UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to ____________________
Commission file number: 0-14399
(Name and Address of Plan)
Golden Comprehensive Security Program
888 Seventh Avenue, New York, New York 10106
Registrant's telephone number including area code: (212) 547-6700
(Name and Address of Issuer)
Golden Books Family Entertainment, Inc.
888 Seventh Avenue, New York, New York 10106
This document consists of 19 pages. The Exhibit Index begins on page 3.
<PAGE>
Supplemental Schedule
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan's trustees have duly caused this annual report to be signed on its
behalf by the undersigned, hereunto duly authorized.
June 29, 1999 Golden Comprehensive Security Program
By: /s/ Philip Galanes
----------------------------------
Philip Galanes
Member of Benefits Plan
Administration Committee
<PAGE>
Exhibit Index
1.1 Consent of Ernst & Young LLP, dated June 29, 1999.
1.2 Audited Financial Statements of Golden Comprehensive Security Program for
the years ended December 31, 1998 and December 31, 1997.
<PAGE>
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-18692) pertaining to the Golden Comprehensive Security Program (the
Plan) of our report dated April 23, 1999, with respect to the financial
statements of the Plan included in this Annual Report (Form 11-K) for the year
ended December 31, 1998.
Ernst & Young LLP
Milwaukee, Wisconsin
June 29, 1999
Financial Statements
Golden Comprehensive
Security Program
Years ended
December 31, 1998 and 1997
<PAGE>
Golden Comprehensive Security Program
Financial Statements
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors ...............................................1
Financial Statements
Statements of Net Assets Available for Benefits with Fund Information ........2
Statements of Changes in Net Assets Available for Benefits with Fund
Information ..................................................................4
Notes to Financial Statements ................................................6
All funds of the Plan are held in a Master Trust.
As a result, supplemental schedules [(Line 27(a) and Line 27(d)] are
omitted because they are not required under the Department of Labor's
Rules and Regulations.
<PAGE>
Report of Independent Auditors
The Plan Administrator
Golden Comprehensive Security Program
We have audited the accompanying statements of net assets available for benefits
of the Golden Comprehensive Security Program (the Plan) as of December 31, 1998
and 1997, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan'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, based on our audits, the financial statements referred to above
present fairly, in all material respects, the net assets available for benefits
of the Plan at December 31, 1998 and 1997, and the changes in its net assets
available for benefits for the years then ended, in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The Fund Information in the statement of net assets
available for benefits and the statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for benefits and changes in net assets available for
benefits of each fund. The Fund Information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
April 23, 1999
<PAGE>
Golden Comprehensive Security Program
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1998
<TABLE>
Parent Putnam Putnam
Company Guaranteed Growth Global Putnam
Stock Income and Income Growth Investors
Fund Contracts Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Investment in Golden Books Publishing
Company, Inc. Master Retirement Trust
(Notes 2 and 3) $256,552 $13,662,449 $10,560,865 $4,147,915 $10,762,340
Receivables:
Employer contribution receivable 1,050 4,328 10,716 6,107 10,101
Participant contribution receivable 3,207 11,134 33,791 20,389 34,829
Interfund transfer receivable (payable) 453 2,542 5,371 2,831 4,249
------------------------------------------------------------------------------
Total assets 261,262 13,680,453 10,610,743 4,177,242 10,811,519
Liabilities
Payable to third parties - 105,285 - - -
-----------------------------------------------------------------------------
Net assets available for benefits $261,262 $13,575,168 $10,610,743 $4,177,242 $10,811,519
=============================================================================
Putnam George
New Putnam
Opportunities Fund Loan
Fund of Boston Fund Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investment in Golden Books Publishing
Company, Inc. Master Retirement Trust
(Notes 2 and 3) $14,072,003 $4,566,989 $861,879 $58,890,992
Receivables:
Employer contribution receivable 17,914 4,142 - 54,358
