SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1 to Current Report on Form 8-K
Dated March 25, 1998 Reporting Event of March 16, 1998
CURRENT REPORT
Pursuant To Section 13 Or 15 (d) Of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 1998
THE YORK GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-28096 76-0490631
(State or other jurisdiction of (Commission (I.R.S. employer
incorporation or organization) file number) 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)
<PAGE>
The undersigned registrant hereby amends the following item of its Current
Report on Form 8-K dated March 25, 1998, reporting an event on March 16, 1998 as
set forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Business Acquired:
Colonial Guild, Ltd. and subsidiaries Audited
Consolidated Financial Statements
Table of Contents
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997
and 1996
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1997, 1996 and
1995
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Colonial Guild, Ltd. and Subsidiaries
Audited Consolidated Financial Statements
December 31, 1997
CONTENTS
Report of Independent Auditors...............................................1
Audited Consolidated Financial Statements
Consolidated Balance Sheets..................................................2
Consolidated Statements of Income............................................4
Consolidated Statements of Changes in Shareholders' Equity...................5
Consolidated Statements of Cash Flows........................................6
Notes to Consolidated Financial Statements...................................7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Colonial Guild, Ltd.
We have audited the accompanying consolidated balance sheets of Colonial Guild,
Ltd. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Colonial Guild,
Ltd. and subsidiaries at December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
February 12, 1998, except
for Note 10, as to which the
date is February 17, 1998
<PAGE>
COLONIAL GUILD, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1997 1996
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ....................... $ 7,811,510 $ 3,751,641
Securities available for sale, at fair value .... 10,028,541 9,073,956
Trading account securities, at fair value ....... -- 2,305,072
Receivables--less allowance for doubtful accounts
of $176,000 in 1997 and $101,000 in 1996 ....... 3,876,742 3,365,222
Inventories:
Raw materials .................................. 1,370,512 1,346,066
In process and finished goods .................. 1,157,330 1,062,060
Prepaid expenses and other current assets ....... 1,608,119 1,448,447
------------ ------------
Total current assets .............................. 25,852,754 22,352,464
Other assets:
Goodwill ........................................ 2,338,749 2,597,615
Other non-current assets ........................ 418,048 339,364
------------ ------------
2,756,797 2,936,979
Fixed assets:
Land ............................................ 629,675 619,675
Buildings and improvements ...................... 4,113,310 4,266,641
Equipment and machinery ......................... 15,274,625 14,468,697
------------ ------------
20,017,610 19,355,013
Accumulated depreciation ........................ (10,487,914) (9,811,447)
------------ ------------
9,529,696 9,543,566
------------ ------------
$ 38,139,247 $ 34,833,009
============ ============
</TABLE>
<PAGE>
COLONIAL GUILD, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
<TABLE>
<CAPTION>
December 31
1997 1996
------------ ------------
<S> <C> <C>
Liabilities and shareholders' equity Current liabilities:
Accounts payable ...................................... $ 913,947 $ 710,485
Income taxes payable .................................. 207,041 --
Accrued salaries and wages ............................ 1,588,374 1,657,193
Deferred income taxes ................................. 195,374 630,355
Accrued expenses and other liabilities ................ 1,821,717 2,248,664
------------ ------------
Total current liabilities ............................... 4,726,453 5,246,697
Long-term obligations:
Deferred compensation ................................. 416,705 456,885
Deferred taxes ........................................ 128,599 412,519
Other long-term liabilities ........................... 3,985,933 3,921,065
------------ ------------
4,531,237 4,790,469
Shareholders' equity:
Common stock, par value of $1.00 per
share--authorized 1,000,000 shares; 662,860 and
647,851 shares issued including treasury shares ...... 662,860 647,851
Additional paid-in capital ............................ 6,385,877 5,567,888
Retained earnings ..................................... 24,891,142 21,016,650
Treasury shares--151,530 and 149,230 shares at
cost ................................................. (3,072,705) (2,975,323)
Unrealized gains on securities available for
sale, net of deferred taxes .......................... 14,383 538,777
------------ ------------
28,881,557 24,795,843
------------ ------------
$ 38,139,247 $ 34,833,009
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COLONIAL GUILD, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
