FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-846
THE YORK GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0490631
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
9430 OLD KATY ROAD, HOUSTON, TEXAS 77055
(Address of principal executive offices) (Zip Code)
(713) 984-5500
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [ ] NO [X]
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AS OF MAY 9,
1996 WAS 7,709,864.
THE YORK GROUP, INC.
INDEX
Part I. Financial Information PAGE
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996 (Unaudited) and December 31, 1995............2
Consolidated Statements of Income (Unaudited) -
Three Months Ended March 31, 1996 and 1995..................3
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 1996 and 1995..................4
Notes to Consolidated Financial Statements (Unaudited)............5
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.....................................7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders...................9
Item 5. Other Information.....................................................9
Item 6. Exhibits and Reports on Form 8-K.....................................10
Signature.....................................................................11
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE YORK GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited) (Audited)
March December
ASSETS 31, 1996 31, 1995
-------- --------
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 17,998 $ 10,896
Accounts and notes receivable, net of allowance for
doubtful accounts and returns and allowances of
$1,584 in 1996 and $1,586 in 1995:
Stockholders and affiliates .................. 6,767 6,457
Other ........................................ 4,828 4,682
Inventories (Note 2) .............................. 15,142 16,925
Prepaid expenses .................................. 1,022 416
Deferred tax assets, net .......................... 2,046 1,918
-------- --------
Total current assets ........................... 47,803 41,294
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements ............................. 2,907 2,897
Buildings and improvements ........................ 10,003 9,973
Equipment ......................................... 26,910 26,607
Construction-in-progress .......................... 1,680 1,197
-------- --------
41,500 40,674
Less: accumulated depreciation .................... (13,641) (12,819)
-------- --------
Property, plant and equipment, net ............ 27,859 27,855
-------- --------
NOTES RECEIVABLE:
Related party ..................................... 851 903
Other ............................................. 41 28
OTHER NONCURRENT ASSETS ............................... 245 252
-------- --------
Total assets .................................. $ 76,799 $ 70,332
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4) ........ $ 9,822 $ --
Accounts payable .................................. 3,926 3,701
Accrued expenses .................................. 9,672 8,292
Income taxes payable .............................. 1,692 148
-------- --------
Total current liabilities ...................... 25,112 12,141
-------- --------
OTHER NONCURRENT LIABILITIES .......................... 1,400 1,400
-------- --------
DEFFERED TAX LIABILITY ................................ 3,865 3,686
-------- --------
LONG-TERM DEBT (Note 4) ............................... 25,000 34,660
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000
shares authorized and unissued ................. -- --
Common stock, $.01 par value, 25,000,000
shares authorized; 5,564,864 and
5,388,864 shares issued and outstanding ........ 56 54
Additional paid-in capital ........................ 2,866 2,428
Retained earnings ................................. 18,500 15,963
-------- --------
Total stockholders' equity ..................... 21,422 18,445
-------- --------
Total liabilities and stockholders' equity ..... $ 76,799 $ 70,332
======== ========
The accompanying notes are an integral part of these financial statements.
