimated postretirement and postemployment benefits over the period of service or at the date of the event triggering benefits. When calculating our projected postretirement and postemployement liabilities, we must make a number of estimates such as discount rate, rate of compensation increase, expected return on plan assets, and rate of increasing health care costs (see note 16 York International Corporation 2003 Annual Report 12 of our consolidated financial statements). Our estimates are based upon prevailing interest rates and current market conditions, as well as, health care cost and compensation trends. Differences between our estimates of future investment returns and actual returns could have a significant effect on future expense and funding requirements. Similarly, differences between our calculations of future benefits and actual benefits could also have a significant impact to our consolidated results of operations, financial position, and cash flows. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) became law. The Act provides for prescription drug benefits to retirees and federal subsidies to sponsors of certain retiree health-care plans. No determination has been made as to whether our plans qualify for federal subsidies. Furthermore, specific authoritative guidance on accounting for the federal subsidies is pending. Income Taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance to the amount that more likely than not will be realized. We assess the recoverability of deferred tax assets based upon our estimated future taxable income and our tax strategies. Our estimated future taxable income is based upon our internal budgets and forecasts. Differences between our estimates and actual taxable income could have a significant impact to our consolidated results of operations and financial position. We also recognize a liability for expected tax contingencies. We assess the liability based on our review of various tax issues and internal and external interpretations of tax law. Differences between our estimates and actual future tax payments could have a significant impact to our consolidated results of operations, financial position, and cash flows. Our income tax provision is impacted by several factors, including, but not limited to, the geographical distribution of our pre-tax income, the extent to which tax holidays may apply, changes in tax legislation in the various jurisdictions where we operate, and estimates of future results and their impact tax assets on the recoverability of deferred tax assets. Impairment of Long-Lived Assets and Goodwill We review long-lived assets and certain identifiable intangibles to be held and used for impairment whenever events or changes in circumstances indicate that the recoverability of the carrying amount of an asset or asset group should be assessed. We assess the carrying amount of the asset or asset group by comparing the carrying amount to our estimate of future cash inflows, net of outflows. If the estimated net cash inflows are less than the asset carrying amount, the asset is written down to fair value. Fair value is based upon quoted market prices, if available. When quoted market prices are not available, we estimate fair value based upon the selling prices of similar assets or valuation techniques. We must estimate the net future cash inflows to assess an asset or asset group carrying amount and fair value. Our estimates are based upon our internal budgets and forecasts. A change in the utilization of our assets or a decision to exit certain product lines or manufacturing locations could impact our estimates of future cash flows. A decrease in estimated future cash flows could reduce the fair values of long-lived assets, increasing the likelihood of impairment, which could have a significant impact to our consolidated results of operations and financial position. We are required to test goodwill for impairment at least annually or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We identify potential goodwill impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, the amount of goodwill impairment loss, if any, must be measured. We measure the amount of goodwill impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized as an operating expense. A goodwill impairment test requires us to estimate the fair value of our reporting units. We estimate reporting unit fair value using a discounted cash flow and market-multiple approach. In estimating future cash flows, we use our internal budgets and forecasts. In the second quarter of 2002, we completed the transitional goodwill impairment test. As required, the transitional goodwill impairment test was performed as of January 1, 2002. The transitional goodwill impairment test resulted in an impairment charge in our former YRG reporting unit. The projected financial performance of YRG, which includes the entities acquired in the Sabroe acquisition, was insufficient to support the related goodwill as of January 1, 2002. We also completed our annual goodwill impairment test in the fourth quarter of 2003. Our 2003 annual goodwill impairment test indicated that the estimated fair values of our reporting units exceeded carrying amounts. As a result, no goodwill impairment was recognized. A decrease in estimated future cash flows or profitability would reduce the fair values of our reporting units and increase the likelihood of goodwill impairment which could have a significant impact to our consolidated results of operations and financial position. 17 York International Corporation 2003 Annual Report Management has discussed the development and selection of critical accounting policies with the audit committee of our board of directors, and the audit committee has reviewed this disclosure. NEW ACCOUNTING STANDARDS We have reviewed and assessed recently issued accounting standards which we have yet to adopt and do not expect them to have a material impact on our consolidated financial statements. FORWARD-LOOKING INFORMATION - RISK FACTORS This document contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These forward-looking statements are intended to provide management's current expectations or plans for the future operating and financial performance based on assumptions currently believed to be valid. To the extent we have made "forward-looking statements," certain risk factors could cause actual results to differ materially from those anticipated in such forward-looking statements including, but not limited to: - Changes in competition within specific markets or geographies - Introduction of new competitive products - Changes in government regulation, including environmental and tax laws - Legal actions, including pending and unasserted claims - Loss of patented technology - Events that create a negative image for our trademarks - Work stoppages - Price and availability of raw materials and components - Successful implementation of our cost reduction initiatives - Changes in individual country economics, including but not limited to: Argentina; Brazil; China; Mexico; Saudi Arabia; United Arab Emirates; and Venezuela - Acts of war or terrorism - Changes in commercial and residential construction markets - Significant changes in customer orders Unseasonably cool weather in various parts of the world could adversely affect our UPG and Global Applied air conditioning businesses and, similarly, the Bristol compressor business. Bristol is also impacted by the successful development, introduction, and customer acceptance of new products. The Global Applied air conditioning business could also be affected by a further slowdown in the large chiller market and by the acceptance of new product introductions. Global Applied could be negatively impacted by reductions in commercial construction. Our ability to effectively implement price increases to offset higher costs is dependent on market conditions and the competitive environment. The financial position and financial results of our foreign locations could be negatively impacted by the translation effect of currency fluctuations and by political changes including nationalization or expropriation of assets. In addition, our overall performance could be affected by declining worldwide economic conditions or slowdowns resulting from world events. 18 York International Corporation 2003 Annual Report INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders, York International Corporation: We have audited the accompanying consolidated balance sheets of York International Corporation and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive income (loss), cash flows and stockholders' equity for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of York International Corporation and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for variable interest entities in 2003 and its method of accounting for goodwill and other intangible assets in 2002. /s/ KPMG LLP KPMG LLP Harrisburg, Pennsylvania February 13, 2004 19 York International Corporation 2003 Annual Report CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 2002 (in thousands, except per share data) -------------------------- ASSETS Current assets: Cash and cash equivalents $ 49,650 $ 92,940 Receivables, net 638,510 627,067 Inventories 512,714 473,779 Prepayments and other current assets 129,921 81,461 -------------------------- Total current assets 1,330,795 1,275,247 -------------------------- Deferred income taxes 107,566 69,696 Investments in affiliates 28,200 29,389 Property, plant, and equipment, net 541,118 500,318 Goodwill 529,182 504,963 Intangibles, net 36,744 32,000 Deferred charges and other assets 99,530 94,509 -------------------------- Total assets $ 2,673,135 $ 2,506,122 -------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 30,755 $ 32,709 Accounts payable and accrued expenses 899,093 768,748 Income taxes 38,453 37,202 -------------------------- Total current liabilities 968,301 838,659 -------------------------- Long-term warranties 46,888 44,748 Long-term debt 582,027 618,224 Postretirement and postemployment benefits 249,912 244,522 Other long-term liabilities 49,607 77,155 -------------------------- Total liabilities 1,896,735 1,823,308 -------------------------- Stockholders' equity: Common stock $.005 par value; 200,000 shares authorized; issued 46,248 shares in 2003 and 45,820 shares in 2002 231 229 Additional paid-in capital 732,339 727,031 Retained earnings 299,195 327,176 Accumulated other comprehensive losses (51,597) (142,344) Treasury stock, at cost; 5,420 shares in 2003 and 6,169 shares in 2002 (200,856) (228,591) Unearned compensation (2,912) (687) -------------------------- Total stockholders' equity $ 776,400 $ 682,814 --------------------------
The accompanying notes are an integral part of these statements. 20 York International Corporation 2003 Annual Report CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, (in thousands, except per share data) 2003 2002 2001 ----------------------------------------- Net sales: Products $ 3,632,980 $ 3,459,038 $ 3,565,682 Services 443,074 384,335 354,414 ----------------------------------------- Net sales 4,076,054 3,843,373 3,920,096 ----------------------------------------- Cost of goods sold: Products (2,919,633) (2,788,856) (2,884,326) Services (373,171) (326,765) (295,565) ----------------------------------------- Cost of goods sold (3,292,804) (3,115,621) (3,179,891) ----------------------------------------- Gross profit 783,250 727,752 740,205 Selling, general, and administrative expenses (636,179) (566,348) (568,030) Restructuring and other charges, net (91,395) 111 (70,504) Gain (loss) on divestiture 345 (10,319) -- ----------------------------------------- Income from operations 56,021 151,196 101,671 Interest expense, net (47,535) (48,485) (67,150) Equity in earnings of affiliates 5,582 4,180 2,444 ----------------------------------------- Income before income taxes and cumulative effect of changes in accounting principles 14,068 106,891 36,965 (Provision) benefit for income taxes (2,653) (25,715) 9,024 ----------------------------------------- Income before cumulative effect of changes in accounting principles 11,415 81,176 45,989 Cumulative effect of changes in accounting principles, net of tax of $10,686 in 2003 and $0 in 2002 (15,413) (179,436) -- ----------------------------------------- Net (loss) income $ (3,998) $ (98,260) $ 45,989 ----------------------------------------- Basic earnings (loss) per share: Income before cumulative effect of changes in accounting principles $ 0.29 $ 2.06 $ 1.19 Cumulative effect of changes in accounting principles (0.39) (4.56) -- ----------------------------------------- Net (loss) income (0.10) (2.50) 1.19 ----------------------------------------- Diluted earnings (loss) per share: Income before cumulative effect of changes in accounting principles 0.28 2.04 1.17 Cumulative effect of changes in accounting principles (0.38) (4.51) -- ----------------------------------------- Net (loss) income $ (0.10) $ (2.47) $ 1.17 ----------------------------------------- Weighted average common shares and common equivalents outstanding: Basic 39,684 39,351 38,626 Diluted 40,206 39,770 39,147 -----------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, (in thousands) 2003 2002 2001 Net (loss) income $ (3,998) $ (98,260) $ 45,989 ------------------------------------------ Other comprehensive income (loss): Foreign currency translation adjustments 85,861 71,964 (50,795) Cash flow hedges: Transition adjustment, net of tax of $(525) in 2001 -- -- (976) Reclassification adjustment, net of tax of $(305), $2,027, and $1,950 in 2003, 2002, and 2001, respectively (567) 3,764 3,622 Net derivative income (loss), net of tax of $5,589, $93, and $(3,937) in 2003, 2002, and 2001, respectively 10,379 172 (7,311) Minimum pension liability adjustments, net of tax of $(3,002), $(11,380), and $(1,200) in 2003, 2002, and 2001, respectively (5,035) (21,496) (2,866) Available for sale securities, net of tax of $65 and $85 in 2003 and 2002, respectively 109 122 -- ------------------------------------------ Total other comprehensive income (loss) 90,747 54,526 (58,326) ------------------------------------------ Comprehensive income (loss) $ 86,749 $ (43,734) $ (12,337) ------------------------------------------
The accompanying notes are an integral part of these statements. 21 York International Corporation 2003 Annual Report CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, (in thousands) 2003 2002 2001 -------------------------------------- Cash flows from operating activities: Net (loss) income $ (3,998) $ (98,260) $ 45,989 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Cumulative effect of changes in accounting principles 15,413 179,436 -- Depreciation and amortization of property, plant, and equipment 69,990 62,167 59,655 Amortization of deferred charges, intangibles, and goodwill 3,966 2,768 27,024 Provision for doubtful receivables 11,862 18,587 7,847 Effect of non-cash charges 55,317 1,631 28,694 (Gain) loss on divestiture (345) 10,319 -- Deferred income taxes (38,545) (12,033) 126 Loss on sale of fixed assets 1,772 1,968 1,301 Other (435) (1,346) 5,462 Change in assets and liabilities net of effects from acquisitions and divestitures: Receivables, net 29,447 (17,620) 57,820 Inventories (15,074) 39,299 112,394 Prepayments and other current assets (35,881) (2,629) 26,858 Accounts payable and accrued expenses 83,704 35,890 (102,629) Income taxes 1,271 32,297 (10,468) Other long-term assets and liabilities (17,130) 9,176 (7,381) ----------------------------------- Net cash provided by operating activities 161,334 261,650 252,692 ----------------------------------- Cash flows from investing activities: Capital expenditures (84,704) (69,562) (98,126) Proceeds from divestiture, net -- 12,071 -- Purchases of and investments in other companies, net of cash acquired (5,976) (2,248) (3,178) Proceeds from sale of fixed assets 4,104 5,696 2,491 ----------------------------------- Net cash used by investing activities (86,576) (54,043) (98,813) ----------------------------------- Cash flows from financing activities: Reduction in sale of receivables (5,000) (20,000) -- Net payments on short-term debt (1,577) (3,602) (14,297) Proceeds from Danish retail notes 41,844 -- -- Net payments of commercial paper borrowings -- (197,702) (255,198) Net (payments) proceeds from senior notes (100,000) 99,149 197,623 Net proceeds (payments) on other long-term debt 23,432 (17,350) (67,270) Payment of sale-leaseback obligation (82,397) -- -- Common stock issued 27,892 10,046 21,100 Dividends paid (23,983) (23,653) (23,222) Treasury stock purchases (7) (39) (52) ----------------------------------- Net cash used by financing activities (119,796) (153,151) (141,316) ----------------------------------- Effect of exchange rate changes on cash 1,748 (950) 446 ----------------------------------- Net (decrease) increase in cash and cash equivalents (43,290) 53,506 13,009 Cash and cash equivalents at beginning of year 92,940 39,434 26,425 ----------------------------------- Cash and cash equivalents at end of year $ 49,650 $ 92,940 $ 39,434 ----------------------------------- Supplemental disclosure of cash paid (received) for: Interest $ 49,216 $ 48,771 $ 63,212 Income taxes 35,707 (5,513) (3,469) Non-cash investing activities, acquisitions of business: Fair value of tangible and intangible assets acquired $ 3,659 $ 4,830 $ 6,820 Liabilities (paid) assumed (2,317) 2,582 3,642 -----------------------------------