1997 1996 1995
----------- ----------- -----------
Revenues:
Net sales ....................... $40,076,366 $32,008,668 $26,068,397
Other income .................... 2,565,921 1,066,189 1,276,522
----------- ----------- -----------
Total revenues .................... 42,642,287 33,074,857 27,344,919
Costs and expenses:
Cost of goods sold .............. 22,044,270 17,283,702 13,839,763
Selling and administrative ...... 11,360,346 9,279,564 7,298,338
Other expenses .................. 2,549,403 1,080,159 617,431
----------- ----------- -----------
Total costs and expenses .......... 35,954,019 27,643,425 21,755,532
----------- ----------- -----------
Income before income taxes ........ 6,688,268 5,431,432 5,589,387
Income taxes ...................... 2,558,121 1,861,948 2,004,007
=========== =========== ===========
Net income ........................ $ 4,130,147 $ 3,569,484 $ 3,585,380
=========== =========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
COLONIAL GUILD, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
GAINS
(LOSSES) ON
ADDITIONAL SECURITIES
COMMON PAID-IN RETAINED TREASURY AVAILABLE
STOCK CAPITAL EARNINGS STOCK FOR SALE TOTAL
-------- ---------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 .................. $618,311 $5,308,043 $ 14,320,086 $(2,214,532) $ (56,247) $ 17,975,661
Cash dividends ............................... -- -- (203,935) -- -- (203,935)
Exercise of stock options .................... 24,262 200,830 -- -- -- 225,092
Purchase of stock for treasury
(6,400 shares) ............................. -- -- -- (235,776) -- (235,776)
Change in unrealized gains (losses)
on securities available for sale ........... -- -- -- -- 67,374 67,374
Net income for 1995 .......................... -- -- 3,585,380 -- -- 3,585,380
-------- ---------- ------------ ----------- --------- ------------
Balances at December 31, 1995 .................. 642,573 5,508,873 17,701,531 (2,450,308) 11,127 21,413,796
Cash dividends ............................... -- -- (254,365) -- -- (254,365)
Exercise of stock options .................... 5,278 59,015 -- -- -- 64,293
Purchase of stock for treasury
(12,400 shares) ............................ -- -- -- (525,015) -- (525,015)
Change in unrealized gains (losses)
on securities available for sale ........... -- -- -- -- 527,650 527,650
Net income for 1996 .......................... -- -- 3,569,484 -- -- 3,569,484
-------- ---------- ------------ ----------- --------- ------------
Balances at December 31, 1996 .................. 647,851 5,567,888 21,016,650 (2,975,323) 538,777 24,795,843
Cash dividends ............................... -- -- (255,655) -- -- (255,655)
Exercise of stock options .................... 3,375 44,444 -- -- -- 47,819
Issuance of common stock
(11,634 shares) ............................ 11,634 773,545 -- -- -- 785,179
Purchase of stock for treasury
(2,300 shares) ............................. -- -- -- (97,382) -- (97,382)
Change in unrealized gains (losses)
on securities available for sale ........... -- -- -- -- (524,394) (524,394)
Net income for 1997 .......................... -- -- 4,130,147 -- -- 4,130,147
-------- ---------- ------------ ----------- --------- ------------
Balances at December 31, 1997 .................. $662,860 $6,385,877 $ 24,891,142 $(3,072,705) $ 14,383 $ 28,881,557
======== ========== ============ =========== ========= ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COLONIAL GUILD, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities
Net income .................................................... $ 4,130,147 $ 3,569,484 $ 3,585,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............................. 2,639,856 1,749,561 1,029,490
Deferred income taxes ...................................... (383,633) 315,690 348,527
Net gain on disposals of securities ........................ (1,968,326) (69,440) (149,588)
Net loss (gain) on disposals of fixed
assets ................................................... 95,249 (4,588) (1,774)
Unrealized gains on securities ............................. -- (342,566) (533,889)
Proceeds from sales of trading account
securities ............................................... 2,660,210 1,568,659 2,141,364
Purchases of trading account securities .................... -- (858,299) (4,048,494)
Changes in operating assets and
liabilities:
Accounts receivable ...................................... (511,520) 854,073 (483,997)
Inventories .............................................. (119,716) 142,063 (60,651)
Income taxes ............................................. 207,041 (206,975) 268,444
Prepaid expenses and other current
assets .................................................. (159,672) 46,494 (770,836)
Other assets ............................................. (78,684) (55,369) 57,230
Accounts payable, accrued expenses,
deferred compensation, and other
liabilities ............................................. (267,618) 140,345 192,814
------------ ------------ ------------
Net cash provided by operating activities ..................... 6,243,334 6,849,132 1,574,020
Investing activities
Proceeds from sales of securities
