SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2001
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-72
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York Research Corporation
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(Exact name of registrant as specified in its charter)
Delaware 06-0608633
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(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
280 Park Avenue, Suite 2700 West, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 557-6200
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check whether registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this report
16,266,697.
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31, February 28,
2001 2001
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(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,477,651 $ 2,438,864
Marketable securities 120,008 1,445,520
Trade accounts receivable 3,787,050 3,637,654
Other receivables - related parties 6,829,519 9,457,308
Cash in escrow 3,919,701 1,284,558
Deferred tax asset 9,335,498 8,920,143
Other current assets 311,219 324,966
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Total current assets 25,780,646 27,509,013
Property, plant and equipment, net 127,671,171 130,016,474
Long-term notes and other receivables - WCTP 83,715,695 81,695,602
Deferred charges, net 14,575,628 15,570,329
Deferred tax asset 6,819,000 6,019,000
Other assets (including advances to employees of $433,461
and $817,757, respectively) 2,989,104 2,640,739
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Total assets $ 261,551,244 $ 263,451,157
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Project payables $ 5,651,175 $ 6,049,732
Accrued expenses and other payables 12,513,720 11,151,629
Income tax payable 190,725 289,008
Project notes payable 145,662,000 147,312,000
Net liabilities of discontinued operations 47,515,067 49,997,637
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Total current liabilities 211,532,687 214,800,006
Other long-term liabilities 1,617,760 1,724,437
Deferred revenue and other credits 2,681,500 2,768,000
Minority interest in partnership 3,655,861 3,424,254
Commitments and contingencies
Stockholders' equity
Common stock, Class A, $.01 par value; authorized 10,000,000
shares; none issued - -
Common stock, $.01 par value; authorized 50,000,000 shares;
issued 16,424,821 shares 164,248 164,208
Additional paid-in capital 69,479,088 69,473,128
Accumulated deficit (24,616,604) (26,233,745)
Accumulated other comprehensive income (net of tax of $35,387
and $450,857, respectively) 68,681 875,308
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45,095,413 44,278,899
Less:
Treasury stock, at cost (158,124 shares) (1,564,713) (1,564,713)
Notes receivable - sale of common stock (314,860) (377,322)
Deferred compensation (1,152,404) (1,602,404)
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Total stockholders' equity 42,063,436 40,734,460
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Total liabilities and stockholders' equity $ 261,551,244 $ 263,451,157
============= =============
The accompanying notes are an integral part of these financial statements.
2
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited)
For the Six Months Ended For the Three Months Ended
August 31, August 31,
------------------------------ ------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues $ 17,914,950 $ 17,070,333 $ 8,689,078 $ 8,963,286
Costs of revenues 10,112,952 9,222,289 4,745,790 5,278,741
------------ ------------ ------------ ------------
Gross profit 7,801,998 7,848,044 3,943,288 3,684,545
------------ ------------ ------------ ------------
Selling, general and administrative:
Power project services 1,128,630 1,216,496 577,809 552,952
General corporate expenses 4,066,346 3,852,237 2,322,078 1,751,013
------------ ------------ ------------ ------------
Total selling, general and administrative 5,194,976 5,068,733 2,899,887 2,303,965
------------ ------------ ------------ ------------
Other income (expense):
Interest income - WCTP 2,020,094 2,505,772 1,030,360 1,286,318
Interest income 87,870 357,106 22,457 166,298
Interest expense (8,831,761) (8,895,041) (4,399,283) (4,459,500)
Other income 5,165,523 4,229,273 1,802,639 2,316,064
Minority interest in partnership (231,607) (315,396) (107,031) (161,906)
------------ ------------ ------------ ------------
(1,789,881) (2,118,286) (1,650,858) (852,726)
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes 817,141 661,025 (607,457) 527,854
Benefit for income taxes (800,000) (730,000) (800,000) (283,000)
------------ ------------ ------------ ------------
Net income $ 1,617,141 $ 1,391,025 $ 192,543 $ 810,854
============ ============ ============ ============
Comprehensive income $ 769,960 $ 1,471,745 $ 85,347 $ 688,174
============ ============ ============ ============
Earnings per share - Basic $ 0.10 $ 0.09 $ 0.01 $ 0.05
============ ============ ============ ============