2
THE YORK GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended March 31 ,
1996 1995
----------- -----------
NET SALES
(including sales to stockholders and affiliates
of $22,732 and $21,176 in 1996 and 1995,
respectively) ................................... $ 38,102 $ 35,273
COST OF SALES .................................... 29,540 27,317
----------- -----------
Gross profit ........................... 8,562 7,956
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ...................... 2,694 2,385
----------- -----------
Operating income ....................... 5,868 5,571
INTEREST EXPENSE, NET ........ ................... (696) (774)
----------- -----------
INCOME BEFORE INCOME TAXES ....................... 5,172 4,797
INCOME TAX PROVISION ............................. 1,939 1,847
----------- -----------
NET INCOME ....................................... $ 3,233 $ 2,950
=========== ===========
NET INCOME PER SHARE ............................. $ .58 $ .54
=========== ===========
AVERAGE SHARES OUTSTANDING ....................... 5,584,437 5,434,365
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
THE YORK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................. $ 3,233 $ 2,950
Adjustments to reconcile income to net cash
provided by operating activities-
Depreciation and amortization ........................... 991 955
Deferred income tax provision ........................... 51 154
Loss on disposition of property, plant and equipment .... 16 --
Provision for doubtful accounts ......................... 15 17
Decrease/(Increase) in:
Accounts receivable .................................. (484) (591)
Inventories .......................................... 1,783 310
Prepaid expenses ..................................... (606) (96)
Prepaid income taxes ................................. -- 113
Increase/(Decrease) in:
Accounts payable ..................................... 225 (179)
Accrued expenses ..................................... 1,380 1,341
Income taxes payable ................................. 1,544 1,234
Other noncurrent liabilities ......................... -- (10)
-------- -------
Net cash provided by operating activities ......... 8,148 6,198
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities purchased ....................................... -- (11)
Capital expenditures ....................................... (844) (1,033)
Collection of notes receivable ............................. 79 74
Advances under notes receivable ............................ (25) --
-------- -------
Net cash used in investing activities ............. (790) (970)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ............................................. (696) --
Repayment of long-term debt ................................ -- (285)
Proceeds from issuance of common stock,
net of issuance costs .................................... 440 296
-------- -------
Net cash provided by (used in) financing activities (256) 11
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS ..................... 7,102 5,239
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................ 10,896 2,837
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................... $ 17,998 $ 8,076
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
THE YORK GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of The
York Group, Inc. and all majority owned subsidiaries (the "Company") and have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
December 31, 1995 audited financial statements and the notes thereto. In the
opinion of the Company, all adjustments and eliminations, consisting only of
normal and recurring adjustments, necessary to present fairly the consolidated
financial position of the Company as of March 31, 1996 and December 31, 1995 and
the consolidated results of its operations and cash flows for the three months
ended March 31, 1996 and 1995 have been included. The results of operations for
such interim periods are not necessarily indicative of the results for the full
year.
2. INVENTORIES
Inventories consisted of the following :
March 31, December 31,
1996 1995
------- -------
( in thousands )
Raw materials ........................... $ 8,959 $ 8,173
Work in process ........................ 2,849 2,871
Finished goods .......................... 3,334 5,881
------- -------
$15,142 $16,925
======= =======
3. CONTINGENCIES
Environmental Matters
In 1991, the Georgia Department of Natural Resources (the GDNR) issued a Notice
of Violation - Consent Order alleging that the Company's Lawrenceville, Georgia
facility was storing and treating hazardous wastes without a permit and was
otherwise in violation of certain hazardous waste regulations in the operation
of its electroplating line and associated wastewater treatment system. The GDNR
approved a closure-plan and post closure plan for the facility in August 1994,
and issued a Hazardous Waste Facility Permit effective September 27, 1995 to
document these post-closure care requirements. The Company has provided
financial assurance in the form of a letter of credit in the amount of
approximately $1,300,000 to secure its post - closure care obligations.
At March 31, 1996 and December 31, 1995, the Company had a reserve of
approximately $1,500,000 and $1,700,000, respectively , for the estimated future
costs to complete the implementation of the post-closure plan. It is possible
that the remediation costs could be different than these reserves due to
unforseen factors that arise as the closure occurs and due to the length of time
during which monitoring activities will be conducted. Accordingly, these
reserves will be adjusted as information becomes available indicating that
higher or lower remediation costs will be incurred.
5
4. SUBSEQUENT EVENTS
In April 1996, the Company completed an initial public offering (the "Offering")
of 2,645,000 shares of its common stock. 2,145,000 shares were sold by the
Company and 500,000 shares were sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company did not receive any of the proceeds from
the sale of shares by the Selling Stockholders. Net proceeds to the Company from
the Offering, after deduction of associated expenses, were approximately
$25,400,000.
