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 June 30, 1999
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: 0-28096
-----------------------------
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 identification
incorporation or organization) number)
8554 KATY FREEWAY, SUITE 200, HOUSTON, TEXAS 77024
(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 [X] NO [ ]
The number of shares outstanding of the registrant's common stock as of August
12, 1999 was 8,940,950.
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
INDEX
PAGE
----
Part I. Financial Information
Item 1.Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1999 (Unaudited) and December 31, 1998.......2
Condensed Consolidated Statements of Income (Unaudited) -
Three and six months ended June 30, 1999 and 1998.....3
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Six months ended June 30, 1999 and 1998...............4
Notes to Condensed Consolidated Financial
Statements (Unaudited)..............................5-7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition..............8-11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders........12
Item 6. Exhibits and Reports on Form 8-K...........................12
Signature...................................................................13
1
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
--------- ------------
(UNAUDITED) (AUDITED)
--------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................... $ 261 $ 3,449
Trade accounts and notes receivable, net of allowance
for doubtful accounts and returns and allowances of
$4,219 in 1999 and $3,854 in 1998:
Stockholders and affiliates .................................. 4,397 5,706
Other ........................................................ 27,899 26,418
Inventories, net ............................................... 36,115 34,841
Prepaid expenses ............................................... 2,509 2,984
Deferred tax assets ............................................ 5,220 5,826
--------- ------------
Total current assets ......................................... 76,401 79,224
--------- ------------
Property, plant and equipment, net ................................ 62,735 60,226
Goodwill and other intangibles, net ............................... 66,690 62,200
Deferred cost and other assets .................................... 10,024 7,614
--------- ------------
Total assets ................................................... 215,850 209,264
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .............................. $ 11,943 4,718
Accounts payable ............................................... 12,618 8,018
Accrued expenses ............................................... 14,652 16,179
--------- ------------
Total current liabilities .................................... 39,213 28,915
--------- ------------
Long-term debt, net of current portion ............................ 71,845 79,267
Other noncurrent liabilities ...................................... 8,396 7,822
Deferred tax liabilities .......................................... 7,615 8,173
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized and
unissued ..................................................... -- --
Common stock, $.01 par value, 25,000,000 shares authorized,
8,940,950 and 8,930,950 shares issued and outstanding ........ 89 89
Additional paid-in capital ..................................... 40,455 40,390
Cumulative foreign currency translation adjustment ............. (78) (103)
Retained earnings .............................................. 48,315 44,711
--------- ------------
Total stockholders' equity ................................... 88,781 85,087
--------- ------------
Total liabilities and stockholders' equity ..................... $ 215,850 $ 209,264
========= ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales (including sales to stockholders
and affiliates of $13,880 and $11,802
for the three months ended June 30,
1999 and 1998, respectively, and
$26,633 and $25,098 for the six
months ended June 30, 1999 and 1998,
respectively) ......................... $ 50,207 $ 60,680 $ 104,782 $ 115,834
Cost of goods sold ....................... 34,118 43,085 71,138 81,442
------------ ------------ ------------ ------------
Gross profit .......................... 16,089 17,595 33,644 34,392
Other operating expenses ................. 11,721 11,325 23,625 20,550
------------ ------------ ------------ ------------
Operating income ...................... 4,368 6,270 10,019 13,842
Interest expense, net .................... 1,286 1,439 2,712 1,828
------------ ------------ ------------ ------------
Income before income taxes ............... 3,082 4,831 7,307 12,014
Income tax provision ..................... 1,279 1,932 2,989 4,697
------------ ------------ ------------ ------------
Net income ............................... $ 1,803 $ 2,899 $ 4,318 $ 7,317
============ ============ ============ ============
Shares used in computing earnings per share:
Basic ................................. 8,934 8,918 8,933 8,913
============ ============ ============ ============