Participant contribution receivable 56,978 12,085 - 172,413
Interfund transfer receivable (payable) 10,591 2,032 (28,069) -
--------------------------------------------------------------
Total assets 14,157,486 4,585,248 833,810 59,117,763
Liabilities
Payable to third parties - - - 105,285
--------------------------------------------------------------
Net assets available for benefits $14,157,486 $4,585,248 $833,810 $59,012,478
==============================================================
</TABLE>
2
<PAGE>
<TABLE>
Golden Comprehensive Security Program
Statements of Net Assets Available for Benefits with Fund Information (continued)
December 31, 1997
<CAPTION>
Putnam Putnam
Parent Guaranteed Growth Global Putnam
Company Income and Income Growth Investors
Stock Fund Contracts Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Investment in Golden Books Publishing
Company, Inc. Master Retirement
Trust (Notes 2 and 3) $1,875,556 $16,595,148 $10,780,593 $4,062,595 $7,839,005
Receivables:
Employer contribution receivable 581,344 4,079 10,599 5,030 8,729
Participant contribution receivable 2,418 13,162 29,928 14,604 29,939
Interfund transfer receivable (payable) 704 3,959 4,791 2,390 3,684
-----------------------------------------------------------------------------------
Total assets 2,460,022 16,616,348 10,825,911 4,084,619 7,881,357
Liabilities
Payable to third parties - 105,285 - - -
-----------------------------------------------------------------------------------
Net assets available for benefits $2,460,022 $16,511,063 $10,825,911 $4,084,619 $7,881,357
===================================================================================
Putnam George
New Putnam
Opportunities Fund Loan
Fund of Boston Fund Total
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investment in Golden Books Publishing
Company, Inc. Master Retirement
Trust (Notes 2 and 3) $13,155,030 $4,638,539 $1,099,810 $60,046,276
Receivables:
Employer contribution receivable 14,129 3,221 - 627,131
Participant contribution receivable 44,142 9,837 - 144,030
Interfund transfer receivable (payable) 9,830 1,482 (26,840) -
----------------------------------------------------------------
Total assets 13,223,131 4,653,079 1,072,970 60,817,437
Liabilities
Payable to third parties - - - 105,285
----------------------------------------------------------------
Net assets available for benefits $13,223,131 $4,653,079 $1,072,970 $60,712,152
================================================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
Golden Comprehensive Security Program
Statements of Changes in Net Assets Available for Benefits with Fund Information
Year ended December 31, 1998
<CAPTION>
Putnam Putnam
Parent Guaranteed Growth Global Putnam
Company Income and Income Growth Investors
Stock Fund Contracts Fund Fund Fund
-------------------------------- --------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Additions:
Equity in earnings (losses) of Golden
Books Publishing Company, Inc.
Master Retirement Trust (Notes 2 and 3) $(2,162,478) $ 865,693 $ 1,494,204 $1,012,546 $ 2,879,059
Contributions:
Employer 6,278 23,203 111,370 63,355 97,987
Participants 79,068 250,456 698,866 423,463 842,383
-------------------------------- --------------- ------------- ------------------
85,346 273,659 810,236 486,818 940,370
-------------------------------- --------------- ------------- ------------------
(2,077,132) 1,139,352 2,304,440 1,499,364 3,819,429
Deductions:
Benefit payments 104,128 4,523,492 2,160,286 1,024,065 1,632,749
Administrative expenses 11 1,458 1,474 738 1,435
-------------------------------- --------------- ------------- ------------------
104,139 4,524,950 2,161,760 1,024,803 1,634,184
Transfer of assets between funds (17,489) 449,702 (354,652) (381,463) 744,917
Transfer of assets (to) from other plans - 1 (3,196) (475) -
-------------------------------- --------------- ------------- ------------------
Net increase (decrease) (2,198,760) (2,935,895) (215,168) 92,623 2,930,162
Net assets available for benefits at
beginning of year 2,460,022 16,511,063 10,825,911 4,084,619 7,881,357
-------------------------------- --------------- ------------- ------------------
Net assets available for benefits at end of
year $ 261,262 $13,575,168 $10,610,743 $4,177,242 $10,811,519
=================================================================================
Putnam George
New Putnam
Opportunities Fund of Loan
Fund Boston Fund Total
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions:
Equity in earnings (losses) of Golden
Books Publishing Company, Inc.