Weighted average number of common shares used
in computing basic earnings per share 16,065,073 15,149,960 16,070,138 15,213,575
============ ============ ============ ============
Earnings per share - Diluted $ 0.09 $ 0.09 $ 0.01 $ 0.05
============ ============ ============ ============
Weighted average number of common shares and
common share equivalents used in computing diluted
earnings per share 18,135,953 15,149,960 18,236,858 15,213,575
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
3
YORK RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31,
(Unaudited)
2001 2000
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OPERATING ACTIVITIES:
Net income $ 1,617,141 $ 1,391,025
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 2,345,236 2,369,676
Amortization of goodwill 19,686 9,843
Amortization of deferred charges 1,157,956 1,170,654
Amortization of deferred credits (86,500) (86,500)
Deferred taxes (800,000) (730,000)
Minority interest in partnership 231,607 315,396
Non-cash bonuses 492,351 -
ESOP contribution - 283,264
Gain on sale of marketable securities (1,128,041) (319,780)
Changes in operating assets and liabilities:
Net (increase) decrease in receivables 2,572,394 (416,242)
Net increase in notes receivable,
other current assets and other assets (3,061,543) (1,951,374)
Net (increase) decrease in accounts payable,
accrued expenses and long-term liabilities 1,255,415 (833,211)
Decrease in accrued taxes (98,283) (465,765)
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NET CASH PROVIDED BY OPERATING ACTIVITIES
OF CONTINUING OPERATIONS 4,517,419 736,986
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES
OF DISCONTINUED OPERATIONS (2,482,570) (2,402,504)
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (398,490) (2,655,410)
Deposits into cash in escrow (10,543,273) (6,465,964)
Receipts from cash in escrow 7,908,130 7,364,885
Proceeds from sale of marketable securities 1,231,571 359,600
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NET CASH USED IN INVESTING ACTIVITIES (1,802,062) (1,396,889)
------------ ------------
FINANCING ACTIVITIES:
Payment of project notes (1,650,000) (1,350,000)
Proceeds from ESOP note 450,000 -
Proceeds from exercise of stock options 6,000 -
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (1,194,000) (1,350,000)
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (961,213) (4,412,407)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,438,864 7,490,106
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,477,651 $ 3,077,699
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 8,975,041 $ 9,000,959
Income taxes paid $ 155,155 $ 90,755
The accompanying notes are an integral part of these financial statements.
4
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) General
In the opinion of management, the accompanying consolidated, unaudited
financial statements contain all adjustments necessary to present fairly York
Research Corporation and Subsidiaries' ("York" or the "Company") consolidated
financial position at August 31, 2001, and the results of operations for the six
and three months ended August 31, 2001 and 2000 and cash flows for the six
months ended August 31, 2001 and 2000.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting principles,
but which is not required for interim reporting purposes, has been condensed or
omitted. The accompanying financial statements need to be read in conjunction
with the financial statements and notes thereto included in the Registrant's
Form 10-K.
Certain amounts in the Fiscal 2001 consolidated financial statements
were reclassified to conform to the Fiscal 2002 presentation. Any adjustments
that have been made to the financial statements are of a normal recurring
nature.
The results of operations for the six and three months ended August 31,
2001 may not be indicative of future results.
2. Liquidity
North American Energy Conservation, Inc. ("NAEC"), an 85% owned
subsidiary of York, estimates that the total third party obligations that would
be subject of its Chapter 11 proceedings approximates $66 million, all of which
have been accrued as of February 28, 2000. York has guaranteed approximately $46
million of the total pre-petition debt of NAEC. York and NAEC had conducted
extensive discussions with both the guaranteed and non-guaranteed creditor
groups and had arrived at a settlement agreement, which was approved by the
bankruptcy court on January 8, 2001. Pursuant to the settlement agreement, among
other requirements, the Company would have been required to fund $13 million
into a trust for the benefit of the creditors by May 1, 2001. To date, both NAEC
and the Company have been unable to fund the initial cash payment into the
trust. The time for the Company to perform had been extended while it continued
negotiations with the creditors and preparation of the required agreements. As a
result of various circumstances the settlement agreement originally reached with
the various creditor groups will now be subject to renegotiation.