Diluted ............................... 9,028 9,129 9,034 9,229
============ ============ ============ ============
Earnings per share:
Basic ................................. $ 0.20 $ 0.33 $ 0.48 $ 0.82
============ ============ ============ ============
Diluted ............................... $ 0.20 $ 0.32 $ 0.48 $ 0.80
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................ $ 4,318 $ 7,317
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization ....................... 5,358 4,234
Deferred income tax benefit ......................... (486) (326)
Loss on disposition of property, plant and equipment -- 55
Provision for doubtful accounts ..................... -- 66
Decrease/(increase) in:
Trade accounts and notes receivable ............... 351 (3,066)
Inventories ....................................... (374) (653)
Prepaid expenses .................................. 537 60
Deferred costs and other assets ................... (4,599) (1,169)
Increase/(decrease) in:
Accounts payable and accrued expenses ............. 1,778 (504)
Other noncurrent liabilities ...................... 532 (764)
------------ ------------
Net cash provided by operating activities ......... 7,415 5,250
------------ ------------
Cash flows from investing activities:
Capital expenditures ................................. (3,298) (4,465)
Collections on notes receivable ..................... 103 210
Acquisitions, net of cash acquired of $507 and $17,582 (4,817) (66,286)
------------ ------------
Net cash used in investing activities ............. (8,012) (70,541)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock ............... 65 90
Repayment of long-term debt .......................... (11,294) (18,517)
Proceeds from issuance of long-term debt ............. 9,352 73,500
Dividends paid ....................................... (714) (714)
------------ ------------
Net cash provided by (used in) financing activities (2,591) 54,359
------------ ------------
Net decrease in cash and cash equivalents .................... (3,188) (10,932)
Cash and cash equivalents, beginning of period ............... 3,449 15,478
------------ ------------
Cash and cash equivalents, end of period ..................... $ 261 $ 4,546
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ................. $ 2,700 $ 1,200
============ ============
Cash paid during the period for income taxes ............. $ 2,400 $ 5,200
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of The York Group, Inc. and 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 rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the Company's December 31, 1998 audited consolidated financial statements and
the notes thereto included in the Company's 1998 Annual Report on Form 10-K. In
the opinion of the Company's management, all adjustments and eliminations,
consisting only of normal and recurring adjustments, necessary to present fairly
the condensed consolidated financial statements have been included. The results
of operations for such interim periods are not necessarily indicative of results
for the full year.
2. ACQUISITIONS
On April 19, 1999, the Company acquired all of the outstanding common stock
of Star Manufacturing Corporation, an assembler of metal caskets, for $4
million, of which $2 million was paid at closing and $2 million is payable in
one year. On April 30, 1999, the Company acquired all of the outstanding common
stock of OMC Industries, a manufacturer of cast metal signage products, for
approximately $3.6 million in cash. Both acquisitions were accounted for using
the purchase method of accounting, with resulting goodwill of approximately $5.1
million. Pro forma results of operations have not been presented as the effects
of the acquisitions are not significant.
3. SUPPLEMENTAL INFORMATION
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
Inventories:
Raw materials .............................. $ 10,176 $ 13,204
Work in process ............................ 2,132 2,807
Finished goods ............................. 23,807 18,830
------------ ------------
$ 36,115 $ 34,841
============ ============
Property, Plant and Equipment:
Land and improvements ...................... $ 4,829 $ 4,819
Building and improvements .................. 21,264 19,806
Equipment .................................. 63,673 56,745
Construction-in-progress ................... 4,095 6,144
------------ ------------
93,861 87,514
Less: accumulated depreciation ............. 31,126 27,288
------------ ------------
$ 62,735 $ 60,226
============ ============
5
<PAGE>
4. EARNINGS PER SHARE
Earnings per share data for all periods presented has been computed pursuant to
SFAS No. 128, "Earnings Per Share" which requires a presentation of basic
earnings per share (basic EPS) and diluted earnings per share (diluted EPS).
Basic EPS excludes dilution and is determined by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock. At June 30, 1999 the Company had options
outstanding for the purchase of an aggregate of 670,678 shares of common stock
of which 584,878 have exercise prices that exceed the average fair value for the
three-month and six-month periods ended June 30, 1999.