available for sale .......................................... 14,668,481 10,811,054 15,906,160
Purchases of securities available for sale .................... (14,918,501) (7,665,608) (16,335,126)
Proceeds from sale of equipment ............................... 33,871 22,500 6,760
Purchases of property, plant, and equipment ................... (2,447,277) (1,344,549) (1,222,644)
Net cash paid in acquisition .................................. -- (6,330,662) --
------------ ------------ ------------
Net cash used in investing activities ......................... (2,663,426) (4,507,265) (1,644,850)
Financing activities
Proceeds from revolving line of credit and
notes payable ............................................... -- -- 60,000
Principal payments on line of credit and
notes payable ............................................... -- -- (60,000)
Proceeds from issuance of common stock ........................ 785,179 -- --
Proceeds from exercise of stock options ....................... 47,819 64,293 225,092
Purchase of common stock for treasury ......................... (97,382) (194,763) (235,776)
Dividends paid ................................................ (255,655) (254,365) (203,935)
------------ ------------ ------------
Net cash provided by (used in) financing
activities .................................................. 479,961 (384,835) (214,619)
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents ................................................. 4,059,869 1,957,032 (285,449)
Cash and cash equivalents at beginning of
year ........................................................ 3,751,641 1,794,609 2,080,058
------------ ------------ ------------
Cash and cash equivalents at end of year ...................... $ 7,811,510 $ 3,751,641 $ 1,794,609
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
COLONIAL GUILD, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The accounting and reporting policies of Colonial Guild, Ltd. and its
subsidiaries (the Company) conform with generally accepted accounting principles
and require management to make estimates and develop assumptions that affect the
amounts reported in the financial statements and related footnotes. Actual
results could differ from management's estimates. The following is a summary of
the more significant policies.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Colonial Guild,
Ltd. and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in bank accounts, money market funds,
and certificates of deposit with maturities of 90 days or less.
SECURITIES AVAILABLE FOR SALE
Management determines the appropriate classification of securities at the time
of purchase. Debt securities and marketable equity securities not classified as
trading are classified as available for sale. Available-for-sale securities are
stated at estimated fair value, with the unrealized gains and losses, net of
tax, reported in a separate component of shareholders' equity.
TRADING ACCOUNT SECURITIES
Trading account securities are held for resale in anticipation of short-term
market movements. Trading account assets, consisting of debt and marketable
equity securities and money market instruments, are stated at estimated fair
value. Gains and losses, both realized and unrealized, are included in other
income.
CREDIT CONCENTRATION AND RISK
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments,
securities available for sale, trade accounts receivable, and cash surrender
value of life insurance.
The Company maintains cash and money market funds with several financial
institutions and broker dealers. At December 31, 1997 and 1996, the Company had
invested approximately $5,619,162 and $1,188,000 in highly liquid money market
funds. Periodic evaluations of the relative credit standing of these
institutions are performed by management as part of the Company's investment
strategy.
<PAGE>
Customers for the Company's principal products are in the interment industry. No
one customer accounts for a significant amount of the Company's year-end
receivables. Credit is extended based on an evaluation of the customer's
financial condition, and generally collateral is not required. Credit losses are
provided for in the financial statements, and consistently have been within
management's expectations.
The Company maintains life insurance policies with a major insurance company.
Management monitors this credit risk by periodically reviewing the financial
condition of this insurance company by referring to insurance industry
publications such as A.M. Best ratings.
INVENTORIES
Inventories are valued at the lower of cost or market with cost determined under
the first-in, first-out (FIFO) method.
GOODWILL
Goodwill is the excess of cost over the fair value of net assets of subsidiaries
acquired and is being amortized by the straight-line method through 2014. The
carrying amount of goodwill is reviewed if facts and circumstances suggest that
it may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the estimated undiscounted cash flows of the
entity acquired over the remaining amortization period, the carrying amount of
the goodwill is reduced by the estimated shortfall of cash flows.