5
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management's plan in regard to this matter is to reach eventual
agreement with the creditors. In this regard York, with the help of Credit
Suisse First Boston ("CSFB") and other consultants, is pursuing several
alternative means, including the potential sale of all or part of York's
interest in various projects, of raising the funds necessary to meet its initial
cash obligation to creditors and meet its other ongoing obligations.
In October 2001, the Company and certain wholly owned indirect
subsidiaries signed an agreement to sell the equity of York Ex International SRL
("York Ex"). York Ex is the indirect parent of the subsidiary that owns and
operates the Trinidad project. The sale is subject to certain significant
conditions precedent including obtaining sufficient funds to redeem the project
notes payable. The Company continues to pursue additional funds as discussed
above.
There can be no assurance that an agreement will be reached with the
creditor groups or that the Company will be able to raise sufficient funds.
General corporate, pre-financing project development and negative
working capital needs have historically been met by the cash flow derived from
the Company's power projects. The Company believes that such cash flow sources
and potential development fees received on future projects, will provide
sufficient cash flow for continuing operations for at least twelve months.
The Company has met all required principal and interest payments on the
project notes payable to date. The project notes payable are non-recourse to
York. However, as a result of the Bond trustee's inability to set up certain
foreign escrow accounts pursuant to provisions included in the bond indenture,
the project notes payable have been classified as a current liability.
(3) Per Share Data
Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average common shares
outstanding for the period. Diluted earnings per share reflects the weighted
average common shares outstanding plus the potential dilutive effect of
securities or contracts which are in the money and convertible to common shares,
such as options and warrants, unless antidilutive based upon income from
continuing operations. The following is a reconciliation of the number of shares
used in the basic and diluted computation of earnings per share for the six and
three months ended August 31, 2001 and 2000.
6
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------- ---------------------------------- ----------------------------------
Six Months Ended Three Months Ended
August 31, August 31,
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
2001 2000 2001 2000
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Weighted average number of common shares
outstanding 16,262,762 15,162,816 16,262,827 15,213,575
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Average of unreleased ESOP shares (197,689) (12,856) (192,689) --
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Weighted average number of common
shares outstanding - basic 16,065,073 15,149,960 16,070,138 15,213,575
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Dilution (warrants and options) 2,070,880 -- 2,166,720 --
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
Weighted average number of common
shares and common share equivalents
outstanding - diluted 18,135,953 15,149,960 18,236,858 15,213,575
---------------------------------------------------- ---------------- ----------------- ---------------- -----------------
The following chart summarizes the number of options and warrants not
included in the computation of diluted earnings per share for the six and three
months ended August 31, 2001 and 2000, as the results would have been
antidilutive. The options and warrants expire between April 2002 and January
2011.
---------------------------------------- ----------------------------------- ------------------------------------
Six Months Ended Three Months Ended
August 31, August 31,
---------------------------------------- ----------------------------------- ------------------------------------
2001 2000 2001 2000
---------------------------------------- ----------------- ----------------- ------------------ -----------------
Options and Warrants 2,832,217 3,852,219 2,832,217 3,852,219
---------------------------------------- ----------------- ----------------- ------------------ -----------------
$3.13 to $7.31 $1.50 to $8.00 $3.13 to $7.31 $1.50 to $8.00
Price Range
---------------------------------------- ----------------- ----------------- ------------------ -----------------
(4) Discontinued Operations
A. Natural Gas Marketing
As of February 28, 2000, North American Energy Conservation, Inc.