The accompanying notes are an integral part of these statements. 22 York International Corporation 2003 Annual Report CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED OTHER ADDITIONAL COMPRE- (in thousands, except COMMON PAID-IN RETAINED HENSIVE TREASURY per share data) STOCK CAPITAL EARNINGS LOSSES STOCK -------------------------------------------------------------------------- Balance, December 31, 2000 $ 227 $ 720,685 $ 426,322 $ (138,544) $ (259,601) Net income -- -- 45,989 -- -- Cash dividends ($.60 per share) -- -- (23,222) -- -- Purchase of treasury stock, at cost -- -- -- -- (52) Issuance of common stock: Employee stock purchase plan 1 6,139 -- -- (1) Stock options exercised and other -- (7,755) -- -- 22,716 Tax effect of options exercised -- 4,911 -- -- -- Other comprehensive losses -- -- -- (58,326) -- Amortization of unearned compensation -- -- -- -- -- -------------------------------------------------------------------------- Balance, December 31, 2001 $ 228 $ 723,980 $ 449,089 $ (196,870) $ (236,938) Net loss -- -- (98,260) -- -- Cash dividends ($.60 per share) -- -- (23,653) -- -- Purchase of treasury stock, at cost -- -- -- -- (39) Issuance of common stock: Employee stock purchase plan 1 3,803 -- -- -- Executive stock agreements, net -- 710 -- -- -- Stock options exercised and other -- (2,144) -- -- 8,386 Tax effect of options exercised -- 682 -- -- -- Other comprehensive income -- -- -- 54,526 -- Amortization of unearned compensation -- -- -- -- -- -------------------------------------------------------------------------- Balance, December 31, 2002 $ 229 $ 727,031 $ 327,176 $ (142,344) $ (228,591) Net loss -- -- (3,998) -- -- Cash dividends ($.60 per share) -- -- (23,983) -- -- Purchase of treasury stock, at cost -- -- -- -- (7) Issuance of common stock: Employee stock purchase plan 2 5,727 -- -- (2) Executive stock agreements, net -- 3,191 -- -- -- Stock options exercised and other -- (5,579) -- -- 27,744 Tax effect of options exercised -- 1,969 -- -- -- Other comprehensive income -- -- -- 90,747 -- Amortization of unearned compensation -- -- -- -- -- -------------------------------------------------------------------------- Balance, December 31, 2003 $ 231 $ 732,339 $ 299,195 $ (51,597) $ (200,856) --------------------------------------------------------------------------
UNEARNED (in thousands, except COMPEN- COMMON SHARES per share data) SATION TOTAL ISSUED TREASURY ------------------------------------------------- Balance, December 31, 2000 $ (113) $ 748,976 45,377 7,005 Net income -- 45,989 -- -- Cash dividends ($.60 per share) -- (23,222) -- -- Purchase of treasury stock, at cost -- (52) -- 2 Issuance of common stock: Employee stock purchase plan -- 6,139 236 -- Stock options exercised and other -- 14,961 3 (613) Tax effect of options exercised -- 4,911 -- -- Other comprehensive losses -- (58,326) -- -- Amortization of unearned compensation 58 58 -- -- -------------------------------------------- Balance, December 31, 2001 $ (55) $ 739,434 45,616 6,394 Net loss -- (98,260) -- -- Cash dividends ($.60 per share) -- (23,653) -- -- Purchase of treasury stock, at cost -- (39) -- 1 Issuance of common stock: Employee stock purchase plan -- 3,804 174 -- Executive stock agreements, net (710) -- 30 -- Stock options exercised and other -- 6,242 -- (226) Tax effect of options exercised -- 682 -- -- Other comprehensive income -- 54,526 -- -- Amortization of unearned compensation 78 78 -- -- -------------------------------------------- Balance, December 31, 2002 $ (687) $ 682,814 45,820 6,169 Net loss -- (3,998) -- -- Cash dividends ($.60 per share) -- (23,983) -- -- Purchase of treasury stock, at cost -- (7) -- -- Issuance of common stock: Employee stock purchase plan -- 5,727 264 -- Executive stock agreements, net (3,191) -- 136 -- Stock options exercised and other -- 22,165 28 (749) Tax effect of options exercised -- 1,969 -- -- Other comprehensive income -- 90,747 -- -- Amortization of unearned compensation 966 966 -- -- -------------------------------------------- Balance, December 31, 2003 $ (2,912) $ 776,400 46,248 5,420 --------------------------------------------
The accompanying notes are an integral part of these statements. 23 York International Corporation 2003 Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS York International Corporation (the Company, which may be referred to as we, us, or our) is a full-line, global provider of heating, ventilating, air conditioning, and refrigeration (HVAC&R) products and services. We market our products and services throughout the world, and our customers range from residential contractors to design builders, commercial contractors, building owners, and original equipment manufacturers. Effective January 1, 2003, we consolidated our former York Refrigeration Group and Engineered Systems Group segments and reorganized management of the combined business. Our new organization consists of: Global Applied, Unitary Products Group, and Bristol Compressors. The Global Applied business is comprised of three geographic regions: the Americas; Europe, Middle East, and Africa (EMEA); and Asia. Global Applied's three geographic regions, Unitary Products Group, and Bristol Compressors represent our reportable segments. USE OF ESTIMATES Preparation of the consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America (U.S.), requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of York International Corporation and its wholly-owned and majority-owned subsidiaries. We eliminate all significant intercompany transactions. On July 1, 2003 we adopted Financial Accounting Standards Board (FASB) Interpretation No. 46, "Consolidation of Variable Interest Entities," an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements." Upon adoption we consolidated the variable interest entity used to transact our December 1999 sale-leaseback. As a result, we recorded approximately $82.4 million of incremental debt, $23.9 million of incremental net machinery and equipment, $10.7 million of incremental deferred tax assets, a $15.4 million reduction to stockholders' equity, and a $32.4 million reduction to other long-term liabilities. The reduction in stockholders' equity represents a reduction in retained earnings recorded as a cumulative-effect adjustment as of July 1, 2003 in our consolidated statement of operations. The retained earnings reduction represents the cumulative differences between our prior accounting of the transaction as a lease of equipment and the consolidation, which resulted in the reflection of the assets as owned depreciable equipment with a related debt obligation. The obligation relating to the sale-leaseback was repaid in full during the third quarter of 2003. CASH AND CASH EQUIVALENTS We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. RECEIVABLES We offer trade terms to our customers in the normal course of business. Receivables are reported at original carrying value net of the allowance for doubtful receivables. Trade terms are extended to customers based upon credit worthiness and general economic and market conditions. We record an allowance for doubtful receivables based upon our historical experience of bad debts and when collection of specific receivables is not probable and can be estimated. INVENTORIES We state inventories at the lower of cost or market using the last-in, first-out (LIFO) or first-in, first-out (FIFO) method. PROPERTY, PLANT, AND EQUIPMENT We state property, plant, and equipment at cost, less accumulated depreciation. Maintenance and repairs are expensed as incurred. Significant improvements and renewals are capitalized and depreciated. Depreciation is computed generally on a straight-line basis over the estimated useful lives of the assets as follows: Buildings 15-30 years Machinery and equipment 3-12 years GOODWILL We record the excess purchase price of net tangible and intangible assets acquired over their estimated fair value as goodwill. On January 1, 2002 we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." Under the statement, we no longer amortize goodwill, but instead test reporting unit goodwill for impairment at least annually in the fourth quarter of each year. We test goodwill for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its 24 York International Corporation 2003 Annual Report carrying amount. Global Applied's three geographic regions, Unitary Products Group, and Bristol Compressors segments were identified as our reporting units, as defined under the statement. We identify potential goodwill impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. We determine fair value using a discounted cash flow and market-multiple approach. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, the amount of goodwill impairment loss, if any, must be measured. We measure the amount of goodwill impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized as an operating expense. Prior to January 1, 2002 we amortized goodwill on a straight-line basis over periods of up to 40 years. We tested goodwill for impairment by comparing the carrying amount to undiscounted future operating cash flows of the acquired operations or the long-lived assets to which the goodwill is attributed. The following table presents net income and basic and diluted earnings per share excluding goodwill amortization for the year ended December 31, 2001.
(In thousands, except per share data) 2001 ---------- Reported net income $ 45,989 Add back: Goodwill amortization 24,447 ---------- Adjusted net income $ 70,436 ---------- Basic earnings per share: Reported net income $ 1.19 Add back: Goodwill amortization 0.63 ---------- Adjusted net income $ 1.82 ---------- Diluted earnings per share: Reported net income $ 1.17 Add back: Goodwill amortization 0.63 ---------- Adjusted net income $ 1.80 ----------
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of an asset or asset group to be held and used is measured by comparing the carrying amount to future net cash flows expected to be generated. If the carrying amount exceeds estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds fair value. Assets or asset groups to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS We provide postretirement and postemployment benefits to certain of our employees and former employees. These benefits include pension, salary continuance, severance, life insurance, and health care. Benefits are accrued over the employees' service periods or at the date of the event triggering the benefit. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We apply SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an amendment to SFAS No. 133, in accounting for derivatives and hedging activities. These statements require that all derivative instruments be recognized in the balance sheet at fair value and establish criteria for the designation of hedges and the determination of effectiveness of hedging relationships for fair value and cash flow hedges. We are exposed to market risk associated with changes in interest rates, foreign currency exchange rates, and certain commodity prices. To enhance our ability to manage these market risks, we enter into derivative instruments for periods consistent with the related underlying hedged exposures. The changes in fair value of these hedging instruments are offset in part or in whole by corresponding changes in fair value or cash flows of the underlying hedged exposures. We mitigate the risk that the counter-party to these derivative instruments will fail to perform by only entering into derivative instruments with major financial institutions. We do not typically hedge our market risk exposures beyond three years and do not hold or issue derivative instruments for trading purposes. Recognized amounts in cost of goods sold due to the discontinuance of ineffective commodity cash flow hedges were a gain of $0.4 million and a loss of $0.1 million for the years ended December 31, 2003 and 2002, respectively. No gain or loss was recognized in the year ended December 31, 2001. Certain derivative instruments are not designated as hedging instruments as they hedge immaterial exposures. 