FIXED ASSETS
Property, plant, and equipment is stated on the basis of historical cost.
Depreciation is computed over the estimated useful lives using both
straight-line and accelerated methods. Expenditures for repairs and maintenance
are expensed when incurred.
INCOME TAXES
The consolidated provisions for income taxes are based upon reported income and
expense. Deferred income taxes are provided for temporary differences between
the tax basis of an asset or liability, and its reported amount in the financial
statements at the statutory tax rate.
INSURANCE
The Company maintains self-funded insurance programs for hospitalization and
medical coverage, with annual losses limited to $75,000 per individual through
the use of stop-loss policies. Provision has been made for all claims incurred.
PENSION PLANS
The Company has a defined benefit pension plan covering substantially all of its
employees, except certain employees who are covered by collective bargaining
agreements. Employees of Gorham Bronze immediately became eligible to
participate in the Company's plan upon acquisition. The Company's policy is to
fund amounts, as necessary on an actuarial basis, to provide assets sufficient
to meet the benefits to be paid to Plan members in accordance with the
requirements of ERISA. Plan assets are primarily invested in unallocated
insurance contracts and an insurance master trust.
<PAGE>
DEFERRED COMPENSATION
The Company has a deferred compensation plan for certain key employees, which
will require payments over a fifteen to twenty-year period upon retirement of
the participants.
OTHER LONG-TERM LIABILITIES
The Company manufactures memorials under a pre-need program whereby a pro rata
portion of the sales price is deferred and the estimated costs to complete the
memorials are accrued as other long-term liabilities.
RESEARCH AND DEVELOPMENT
Research and development costs are included in costs of goods sold and charged
to expense when incurred. Total research and development costs charged to
expense were $311,801, $359,932, and $159,359 in 1997, 1996, and 1995.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been restated to
conform with current year presentation.
2. ACQUISITION
On August 1, 1996, the Company acquired certain assets, with an estimated fair
value of approximately $11,238,000, and assumed certain liabilities of
approximately $4,035,000 of Heritage International Corporation dba Gorham
Bronze, located in Aiken, South Carolina. The transaction was accounted for
under the purchase method of accounting. Accordingly, the acquisition costs have
been allocated to the assets and liabilities acquired based upon their fair
values at the acquisition date. The operating results of Gorham are included in
the consolidated income statements since August 1, 1996. Goodwill of
approximately $1,379,000 is being amortized over 15 years from the acquisition
date.
3. INVESTMENTS
The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Treasury obligations ..................... $ 5,221,637 $ 3,421 $ -- $ 5,225,058
Obligations of states and
political subdivisions ...................... 4,708,575 35,582 16,058 4,728,099
U.S. corporate securities ..................... 74,748 636 -- 75,384
=========== ======== =========== ===========
$10,004,960 $ 39,639 $ 16,058 $10,028,541
=========== ======== =========== ===========
DECEMBER 31, 1996
U.S. Treasury notes ........................... $ 1,989,936 $ 7,133 $ -- $ 1,997,069
Obligations of states and
political subdivisions ...................... 3,383,950 12,520 18,405 3,378,065
U.S. corporate securities ..................... 2,816,829 881,993 -- 3,698,822
=========== ======== =========== ===========
$ 8,190,715 $901,646 $ 18,405 $ 9,073,956
=========== ======== =========== ===========
</TABLE>
<PAGE>
The amortized cost and estimated fair value of debt securities available for
sale at December 31, 1997, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because the issuers of the
securities may have the right to prepay obligations without prepayment
penalties.
ESTIMATED
FAIR
COST VALUE
----------- -----------
Due in one year or less ........................ $ 6,334,119 $ 6,337,037
Due after one year through three years ......... 1,854,625 1,857,269
Due after three years .......................... 1,816,218 1,834,235
=========== ===========
$10,004,962 $10,028,541
=========== ===========
Gross realized gains on sales of available-for-sale securities totaled
$1,804,353, $191,769, and $40,700 in 1997, 1996, and 1995. Gross realized losses
totaled $18,319, $33,344, and $56,014 in 1997, 1996, and 1995. Management
specifically identifies the cost basis of each security sold in determining the
amount of realized gains or losses to be recognized.