("NAEC") discontinued its natural gas marketing business. On March 2, 2000, NAEC
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the Southern
District of New York. NAEC ceased the wholesale natural gas business as of
February 28, 2000, but continued its retail natural gas business until it sold
the retail business to Amerada Hess Corporation on April 20, 2000 for $250,000
payable between July 1, 2000 and December 31, 2000 which has been paid in full,
net of certain offsets. Amerada Hess assumed all obligations in connection with
the Syracuse office and equipment leases and hired all of the NAEC Syracuse
personnel. The filing of Chapter 11 was necessitated by an extreme credit crunch
which rendered NAEC unable to purchase natural gas to meet its commitments and
unable to pay its creditors for natural gas previously delivered.
As of February 28, 2000, the Company accounted for the NAEC wholesale
and retail natural gas marketing business as a discontinued operation, as well
as the electric marketing business, which was discontinued previously.
7
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The operating results of the discontinued natural gas operations
(which had been accrued as of February 28, 2000), are summarized as follows:
---------------------------------------- ----------------------------------- ------------------------------------
Six Months Ended Three Months Ended
August 31, August 31,
---------------------------------------- ----------------------------------- ------------------------------------
2001 2000 2001 2000
---------------------------------------- ----------------- ----------------- ------------------ -----------------
Revenues $ -- $ 2,734,250 $ -- $ --
---------------------------------------- ----------------- ----------------- ------------------ -----------------
Loss from operations $(2,583,735) $(3,290,198) $(1,189,188) $(1,285,548)
---------------------------------------- ----------------- ----------------- ------------------ -----------------
B. Net liabilities of discontinued operations
As of August 31, 2001, net liabilities of discontinued operations
consisted mainly of trade accounts receivable, trade accounts payable, an
accrual of alleged liquidated damages due certain gas suppliers and a balance
due for a line of credit.
(5) Income Taxes
For the six months ended August 31, 2001 a tax benefit of $800,000 was
recognized relating to the federal wind tax credits generated by the Big Spring
facility. For the three months ended August 31, 2001 the company recognized a
tax benefit of $340,000 relating to these federal wind tax credits and a current
tax benefit of $460,000. For the six and three months ended August 31, 2000 a
tax benefit of $1,000,000 and $500,000, respectively, was recognized related to
these federal wind tax credits.
(6) Other Income
Included in other income for the six and three months ended August 31,
2001 is a gain on sale of marketable securities of approximately $1,128,000 and
$36,000, respectively.
(7) Employee Notes and Advances
On June 1, 2001, in order to ensure retention of key employees,
including two executive vice presidents, the Company cancelled, in the form of
bonuses, certain employee notes and advances that had been outstanding for a
number of years. Approximately $500,000 was recognized during the quarter ended
August 31, 2001 and approximately $750,000 is being cancelled ratably over the
eighteen month period commencing June 1, 2001 provided certain conditions are
met, including that the two executive vice presidents do not resign during this
period.
8
YORK RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Recent Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations completed after June 30, 2001. SFAS 142
is effective for fiscal years beginning after December 15, 2001; however,
certain provisions of this Statement apply to goodwill and other intangible
assets acquired between July 1, 2001 and March 1, 2002. Major provisions of
these Statements and their effective dates for the Company are as follows:
o all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001.
o intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability.
o goodwill, as well as intangible assets with indefinite lives, acquired
after June 30, 2001, will not be amortized. Effective March 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
will no longer be subject to amortization.
o effective March 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator. All acquired goodwill must be assigned to reporting
units for purposes of impairment testing and segment reporting.
The Company does not expect the implementation of these standards to
have a material impact on the financial statements.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets", ("SFAS 144"). This statement is effective for fiscal years beginning
after December 15, 2001. This statement supercedes SFAS 121, while retaining
many of the requirements of such statement. Under SFAS 144 assets held for sale
will be included in discontinued operations if the operations and cash flows
will be or have been eliminated from the ongoing operations of the entity and
the entity will not have any significant continuing involvement in the
operations of the component. The Company is currently evaluating the impact this
may have.
9
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company's business is Greenpower, which includes developing,
constructing and operating Greenenergy production facilities, including those
that utilize natural gas as fuel to produce thermal and electric power
("cogeneration") or renewable energy projects primarily converting wind energy
into transmittable electric power.