25 York International Corporation 2003 Annual Report Currency Rate Hedging We manufacture and sell our products in a number of countries throughout the world, and therefore, are exposed to movements in various currencies against the U.S. dollar and against the currencies in which we manufacture. Through our currency hedging activities, we seek to minimize the risk that cash flows resulting from the sale of products, manufactured in a currency different from the currency used by the selling subsidiary, will be affected by changes in foreign currency exchange rates. Foreign currency derivative instruments (forward contracts) are matched to the underlying foreign currency exposures and are executed to minimize foreign exchange transaction costs. Changes in fair value of foreign currency derivative instruments, qualifying as cash flow hedges, are reported in accumulated other comprehensive losses. The gains or losses on these hedges are reclassified to earnings as the underlying hedged items affect earnings. As of December 31, 2003, we forecasted that $0.6 million of net gains in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Hedges of Net Investment We issue Danish denominated, retail notes as a hedge to protect the value of a portion of our net investment in a Danish subsidiary. Hedges of net investment are accounted for under SFAS No. 52, "Foreign Currency Translation." Under SFAS No. 52, the gains or losses on a foreign-denominated, nonderivative financial instrument designated as a hedge of net investment are recorded in foreign currency translation adjustments within accumulated other comprehensive losses. The gains and losses are accounted for in a similar manner as the foreign denominated net assets, offsetting a portion of the change in net assets due to foreign currency fluctuations. As of December 31, 2003, we have designated $41.8 million in Danish retail notes as a hedge of net investments. Commodity Price Hedging We purchase raw material commodities and are at risk for fluctuations in the market price of those commodities. In connection with the purchase of major commodities, principally copper for manufacturing requirements, we enter into commodity swap contracts to effectively fix our cost of the commodity. These contracts require each settlement between us and our counterparty to coincide with cash market purchases of the actual commodity. Changes in the fair value of commodity derivative instruments qualifying as cash flow hedges are reported in accumulated other comprehensive losses. The gains or losses are reclassified to earnings as the underlying hedged items affect earnings. As of December 31, 2003, we forecasted that $8.3 million of net gains in accumulated other comprehensive losses will be reclassified into earnings within the next twelve months. Interest Rate Hedging We manage our interest rate risk by entering into both fixed and variable rate debt. In addition, we enter into interest rate swap contracts in order to achieve a balanced mix of fixed and variable rate indebtedness. Under these contracts, we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated from an agreed upon referenced notional amount. The notional amounts are not exchanged and no other cash payments are made unless the contract is terminated prior to maturity. We have designated our outstanding interest rate swap contracts as fair value hedges of an underlying fixed rate debt obligation. The fair value of these contracts is recorded in other long-term assets or liabilities with a corresponding increase or decrease in the fixed rate debt obligation. The change in fair values of both the fair value hedge instruments and the underlying debt obligations are recorded as equal and offsetting unrealized gains and losses in the interest expense component of our consolidated statements of operations. All existing fair value hedges are determined to be 100% effective under SFAS No. 133, as amended. As a result, there is no impact on current earnings resulting from hedge ineffectiveness. REVENUE RECOGNITION In the normal course of business, we sell HVAC&R products and services. Our products and services include individual sales of products, long-term contracts, extended warranty and maintenance arrangements, and other services, such as repair work and installation. We also sell our products and services in bundled arrangements. Revenue from the sale of products is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed and determinable, and collectibility is reasonably assured. Properly executed and authorized contracts, purchase orders or point of sale receipts provide evidence that an arrangement exists and the sale price is fixed and determinable. Delivery occurs when title and the risks and rewards of ownership transfer to the customer pursuant to shipping terms. Collectibility is determined based upon a customer's credit worthiness. Revenue under long-term contracts is recognized on a percentage of completion basis. Percent complete is determined as the ratio of costs incurred to date to the total estimated costs under the contract. Revenue under extended warranty and maintenance agreements is recognized over the terms of the agreements on a straight-line basis, unless the costs to perform under the agreements are incurred on other than a straight-line basis. Under those circumstances, revenue under extended warranty and maintenance agreements is recognized in proportion to the costs expected to be incurred. Service revenues are recognized upon performance of the service. 26 York International Corporation 2003 Annual Report Our bundled arrangements represent agreements under which we sell multiple products, multiple services, or multiple products and services. These arrangements include general rights of return for our failure to perform as specified under the terms of the agreements. On July 1, 2003, we adopted Emerging Issues Task Force (EITF) Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." This requires that we divide bundled arrangements into separate deliverables. Revenue is allocated to each deliverable based upon the relative fair value of all elements or the fair value of undelivered elements. Revenue is recognized for each deliverable as described above. We adopted EITF Issue No. 00-21 prospectively; therefore, it was only applied to bundled arrangements entered into after June 30, 2003. Prior to July 1, 2003, we recognized revenue under bundled arrangements in a similar manner. The adoption did not have a material impact on our consolidated financial statements. We record amounts billed to customers for shipping and handling in net sales and the related shipping and handling costs in cost of goods sold. PRODUCT RELATED EXPENSES We charge advertising, research and development, and other product-related costs to expense as incurred. Advertising expense was $27.5 million, $23.6 million, and $24.2 million in 2003, 2002, and 2001, respectively. Research and development (R&D) costs were $42.3 million, $42.2 million, and $46.2 million in 2003, 2002, and 2001, respectively. We record warranty liabilities at the time of product sale. Warranties include extended warranty contracts sold to customers to increase the warranty period beyond the standard period. Estimated warranty costs are based upon the historical trend of warranty claims and specifically identifiable claims and include estimated costs for labor and parts. Warranty expense was $80.2 million, $64.9 million, and $74.3 million in 2003, 2002, and 2001, respectively. Changes in our warranty liability for the years ended December 31, 2003 and 2002 were as follows:
PAYMENTS ACCRUALS FOR BEGINNING MADE UNDER WARRANTIES ENDING (in thousands) BALANCE WARRANTIES ISSUED BALANCE - ------------------------------------------------------------------------------------------------------------------- 2003 $ 87,940 $ 66,464 $ 80,199 $ 101,675 2002 87,883 64,830 64,887 87,940 - -------------------------------------------------------------------------------------------------------------------
RESTRUCTURING On January 1, 2003, we adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." The statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Under the statement, we recognize liabilities at fair value for costs associated with exit or disposal activities only when the liability is incurred. Prior to January 1, 2003, we recognized costs when we committed to an exit or disposal plan in accordance with EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Information related to our restructuring activities is presented in note 16. INCOME TAXES We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings of foreign operations are reinvested in the business and no provision for domestic income tax or foreign withholding tax is made on such earnings until distributed. (LOSS) EARNINGS PER SHARE Basic (loss) earnings per share is based upon the weighted average common shares outstanding during the period. Diluted (loss) earnings per share is based upon the weighted average outstanding common shares and common share equivalents. FOREIGN CURRENCY TRANSLATION The functional currency for the majority of our foreign operations is the applicable local currency. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in foreign currency translation adjustments in accumulated other comprehensive losses. Gains or losses resulting from foreign currency transactions are included in our results of operations. ACCOUNTING FOR STOCK-BASED COMPENSATION We apply the intrinsic value method in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for our stock-based compensation plans. 27 York International Corporation 2003 Annual Report Accordingly, no compensation expense has been recognized for the stock-based compensation plans other than for restricted stock and performance-based awards. Had compensation expense for all stock and employee stock purchase plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under SFAS No. 123, "Accounting for Stock-Based Compensation," as amended, our net (loss) income and (loss) earnings per share would have been adjusted to the pro forma amounts as follows:
(in thousands, except per share data) 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------ Net (loss) income - as reported $ (3,998) $ (98,260) $ 45,989 Add: Stock-based employee compensation expense included in reported net (loss) income, net of related tax effects 609 49 37 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (4,905) (8,230) (8,773) - ------------------------------------------------------------------------------------------------------------------ Pro forma net (loss) income (8,294) (106,441) 37,253 - ------------------------------------------------------------------------------------------------------------------ (Loss) earnings per share: Basic - as reported (0.10) (2.50) 1.19 Basic - pro forma (0.21) (2.70) 0.96 Diluted - as reported (0.10) (2.47) 1.17 Diluted - pro forma (0.21) (2.68) 0.95 - ------------------------------------------------------------------------------------------------------------------
Since the determination of fair value of all stock options granted includes variable factors, including volatility, and additional stock option grants are expected to be made each year, the above pro forma disclosures are not representative of pro forma effects on reported net income and earnings per share for future years. The per share weighted average fair value of stock options granted during 2003, 2002, and 2001 is calculated as $7.74, $15.13, and $11.04, respectively, on the date of grant using the Black-Scholes option-pricing model. The weighted average assumptions based on the date of grant are as follows:
2003 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Dividend yield 2.8% 1.7% 2.1% Volatility 41.6% 42.1% 40.0% Risk-free interest rate 3.9% 5.3% 4.8% Expected life 7.0 years 6.6 years 6.7 years - ----------------------------------------------------------------------------------------------------------------------
Information related to stock-based compensation awards is presented in note 18 along with the additional disclosures required under SFAS No. 123. GUARANTEES On December 31, 2002, we adopted FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." The interpretation elaborates on the disclosures to be made in our interim and annual financial statements about obligations under certain guarantees. Effective January 1, 2003, we recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The interpretation did not have a material impact on our consolidated financial statements. Information related to our guarantees is presented in note 13 along with the additional disclosures required. RECLASSIFICATIONS Certain reclassifications have been made to the 2002 and 2001 consolidated financial statements to conform to the 2003 presentation. 28 York International Corporation 2003 Annual Report NOTE 2--RECEIVABLES, NET Receivables, net consists of:
(in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------------ Customers, trade $ 550,506 $ 576,016 Affiliate receivables, trade 5,139 5,683 Other receivables 112,245 73,314 - ------------------------------------------------------------------------------------------------------------------ 667,890 655,013 Less allowance for doubtful receivables (29,380) (27,946) - ------------------------------------------------------------------------------------------------------------------ Receivables, net $ 638,510 $ 627,067 - ------------------------------------------------------------------------------------------------------------------
Pursuant to the terms of an annually renewable revolving facility, we sell certain of our trade receivables to a wholly owned, consolidated subsidiary, York Receivables Funding LLC (YRFLLC). In turn, YRFLLC sells, on a revolving basis, undivided ownership interest in the purchased trade receivables to bank-administered asset-backed commercial paper vehicles. In April 2003, we amended the facility, reducing it from $175 million to $150 million. We continue to service sold trade receivables. No servicing asset or liability has been recognized as our cost to service sold trade receivables approximates the servicing income. In accordance with the facility, YRFLLC has sold $150 million and $155 million of an undivided interest in trade receivables as of December 31, 2003 and 2002, respectively, resulting in a reduction of receivables reflected in our consolidated balance sheets. The discount rate on trade receivables sold was 1.12% and 1.40% as of December 31, 2003 and 2002, respectively. The program fee on trade receivables sold was 0.50% and 0.338% as of December 31, 2003 and 2002, respectively. NOTE 3--INVENTORIES Inventories consist of:
(in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------------ Raw material $ 138,108 $ 126,227 Work in progress 147,094 116,784 Finished goods 227,512 230,768 - ------------------------------------------------------------------------------------------------------------------ Inventories $ 512,714 $ 473,779 - ------------------------------------------------------------------------------------------------------------------
Inventories valued under the LIFO method comprised approximately 21% and 23% of the December 31, 2003 and 2002 totals, respectively. If valued under the FIFO method, inventories would have been greater by $11.1 million and $11.3 million as of December 31, 2003 and 2002, respectively. NOTE 4--PREPAYMENTS AND OTHER CURRENT ASSETS Prepayments and other current assets consist of:
(in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------------ Deferred income taxes, current $ 53,635 $ 41,639 Prepaid insurance 22,990 3,429 Fair value of derivative instruments 19,431 5,648 Prepaid materials and supplies 11,769 10,343 Other 22,096 20,402 - ------------------------------------------------------------------------------------------------------------------ Prepayments and other current assets $ 129,921 $ 81,461 - ------------------------------------------------------------------------------------------------------------------
NOTE 5--INVESTMENTS IN AFFILIATES We own interests in affiliate operations located in Malaysia, Saudi Arabia, Spain, Denmark, Japan, Korea, Morocco, South Africa, and the U.S. These investments are accounted for using the equity method and total $28.2 million and $29.4 million as of December 31, 2003 and 2002, respectively. Dividends received from affiliates were $2.2 million, $2.1 million, and $2.9 million in 2003, 2002, and 2001, respectively. Our sales to affiliates are less than 1% of our net sales, and our purchases from affiliates are less than 1% of our total purchases. 29 York International Corporation 2003 Annual Report NOTE 6--PROPERTY, PLANT, AND EQUIPMENT, NET Property, plant, and equipment, net consists of:
(in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------------ Land $ 36,576 $ 32,747 Buildings 204,462 197,862 Machinery and equipment 777,304 621,802 Construction in progress 42,523 39,062 Capital leases 3,253 3,001 - ------------------------------------------------------------------------------------------------------------------ 1,064,118 894,474 Less accumulated depreciation and amortization (523,000) (394,156) - ------------------------------------------------------------------------------------------------------------------ Property, plant, and equipment, net $ 541,118 $ 500,318 - ------------------------------------------------------------------------------------------------------------------
Amortization of plant and equipment under capital leases has been included in depreciation and amortization expense. Accumulated amortization was $2.2 million and $2.0 million as of December 31, 2003 and 2002, respectively. NOTE 7--GOODWILL The changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2002 by segment, are as follows:
NET FOREIGN GOODWILL CURRENCY (in thousands) 2002 ACQUIRED FLUCTUATION 2003 - ----------------------------------------------------------------------------------------------- Global Applied: Americas $ 92,464 $ -- $ 485 $ 92,949 EMEA 107,873 1,950 20,343 130,166 Asia 107,873 1,027 414 109,314 -------- -------- -------- -------- 308,210 2,977 21,242 332,429 Unitary Products Group 140,440 -- -- 140,440 Bristol Compressors 56,313 -- -- 56,313 -------- -------- -------- -------- $504,963 $ 2,977 $ 21,242 $529,182 -------- -------- -------- --------