Master Retirement Trust (Notes 2 and 3) $ 2,859,467 $ 472,738 $ 59,006 $ 7,480,235
Contributions:
Employer 185,948 42,314 - 530,455
Participants 748,930 149,355 - 3,192,521
-------------------------------- --------------- ------------- ------------------
934,878 191,669 - 3,722,976
--------------------------------------------------------------
3,794,345 664,407 59,006 11,203,211
Deductions:
Benefit payments 2,469,561 771,139 207,738 12,893,158
Administrative expenses 2,302 536 - 7,954
--------------------------------------------------------------
2,471,863 771,675 207,738 12,901,112
Transfer of assets between funds (383,684) 39,437 (96,768) -
Transfer of assets (to) from other plans (4,443) - 6,340 (1,773)
--------------------------------------------------------------
Net increase (decrease) 934,355 (67,831) (239,160) (1,699,674)
Net assets available for benefits at
beginning of year 13,223,131 4,653,079 1,072,970 60,712,152
--------------------------------------------------------------
Net assets available for benefits at end of
year $14,157,486 $4,585,248 $ 833,810 $59,012,478
==============================================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
Golden Comprehensive Security Program
Statements of Changes in Net Assets Available for Benefits with Fund Information (continued)
Year ended December 31, 1997
<CAPTION>
Putnam Putnam
Parent Guaranteed Growth Global Putnam
Company Income and Income Growth Investors
Stock Fund Contracts Fund Fund Fund
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions:
Equity in earnings of Golden Books Publishing
Company, Inc. Master Retirement Trust (Notes 2
and 3) $(123,406) $ 1,063,136 $ 2,244,365 $ 493,243 $1,969,992
Contributions:
Employer 583,737 50,248 134,098 85,622 104,564
Participants 69,308 267,068 418,193 245,172 321,854
---------------------------------------------------------------------------
653,045 317,316 552,291 330,794 426,418
---------------------------------------------------------------------------
529,639 1,380,452 2,796,656 824,037 2,396,410
Deductions:
Benefit payments 111,717 2,392,175 1,725,221 556,579 982,566
Administrative expenses 15 23,823 890 365 587
---------------------------------------------------------------------------
111,732 2,415,998 1,726,111 556,944 983,153
Transfer of assets between funds 116,517 (730,174) 1,001,278 43,409 940,607
Transfer of assets (to) from other plans (85) 134,954 16,594 (4,799) (12,595)
---------------------------------------------------------------------------
Net increase (decrease) 534,339 (1,630,766) 2,088,417 305,703 2,341,269
Net assets available for benefits at beginning of year 1,925,683 18,141,829 8,737,494 3,778,916 5,540,088
---------------------------------------------------------------------------
Net assets available for benefits at end of year $2,460,022 16,511,063 $10,825,911 $4,084,619 $7,881,357
===========================================================================
Putnam New George Putnam
Opportunities Fund Loan
Fund of Boston Fund Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Additions:
Equity in earnings of Golden Books Publishing
Company, Inc. Master Retirement Trust (Notes 2
and 3) $ 2,503,732 $ 878,060 $ 86,133 $ 9,115,255
Contributions:
Employer 254,634 54,849 - 1,267,752
Participants 741,574 163,316 - 2,226,485
-----------------------------------------------------------
996,208 218,165 - 3,494,237
-----------------------------------------------------------
3,499,940 1,096,225 86,133 12,609,492
Deductions:
Benefit payments 1,130,185 867,989 185,658 7,952,090
Administrative expenses 1,203 329 - 27,212
-----------------------------------------------------------
1,131,388 868,318 185,658 7,979,302
Transfer of assets between funds (1,201,232) 37,321 (207,726) -
Transfer of assets (to) from other plans 10,375 9,816 (965) 153,295
-----------------------------------------------------------
Net increase (decrease) 1,177,695 275,044 (308,216) 4,783,485
Net assets available for benefits at beginning of year 12,045,436 4,378,035 1,381,186 55,928,667
-----------------------------------------------------------
Net assets available for benefits at end of year $13,223,131 $4,653,079 $1,072,970 $60,712,152
===========================================================
</TABLE>
See accompanying notes.