4. RETIREMENT PLANS
The following table sets forth the funded status and amounts recognized in the
Company's statement of financial position at December 31 relating to the
Company's defined benefit pension plan:
1997 1996
----------- -----------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $3,464,000 in 1997
and $2,668,000 in 1996 ........................ $(3,637,000) $(2,794,000)
=========== ===========
Projected benefit obligation for service
rendered to date ............................... $(4,322,463) $(3,253,238)
Plan assets at fair value, primarily
unallocated insurance contracts ................ 4,853,015 3,794,734
----------- -----------
Plan assets in excess of projected benefit
obligation ..................................... 530,552 541,496
Unrecognized prior service cost from plan
amendment, net of amortization ................. 128,915 137,930
Unrecognized gain (loss) ......................... 150,044 (86,031)
Unrecognized net asset at transition, net
of amortization ................................ (55,440) (59,400)
----------- -----------
Prepaid pension cost included in
consolidated balance sheet ..................... $ 754,071 $ 533,995
=========== ===========
<PAGE>
Net pension cost included the following components:
1997 1996 1995
--------- --------- ---------
Service cost--benefits earned during the
period ................................ $ 310,319 $ 178,203 $ 153,703
Interest cost on projected benefit
obligation ............................ 202,667 206,339 185,422
Actual return on plan assets ............ (320,675) (269,983) (213,119)
Net deferrals ........................... 5,055 5,055 5,055
--------- --------- ---------
Net periodic pension cost ............... $ 197,366 $ 119,614 $ 131,061
========= ========= =========
The more significant assumptions underlying the actuarial computations are as
follows:
DECEMBER 31
-----------------------------------
1997 1996 1995
------- ------- -------
Assumed rate of return ............... 8.00% 8.00% 8.00%
Salary increase per year ............. 4.00 4.00 4.00
Weighted-average discount rate ....... 7.00 7.00 7.75
Certain employees of the Company's subsidiaries are also covered by union
sponsored defined benefit pension plans. The Company contributed, and charged to
expense, approximately $23,000 in 1997 and 1996 for such plans. These amounts
were determined by the union contracts and the Company does not administer or
control these funds.
The Company has a defined contribution plan that covers all nonunion employees.
Contributions are made to the plans based on a percentage of participants' gross
wages. During 1997, 1996, and 1995, the Company contributed, and charged to
expense, approximately $82,000, $61,000, and $48,000, respectively, for such
plans.
5. INCOME TAXES
Income taxes included in the Consolidated Statements of Income consist of:
1997 1996 1995
----------- ----------- ----------
Federal:
Current .................. $ 2,569,155 $ 1,608,126 $1,472,383
Deferred ................. (334,449) (4,075) 242,272
----------- ----------- ----------
2,234,706 1,604,051 1,714,655
State:
Current .................. 372,599 258,530 183,097
Deferred ................. (49,184) (633) 106,255
----------- ----------- ----------
323,415 257,897 289,352
=========== =========== ==========
Income tax provision ....... $ 2,558,121 $ 1,861,948 $2,004,007
=========== =========== ==========
Income taxes paid .......... $ 2,433,575 $ 2,053,600 $1,390,300
=========== =========== ==========
The Company's effective tax rate varies from the statutory federal income tax
rate principally due to state income taxes.
<PAGE>
The components of the net deferred tax assets consisted of the following:
1997 1996
----------- -----------
Deferred tax assets:
Deferred compensation and supplemental
retirement ..................................... $ 268,238 $ 231,296
Accelerated tax depreciation ................... 59,273 52,657
Non-compete agreement .......................... 34,436 38,015
Allowance for doubtful accounts ................ 39,346 39,346
Inventory capitalization ....................... 21,776 19,072
Medical self insurance plan .................... 11,700 11,700
Expenses deductible on a cash basis ............ 33,966 49,217
----------- -----------
468,735 441,303
Deferred tax liabilities:
Prepaid pension costs .......................... 292,965 177,161
Gain on trading account securities ............. -- 228,064
Unrealized gains on securities available for
sale ........................................... 9,196 344,464
State income taxes ............................. 352,854 330,187
Accrued liabilities ............................ 137,693 404,301
----------- -----------
792,708 1,484,177
----------- -----------
Net deferred tax liability ....................... (323,973) (1,042,874)
Less current liability ........................... (195,374) (630,355)
----------- -----------
$ (128,599) $ (412,519)
=========== ===========
6. OTHER INCOME
Significant components of "other income" include:
1997 1996 1995
---------- ----------- ---------
Interest and dividend income .......... $ 515,828 $ 497,812 $ 384,490
Net realized gains (losses) on sales
of available-for-sale securities .... 1,584,620 (15,314) (5,787)
Net gains (losses) on trading
securities .......................... 358,304 700,566 (59,107)
Other income .......................... 107,169 93,458 91,117
---------- ----------- ---------
$2,565,921 $ 1,276,522 $ 410,713
========== =========== =========
Approximately $342,566 and $533,890 of unrealized holding gains on trading
securities are included in earnings for 1996 and 1995.