The Company utilized a portion of the proceeds from the Offering to repay its
$11,000,000 Subordinated Series A Note, which was originally issued at a
discount. Accordingly, at March 31, 1996, $9,822,000 of debt has been classified
as current. The early extinguishment of this debt will result in an
extraordinary charge of $736,000, net of tax, during the three month period
ending June 30, 1996, related to the write-off of the unamortized discount.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The Company is the second largest casket manufacturer in the United
States and produces a wide variety of metal and hardwood caskets, as well as
casket components. The Company's finished caskets are primarily marketed through
a network of privately owned distributors, which serve an estimated 15,000
domestic funeral homes, as well as certain foreign markets. Casket components
are sold to other casket manufacturers and assemblers.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Net sales increased $2.8 million, or 8.0%. The increase reflects a 7.3%
increase in finished casket volume, a 5.5% increase in components volume as well
as increased net prices, partially offset by disproportionate growth in lower
priced finished metal caskets.
Gross profit increased $606,000, or 7.6%. Gross margin decreased from
22.6% to 22.5%. The gross margin was affected by including increased sales
volume and net price increases, offset by overtime production requirements
resulting from the extreme weather during late 1995 and early 1996, high demand
for new metal products which were introduced at price points aimed at market
share growth, and weaker demand for hardwood product in the month of March.
Selling, general and administrative expenses increased $309,000, or
13.0%, and as a percentage of net sales, increased from 6.8% to 7.1%. The
increase in selling, general and administrative expenses as a percentage of net
sales reflects an increase in the number of personnel and related hiring and
relocation costs, expenses related to the Company's launch of its preneed
insurance program and general cost increases, offset partially by higher net
sales.
Net interest expense decreased $78,000, or 10.1%. The decrease reflects
a slightly lower debt level and increased interest income, offset partially by
higher debt discount amortization.
The Company's effective tax rate decreased from 38.5% to 37.5%. The
decrease reflects a decrease in nondeductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on cash flow from operations as
well as borrowings from banks and other lenders to fund its operations. In April
1996 the Company completed an initial public offering of common stock in which
it sold 2,145,000 shares of common stock at $13 per share. A portion of the net
proceeds of the offering of approximately $25.4 million was used to repay the
Company's outstanding subordinated debt and the remainder will be available for
general corporate purposes, including potential acquisitions.
Cash and cash equivalents were $18.0 million at March 31, 1996, an
increase of $7.1 million from December 31, 1995. For the three months ended
March 31, 1996, cash flows from operations totaled approximately $8.1 million,
cash used in investing activities totaled $790,000 and cash used in financing
activities totaled $256,000.
7
Capital expenditures during the three months ended March 31, 1996 were
$844,000 compared to approximately $1.0 million in 1995. The decrease reflects
the timing of capital projects. The Company has outstanding commitments of
approximately $1.2 million for capital improvements at its hardwood
manufacturing facility, and the Company's current plans call for capital
spending to increase during the second and third quarters of 1996.
Long-term debt, including current maturities, at March 31, 1996 totaled
$34.8 million compared to $34.7 million at December 31, 1995, with the increase
attributable to accretion of debt discount during the three month period ended
March 31, 1996. Long-term debt at March 31, 1996 consisted of $25 million of
Senior Notes and $9.8 million related to the Subordinated Series A Note which
was originally issued at a discount (face amount of $11 million). In April 1996
the Company utilized a portion of the proceeds of its initial public offering of
common stock to repay the Subordinated Series A Note and, during the second
quarter of 1996, the Company will record an extraordinary charge of
approximately $736,000, net of tax, to write off the remaining unamortized debt
discount.
The Company maintains a $10 million unsecured revolving credit facility
with a major bank which expires January 31, 1997. The revolving credit facility
provides for borrowings and the issuance of letters of credit up to the lesser
of $10 million or a borrowing base, consisting of accounts receivable and
inventory. At March 31, 1996, no borrowings were outstanding, $2.5 million of
letters of credit were outstanding and $7.5 million was available under the
revolving credit facility.