5
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements
December 31, 1998
1. Description of the Plan
The following description of the Golden Comprehensive Security Program (the
Plan) provides only general information. Participants should refer to the
Summary Plan Description for a more complete description of the Plan's
provisions. The Plan is a contributory defined contribution plan covering all
eligible employees of Golden Books Publishing Company, Inc. (the Company). The
Company is a subsidiary of Golden Books Family Entertainment, Inc. (Parent
Company). Employees of any United States subsidiary of the Parent Company which
adopts the Plan, with the consent of the Company, who meet certain eligibility
requirements are also eligible. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
The Parent Company filed for bankruptcy on February 26, 1999 and filed a Joint
Plan of Reorganization on March 25, 1999 that has been approved by the Company
Senior Notes and TOPrS holders. Currently, there are no intentions to terminate
the Plan and the Company continues to make contributions to the Plan as required
under the Plan Document.
Each employee becomes a participant of the Plan on specified monthly entry dates
after meeting the following requirements:
a. Is a salaried employee or a member of a group or class of employees to whom
the Plan has been extended by the Board of Directors of the Company; and
b. Is not a member of a collective bargaining unit of employees represented by
a collective bargaining representative, except to the extent that an
agreement between the participating company (Employer) and such
representative extends the Plan to such unit of employees; and
c. Has completed one month of continuous employment (as defined in the Plan).
Participants may elect to make contributions to the Plan in amounts based on a
percentage of compensation, as defined in the Plan. A participating employee's
total contribution is limited to not less than 1% and not more than 16% of
compensation. Income deferral contributions were limited to no more than $10,000
in 1998 and 1997, in accordance with the Internal Revenue Code (IRC).
6
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Each Employer will contribute for a participant an amount equal to 60% of the
first 6% of "income deferral contributions" made by, or on behalf of the
participant who has completed one year of service. In addition, each Employer
annually contributes to the Plan an amount equal to 0% to 3% of the aggregate
compensation of participants entitled to share in the contribution for that
year. Effective January 1, 1998, these contributions became discretionary based
on the Company's financial performance and there were no discretionary
contributions for 1998. Any discretionary contributions for each plan year are
allocated to the participants' accounts pro rata based on the eligible
compensation paid to the participant by the Employer in that year. Employer
contributions are reduced by any forfeitures to be credited for the applicable
period. Forfeitures for 1998 and 1997 totaled $75,753 and $98,632, respectively.
Amounts credited to a participant's account are designated as "Plan Credits."
The Plan is intended to satisfy the requirements under Section 404(c) of ERISA
and, therefore, provides that participants may choose to direct their
contributions and all or part of their account balances among any of the Plan's
investment alternatives.
Interest, dividends and net realized and unrealized gains and losses on Plan
investments are allocated to participants' accounts monthly based on their
proportionate share of the applicable fund's assets.
If a participant's employment terminates for any reason other than retirement,
disability or death, the participant is entitled to receive Plan Credits
resulting from Employer contributions which are then vested according to the
following schedule:
Vested Percentage
Years of Continuous of Employer
Employment Contribution Account
------------------------ -----------------------------
Less than 1 0%
1 but less than 2 25
2 but less than 3 50
3 but less than 4 75
4 or more 100
The Cambridge, Maryland, facility owned by the Company was sold in 1997. All
Plan participants whose employment was terminated as a result of the sale are
100% vested in Employer contributions.
7
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Balances in a participant's income deferral contribution account, participant
contribution account and prior plan account are fully vested at all times.
In the event of a participant's retirement, disability or death, Plan Credits
not previously vested become fully vested and are not subject to forfeiture, and
all Plan Credits become immediately distributable in the manner described below.
When a participant's employment terminates for any reason, all vested Plan
Credits of the participant may be distributed to the participant or, in the
event of death, to the beneficiary by one or both of the following methods:
a. By a lump-sum distribution of any or all Plan Credits.
b. By applying the cash equivalent of any or all such Plan Credits towards the
purchase of an annuity contract, subject to certain requirements as defined
in the Plan.
A participant may elect to defer distribution of vested Plan Credits until age
70 1/2.