A reconciliation of weighted-average shares outstanding to shares used in
computing diluted EPS is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Weighted-average shares outstanding ........ 8,934 8,918 8,933 8,913
Dilutive securities consisting of options
and convertible debt ..................... 94 211 101 316
------------ ------------ ------------ ------------
Shares used in computing diluted EPS ....... 9,028 9,129 9,034 9,229
============ ============ ============ ============
</TABLE>
5. SEGMENT INFORMATION
SFAS No. 131, "Disclosure About Segments of an Enterprise and Related
Information", requires certain financial and supplementary information to be
discussed on an annual and interim basis for each reportable segment of an
enterprise. In accordance with SFAS No. 131, the Company identified its
reporting segments based on its internal reporting of strategic business units.
The products within each segment require substantially different manufacturing
processes, are marketed to different customer bases and have different economic
characteristics.
The Company's Casket Segment includes the manufacturing and distribution
operations of a wide variety of metal, wood and other caskets, caskets
components and metal burial vaults. The Company's Commemorative Products Segment
produces and sells products, primarily cast bronze, which are used to
commemorate people, places and events. The All Other Segment includes the
Company's fleet operations, architectural services, merchandising products and
services, and corporate expenses. Product transfers between industry segments
are not material. The Company evaluates segment performance based upon operating
income.
Interim financial information regarding the Company's segments is presented
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales:
Caskets ............................ $ 35,276 $ 45,416 $ 76,161 $ 95,725
Commemorative Products ............. 12,568 12,687 23,481 15,145
All other .......................... 2,363 2,577 5,140 4,964
------------ ------------ ------------ ------------
Consolidated net sales ...... $ 50,207 $ 60,680 $ 104,782 $ 115,834
============ ============ ============ ============
Operating income:
Caskets ............................ $ 5,692 $ 8,098 $ 13,772 $ 18,891
Commemorative Products ............. 2,768 2,100 4,632 2,515
All other .......................... (4,092) (3,928) (8,385) (7,564)
------------ ------------ ------------ ------------
Consolidated operating income $ 4,368 $ 6,270 $ 10,019 $ 13,842
============ ============ ============ ============
</TABLE>
6
<PAGE>
6. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components. Comprehensive income is the
total of net income and all other non-owner changes in equity. The Company has
comprehensive income of $1.8 million and $4.3 million for the three and six
months periods ended June 30, 1999, respectively, consisting of net income and
foreign currency translation adjustment. The only component of 1998
comprehensive income for the Company was net income.
7. DEBT
The Company amended and restated its $60 revolving credit facility in August,
1999. Under the terms of the amended agreement, the facility consists of a $35
million amortizing term loan and a revolving credit facility providing for
borrowings and the issuance of letters of credit in an aggregate amount equal to
the lesser of $25 million or a borrowing base, as defined. The terms of the
facility call for an interest rate to be based, at the Company's option, upon an
adjusted LIBOR rate or prime rate. Adjustment factors are based upon certain
financial ratios, as defined, with a specified ceiling (LIBOR +2.50%; Prime
+1.50%) and floor (LIBOR +1.75%; Prime +.75%). The facility is secured and
expires on June 30, 2001. The amended credit facility is secured by
substantially all of the Company's assets, including the stock of all the
Company's subsidiaries, does not permit the payment of cash dividends under
certain circumstances and requires the Company's compliance with certain
leverage, net worth and debt service covenants. The facility also contains a
limitation on the Company's capital expenditures. The facility and the Senior
Notes (which carry an interest rate of 8.37%) are guaranteed by the Company's
subsidiaries. The banks and the holder of the Senior Notes have entered into an
intercreditor agreement whereby both sets of creditors have a security interest
in substantially all of the Company's assets.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
The Company is the second largest casket manufacturer in the United States and
produces a wide variety of caskets, casket components and burial vaults. During
March 1998, the Company acquired Colonial Guild, Ltd. thus becoming a major
manufacturer of commemorative products. The Company's finished caskets are
marketed through a network of Company and privately owned distributors, which
serve domestic funeral homes, as well as certain foreign markets, principally
Canada. Burial vaults are sold directly to funeral home and cemetery operators
as well as to privately owned distributors. The Company's commemorative memorial
products are sold directly to cemetery operators, monument dealers and funeral
homes, and its architectural signage products are sold primarily to sign and
trophy dealers.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net sales for the three months ended June 30, 1999 were $50.2 million compared
to $60.7 million for the same period in 1998. Casket Segment net sales were
$35.3 million, a decrease of $10.1 million from $45.4 in the 1998 period. This
decline reflects the loss of sales to Service Corporation International ("SCI")
in 1999 as a result of the termination as of December 31, 1998 of the supply
contract between the Company and SCI, partially offset by a slight increase in
sales to independent funeral operations by Company owned distribution operations
and an increase in sales to independent distributors of the Company's Casket
Segment products. Second quarter net sales of the Company's Commemorative
Products Segment were $12.6 million compared to $12.7 million in the comparable
1998 quarter. This modest decline reflects the planned exit from the industrial
products business following the closure of the Company's Portland, Oregon
foundry in late 1998 and a shift to sales of lower priced memorial products
during 1999, partially offset by sales of OMC Industries, Inc., a cast signage
manufacturer, which was acquired during the second quarter of 1999. Second
quarter 1999 net sales of the All Other Segment, consisting primarily of
merchandising display systems, were $2.4 million and were not significantly
different from the corresponding period in 1998.