Within our Greenpower business, we currently have five operating
facilities: in New York City, a 38MW Warbasse cogeneration facility (the
"Warbasse facility") and a 286MW Brooklyn Navy Yard cogeneration facility (the
"BNY facility"); in Big Spring, Texas, a 34MW wind energy facility (the "Big
Spring facility"), and a 6.6MW wind energy facility (the "West Texas project");
and a 225 MW natural gas fueled power project in the Republic of Trinidad and
Tobago (the "Trinidad project"). Other power projects are in earlier stages of
development.
On March 2, 2000, North American Energy Conservation, Inc. ("NAEC"), an
85% owned subsidiary of the Company, filed a voluntary petition under Chapter 11
of the United States Bankruptcy Code with the United States Bankruptcy Court for
the Southern District of New York. As of February 28, 2000, the Company
accounted for NAEC's wholesale and retail natural gas marketing business as a
discontinued operation, as well as the electric marketing business, which was
discontinued previously. On April 20, 2000, NAEC sold its retail natural gas
marketing business to Amerada Hess Corporation (see Note 4).
Liquidity and Capital Resources
Overview
The Company finances initial development of a project's cash needs from
its own funds. When a project is determined to be feasible, the Company will
generally seek to finance construction through some form of non-recourse project
financing. Once a project is operational, any additional capital requirements
are expected to be met by the operations of the facility. In addition, the
Company may finance future projects through the sale of partial interests (or in
some cases significant interests) or other financing techniques. For example,
construction of the West Texas project was financed by a capital contribution of
the limited partner in this project.
General corporate, pre-financing project development and negative
working capital needs have historically been met by the cash flow derived from
the power projects. The Company believes that from these cash flow sources and
from potential development fees received on future projects, there will be
sufficient cash flow for continuing operations for at least twelve months.
However, unless the Company is successful in raising new funds as described
below, there can be no assurance that it will have sufficient working capital to
meet its obligations.
10
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
York has guaranteed approximately $46 million of the total pre-petition
debt of NAEC. York and NAEC had conducted extensive discussions with both the
guaranteed and non-guaranteed creditor groups and had arrived at a settlement
agreement, which was approved by the bankruptcy court on January 8, 2001.
Pursuant to the settlement agreement, among other requirements, the Company
would have been required to fund $13 million into a trust for the benefit of the
creditors by May 1, 2001. To date, both NAEC and the Company have been unable to
fund the initial cash payment into the trust. The time for the Company to
perform had been extended while it continued negotiations with the creditors and
preparation of the required agreements. As a result of various circumstances the
settlement agreement originally reached with the various creditor groups will
now be subject to renegotiation.
In October 2001, the Company and certain wholly owned indirect
subsidiaries signed an agreement to sell the equity of York Ex International SRL
("York Ex"). York Ex is the indirect parent of the subsidiary that owns and
operates the Trinidad project. The sale is subject to certain significant
conditions precedent including obtaining sufficient funds to redeem the project
notes payable. The Company continues to pursue additional funds as discussed
above.
York, with the help of Credit Suisse First Boston ("CSFB") and other
consultants, is pursuing several alternative means, including the potential sale
of all or part of York's interest in various projects, of raising the funds
necessary to fund its initial cash obligation to creditors and meet its other
ongoing obligations.
There can be no assurance that the negotiations being conducted with
the creditor groups will ultimately resolve NAEC's liabilities or York's
obligations with respect thereto. There also can be no assurance that the
efforts of the Company to raise sufficient funds will be successful.
The Company has met all required principal and interest payments on the
project notes payable to date. The project notes payable are non-recourse to
York. However, as a result of the Bond trustee's inability to set up certain
foreign escrow accounts pursuant to provisions included in the bond indenture,
the project notes payable have been classified as a current liability.
General
During the six months ended August 31, 2001, cash and cash equivalents
decreased approximately $961,000. Cash provided by operating activities from
continuing operations was approximately $4,517,000. Cash used in activities of
discontinued operations was approximately $2,483,000.