NET TRANSITIONAL FOREIGN GOODWILL IMPAIRMENT CURRENCY (in thousands) 2001 ACQUIRED ADJUSTMENT FLUCTUATION 2002 - ---------------------------------------------------------------------------------------------------------------------- Global Applied: Americas $ 113,260 $ -- $ (19,738) $ (1,058) $ 92,464 EMEA 219,006 2,913 (147,137) 33,091 107,873 Asia 122,654 -- (12,561) (2,220) 107,873 ----------- ------- --------- --------- ---------- 454,920 2,913 (179,436) 29,813 308,210 Unitary Products Group 140,440 -- -- -- 140,440 Bristol Compressors 56,313 -- -- -- 56,313 - ---------------------------------------------------------------------------------------------------------------- $ 651,673 $ 2,913 (179,436) $ 29,813 $ 504,963 - ----------------------------------------------------------------------------------------------------------------
Upon adoption of SFAS No. 142, we were required to perform a transitional goodwill impairment test as of January 1, 2002. We completed the transitional goodwill impairment test that indicated an impairment existed in one of our reporting units. The projected financial performance of our former York Refrigeration Group, which included the entities acquired in the Sabroe acquisition, was insufficient to support the related goodwill. As a result, we recognized a non-cash transitional goodwill impairment charge of $179.4 million. As required, the transitional goodwill impairment charge was recorded as a cumulative effect of a change in accounting principle in our consolidated statement of operations as of January 1, 2002. As discussed in Note 1, we perform an annual goodwill impairment test in the fourth quarter of each year. No impairment of goodwill was required as a result of this annual test in 2003 or 2002. 30 York International Corporation 2003 Annual Report NOTE 8--INTANGIBLES, NET The following table summarizes the major intangible asset classes subject to amortization included in our consolidated balance sheets as of December 31, 2003 and 2002:
GROSS CARRYING ACCUMULATED NET CARRYING (in thousands) AMOUNT AMORTIZATION AMOUNT - ---------------------------------------------------------------------------------------------------------------------- 2003: Trade names and trademarks $ 42,028 $ 6,723 $ 35,305 Other 2,536 1,097 1,439 - ---------------------------------------------------------------------------------------------------------------------- $ 44,564 $ 7,820 $ 36,744 - ---------------------------------------------------------------------------------------------------------------------- 2002: Trade names and trademarks $ 35,693 $ 4,375 $ 31,318 Other 1,448 766 682 - ---------------------------------------------------------------------------------------------------------------------- 37,141 $ 5,141 $ 32,000 - ----------------------------------------------------------------------------------------------------------------------
Amortization expense for trade names and trademarks and other intangible assets was $1.7 million, $1.2 million, and $1.2 million for the years ended December 31, 2003, 2002, and 2001, respectively. Estimated amortization expense for trade names and trademarks and other intangible assets for the fiscal years indicated is as follows:
(in thousands) - ----------------------------------------------------------------------------------------------------------------------- 2004 $ 1,665 2005 1,629 2006 1,571 2007 1,462 2008 1,464 Thereafter 28,953 - ----------------------------------------------------------------------------------------------------------------------- Total $ 36,744 - -----------------------------------------------------------------------------------------------------------------------
NOTE 9--ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of:
(in thousands) 2003 2002 - ----------------------------------------------------------------------------------------------------------------------- Accounts payable, trade and other $ 527,195 $ 446,288 Employee compensation, benefits, and related accruals 164,720 140,236 Warranties 54,787 43,192 Accrued insurance 22,210 21,153 Accruals for restructuring and other charges 23,913 3,946 Other accrued expenses 106,268 113,933 - ----------------------------------------------------------------------------------------------------------------------- Accounts payable and accrued expenses $ 899,093 $ 768,748 - -----------------------------------------------------------------------------------------------------------------------
NOTE 10--NOTES PAYABLE AND LONG-TERM DEBT As of December 31, 2003 and 2002, our indebtedness consisted of senior notes and various other bank and term loans. In March 2003, we amended our Five Year Credit Agreement and renewed our 364-Day Credit Agreement at a $200 million level. We have a $400 million Five Year Credit Agreement, which expires on May 29, 2006, and a $200 million 364-Day Credit Agreement, which expires on March 13, 2004 (collectively, the Agreements). As of December 31, 2002, we had the $400 million Five Year Credit Agreement and a $300 million 364-Day Credit Agreement. As of December 31, 2003 and 2002, no amounts were outstanding under our credit agreements. We renewed our 364-day Agreement in March 2004. The $400 million Five Year Credit Agreement provides for borrowings at the London InterBank Offering Rate (LIBOR) plus 1.175%, and the $200 million 364-Day Credit Agreement provides for borrowings at LIBOR plus 1.225%. We pay annual fees of 0.20% on the $400 million facility and 0.15% on the $200 million facility. The Agreements allow for borrowings at specified bid rates. As of December 31, 2003 and 2002, the three-month LIBOR rate was 1.14% and 1.38%, respectively. The Agreements contain financial covenants requiring us to maintain certain financial ratios and standard provisions limiting leverage and liens. We were in compliance with these financial covenants as of December 31, 2003 and 2002. We have domestic bank lines that provide for total borrowings of up to $135 million and $50 million as of December 31, 2003 and 2002, respectively. As of December 31, 2003, $25 million was outstanding under the domestic bank lines. No amounts were outstanding as of December 31, 2002. In October and December 2003, we issued Danish denominated retail notes of DKK 200 million and DKK 50 million, respectively, aggregating $41.8 million. These notes are due in October 2004 and are at a rate of 2%. Both the domestic 31 York International Corporation 2003 Annual Report bank lines and the Danish retail notes are classified as long-term, as they are supported by our $400 million Five Year Credit Agreement. Our non-U.S. subsidiaries maintain bank credit facilities in various currencies that provide for total borrowings of $355.2 million and $384.5 million as of December 31, 2003 and 2002, respectively. As of December 31, 2003 and 2002, $27.8 million and $28.4 million, respectively, were outstanding under the non-U.S. facilities, with remaining availability of $246.3 million and $282.5 million, respectively, after bank guarantees and letters of credit usage. Notes payable and long-term debt consists of:
(in thousands) 2003 2002 - ----------------------------------------------------------------------------------------------------------------------- Notes payable and current portion of long-term debt: Bank loans (primarily foreign currency) $ 27,784 $ 29,361 Current portion of long-term debt 2,971 3,348 - ----------------------------------------------------------------------------------------------------------------------- Total $ 30,755 $ 32,709 - ----------------------------------------------------------------------------------------------------------------------- Long-term debt: Domestic bank lines at an average rate of 1.58% in 2003 $ 25,000 $ -- Danish retail notes, 2% interest, due October 2004 41,844 -- Senior notes, 6.75% interest, due March 2003 -- 100,000 Senior notes, 6.625% interest, due August 2006 200,000 200,000 Senior notes, 6.70% interest, due June 2008 200,000 200,000 Senior notes, 5.80% interest, due November 2012 100,000 100,000 Other (primarily foreign bank loans) at an average rate of 6.67% in 2003 and 6.64% in 2002 18,154 21,572 - ----------------------------------------------------------------------------------------------------------------------- Total 584,998 621,572 Less current portion (2,971) (3,348) - ----------------------------------------------------------------------------------------------------------------------- Noncurrent portion $ 582,027 $ 618,224 - -----------------------------------------------------------------------------------------------------------------------
Annual principal payments on long-term debt are as follows for the fiscal years indicated:
(in thousands) - ----------------------------------------------------------------------------------------------------------------------- 2004 $ 2,971 2005 1,625 2006 276,894 2007 865 2008 200,456 Thereafter 102,187 - ----------------------------------------------------------------------------------------------------------------------- Total $ 584,998 - -----------------------------------------------------------------------------------------------------------------------
Interest expense is net of interest income of $9.0 million, $8.2 million, and $8.6 million in 2003, 2002, and 2001, respectively. NOTE 11--FINANCIAL INSTRUMENTS FOREIGN CURRENCY INSTRUMENTS The following table reflects the notional and estimated fair values of forward currency contracts outstanding as of December 31, 2003 and 2002. Foreign currency amounts were translated at current exchange rates as of the reporting date. Fair values reflect the estimated net amount that we would receive to terminate the contracts, as of the reporting date, based on quoted market prices.
2003 2002 ------------------------------------------------------------------------- (U.S. Dollar equivalents in thousands) NOTIONAL AMOUNT FAIR VALUE NOTIONAL AMOUNT FAIR VALUE - ----------------------------------------------------------------------------------------------------------------------- Forwards $ 230,564 $ (1,959) $ 91,390 $ 775 - -----------------------------------------------------------------------------------------------------------------------
32 York International Corporation 2003 Annual Report The following table summarizes our contractual amounts of forward currency contracts as of December 31, 2003 and 2002. Foreign currency amounts were translated at current exchange rates as of the reporting date. The "buy" amounts represent the U.S. dollar equivalent of commitments to purchase currencies and the "sell" amounts represent the U.S. dollar equivalent of commitments to sell currencies.
2003 2002 -------------------------------------------------------------- (U.S. Dollar equivalents in thousands) BUY SELL BUY SELL - ------------------------------------------------------------------------------------------------------------- Brazilian Real $ -- $ 1,037 $ -- $ -- Canadian Dollar -- 35,142 -- -- Danish Krone 41,831 61,662 36,862 2,643 Euro 11,775 38,539 14,056 36,163 British Pound Sterling 3,214 1,078 8,072 4,899 Japanese Yen -- 392 -- 292 Mexican Peso 26,344 1,631 -- -- Norwegian Krone 21,409 1,796 4,432 5,782 Singapore Dollar 96 3,868 -- 706 South African Rand -- 3,738 -- 8,727 Swedish Krona 11,119 1,744 10,018 2,451 Other Currencies 9,770 7,926 783 484 U.S. Dollar 109,626 78,587 19,114 30,417 - -------------------------------------------------------------------------------------------------------------
COMMODITY CONTRACTS The following table reflects the pounds hedged, notional amount, and estimated fair value of our commodity hedging contracts for copper outstanding as of December 31, 2003 and 2002. COPPER HEDGING CONTRACTS
(in thousands) - ------------------------------------------------------------------------------------------------------------------------ YEAR POUNDS HEDGED NOTIONAL AMOUNT FAIR VALUE - ------------------------------------------------------------------------------------------------------------------------ 2003 2004 30,000 $ 22,683 $ 8,398 2005 21,000 17,585 3,606 - ------------------------------------------------------------------------------------------------------------------------ 2002 2003 39,000 $ 29,544 $ (1,779) 2004 30,000 22,683 (772) - ------------------------------------------------------------------------------------------------------------------------
INTEREST RATE INSTRUMENTS The following table reflects our interest rate swap contracts to pay variable interest and receive a fixed rate of interest of 6.625%, with final maturity in August 2006. The variable interest is based on the six-month LIBOR rate and is reset biannually. The applicable LIBOR rate was 1.18% and 1.74% as of December 31, 2003 and 2002, respectively.
2003 2002 ---------------------------------------------------------------------------- (in thousands) NOTIONAL AMOUNT FAIR VALUE NOTIONAL AMOUNT FAIR VALUE - ----------------------------------------------------------------------------------------------------------------------- Interest rate swaps: Fixed to variable rates $ 100,000 $ 8,880 $ 100,000 $ 10,730 - -----------------------------------------------------------------------------------------------------------------------
33 York International Corporation 2003 Annual Report OTHER FINANCIAL INSTRUMENTS The carrying amounts and estimated fair values of our other financial instruments are as follows:
2003 2002 ------------------------------------------------------------------------ (in thousands) CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE - --------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents $ 49,650 $ 49,650 $ 92,940 $ 92,940 Bank loans (primarily foreign currency) 27,784 27,784 29,361 29,361 Long-term debt: Domestic bank lines 25,000 25,000 -- -- Danish retail notes 41,844 41,405 -- -- Senior notes at 6.75% -- -- 100,000 100,534 Senior notes at 6.625% 200,000 217,800 200,000 218,660 Senior notes at 6.70% 200,000 220,020 200,000 218,692 Senior notes at 5.80% 100,000 102,290 100,000 99,033 Other (primarily foreign bank loans) 18,154 18,154 21,572 21,572 - ---------------------------------------------------------------------------------------------------------------------
The fair values of each of our long-term debt instruments are based on the amount of future cash flows associated with each instrument discounted using our current borrowing rate for similar debt instruments of comparable maturity. NOTE 12--POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS PENSION PLANS A majority of our U.S. employees participate in noncontributory pension plans, and some of our non-U.S. employees participate in contributory or noncontributory pension plans. Plans covering salaried and management employees generally provide pension benefits that are based on employees' compensation several years before retirement. Effective January 1, 2004, we replaced our defined benefit pension plans for U.S. salaried non-bargaining and certain U.S. salaried bargaining employees with a new defined contribution plan. Plans covering hourly employees and union members generally provide stated benefit amounts for each year of service. Contributions to the plans are based upon the projected unit credit actuarial funding method. We use a December 31 measurement date for our pension plans. We also have a supplemental benefit plan for certain members of senior management. 34 York International Corporation 2003 Annual Report The following table sets forth the funded status and amounts recognized in our consolidated balance sheets:
U.S. PENSION NON-U.S. PENSION BENEFITS BENEFITS ----------------------------------------------------- (in thousands) 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $(369,824) $(326,604) $(140,755) $(143,928) Service cost (14,616) (13,080) (6,192) (4,872) Interest cost (23,835) (22,881) (8,849) (8,680) Contributions by plan participants -- -- (852) (760) Actuarial gain (loss) 6,742 4,288 (12,238) 13,129 Plan assumptions (25,813) (31,844) (668) 3,568 Benefits paid 19,094 22,661 5,909 19,058 Plan amendments (4,057) (2,364) -- -- Foreign exchange -- -- (18,565) (18,270) Curtailments 12,982 -- -- -- Other (148) -- -- -- - --------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year (399,475) (369,824) (182,210) (140,755) - --------------------------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year 246,733 287,037 85,116 96,730 Actual return on plan assets 51,728 (27,472) 16,828 (16,421) Contributions by employer 37,585 9,829 10,756 11,590 Contributions by plan participants -- -- 852 760 Benefits paid (19,094) (22,661) (5,909) (19,058) Foreign exchange -- -- 10,463 11,515 - --------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 316,952 246,733 118,106 85,116 - --------------------------------------------------------------------------------------------------------------- Funded status (82,523) (123,091) (64,104) (55,639) Unrecognized prior service cost 14,097 31,371 909 954 Unrecognized loss 55,955 74,246 39,491 33,707 - --------------------------------------------------------------------------------------------------------------- Net amount recognized $ (12,471) $ (17,474) $ (23,704) $ (20,978) - --------------------------------------------------------------------------------------------------------------- Amounts recognized in consolidated balance sheets: Prepaid benefit cost $ 43,936 $ 44,934 $ 463 $ 182 Accrued benefit liability (98,451) (101,647) (39,852) (36,117) Intangible asset 11,127 15,660 949 920 Accumulated other comprehensive losses 30,917 23,579 14,736 14,037 - --------------------------------------------------------------------------------------------------------------- Net amount recognized $ (12,471) $ (17,474) $ (23,704) $ (20,978) - ---------------------------------------------------------------------------------------------------------------
Net periodic benefit costs include the following components:
U.S. PENSION NON-U.S. PENSION BENEFITS BENEFITS ------------------------------------------------------------------------------ (in thousands) 2003 2002 2001 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost $ 14,616 $ 13,080 $ 11,254 $ 6,192 $ 4,872 $ 5,564 Interest cost 23,835 22,881 21,857 8,849 8,680 7,818 Expected return on plan assets (28,582) (32,285) (31,480) (700) (8,008) (8,719) Amortization of prior service cost 3,197 3,223 3,131 153 123 107 Amortization of net loss (gain) 243 (2,221) (4,598) 1,617 (1,516) (1,646) Curtailments 19,024 419 -- -- -- -- Other 369 -- 3,023 -- -- (289) - --------------------------------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 32,702 $ 5,097 $ 3,187 $ 16,111 $ 4,151 $ 2,835 - ---------------------------------------------------------------------------------------------------------------------------
35 York International Corporation 2003 Annual Report Other information related to our plans is as follows:
U.S. PENSION NON-U.S. PENSION BENEFITS BENEFITS ------------------------------------------------------------ (in thousands) 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------------------------------- FOR ALL PLANS: Accumulated benefit obligation $360,431 $313,205 $155,121 $121,847 FOR PENSION PLANS WITH ACCUMULATED BENEFIT OBLIGATIONS IN EXCESS OF PLAN ASSETS: Projected benefit obligation 360,597 324,872 176,176 140,755 Accumulated benefit obligation 324,849 274,606 149,866 121,847 Fair value of plan assets 239,250 174,554 113,194 85,116 Increase in minimum liability included in other comprehensive income (loss) 7,338 18,839 699 14,037 - -----------------------------------------------------------------------------------------------------------------------
Pension plan weighted-average asset allocations at December 31, 2003 and 2002 and target allocations, by asset category are as follows:
U.S. PENSION NON-U.S. PENSION BENEFITS BENEFITS --------------------------------------------------------------------------- 2003 2002 TARGET 2003 2002 TARGET - --------------------------------------------------------------------------------------------------------------- ASSET ALLOCATIONS: Equity Securities 59% 55% 55-70% 74% 72% 60-75% Debt Securities 41 45 30-45 22 18 25-40 Real Estate -- -- -- 3 4 -- Other -- -- -- 1 6 -- - --------------------------------------------------------------------------------------------------------------- 100% 100% 100% 100% 100% 100% - ---------------------------------------------------------------------------------------------------------------
Our investment policies seek to provide for growth of capital with a moderate level of volatility by investing assets in accordance with the above target allocations. Our investment performance and policies are reviewed by our Pension Investment Committee. Our expected long term rate of investment return is based on the expected returns of each of the asset categories, weighted based on the median of the target allocation for each category. Equity securities are expected to return 10% -11% over the long-term, while fixed income and other is expected to return 4% - 6%. Based on historical experience, we expect our plan assets to provide a modest additional return, when compared to their respective benchmarks. Weighted average assumptions are as follows:
U.S. PENSION NON-U.S. PENSION BENEFITS BENEFITS -------------------------------------------------------------------- 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS AT DECEMBER 31: Discount Rate 6.25% 6.75% 3.00- 6.50% 4.00- 5.75% Rate of compensation increase 4.25% 4.25% 1.50- 4.75% 3.10- 3.50% WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST FOR YEARS ENDED DECEMBER 31: Discount rate 6.75% 7.25% 4.00- 5.75% 4.00- 6.50% Expected return on plan assets 8.75% 9.75% 7.00- 8.75% 7.50- 9.75% Rate of compensation increase 4.25% 4.75% 3.10- 3.50% 1.00- 4.25% - -------------------------------------------------------------------------------------------------------------------------
We expect to contribute $5.6 million and $8.7 million to our U.S. and non-U.S. plans, respectively, in 2004. 36 York International Corporation 2003 Annual Report The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
U.S. PENSION NON-U.S.PENSION BENEFITS BENEFITS - ------------------------------------------------------------------------------------------------------------------------- 2004 $ 25,643 $ 6,287 2005 25,523 6,591 2006 25,073 6,603 2007 24,189 6,744 2008 26,692 7,046 2009-2013 148,738 41,346 - -------------------------------------------------------------------------------------------------------------------------
POSTRETIREMENT HEALTH AND LIFE INSURANCE PLANS We have several unfunded postretirement health and life insurance plans covering certain U.S. employees who were hired before February 1, 1993 and retire under the normal, early, or disability retirement provisions of any one of our U.S. defined benefit pension plans. Former employees who retired prior to February 1, 1993, contribute to the cost of the plans, although we pay the majority of the cost. Employees retiring after February 1, 1993, contribute to the cost of the plans based on an indexed service-related premium. We use a December 31 measurement date for our postretirement health and life insurance plans. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) became law. The Act provides for prescription drug benefits to retirees and federal subsidies to sponsors of certain retiree health-care plans. No determination has been made as to whether our plans qualify for federal subsidies. Furthermore, specific authoritative guidance on accounting for the federal subsidies is pending. Accordingly, any measurements of benefit obligations or costs reflected below do not reflect the effects of the Act. When specific accounting guidance is provided, we may need to change previously reported financial information. The following table sets forth the funded status and amounts recognized in our consolidated balance sheets:
(in thousands) 2003 2002 - -------------------------------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ (131,760) $ (96,988) Service cost (2,091) (1,222) Interest cost (9,686) (6,485) Contributions by plan participants (1,369) (1,149) Actuarial gain (5,369) (7,672) Plan assumptions (16,614) (36,767) Benefits paid 9,539 8,765 Plan amendments 13,391 9,758 Curtailments 8,435 -- - -------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year (135,524) (131,760) - -------------------------------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year -- -- Contributions by employer 8,170 7,616 Contributions by plan participants 1,369 1,149 Benefits paid (9,539) (8,765) - -------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year -- -- - -------------------------------------------------------------------------------------------------------------------- Funded status (135,524) (131,760) Unrecognized prior service cost (33,005) (22,188) Unrecognized loss 52,920 43,190 - -------------------------------------------------------------------------------------------------------------------- Net amount recognized - Accrued benefit liability $ (115,609) $ (110,758) - --------------------------------------------------------------------------------------------------------------------
37 York International Corporation 2003 Annual Report Net periodic benefit costs include the following components:
(in thousands) 2003 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost $ 2,091 $ 1,222 $ 1,520 Interest cost 9,686 6,485 7,336 Amortization of prior service cost (2,834) (1,794) (1,236) Amortization of net loss (gain) 3,754 (388) (430) Curtailments 323 -- (6,119) Other -- -- 336 - --------------------------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 13,020 $ 5,525 $ 1,407 - ----------------------------------------------------------------------------------------------------------------------
We expect to contribute $7.4 million to our post-retirement health and life insurance plans in 2004. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
(in thousands) - ------------------------------------------------------------------------------------------------------------------- 2004 $ 9,485 2005 10,571 2006 11,029 2007 11,437 2008 11,785 2009-2013 65,918 - -------------------------------------------------------------------------------------------------------------------
Weighted average assumptions are as follows:
2003 2002 - ----------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS AT DECEMBER 31: Discount Rate 6.25% 6.75% WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST FOR YEARS ENDED DECEMBER 31: Discount Rate 6.75% 7.25% - ----------------------------------------------------------------------------------------------------------------
Assumed health care cost trend rates at December 31 are as follows:
2003 2002 - ---------------------------------------------------------------------------------------------------------------- Health care cost trend rate assumed for next year 7.9% 9.1% Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5.0% 5.0% Year that the rate reaches the ultimate trend rate 2008 2008 - ----------------------------------------------------------------------------------------------------------------
Assumed health care cost trend rates have an effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
(in thousands) 1% INCREASE 1% DECREASE - -------------------------------------------------------------------------------------------------------------------- Effect on total of service and interest cost components $ 1,994 $ (1,621) Effect on postretirement benefit obligation 17,424 (14,592) - --------------------------------------------------------------------------------------------------------------------
INVESTMENT PLANS Certain employees also participate in various investment plans. Under the plans, the employees may voluntarily contribute a percentage of their compensation. We contribute a cash amount based on participants' contributions. Our contributions were approximately $1.7 million, $1.6 million, and $1.6 million in 2003, 2002, and 2001, respectively. 38 York International Corporation 2003 Annual Report NOTE 13--COMMITMENTS AND CONTINGENCIES LEASES We have numerous non-cancelable leases with terms exceeding one year. As of December 31, 2003, lease commitments for all such operating leases are as follows:
(in thousands) - -------------------------------------------------------------------------------------------------------------------- 2004 $ 37,808 2005 30,289 2006 19,464 2007 11,304 2008 7,653 Thereafter 7,213 - -------------------------------------------------------------------------------------------------------------------- Total $ 113,731 - --------------------------------------------------------------------------------------------------------------------
Total rental expense was $51.1 million, $45.2 million, and $43.4 million in 2003, 2002, and 2001, respectively. CONTINGENT LIABILITIES We issue various types of guarantees in the normal course of business. As of December 31, 2003, we have the following guarantees outstanding:
(in thousands) - ------------------------------------------------------------------------------------------------------------------- Standby letters of credit and surety bonds $ 107,311 Performance guarantees 167,916 Commercial letters of credit 34,214 Guarantee of affiliate debt 30,000 - -------------------------------------------------------------------------------------------------------------------
Standby letters of credit and surety bonds are issued to guarantee our performance under contractual obligations. The most significant of these obligations is collateral to insurance companies for our insurance programs. In the event we fail to pay insurance claims, the issuing bank or surety may be asked to release some or all of this collateral to the insurance companies. Standby letters of credit and surety bonds have a term of one year and automatically renew. As of December 31, 2003, our consolidated balance sheet included liabilities of $35.5 million related to these insurance programs. Performance guarantees provided by standby letters of credit and performance bonds are issued to certain customers to guarantee the operation of the equipment we sell or to guarantee our ability to complete a contract. These performance guarantees have various terms, generally less than one year. Commercial letters of credit are issued to certain suppliers to guarantee our payment for purchases under favorable trade terms. Once our suppliers provide the proper documentation, the issuing bank charges our account and pays the commercial letters of credit on our behalf. Commercial letters of credit have a term of one year or less. The debt obligations of our subsidiaries are reflected in our consolidated balance sheets. In order to obtain favorable terms, guarantees of subsidiary debt are issued to local lending institutions requiring the parent company to repay the debt should our subsidiaries default on their debt obligations. There is a similar guarantee of affiliate debt relating to our 50% owned joint venture, Scroll Technologies. In the event Scroll Technologies would default on its debt obligation, we are required to assume 50% of Scroll's outstanding debt ($23.2 million as of December 31, 2003). The guarantee of affiliate debt is for the entire term of the borrowing ending in January 2012. We are subject to contingencies, including legal proceedings and claims arising out of the ordinary course of business that cover a range of matters, including, among others, product liability, contract and employment claims, warranty, environmental, intellectual property, and property tax disputes. We believe that such claims and litigation have been adequately provided for or are covered by insurance and that the resolution of such matters will not have a material effect on our financial position or ongoing results of operations. However, if a claim results in a judgment against us or we ultimately settle a claim, the amount of such judgment and/or settlement may be material to results of operations in an individual quarter. OTHER COMMITMENTS We own 50% of a small refrigeration company and are contingently obligated to purchase the remaining 50% no later than 2014. Our purchase commitment can be accelerated under certain circumstances. The purchase price will be determined based upon the profitability of the company but cannot be less than $5 million. In addition, as of December 31, 2003, we have outstanding purchase obligations of approximately $847.2 million, consisting of contracts for information technology services of $435.4 million, which include unconditional payments in the amount of 39 York International Corporation 2003 Annual Report $33.6 million, unconditional contracts to purchase raw materials, motors and controls in the amount of $158.3 million, and approximately $253.5 million of open purchase orders in the normal course of business. NOTE 14--INCOME TAXES Components of earnings and taxes consist of:
(in thousands) 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------- (Loss) income before income taxes and cumulative effect of changes in accounting principles: U.S. $ (46,650) $ 9,134 $ (1,104) Non-U.S. 60,718 97,757 38,069 - -------------------------------------------------------------------------------------------------------------------- 14,068 106,891 36,965 - -------------------------------------------------------------------------------------------------------------------- Income tax expense (benefit): Current: U.S. Federal -- 3,974 (23,841) State 1,078 1,587 1,305 Non-U.S. 31,777 19,819 9,833 - -------------------------------------------------------------------------------------------------------------------- Total current 32,855 25,380 (12,703) - -------------------------------------------------------------------------------------------------------------------- Deferred tax (benefit) expense: U.S. (23,037) 2,414 949 Non-U.S. (7,165) (2,079) 2,730 - -------------------------------------------------------------------------------------------------------------------- Total Deferred (30,202) 335 3,679 - -------------------------------------------------------------------------------------------------------------------- Provision (benefit) for income taxes $ 2,653 $ 25,715 $ (9,024) - --------------------------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes differed from the amounts computed by applying the U.S. Federal income tax rate of 35% to income before income taxes and cumulative effect of changes in accounting principles as a result of the following:
(in thousands) 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Tax expense at statutory rate $ 4,924 $ 37,412 $ 12,938 Increase (decrease) resulting from: Equity in earnings of affiliates/minority interest 1,272 1,098 630 Taxes on foreign earnings 6,588 (9,996) (24,106) State income taxes-current 701 1,031 848 Purchase accounting adjustments -- -- 8,403 State income taxes-deferred (1,169) 1,310 40 Export incentives (7,750) (3,000) (3,955) Other items (1,913) (2,140) (3,822) - ------------------------------------------------------------------------------------------------------------------- Provision (benefit) for income taxes $ 2,653 $ 25,715 $ (9,024) - -------------------------------------------------------------------------------------------------------------------
In 2003, taxes on foreign earnings are favorably impacted by tax holidays in certain foreign jurisdictions ($15.4 million) and other favorable rate variances ($2.4 million), offset by foreign restructuring actions for which the tax benefit was less than the statutory rate ($14.7 million), operating losses in jurisdictions where no tax benefit was recognized ($3.6 million), and the unfavorable tax impact of deemed and actual distributions ($6.1 million). In 2002, taxes on foreign earnings are primarily impacted by tax holidays in certain foreign jurisdictions ($16.2 million) and other favorable rate variances ($3.5 million), offset by the unfavorable impact of deemed and actual distributions ($6.0 million) and a loss on the disposition of a foreign operation that yielded no tax benefit ($3.7 million). In 2001, taxes on foreign earnings include a $20 million tax benefit recognized in connection with a restructuring action involving the disposition of foreign operations, and a $13.9 million benefit from certain tax holidays, offset by an unfavorable impact of $9.8 million, relating to losses in jurisdictions where the tax benefit recognized was less than the statutory rate, and other tax rate differentials. Other items consist primarily of R&D credits of $2.3 million, $2.0 million, and $5.1 million for years 2003, 2002, and 2001, respectively. The provision (benefit) for income taxes reported above excludes the tax benefit of $10.7 million related to the 2003 cumulative effect of a change in accounting principle associated with the adoption of FIN 46 related to variable interest entities. This tax benefit was recorded at applicable US federal and state income tax rates. No tax benefit was applied to the 2002 cumulative effect of a change in accounting principle associated with the adoption of SFAS No. 142, because the goodwill was not tax deductible. Several foreign subsidiaries continue to operate under separate tax holiday arrangements as granted by certain foreign jurisdictions. The nature and extent of such arrangements vary, and the benefits of such arrangements phase out in future years according to the specific terms and schedules as set forth by the particular taxing authorities having jurisdiction over the arrangements. 40 York International Corporation 2003 Annual Report The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2003 and 2002 are presented below:
(in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------------- Deferred tax assets: Receivables, net, principally due to allowance for doubtful receivables $ 3,556 $ 5,025 Inventories, including uniform capitalization 16,547 9,624 Accrued expenses, due to accrual for financial reporting purposes 17,757 16,553 Warranties, due to accrual for financial reporting purposes 32,307 26,719 Postretirement and postemployment benefits 72,505 74,234 Foreign tax loss carryforwards 38,657 40,399 Foreign tax credit carryforwards 25,627 11,594 R&D credit carryforwards 9,925 6,000 U.S. federal and state tax loss carryforwards 9,133 798 Other carryforward Items 2,829 -- - ------------------------------------------------------------------------------------------------------------------- 228,843 190,946 Valuation allowances for certain foreign tax loss carryforwards (14,218) (13,818) - ------------------------------------------------------------------------------------------------------------------- Total deferred tax assets, net of valuation allowances 214,625 177,128 - ------------------------------------------------------------------------------------------------------------------- Deferred tax liabilities: Plant, equipment, and intangible assets due to purchase accounting adjustments and differences in depreciation and amortization 26,433 43,053 Inventory, due to purchase accounting adjustments 18,357 18,293 Other 8,634 4,447 - ------------------------------------------------------------------------------------------------------------------- Total deferred tax liabilities 53,424 65,793 - ------------------------------------------------------------------------------------------------------------------- Net deferred tax assets $ 161,201 $ 111,335 - -------------------------------------------------------------------------------------------------------------------
Based on our historical and current pre-tax earnings as well as projections of future taxable income, management believes it is more likely than not that we will realize the net deferred tax assets. The valuation allowance on foreign tax loss carryforwards increased $0.4 million primarily due to losses in jurisdictions where the deferred tax assets are not expected to be realized. Of the $38.7 million of gross deferred tax assets relating to foreign tax loss carryforwards, $11.1 million are subject to expiration limitations, and approximately $7.0 million ($2.6 million net of valuation allowance) are set to expire over the next three years. The remaining tax losses carry no expiration date. Foreign tax credit carryforwards of $5.2 million, $5.8 million, $2.1 million, and $12.5 million expire in 2005, 2006, 2007, and 2008, respectively. Of the $9.1 million of U.S. federal and state tax loss carryforwards, $6.1 million of this amount relates to the U.S. federal tax loss carryforward, which is set to expire in 2023; the remaining amount relates to state tax loss carryforwards, which have various expiration dates. Of the $9.9 million in R&D credit carryforwards, $1.6 million of this amount is set to expire in 2020; the remainder expires in subsequent years. The IRS is examining our Federal income tax returns for 1997, 1998, and 1999. Various other federal, state, and foreign tax returns are under examination by the applicable authorities. We do not anticipate any material adverse effect to our consolidated financial statements resulting from these examinations. Neither income taxes nor foreign withholding taxes have been provided on $286 million and $225 million of cumulative undistributed earnings of foreign subsidiaries and affiliates at December 31, 2003 and 2002, respectively. These earnings are considered to be permanently invested in the businesses and, under the tax laws, are not subject to such taxes until distributed as dividends. If the earnings were not considered permanently invested, approximately $71 million and $41 million of deferred income taxes, consisting of foreign withholding taxes and additional U.S. tax net of foreign tax credits, would have been provided at December 31, 2003 and 2002, respectively. NOTE 15--ACQUISITIONS AND DIVESTITURES We made cash payments of $6.0 million, $2.2 million, and $3.2 million during 2003, 2002, and 2001, respectively, related to the acquisition of several small businesses. In 2002, we sold air conditioning operations in Australia for $12.1 million; the sale resulted in a loss of $10.3 million. In 2003, there was no similar transaction and finalization of the Australia sale resulted in a gain of $0.3 million. 41 York International Corporation 2003 Annual Report NOTE 16--CHARGES TO OPERATIONS In 2003, 2002, and 2001, we incurred costs by segment as follows:
(in thousands) 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------ 2003 INITIATIVES Global Applied: Americas $ 22,812 $ -- $ -- EMEA 56,620 -- -- Asia 3,407 -- -- ----------------------------------------------------- 82,839 -- -- Unitary Products Group 9,654 -- -- Bristol Compressors 2,135 -- -- Corporate 2,708 -- -- - ------------------------------------------------------------------------------------------------------------------ 97,336 -- -- - ------------------------------------------------------------------------------------------------------------------ 2000 AND 2001 INITIATIVES Global Applied Americas -- 205 16,782 EMEA (39) (1,034) 39,608 Asia (418) 209 3,742 ----------------------------------------------------- (457) (620) 60,132 Unitary Products Group -- 2,122 11,874 Bristol Compressors -- (1,543) 12,714 Corporate -- 18 202 - ------------------------------------------------------------------------------------------------------------------ (457) (23) 84,922 - ------------------------------------------------------------------------------------------------------------------ Total charges to operations, net 96,879 (23) 84,922 Charges reflected in cost of goods sold 5,484 88 14,418 - ------------------------------------------------------------------------------------------------------------------ Restructuring and other charges, net $ 91,395 $ (111) $ 70,504 - ------------------------------------------------------------------------------------------------------------------
2003 Initiatives In 2003, we initiated actions to further reduce our overall cost structure and support the implementation of our new geographic organization. These actions include the further reduction of manufacturing capacity, the elimination of certain product lines, the exiting of several small, non-core businesses, and the write down of assets associated with a European joint venture, as well as cost reductions associated with the consolidation of our former Engineered Systems Group and York Refrigeration Group segments. As of December 31, 2003, all actions were substantially complete. Charges included write-downs for the impairment of assets relating to businesses or facilities to be closed or divested, severance and other accruals relating to planned reductions in workforce throughout the Company, and estimated costs related to the elimination of certain product lines. Workforce reductions included the severance of approximately 1,270 salary and wage employees. 2000 and 2001 Initiatives In 2000, we initiated a cost reduction process, which included plant closures and divestitures, product line and facility rationalizations, selling, general, and administrative expense reductions, and other actions. In 2001, we expanded the scope of the cost reduction process to include additional plant closings and staff reductions. As of December 31, 2002, all of the 2000 and 2001 actions were substantially complete. 42 York International Corporation 2003 Annual Report Detail of activity relating to the 2003 initiatives and the 2000 and 2001 initiatives in the years ended December 31, 2003, 2002, and 2001 is as follows:
ACCRUALS NON-CASH AT BEGINNING ACCRUALS ACCRUAL ACCRUALS AT (in thousands) WRITE-DOWNS OF YEAR ESTABLISHED UTILIZED REDUCTION END OF YEAR - ---------------------------------------------------------------------------------------------------------------------------------- 2003 ACTIVITY: Fixed asset write-downs $ 18,266 $ -- $ -- $ -- $ -- $ -- Inventory write-downs 5,484 -- -- -- -- -- Receivables write-downs 405 -- -- -- -- -- Other asset write-downs 17,120 -- -- -- -- -- Severance -- 1,469 29,167 12,939 1,160 16,537 Contractual and other obligations -- 1,654 14,756 9,644 610 6,156 Warranty -- 599 -- 599 -- -- Other -- 224 13,508 12,455 57 1,220 - -------------------------------------------------------------------------------------------------------------------------------- 41,275 3,946 57,431 35,637 1,827 23,913 - -------------------------------------------------------------------------------------------------------------------------------- 2002 ACTIVITY: Fixed asset write-downs 1,500 -- -- -- -- -- Inventory write-downs 44 -- -- -- -- -- Receivables write-downs 87 -- -- -- -- -- Gain on sale of fixed assets (1,396) -- -- -- -- -- Severance -- 10,728 1,147 9,298 1,108 1,469 Contractual and other obligations -- 3,011 6 925 438 1,654 Warranty -- 563 44 8 -- 599 Other -- 2,017 635 1,884 544 224 - -------------------------------------------------------------------------------------------------------------------------------- 235 16,319 1,832 12,115 2,090 3,946 - -------------------------------------------------------------------------------------------------------------------------------- 2001 ACTIVITY: Fixed asset write-downs 15,549 -- -- -- -- -- Inventory write-downs 12,443 -- -- -- -- -- Receivables write-downs 4 -- -- -- -- -- Other asset write-downs 698 -- -- -- -- -- Severance -- 5,526 30,057 22,726 2,129 10,728 Contractual and other obligations -- 738 5,725 2,884 568 3,011 Warranty -- 600 1,975 2,012 -- 563 Other -- -- 21,998 19,151 830 2,017 - -------------------------------------------------------------------------------------------------------------------------------- $ 28,694 $ 6,864 $ 59,755 $ 46,773 $ 3,527 $ 16,319 - --------------------------------------------------------------------------------------------------------------------------------