The Company's capital resources consist of its cash balance at March
31, 1996, the remaining proceeds of its initial public offering, future cash
flows from operations and the borrowing capacity under the revolving credit
facility. The Company believes that these resources should be sufficient to fund
capital expenditures and meet other operating requirements for the foreseeable
future. These resources should also be sufficient to fund currently identified
potential acquisition opportunities.
SEASONALITY
Historically, the Company's operations have experienced certain
seasonal patterns. Generally, the Company's net sales are highest in the first
quarter and lowest in the third quarter of each year. These fluctuations are due
in part to the seasonal variance in the death rate, with a greater number of
deaths generally occurring in cold weather months, and the timing of the
Company's annual manufacturing facility vacation shutdowns, which occur
primarily in the third quarter. In addition, operating results can vary between
quarters of the same or different years due to, among other things, fluctuations
in the number of deaths, changes in product mix, limitations on the timing of
price increases, and variances in the cost of raw materials. As a result, the
Company experiences variability in its operating results on a quarterly basis,
which may make quarterly year-to-year comparisons less meaningful.
INFLATION
Historically, inflation has not had a material impact on the results of
operations of the Company.
8
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company was reincorporated in Delaware pursuant to a merger of The
York Group, Inc., a Pennsylvania corporation, with and into The York Group,
Inc., a Delaware corporation. A special meeting of stockholders of the
Pennsylvania corporation was held on January 24, 1996 to (i) approve the merger,
(ii) approve the Company's 1996 Employee Stock Option Plan, and (iii) approve
the Company's 1996 Independent Director Stock Option Plan. As to each of the
matters, the number of votes cast for, against, and withheld were as follows:
FOR AGAINST WITHHELD
Approve the merger ...................... 1,103,387 -0- -0-
Approve the Company's
1996 Stock Option Plan .................. 1,084,087 -0- 19,300
Approve the Company's 1996
Independent Director Stock Option
Plan .................................... 1,005,313 78,774 19,300
The stockholder of the newly formed Delaware corporation approved the merger and
the option plans by unanimous written consent on January 24, 1996.
On March 11, 1996 the Company held a special meeting of stockholders to
elect directors. The following table sets forth the name of each director, and
the number of votes cast for each director or withheld.
WITHHELD
NAME FOR AUTHORITY
Bruce E. Elder ............................ 4,701,120 -0-
George L. Foley, Jr. ...................... 4,635,920 65,200
Eldon P. Nuss ............................. 4,701,120 -0-
Kirk P. Pendleton ......................... 4,701,120 -0-
Gerald D. Runnels ......................... 4,635,920 65,200
Bill W. Wilcock ........................... 4,701,120 -0-
ITEM 5. OTHER INFORMATION
On April 8, 1996, the Company closed the initial public offering of
2,645,000 share of its common stock, 2,145,000 shares of which were sold by the
Company and 500,000 shares of which were sold by stockholders of the Company.
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial data schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K during the three months ended March 31, 1996.
10
SIGNATURE
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.
May 9, 1996 THE YORK GROUP INC.
BY:/S/ DAVID F. BECK
David F. Beck
Vice President and Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE YORK GROUP, INC. 1996 FIRST QUARTER REPORT ON FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,998
<SECURITIES> 0
<RECEIVABLES> 13,179
<ALLOWANCES> 1,584
<INVENTORY> 15,142
<CURRENT-ASSETS> 47,803
<PP&E> 41,500
<DEPRECIATION> 13,641
<TOTAL-ASSETS> 76,799
<CURRENT-LIABILITIES> 25,112
<BONDS> 25,000
0
0
<COMMON> 56
<OTHER-SE> 21,366
<TOTAL-LIABILITY-AND-EQUITY> 76,799
<SALES> 38,102
<TOTAL-REVENUES> 38,102
<CGS> 29,540
<TOTAL-COSTS> 29,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 696
<INCOME-PRETAX> 5,172
<INCOME-TAX> 1,939
<INCOME-CONTINUING> 3,233
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,233
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