Second quarter 1999 gross profit was $16.1 million compared to $17.6 million
during the second quarter of 1998. 1999 Casket Segment gross profit decreased
approximately $2.7 million primarily reflecting the loss of sales to SCI. Second
quarter 1999 Commemorative Products Segment gross profit increased approximately
$1.1 million, reflecting the acquisition of OMC Industries, Inc. during the 1999
period and the efficiencies realized as a result of the closure of the Portland,
Oregon foundry and movement of its memorialization business into the segment's
other foundry operations. Gross profit of the All Other Segment was
approximately the same in both 1999 and 1998.
Operating income for the second quarter of 1999 was $4.4 million, a $1.9 million
decrease from the 1998 second quarter. Casket Segment 1999 second quarter
operating income decreased to $5.7 million from $8.1 million in 1998, again
primarily attributable to the loss of sales to SCI. 1999 second quarter
operating income for the Commemorative Products Segment increased $.7 million to
$2.8 million, reflecting the OMC Industries acquisition and the operating income
leverage of more efficient operations after the Portland foundry closure and
production consolidation. Operating loss during the second quarter of 1999 for
the All Other Segment, which includes corporate expenses, increased $.2 million
to $4.1 million from the 1998 level. This increase reflects an increase in
merchandising systems development expenses during the quarter, partially offset
by a decrease in general corporate expenses.
Net interest expense decreased slightly from 1998, reflecting slightly lower
debt levels in 1999 and interest capitalized relative to information systems
capital expenditures during 1999.
The Company's effective tax rate increased to 41.5% from 40.0% in 1998,
reflecting the impact of non-deductible expenses, primarily goodwill
amortization, relative to lower pre-tax earnings.
Net income decreased $1.1 million to $1.8 million in 1999, and both basic and
diluted earnings per share were $.20 in 1999 compared to $.33 and $.32,
respectively, in 1998.
8
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Many of the factors that affected second quarter results also had an impact on
year to date results. Refer to the second quarter comparison for additional
discussion.
Net sales were $104.8 million, a decline of $11.0 million from 1998. Casket
Segment net sales were $76.2 million, a 20.4% reduction from 1998, reflecting
the loss of sales to SCI, offset partially by increased sales to independent
funeral homes and independent distributors. Commemorative Products Segment net
sales increased to $23.5 million from $15.1 million in 1998, reflecting a full
six months of sales in 1999 compared to only slightly more than three months in
1998. All Other Segment net sales approximated the 1998 level.
Gross profit was $33.6 million compared to $34.4 million in 1998. The decline
reflects the loss of SCI business in the Casket Segment mostly offset by gross
profit of the Commemorative Products Segment for a full six months in 1999.
Operating income was $10.0 million in 1999 compared to $13.8 million in 1998.