NOTE 17--SEGMENT INFORMATION Our global business operates in the HVAC&R industry. Effective January 1, 2003, we consolidated our former York Refrigeration Group and Engineered Systems Group segments and reorganized management of the combined business. Our new organization consists of Global Applied, Unitary Products Group, and Bristol Compressors. The Global Applied business is comprised of three geographic regions: the Americas; Europe, Middle East and Africa (EMEA); and Asia. Global Applied's three geographic regions, Unitary Products Group, and Bristol Compressors represent our reportable segments. Prior year amounts were reclassified to conform to the current presentation. Global Applied designs, produces, markets, and sells heating, ventilating, air conditioning, and refrigeration (HVAC&R) equipment and solutions and provides maintenance and service of equipment manufactured by us and by others. Types of equipment include air cooled and water-cooled chillers, central air handling units, variable air volume units, screw and reciprocating compressors, condensers, evaporators, heat exchangers, ductless mini-splits, process refrigeration systems, hygienic air distribution systems, gas compression systems, and control equipment to monitor and control the entire system. Heating and air conditioning solutions are provided for buildings ranging from small office buildings and fast food restaurants to large commercial and industrial complexes. Refrigeration systems are provided for industrial applications in the food, beverage, chemical, and petroleum industries. Cooling and refrigeration systems are also supplied for use on naval, commercial, and passenger vessels. Products within Global Applied are similar in nature. Products produced in our factories are utilized in both air conditioning and refrigeration applications depending on customers needs. The end use application is the determining factor in labeling a product as refrigeration or air conditioning. As part of the integration of our former YRG and ESG segments, we sell our full line of HVAC&R products through one sales channel, regardless of the application. Sales of refrigeration products for 2003, 2002, and 2001 were $985 million, $855 million, and $871 million, respectively. Also within Global Applied, we sell services in the form of inspection, service, repair, maintenance, commissioning of equipment, and other service activities. Service sales in 2003, 2002, and 2001 were $443 million, $384 million, and $354 million, respectively. The balance of sales in Global Applied are air conditioning products. 43 York International Corporation 2003 Annual Report Unitary Products Group (UPG) produces heating and air conditioning solutions for buildings ranging from private homes and apartments to small commercial buildings. UPG products include ducted central air conditioning and heating systems (air conditioners, heat pumps, and furnaces), and light commercial heating and cooling equipment. Bristol Compressors (Bristol) manufactures reciprocating and scroll compressors for our use and for sale to original equipment manufacturers and wholesale distributors. Bristol purchases an essential component from one vendor. Due to consolidation in the vendor's industry, there are limited alternate sources of supply. We believe an alternate source of supply is attainable in the event the current vendor is unable to supply the component. However, a change in vendors would cause a delay in manufacturing and loss of sales, which would adversely impact the results of operations of Bristol and our consolidated results of operations. In 2002, we allocated certain goodwill, which was previously reflected as a non-allocated asset, to our operating segments in accordance with SFAS No. 142. Prior year total assets were reclassified to conform to the current presentation. The following table provides our segment operating results, assets, and other items:
(in thousands) 2003 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Net sales: Global Applied: Americas $ 1,388,930 $ 1,335,392 $ 1,425,885 Europe, Middle East, and Africa 1,343,138 1,161,605 1,147,842 Asia 490,063 418,599 439,858 Intragroup sales (194,537) (165,443) (195,941) ------------ ------------- ----------- 3,027,594 2,750,153 2,817,644 Unitary Products Group 760,059 736,789 755,860 Bristol Compressors 451,241 515,372 509,706 Eliminations(1 (162,840) (158,941) (163,114) - --------------------------------------------------------------------------------------------------------------------- 4,076,054 3,843,373 3,920,096 - --------------------------------------------------------------------------------------------------------------------- (1)Eliminations include the following intersegment net sales: Global Applied 2,673 2,623 3,542 Unitary Products Group 52,896 48,105 57,346 Bristol Compressors 107,271 108,213 102,226 - --------------------------------------------------------------------------------------------------------------------- Eliminations 162,840 158,941 163,114 - --------------------------------------------------------------------------------------------------------------------- Income from operations: Global Applied: Americas 54,855 39,710 82,575 Europe, Middle East, and Africa 44,691 50,550 49,025 Asia 69,634 55,945 54,560 ------------ ------------- ----------- 169,180 146,205 186,160 Unitary Products Group 60,698 40,262 59,083 Bristol Compressors 25,405 29,002 39,684 General corporate expenses, eliminations, and other non-allocated items (79,858) (44,037) (54,314) Charges and other expenses (119,749) (9,917) (128,942) Gain (loss) on divestiture 345 (10,319) -- - --------------------------------------------------------------------------------------------------------------------- 56,021 151,196 101,671 - --------------------------------------------------------------------------------------------------------------------- Equity in earnings (losses) of affiliates: Global Applied: Europe, Middle East, and Africa 2,554 2,038 1,546 Asia 984 964 1,137 ------------ ------------- ----------- 3,538 3,002 2,683 Bristol Compressors 2,044 1,178 (239) - --------------------------------------------------------------------------------------------------------------------- 5,582 4,180 2,444 - --------------------------------------------------------------------------------------------------------------------- Interest expense, net (47,535) (48,485) (67,150) Income before income taxes and cumulative effect of changes in accounting principles 14,068 106,891 36,965 (Provision) benefit for income taxes (2,653) (25,715) 9,024 - --------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of changes in accounting principles $ 11,415 $ 81,176 $ 45,989 - ---------------------------------------------------------------------------------------------------------------------
44 York International Corporation 2003 Annual Report
(in thousands) 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------ (continued) Total assets: Global Applied: Americas $ 711,103 $ 683,138 $ 735,270 EMEA 937,981 831,662 881,645 Asia 389,456 337,303 330,556 Eliminations and other non-allocated assets (111,789) (51,570) (53,618) ----------- ----------- ------------ 1,926,751 1,800,533 1,893,853 Unitary Products Group 384,355 419,540 447,359 Bristol Compressors 242,375 264,111 270,943 Eliminations and other non-allocated assets 119,654 21,938 (39,646) - -------------------------------------------------------------------------------------------------------------------- 2,673,135 2,506,122 2,572,509 - -------------------------------------------------------------------------------------------------------------------- Depreciation and amortization of property, plant, and equipment: Global Applied: Americas 22,201 17,428 16,862 EMEA 16,435 14,010 12,472 Asia 4,499 4,015 4,785 ----------- ----------- ------------ 43,135 35,453 34,119 Unitary Products Group 11,231 8,877 9,163 Bristol Compressors 13,316 13,911 13,351 Other non-allocated depreciation and amortization 2,308 3,926 3,022 - -------------------------------------------------------------------------------------------------------------------- 69,990 62,167 59,655 - -------------------------------------------------------------------------------------------------------------------- Capital expenditures: Global Applied: Americas 28,174 23,883 25,001 EMEA 8,849 9,767 19,438 Asia 6,700 4,242 8,684 ----------- ----------- ------------ 43,723 37,892 53,123 Unitary Products Group 11,921 14,847 24,584 Bristol Compressors 12,925 12,870 18,374 Other non-allocated capital expenditures 16,135 3,953 2,045 - -------------------------------------------------------------------------------------------------------------------- $ 84,704 $ 69,562 $ 98,126 - --------------------------------------------------------------------------------------------------------------------
General corporate expenses and charges and other expenses are not allocated to the individual segments for management reporting. General corporate expenses include certain pension, medical, and insurance costs, corporate administrative costs, development costs for information technology applications and infrastructure, goodwill amortization in 2001, and other corporate costs. Charges and other expenses include restructuring and other charges, operating expenses related to cost reduction actions, a curtailment loss related to the decision to replace our defined benefit pension plans for U.S. salaried non-bargaining and certain U.S. salaried bargaining employees with a new defined contribution plan, effective January 1, 2004, and costs related to a discontinued product line. Non-allocated assets primarily consist of prepaid pension benefit cost, net deferred tax assets, LIFO inventory reserves, and other corporate assets. For management reporting, intersegment sales are recorded on a cost-plus basis. Business segment management performance is based on earnings before interest and taxes, net capital employed, and earnings per share. Our net sales to the U.S. and to non-U.S. countries are as follows:
(in thousands) 2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------------ Net sales: United States 45% 48% 48% Other 55% 52% 52% - ---------------------------------------------------------------------------------------------------------------------- 100% 100% 100% - ----------------------------------------------------------------------------------------------------------------------
No single non-U.S. country or single customer accounts for greater than 10% of our net sales. 45 York International Corporation 2003 Annual Report Information related to U.S. and non-U.S. sales to outside customers, based on the location of the assets generating the sales, is as follows:
2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------ Net sales: United States 51% 55% 55% Other 49% 45% 45% - ----------------------------------------------------------------------------------------------------------------- 100% 100% 100% - -----------------------------------------------------------------------------------------------------------------
Included in U.S. sales are export sales of $255.5 million, $284.9 million, and $314.0 million in 2003, 2002, and 2001, respectively. The location of our net property, plant, and equipment is as follows:
2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------ Net property, plant, and equipment: United States 55% 56% 58% Denmark 24% 24% 22% Other 21% 20% 20% - ----------------------------------------------------------------------------------------------------------------- 100% 100% 100% - -----------------------------------------------------------------------------------------------------------------
NOTE 18--STOCKHOLDERS' EQUITY EMPLOYEE STOCK PURCHASE PLAN We provide an employee stock purchase plan that authorizes employees to purchase up to 2.5 million shares of our common stock, inclusive of 0.5 million shares authorized by the stockholders in May 2001. The purchase price is 85% of the lower of the fair market value of shares at the beginning or end of the period. No compensation expense is recorded in connection with employee purchases of shares. As of December 31, 2003, 0.1 million shares were available for employee purchases. Employees purchased shares under the plan as follows:
2003 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Shares purchased (in thousands) 264 174 236 Weighted average purchase price per share $ 21.72 $ 21.74 $ 26.06 - -------------------------------------------------------------------------------------------------------------------
MANAGEMENT STOCK PURCHASE PLAN During 2003, we established a management stock purchase plan that allows eligible employees to defer a percentage of their annual incentive compensation as vested restricted stock units. In 2003, we provided a 25% restricted stock unit match which vests over a three-year period. Common stock is issued on the third anniversary from the contribution date or upon employee termination. Deferrals of annual incentive compensation are expensed in the respective incentive period. Matching contributions are expensed over the vesting period. STOCK PLANS In 2002, our shareholders approved a stock plan that will expire in 2012. As a result, we are authorized to issue up to 2.0 million shares of our common stock through stock option and restricted stock awards. Under a former stock plan, which was originally approved in 1992 and expired in 2002, we issued stock options and restricted stock awards of 7.5 million shares. The general terms of both stock plans are similar. Awards can be granted only to our directors and employees. The exercise price of stock options cannot be less than the fair market value of our common stock on the grant date. The maximum term of stock options is 10 years. Restricted stock awards cannot exceed 3% of our issued and outstanding common stock. We determine the price of restricted stock awards at the time of grant. We also determine vesting requirements of stock option and restricted stock awards at the time of grant. In 2003 and 2002, 136 thousand and 30 thousand restricted shares, respectively, were granted to key employees. Accordingly, unearned compensation of $3.2 million and $0.7 million was recorded as a charge to stockholders' equity in 2003 and 2002, respectively. No restricted stock awards were granted in 2001. 46 York International Corporation 2003 Annual Report Information regarding stock options under our stock plans is as follows (shares in thousands):
2003 2002 2001 ----------------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE - ---------------------------------------------------------------------------------------------------------------------------- Outstanding, January 1, 5,343 $ 34.58 5,185 $ 34.72 5,583 $ 34.68 Granted 783 21.42 814 35.24 759 28.46 Exercised (777) 28.52 (226) 27.56 (615) 24.31 Canceled (430) 39.81 (430) 41.19 (542) 37.39 - ---------------------------------------------------------------------------------------------------------------------------- Outstanding, December 31, 4,919 $ 32.94 5,343 $ 34.58 5,185 $ 34.72 - ---------------------------------------------------------------------------------------------------------------------------- Exercisable, December 31, 4,061 $ 35.17 4,425 $ 34.62 4,246 $ 36.03 - ---------------------------------------------------------------------------------------------------------------------------- Available, December 31, 1,015 1,884 1,284 - ----------------------------------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------ -------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE CONTRACTUAL EXERCISE EXERCISE RANGE OF EXERCISE PRICE SHARES LIFE PRICE SHARES PRICE - ----------------------------------------------------------------------------------------------------------------------------- $20.89 - $26.69 1,393 7.8 $ 22.14 620 $ 23.17 $27.00 - $36.27 2,088 6.8 32.78 2,032 32.89 $37.00 - $44.63 769 3.3 41.08 740 41.19 $45.38 - $54.88 669 2.7 46.52 669 46.52 - --------------------------------------------------------------------------------------------------------------- ------------- $20.89 - $54.88 4,919 6.0 $ 32.94 4,061 $ 35.17 - -----------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive losses consist of:
(in thousands) 2003 2002 - ------------------------------------------------------------------------------------------------------------------------ Foreign currency translation adjustments $ 31,063 $ 116,924 Cash flow hedges (9,083) 729 Minimum pension liability adjustments 29,848 24,813 Available for sale securities (231) (122) - ------------------------------------------------------------------------------------------------------------------------ Accumulated other comprehensive losses $ 51,597 $ 142,344 - ------------------------------------------------------------------------------------------------------------------------
NOTE 19--(LOSS) EARNINGS PER SHARE RECONCILIATION OF SHARES OUTSTANDING Net (loss) income as set forth in our consolidated statements of operations is used in the computation of basic and diluted (loss) earnings per share information. Reconciliations of shares used in the computations of (loss) earnings per share are as follows:
(in thousands) 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding used in the computation of basic (loss) earnings per share 39,684 39,351 38,626 Effect of dilutive securities: Non-vested restricted shares 166 31 3 Stock options 356 388 518 - -------------------------------------------------------------------------------------------------------------------- Weighted average common shares and equivalents used in the computation of diluted (loss) earnings per share 40,206 39,770 39,147 - --------------------------------------------------------------------------------------------------------------------
Stock options of 2.9 million shares, 3.6 million shares, and 3.2 million shares in 2003, 2002, and 2001, respectively, are not included in the diluted (loss) earnings per share computation as their effect would have been anti-dilutive. 47 York International Corporation 2003 Annual Report SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
FIRST SECOND THIRD FOURTH (in thousands, except per share data) QUARTER QUARTER QUARTER QUARTER - ------------------------------------------------------------------------------------------------------------------------ 2003 Net sales $ 868,357 $ 1,084,417 $ 1,008,958 $ 1,114,322 Gross profit 160,100 226,364 191,062 205,724 Net (loss) income (13,636) 19,206 (5,430) (4,138) (Loss) earnings per share: Basic (0.34) 0.48 (0.14) (0.10) Diluted (0.34) 0.48 (0.13) (0.10) - ------------------------------------------------------------------------------------------------------------------------ 2002 Net sales $ 841,532 $ 1,044,093 $ 946,774 $ 1,010,974 Gross profit 149,997 212,851 179,401 185,503 Net (loss) income (194,181) 48,219 26,035 21,667 (Loss) earnings per share: Basic (4.95) 1.23 0.66 0.55 Diluted (4.95) 1.21 0.65 0.55 - -----------------------------------------------------------------------------------------------------------------------
Notes regarding quarterly results: -- In the third quarter of 2003, we recorded a $15.4 million reduction to stockholders' equity as a cumulative effect of change in accounting principle adjustment. See note 1 to our consolidated financial statements. -- In the first quarter of 2002, we recorded a transitional goodwill impairment charge of $179.4 million as a cumulative effect of a change in accounting principle. See note 7 to our consolidated financial statements. -- We recorded restructuring and other charges of $16.1 million, $33.1 million, $12.1 million, and $30.1 million in the first, second, third, and fourth quarters of 2003, respectively. In the first and fourth quarter of 2002, we recorded restructuring and other charges (credits) of $2.7 and $(2.8) million, respectively. See note 16 to our consolidated financial statements. TRADING AND DIVIDEND INFORMATION
DIVIDENDS HIGH LOW DECLARED - ----------------------------------------------------------------------------------------------------------------------- 2003 Fourth quarter $ 40.74 $ 33.65 $ 0.15 Third quarter 36.00 23.31 0.15 Second quarter 26.72 21.00 0.15 First quarter 26.04 18.82 0.15 - ----------------------------------------------------------------------------------------------------------------------- 2002 Fourth quarter $ 29.66 $ 21.35 $ 0.15 Third quarter 34.84 27.18 0.15 Second quarter 39.08 32.60 0.15 First quarter 38.68 31.35 0.15 - -----------------------------------------------------------------------------------------------------------------------
48 York International Corporation 2003 Annual Report EX-21 21 w94715exv21.txt SUBSIDIARIES OF THE REGISTRANT . . . EXHIBIT 21 YORK INTERNATIONAL CORPORATION SUBSIDIARIES OF THE REGISTRANT
Name and Jurisdiction of Incorporation Percent of Ownership - -------------------------------------- -------------------- York Air Conditioning and Refrigeration, Inc. (Delaware) 100% York F C Corporation (Delaware) 100% Bristol Compressors, Inc. (Delaware) 100% Bristol Compressors Purchasing, Inc. (Delaware) 100% Bristol Scroll Compressors Co. LLC (Delaware) 100% Codorus Acceptance Corp. (Delaware) 100% Coil Services, Inc. (Delaware) 100% Frigid Coil/Frick, Inc. (Delaware) 100% IMECO, Inc. (Delaware) 100% Natkin Service Company (Delaware) 100% Evcon Holdings Inc. (Delaware) 100% Evcon Industries, Inc. (Delaware) 100% York International (SA), Inc. (Delaware) 100% York Snow, Inc. (Delaware) 100% York International Treasury Services Inc. (Delaware) 100% York Receivables Funding LLC (Delaware) 100% Evcon Supply, Inc. (Kansas) 100% General Refrigermetics Corporation (New York) 100% York International Ltd. (Canada) 100% Sabroe M&M Refrigeration, Inc. (Canada) 100% York International G.e.s.m.b.H. (Austria) 100% York International EOOD (Bulgaria) 100% Y.I.C. Limited (Cyprus) 100% York International Spol.s.r.o. (Czech Republic) 100% YORK Refrigeration ApS (Denmark) 100% YORK Koleteknik ApS (Denmark) 100% YORK Refrigeration Marine Controls ApS (Denmark) 100% Retech Refrigeration Technologies ApS (Denmark) 100% Novenco ApS (Denmark) 100% Reffin Holding ApS (Denmark) 100% Oy Novenco AB (Finland) 100% Sabroe Finland Oy (Finland) 100% York International S.A.S. (France) 100% York France S.A.S. (France) 100% York Neige S.A.S. (France) 100% Duplan Engineering S.A.S. (France) 100% IMEF S.A.S. (France) 100% Franchise Refrigeration S.A.S. (France) 100% York France Management S.A.S. (France) 100% Gradius Lyon S.A.S. (France) 100% York Deutschland GmbH (Germany) 100%
1 YORK INTERNATIONAL CORPORATION SUBSIDIARIES OF THE REGISTRANT (CONT'D)
Name and Jurisdiction of Incorporation Percent of Ownership - -------------------------------------- -------------------- Sigma Frigo Therm Handellgeselschaft Gmbh (Germany) 100% Aircon GmbH (Germany) 100% BMK Kaelte and Energie-Technik Gmbh (Germany) 100% WTA Wartung und Vertrieb haustechnischer Anlagen GmbH (Germany) 100% York Hellas S.A. (Greece) 100% York International KFT (Hungary) 100% YORK Refrigeration Ltd. Hungary (Hungary) 100% York A.C.R. Ltd. (Ireland) 100% CBAW S.r.l. (Italy) 100% York International Italia S.r.l. (Italy) 100% York Neve S.r.l. (Italy) 100% York International SIA (Latvia) 100% YORK International Holding B.V. (Netherlands) 100% York International Services & Holding B.V. (Netherlands) 100% Novenco B.V. (Netherlands) 100% York International B.V. (Netherlands) 100% YORK - Inham-Refrigeration BV (Netherlands) 100% York Refrigeration Nederland BV (Netherlands) 100% Novenco A.S. (Norway) 100% YORK Kulde AS (Norway) 100% York International sp.zo.o (Poland) 100% York Refrigeration, S.U., Lda. (Portugal) 100% York International SRL (Romania) 100% York International AOZT (Russia) 100% York International Spol.s.r.o. (Slovak Republic) 100% Supremeair (Proprietary) Limited (South Africa) 100% YORK Refrigeration, S.L. (Spain) 100% York Holding AB (Sweden) 100% York Refrigeration Sweden AB (Sweden) 100% YORK Marine AB (Sweden) 100% YORK International AB (Sweden) 100% YORK Bonus Energi AB (Sweden) 100% Sabroe Refrigeration AB (Sweden) 100% Tre AG (Switzerland) 100% York International Ukraine (Ukraine) 100% Sabroe (UK) Holdings Ltd. (UK) 100% York Refrigeration Ltd. (UK) 100% Sabroe Limited (UK) 100% Gram Refrigeration (UK) Ltd. (UK) 100% Preston Refrigeration Limited (UK) 100% VACR Limited (UK) 100%
2 YORK INTERNATIONAL CORPORATION SUBSIDIARIES OF THE REGISTRANT (CONT'D)
Name and Jurisdiction of Incorporation Percent of Ownership - -------------------------------------- -------------------- York CEE Holdings Ltd. (UK) 100% York Finance Limited (UK) 100% York Food Systems Limited (UK) 100% York International (Holdings) Ltd. (UK) 100% York International Limited (UK) 100% Procardia (UK) 100% TTF Air Conditioning and Refrigeration Ltd. (UK) 100% YORK Refrigeration Scotland Limited (UK) 100% York Refrigeration Argentina S.A. (Argentina) 100% YORK Engenharia e Servicos Ltda. (Brazil) 100% York International Ltda. (Brazil) 100% SAR Sul Americana Refrigeracao Ltda. (Brazil) 100% Sabroe Latin America S.A. (Cayman Islands) 100% YORK Refrigeration Chile S/A (Chile) 100% York International Ltda. (Colombia) 100% York International S.A. (Colombia) 100% York International del Ecuador C.A. Interyork (Ecuador) 100% York International, S.A. de C.V. (Mexico) 100% York Aire, S. de R.L. de C.V. (Mexico) 100% York Corporativo S. de R.L. de C.V. (Mexico) 100% Sabroe de Mexico S.A. de C. V. (Mexico) 100% York International S.R.L. (Peru) 100% York International S.A. (Uruguay) 100% Saditel S.A. (Uruguay) 100% York International S.A. (Venezuela) 100% York International Australia Pty, Ltd. (Australia) 100% YORK Refrigeration Australia Pty. Ltd. (Australia) 100% YORK Thermfresh Pty Ltd. (Australia) 100% York Shanghai Air Conditioning and Refrigeration International Trading Co., Ltd. (China) 100% York Wuxi Compressor Company, Ltd. (China) 100% York Guangzhou Air Conditioning and Refrigeration Co. Ltd. (China) 100% York International (Northern Asia) Limited (Hong Kong) 100% YORK Refrigeration India Ltd. (India) 100% PT York Aditama Teknik (Indonesia) 100% YORK Japan Co. Ltd. (Japan) 100% York International CH (Korea) 100% York New Zealand Limited (New Zealand) 100% Sabroe Limited (New Zealand) 100% York Philippines, Inc. (Philippines) 100% York Refrigeration Philippines, Inc. (Philippines) 100% Southeast Asia Pte Ltd. (Singapore) 100% York International Pte. Ltd. (Singapore) 100% Sabroe Properties Co., Ltd. (Thailand) 100%
3 YORK INTERNATIONAL CORPORATION SUBSIDIARIES OF THE REGISTRANT (CONT'D)
Name and Jurisdiction of Incorporation Percent of Ownership - -------------------------------------- -------------------- Sabroe Service Co., Ltd. (Thailand) 100% YORK Refrigeration (Thailand) Co. Ltd. (Thailand) 100% York A/C and Refrigeration Co. Ltd. (Thailand) 100% York Industrial (Thailand) Co., Ltd. (Thailand) 100% UPG International Ltd. (Thailand) 100% York Air Conditioning & Refrigeration Ltd. Co. (Egypt) 100% Arduman Mumessillik Klima Sanayi ve Ticaret AS (Turkey) 100% Arduman Klima Sanayi Servisi AS (Turkey) 100% York Air Conditioning and Refrigeration FZE (U.A.E.) 100% York A/C and Refrigeration (Lebanon) Ltd. (Lebanon) 98% York-Wuxi Air Conditioning and Refrigeration Co. Ltd. (China) 80% YORK Refrigeration Marine (China) Ltd. (China) 75% Sabroe de Colombia Ltda. (Colombia) 60% York-Taiwan, Inc. (Taiwan) 60% York Refrigeration Marine U.S. Inc. (Delaware) 50%
4 EX-23 22 w94715exv23.txt ACCOUNTANTS' CONSENT EXHIBIT 23 ACCOUNTANTS' CONSENT The Board of Directors and Stockholders York International Corporation: We consent to incorporation by reference in the registration statements on Forms S-8 (File Nos. 333-2384, 333-39398 and 333-55815 Amended and Restated 1992 Omnibus Stock Plan, File No. 33-64684 1992 Omnibus Stock Plan, File No. 333-85570 Amended and Restated 1992 Employee Stock Purchase Plan, File No. 33-51374 1992 Employee Stock Purchase Plan, File No. 333-98137 Amended and Restated 2002 Omnibus Stock Plan, File No. 333-73079 Investment Plan for Puerto Rico, File No. 333-73077 Investment Plan and File No. 333-73081 Bristol Compressors Thrift and Retirement Plan) of York International Corporation of our report dated February 13, 2004 with respect to the consolidated balance sheets of York International Corporation and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2003 and the related financial statement schedule, which report appears in the December 31, 2003 annual report on Form 10-K of York International Corporation. Our report on the consolidated financial statements refers to the changes by the Company in its method of accounting for variable interest entities in 2003 and its method of accounting for goodwill and other intangible assets in 2002. /s/ KPMG LLP KPMG LLP Harrisburg, Pennsylvania March 11, 2004 EX-24 23 w94715exv24.txt POWER OF ATTORNEY EXHIBIT 24 YORK INTERNATIONAL CORPORATION POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and officers of York International Corporation, a Delaware corporation (the "Company"), hereby constitute and appoint Jane G. Davis and M. David Kornblatt, or either of them acting singly or jointly, the true and lawful agents and attorneys-in-fact of the undersigned with full power and authority in said agents and attorneys-in-fact, or any of them, to sign for the undersigned and in their respective names, as directors and as officers of the Company, the Annual Report of the Company on Form 10-K for 2003 or other appropriate form, to be filed under the Securities Act of 1933, as amended, with the Securities and Exchange Commission. Capacity Date /s/ Gerald C. McDonough March 10, 2004 - ----------------------- Gerald C. McDonough, Chairman /s/ W. Michael Clevy March 10, 2004 - -------------------- W. Michael Clevy, Director /s/ J. Roderick Heller, III March 10, 2004 - --------------------------- J. Roderick Heller, III, Director /s/ Robert F. B. Logan March 10, 2004 - ---------------------- Robert F. B. Logan, Director /s/ C. David Myers March 10, 2004 - ------------------ C. David Myers, Director /s/ Paul J. Powers March 10, 2004 - ------------------ Paul J. Powers, Director /s/ Donald M. Roberts March 10, 2004 - --------------------- Donald M. Roberts, Director /s/ James A. Urry March 10, 2004 - ----------------- James A. Urry, Director EX-31.1 24 w94715exv31w1.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, C. DAVID MYERS, Chief Executive Officer of York International Corporation, certify that: 1. I have reviewed this annual report on Form 10-K of York International Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: March 12, 2004 /s/ C. David Myers ------------------------------------- C. David Myers, President and Chief Executive Officer EX-31.2 25 w94715exv31w2.txt CERTIFICATION OF THE CHIEF FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, M. DAVID KORNBLATT, Chief Financial Officer of York International Corporation, certify that: 1. I have reviewed this annual report on Form 10-K of York International Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: March 12, 2004 /s/ M. David Kornblatt ------------------------------------------ M. David Kornblatt, Vice President and Chief Financial Officer EX-32.1 26 w94715exv32w1.txt CERTIFICATION OF THE CEO AND CFO OF YORK INT'L EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of York International Corporation (the "Company") for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned C. David Myers, President and Chief Executive Officer of York International Corporation, and M. David Kornblatt, Vice President and Chief Financial Officer of York International Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: March 12, 2004 /s/ C. David Myers ------------------------------------------ C. David Myers, President and Chief Executive Officer /s/ M. David Kornblatt ------------------------------------------ M. David Kornblatt, Vice President and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to York International Corporation and will be retained by York International Corporation and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----