7. LINES OF CREDIT
At December 31, 1997, the Company had unsecured lines of credit with two
financial institutions totaling $1,200,000 which expire annually. Funds may be
drawn on these lines at rates ranging from prime minus 1/4 % to prime.
8. STOCK OPTION AND LONG-TERM INCENTIVE PLAN
The Company maintains the Colonial Guild, Ltd. Long-Term Incentive Plan (the
Plan). Under the Plan, stock options are granted to certain key employees at
exercise prices generally equal to or greater than the fair value of the stock
on the date of the grant as determined by the Board of Directors of the Company.
Options are granted for periods up to ten years and are exercisable
<PAGE>
three years after the date of grant, subject to continued employment. Each
option entitles the employee to purchase one share of stock. The Plan also
provides for performance unit awards, none of which were granted during the year
ending December 31, 1997.
At December 31, 1997 and 1996, 23,876 and 27,251 shares were under option at
various prices totaling $496,107 and $543,926. There were 3,375, 5,278, and
24,262 options exercised in 1997, 1996, and 1995, respectively. At December 31,
1997, the Company had guaranteed loans of certain key employees at a financial
institution. The loans, with aggregate unpaid balances of approximately $232,578
are secured by stock in the Company with an approximate aggregate book value of
$1,656,375.
9. ACCOUNTING FOR LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The effect of adopting
Statement No. 121 did not materially impact the Company's financial statements.
10. SALE OF COMPANY
On February 17, 1998, the Company entered into a definitive agreement with The
York Group, Inc. (York), where York will acquire 100% of the outstanding stock
of the Company for cash of $60 million plus the value of the Company's cash,
cash equivalents, and marketable securities and other adjustments as provided
for at the date of closing. The closing is expected to be on or about March 16,
1998.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma combined statement of income assumes that
the acquisition of Colonial Guild, Ltd. ("Colonial Guild") by The York Group,
Inc. ("The York Group") took place on January 1, 1997. The unaudited pro forma
combined balance sheet reflects the combined financial position of Colonial
Guild and The York Group assuming the acquisition took place on December 31,
1997.
The unaudited pro forma financial information is based upon the purchase
method of accounting for the acquisition transaction, and pro forma adjustments
are described in the accompanying notes. The pro forma financial information is
provided for comparative purposes only and is not necessarily indicative of the
results of operations which actually would have been obtained had the
acquisition occurred on the date indicated or of results which may be obtained
in the future.
<PAGE>
THE YORK GROUP, INC.