The decline again reflects the loss of sales to SCI, offset partially by full
period results of the Commemorative Products Segment in 1999, although the
positive contribution of that Segment is not as great on operating income as on
gross profit due to the higher level of selling and other operating expenses in
the Commemorative Products Segment relative to the Casket Segment.
Net interest expense increased $.9 million to $2.7 million in 1999, primarily
reflecting the debt incurred for the Colonial Guild, Ltd. acquisition in
mid-March 1998. Cash paid for interest during the six months ended June 30, 1999
and 1998 was $2.7 million and $1.2 million, respectively.
The Company's effective tax rate increased from 39.1% in 1998 to 40.9% in 1999.
Cash paid for income taxes during the six months ended June 30, 1999 and 1998
was $2.7 million and $5.2 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically relied on cash flows from operations as well as
borrowings from banks and other lenders to fund its operations.
Cash and cash equivalents were $.3 million at June 30, 1999, a decrease of $3.2
million from December 31, 1998. For the six months ended June 30, 1999, cash
provided by operating activities totaled $7.4 million, cash used in investing
activities totaled $8.0 million and cash used in financing activities totaled
$2.6 million.
The Company utilized approximately $4.8 million of cash for acquisitions during
the first six months of 1999, net of cash acquired.
Long-term debt, including current maturities, at June 30, 1999 totaled $83.8
million compared to $84.0 million at December 1, 1998. Long-term debt at June
30, 1999 consisted primarily of $54.5 million borrowed under the Company's
revolving line of credit, $17.9 million of Senior Notes, $2.5 million in
promissory notes, $2.0 million in convertible notes, $1.9 million in deferred
acquisition cost and $4.3 million of capitalized lease obligations.
The Company maintains a $60 million unsecured revolving credit facility with a
group of major banks. At June 30, 1999, $3.5 million was available under the
revolving credit facility.
The Company amended and restated its $60 revolving credit facility in August,
1999. Under the terms of the amended agreement, the facility consists of a $35
million amortizing term loan and a revolving credit facility providing for
borrowings and the issuance of letters of credit in an aggregate amount equal to
the lesser of $25 million or a borrowing base, as defined. The facility is
secured and expires on June 30, 2001. The amended credit facility is secured by
substantially all of the Company's assets, including the stock of all the
Company's subsidiaries, does not permit the payment of cash dividends under
certain circumstances and requires the Company's compliance with certain
leverage, net worth and debt service covenants. The facility also contains a
limitation on the Company's capital expenditures. The facility and the Senior
Notes are guaranteed by the Company's subsidiaries. The banks and the holder of
the Senior Notes have entered into an intercreditor agreement whereby both sets
of creditors have a security interest in substantially all of the Company's
assets.
9
<PAGE>
The Company's primary capital requirements are for capital expenditures, such as
furniture, fixtures and equipment and working capital. The Company's capital
resources consist of its cash balances, cash flow from operations and borrowing
capacity under its revolving credit facility. The Company believes that these
resources will be sufficient to fund capital expenditures and working capital.
As of June 30, 1999, the Company had invested nearly $10 million in the
installation of leased YMS(TM) systems on behalf of its customers. In July 1999,
the Company formed an alliance with First Sierra Financial, Inc., a commercial
leasing company, which allows the Company to continue offering the YMS program
without having to fund each installation.
The Company's capital resources consist of its cash balances at June 30, 1999,
future cash flows from operations and the borrowing capacity under the its
credit facility. The Company believes that these resources will be sufficient to
fund capital expenditures and meet other operating requirements. In order to
finance any future acquisition activities, the Company would require additional
capital resources.
THE YEAR 2000 ISSUE
The Company has assessed how it may be impacted by Year 2000 issues and has
formulated and commenced implementation of a plan to address both its
information technology ("IT") and non-IT systems issues. This plan involves a
combination of hardware and software modifications, upgrades and replacement,
including implementation of a new software package which will not only address
the Year 2000 issues but provide additional business process functionality in
the future. The Company is approximately 80% complete with its modifications,
upgrades and replacements. The Company has completed testing of its plan and
implementation with respect to all significant operations is expected to be
completed by October 31, 1999.