During the six months ended August 31, 2001, investing activities used
approximately $1,802,000. Net cash used for the escrow accounts was
approximately $2,635,000 offset by proceeds on the sale of marketable securities
of approximately $1,232,000.
During the six months ended August 31, 2001, financing activities used
$1,194,000 primarily for a $1,650,000 principal payment on the project notes,
offset by $450,000 collected for payment of an ESOP note receivable.
11
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
2001 Compared to 2000
Revenues include the sale of electric energy to utility customers by
the Big Spring and Trinidad projects. Revenues also include power project
services such as engineering services, fuel procurement and other services.
Costs of revenues include fuel, payroll, depreciation and other operations and
maintenance costs. Revenues increased approximately $845,000 and costs of
revenues increased approximately $891,000 when comparing the six months ended
August 31, 2001 to the same period last year primarily from increased revenues
and the related cost of fuel of approximately $672,000 for the Warbasse
facility. Revenues decreased approximately $274,000 and costs of revenues
decreased approximately $533,000 when comparing the quarter ended August 31,
2001 to the same period last year primarily from decreased revenues and related
cost of fuel of approximately $550,000 for the Warbasse facility.
The Big Spring project revenues decreased approximately $239,000 and
$105,000, respectively, when comparing the six and three months ended August 31,
2001 to the same periods in the prior year. Revenues decreased due to lower
average winds. Costs of revenues increased approximately $196,000 and $133,000,
respectively, when comparing the six and three months ended August 31, 2001 to
the same periods in the prior year. This increase is due primarily to real
estate taxes.
The Trinidad project revenues increased approximately $556,000 and
$508,000, respectively, when comparing the six and three months ended August 31,
2001 to the same periods last year. These increases are due to a higher
availability to produce power this year. Costs of revenues increased
approximately $277,000 and $71,000, respectively, when comparing the six and
three months ended August 31, 2001 to the same periods last year. These
increases in costs of revenues are primarily due to higher planned maintenance
costs.
Engineering services revenues and related costs of revenues decreased
approximately $100,000 when comparing the six and three months ended August 31,
2001 to the same periods last year.
Selling, general and administrative expenses increased approximately
$126,000 and $596,000 respectively, when comparing the six and three months
ended August 31, 2001 to the same periods in the prior year. The increase for
the six months is primarily due to an increase in payroll expense as a result
principally of non cash bonuses in the form of cancellation of certain advances
and notes for certain employees, offset by decreases in professional fees and
certain other expenses. The increase for the three months is primarily due to
the non cash bonuses.
12
YORK RESEARCH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest income-WCTP decreased approximately $486,000 and $256,000,
respectively, when comparing the six and three months ended August 31, 2001 to
the same periods last year due to decreases in the variable interest rate
earned.
Interest income decreased approximately $269,000 and $144,000,
respectively, when comparing the six and three months ended August 31,2001 to
the same periods in the prior year. These decreases were caused by decreased
levels of cash available for investment due to payments on construction of the
Trinidad and Big Spring projects.
Interest expense was comparable for the six and three months ended
August 31, 2001 to the same periods last year.
Other income increased approximately $936,000 when comparing the six
months ended August 31, 2001 to the same period last year. This increase was
primarily due to a higher gain on the sale of marketable securities of
approximately $808,000. Other income decreased approximately $513,000 when
comparing the quarter ended August 31, 2001 to the same period last year. This
decrease was primarily due to a lower gain on the sale of marketable securities
of approximately $284,000 and a decrease in royalty fees from BNYLP of
approximately $210,000.
13
YORK RESEARCH CORPORATION AND SUBSIDIARIES
PART II
ITEM 1. Legal Proceedings
None
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits
None
(b) Current report on Form 8-K dated July 18, 2001, reporting
Item 9. Regulation FD Disclosure.
14
YORK RESEARCH CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of The Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 15, 2001 /s/ Robert M. Beningson
-------------------------
Robert M. Beningson
Chairman of the Board and
President
Dated: October 15, 2001 /s/ Michael Trachtenberg
------------------------
Michael Trachtenberg
Executive Vice President
and Chief Financial and
Accounting Officer
15