York International Corporation reported net income of U.S. $14.8 million for the third quarter of 2005. Excluding the three items listed below, net income for the third quarter of 2005 would have been $39.4 million, an improvement of 25.8 percent on a revenue increase of 11.5 percent, as compared to $31.3 million for the third quarter of 2004. Third quarter results were reduced by the following items: pre-tax costs associated with the restructuring program announced on Sept. 20, 2005 of $13.7 million ($13.1 million after tax), pre-tax expenses related to the proposed merger with Johnson Controls, Inc. of $1.2 million ($0.9 million after tax), and a tax charge of $10.6 million (or $0.25 per share) associated with the Company's intention to remit approximately $220 million of intercompany dividends under the American Jobs Creation Act (AJCA).
C. David Myers, president and CEO, said, "Our performance exceeded our expectations and reflects solid execution on key initiatives and exceptional performance at UPG."
Net sales increased 11.5 percent from the third quarter of 2004 to $1.3 billion. UPG delivered very strong sales growth of 23.5 percent; Americas and Bristol delivered double-digit increases while EMEA and Asia sales were weak as compared to the third quarter of 2004. Income from operations improved 6.1 percent to $52.1 million as compared to $49.1 million in 2004 despite $13.7 million in pre-tax restructuring and other expenses and $1.2 million in pre-tax merger costs. Excluding the restructuring and merger-related costs, income from operations improved 36.5 percent. Strength in the Global Applied Service businesses and the benefit from realized price increases in Americas, EMEA and UPG more than offset increases in material costs, continued weakness in European markets and continued pricing pressure in Asia.
Net interest expense in the third quarter of 2005 increased to $12.5 million as compared to $10.9 million in the third quarter of 2004 as a result of higher average borrowing rates. Income tax expense was greater as a result of increased income in higher tax-rate jurisdictions and the tax charge related to the AJCA mentioned above. The operating income tax rate, which excludes the impact of the tax effect of restructuring costs, merger expenses and dividends under the AJCA, was 30.1 percent in the third quarter of 2005 and the projected operating tax rate for the full year is 29.5 percent.
Cash flow in the third quarter also exceeded expectations and resulted in an improvement in the debt (including the receivables securitization) to capital ratio, to 42.9 percent as compared to 49.7 percent at the end of the third quarter of 2004.
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