The Company has surveyed its suppliers and reviewed its customers to identify
and resolve any Year 2000 issues that may arise with such customers and
suppliers, but the Company currently does not believe that any such issues will
have a material effect on its operations or financial results.
The Company currently estimates that the cost of Year 2000 compliance for its
information systems, combined with capital expenditures for hardware and
software involving functionality improvements will approximate $6.2 million, of
which approximately $5.5 million has already been incurred. Approximately 80% of
the remaining expenditures are expected to be capitalized.
The Company is in the process of establishing a worst-case scenario and written
contingency plans to address any issues that could arise should the Company or
any of its suppliers or customers not be prepared to accommodate Year 2000
issues timely. The Company believes that in an emergency it could revert to the
use of manual systems that do not rely on computers and could perform the
minimum functions required to provide information reporting to maintain
satisfactory control of its business. Should the Company have to utilize manual
systems, it is uncertain that it could maintain the same level of operations,
and the result could have a material adverse effect on its operations or
financial results. The Company intends to maintain constant surveillance on this
situation and develop more practicable contingency plans as may be required by
the changing environment.
INFLATION
Historically, inflation has not had a material impact on the results of
operations of the Company nor is it anticipated to have a material impact for
the foreseeable future.
SELECTED QUARTERLY OPERATING RESULTS AND SEASONALITY
Historically, the Company's operations have experienced seasonal variations.
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. The Company's memorialization sales seasonally lag the Company's casket
business, and are highest in the second quarter, coinciding with the Memorial
Day Holiday, and lowest in the first 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, and the timing of
annual price increases relative to changes in costs. 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.
FORWARD-LOOKING STATEMENTS
10
<PAGE>
Certain of the information relating to the Company contained or incorporated by
reference in this Form 10-Q is "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
or incorporated by reference in this Form 10-Q or made by management of the
Company other than statements of historical fact regarding the Company are
forward-looking statements. These statements, and all phases of the Company's
operations, are subject to risks and uncertainties, any one of which could cause
actual results to differ materially from those described in the forward-looking
statements. Such risks and uncertainties include or relate to, among other
things, the availability of debt and equity financing on terms that are
favorable to the Company, changes in demand for the Company's products and
services which could be caused by a number of factors, including changes in
death rate, cremation rates, competitive pressures and economic conditions, the
effect of competition on the Company's ability to maintain margins on existing
or acquired operations, the Company's ability to successfully integrate the
operations of acquired companies with existing operations, including risks and
uncertainties relating to its ability to achieve administrative and operating
costs savings and anticipated synergies and the ability of the Company or
critical third party suppliers to adequately complete "Y2K" preparation efforts.
11
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 7, 1999 the Company held its annual meeting of
stockholders to elect directors.
The following table sets forth the number of votes
cast for or withheld with respect to the election of
each director nominee.
NAME FOR WITHHELD AUTHORITY
Bruce E. Elder 7,289,550 298,825
Eldon P. Nuss 7,289,550 298,825
Kirk P. Pendleton 6,271,044 1,317,331
Robert T. Rakich 7,289,550 298,825
Roger W. Sevedge 7,289,550 298,825
Bill W. Wilcock 7,208,367 380,008
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial data schedule
(b) Reports on Form 8-K
None
12
<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.
August 20, 1999 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)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE YORK GROUP, INC. 1999 SECOND QUARTER REPORT ON FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 261
<SECURITIES> 0
<RECEIVABLES> 36,515
<ALLOWANCES> 4,219
<INVENTORY> 36,115
<CURRENT-ASSETS> 76,401
<PP&E> 93,861
<DEPRECIATION> 31,126
<TOTAL-ASSETS> 215,850
<CURRENT-LIABILITIES> 39,213
<BONDS> 71,845
0
0
<COMMON> 89
<OTHER-SE> 88,692
<TOTAL-LIABILITY-AND-EQUITY> 215,850
<SALES> 104,782
<TOTAL-REVENUES> 104,782
<CGS> 71,138
<TOTAL-COSTS> 71,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,712
<INCOME-PRETAX> 7,307
<INCOME-TAX> 2,989
<INCOME-CONTINUING> 4,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,318
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.48
</TABLE>