UNAUDITED PRO FORMA COMBINED
BALANCE SHEET
DECEMBER 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Historical
-------------------------
The Colonial
York Group Guild Adjustments Combined
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .................................. $ 15,478 $ 7,811 $(16,152)(1) $ 7,137
Securities available for sale, at fair value ............... -- 10,028 (10,028)(1) --
Accounts receivable, net ................................... 21,985 3,877 -- 25,862
Inventories ................................................ 36,325 2,528 -- 38,853
Deferred tax asset ......................................... 4,506 -- -- 4,506
Prepaid expenses and other current assets .................. 1,228 1,608 -- 2,836
-------- -------- -------- --------
Total Current Assets ....................................... 79,522 25,852 (26,180) 79,194
-------- -------- -------- --------
Property, plant and equipment, net ............................. 38,718 9,530 3,665 (1) 51,913
Goodwill and intangibles, net .................................. 10,867 2,339 49,949 (1) 60,775
-- -- (2,380)(1) --
DEFERRED COSTS AND OTHER NON-CURRENT
ASSETS ....................................................... 1,438 418 -- 1,856
-------- -------- -------- --------
Total assets ............................................... $130,545 $ 38,139 $ 25,054 $193,738
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ......................... $ 3,608 $ -- $ -- $ 3,608
Accounts payable .......................................... 4,409 914 -- 5,323
Income taxes payable ...................................... 1,565 402 -- 1,967
Accrued expenses .......................................... 13,333 3,410 150 (1) 16,893
-------- -------- -------- --------
Total current liabilities ................................. 22,915 4,726 150 27,791
-------- -------- -------- --------
LONG-TERM DEBT ................................................. 25,925 -- 52,500 (1) 78,425
OTHER NONCURRENT LIABILITIES ................................... 870 4,403 -- 5,273
DEFERRED TAX LIABILITY ......................................... 5,188 129 1,285 (1) 6,602
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY ........................................... 75,647 28,881 (28,881)(1) 75,647
-------- -------- -------- --------
Total liabilities and stockholders' equity ................. $130,545 $ 38,139 $ 25,054 $193,738
======== ======== ======== ========
</TABLE>
The York Group, Inc.
Notes to Unaudited Pro Forma Combined Balance Sheet
December 31, 1997
(1) To record purchase price of Colonial Guild and the use of cash and debt to
fund the acquisition.
<PAGE>
THE YORK GROUP, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
THE COLONIAL
YORK GROUP GUILD ADJUSTMENTS COMBINED
--------- -------- --------- ---------
<S> <C> <C> <C>
Sales ............................................. $ 178,690 $ 40,076 -- $ 218,766
Cost of sales ..................................... 130,144 22,044 196(2) 152,384
Other operating expenses .......................... 28,439 13,910 1,190(4) 41,899
-- -- (1,640)(3) --
--------- -------- --------- ---------
Operating income .................................. 20,107 4,122 254 24,483
--------- -------- --------- ---------
Other income (expense):
Interest and dividend income ................... 1,679 516 (516)(1) 1,317
-- -- (362)(1) --
Interest expense ............................... (2,329) -- (3,675)(1) (6,004)
Gain on sales of investments ................... -- 2,050 (2,050)(1) --
--------- -------- --------- ---------
(650) 2,566 (6,603) (4,687)
--------- -------- --------- ---------
Income before income taxes ....................... 19,457 6,688 (6,349) 19,796
Income tax provision ............................. 7,394 2,558 (2,034) 7,918
--------- -------- --------- ---------
Net income ....................................... $ 12,063 $ 4,130 $ (4,315) $ 11,878
========= ======== ========= =========
Earnings per share:
Basic ....................................... $ 1.38 -- -- $ 1.36
--------- -------- --------- ---------
Diluted ..................................... $ 1.34 -- -- $ 1.32
--------- -------- --------- ---------
</TABLE>
The York Group, Inc.
Notes to Unaudited Pro Forma Statement of Income
As of December 31, 1997
(1) Reflects the elimination of investment income and gain on sales of
investments resulting from diverting investment funds towards the funding
of the Colonial Guild acquisition. In addition, incremental interest
expense is reflected resulting from debt financing on the Colonial Guild
acquisition.
(2) Reflects an incremental increase in depreciation expense resulting from the
step-up in depreciable asset basis to fair value.
(3) Reflects the elimination of non-recurring costs incurred and expensed by
Colonial Guild relating to its acquisition by The York Group, and expenses
that would not recur after consummation of the acquisition.
(4) Reflects amortization of goodwill resulting from the excess of purchase
price paid over the fair value of the net assets acquired. Goodwill is
being amortized over 40 years.
<PAGE>
(c) Exhibits
Exhibit 23.1 - Consent of Ernst & Young LLP
<PAGE>
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 14, 1998 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)
EXHIBIT 23.1
We consent to the use of our report dated February 12, 1998 (except for Note 10,
as to which the date is February 17, 1998) with respect to the financial
statements of Colonial Guild, Ltd. and subsidiaries included in the filing on
Form 8-K/A of The York Group, Inc. dated May 14, 1998.
/s/ Ernst & Young LLP
Charleston, West Virginia
May 12, 1998