No more often than once per quarter, a participant may elect to withdraw all or
any portion of the net credit balance in the participant's contribution account,
prior plan account or rollover account. Participants may borrow, up to certain
limits, against their account balance. The loan must be repaid over a period not
to exceed 60 months unless the proceeds were used for the purchase of a primary
residence in which case it must be repaid within 240 months. Generally, loan
repayments are made by payroll deduction.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of
accounting.
Investments
The Plan participates in investment accounts under the Golden Books Publishing
Company, Inc. Master Retirement Trust (the Master Trust). Investment income,
realized gains and losses on investment transactions, expenses and investment
appreciation or depreciation on assets held in the Master Trust are allocated
daily to each fund under the Plan based on its proportionate share of Master
Trust assets. Plan participation in the Master Trust is adjusted monthly for
withdrawals for benefit payments to Plan participants and for contributions made
to the Plan.
8
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Valuation of Investments
Investments in the Master Trust mutual funds, common trust fund and parent
company stock are valued at fair value based on quoted redemption values on the
last business day of the Plan year. Investments in unallocated insurance
contracts are valued at contract value. Contract value represents contributions
made under the contract, plus interest, less benefit payments. The contracts are
fully benefit responsive, as that terminology is defined in AICPA Statement of
Position (SOP) No. 94-4, "Reporting of Investment Contracts Held by Health and
Welfare Benefit Plans and Defined Contribution Pension Plans." Participant loans
are valued at the remaining unpaid principal amount of the loans, which
approximates fair value.
Expenses
Investment management fees are paid by the Plan and other administrative
expenses of the Plan are paid by the Company.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Reclassifications
Certain 1997 balances were reclassified to conform to the 1998 presentation.
9
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements (continued)
3. Investments in Master Trust
Assets held by the Master Trust at December 31, are as follows:
<TABLE>
1998 1997
---------------------------------------
<S> <C> <C>
Investments, at fair value determined
by quoted market price:
Mutual funds $60,561,106 $56,009,475
Parent Company common stock 346,167 2,610,096
Common trust fund 17,750,976 12,485,083
Unallocated insurance contracts, at contract value 7,710,528 16,820,887
Loans receivable from participants, at estimated fair value 2,056,908 2,459,510
--------------------------------------
88,425,685 90,385,051
Less amounts allocated to other plan 29,534,693 30,338,775
--------------------------------------
$58,890,992 $60,046,276
======================================
</TABLE>
The interest rates on the unallocated insurance contracts held by the Master
Trust were 6.04% to 6.40% in 1998 and 5.94% to 6.40% in 1997. The average yield
was 5.8% and 6.1% in 1998 and 1997, respectively. As of December 31, 1998, the
Master Trust only invests in one contract that has an interest rate of 6.40%
through the October 1, 1999 maturity date.
Interest and dividend income earned by the Master Trust during 1998 and 1997 was
as follows:
<TABLE>
1998 1997
--------------------------------
<S> <C> <C>
Interest and dividend income earned by the Master Trust $4,839,630 $7,233,183
Less amount allocated to other plans 1,690,427 2,467,109
-------------------------------
$3,149,203 $4,766,074
================================
</TABLE>
The Master Trust's investments (including investments bought and sold, as well
as held during the year) appreciated (depreciated) in value and were allocated
to the Plan for the years ended December 31, as follows:
<TABLE>
1998 1997
-------------------------------------
<S> <C> <C>
Investments at fair value as determined by quoted market prices:
Mutual funds $ 8,646,742 $5,919,208
Investments in the Parent Company's common stock (3,030,117) (146,315)
-------------------------------------
5,616,625 5,772,893
Less amounts allocated to other plan 1,285,593 1,423,712
-------------------------------------
$ 4,331,032 $4,349,181
=====================================
</TABLE>
10
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements (continued)
4. Income Tax Status
The Internal Revenue Service ruled November 24, 1995 that the Plan is qualified
under Section 401(a) of the IRC and, therefore, the related trust is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
IRC to maintain its qualification. The Administrative Committee believes the
Plan is being operated in compliance with the applicable requirements of the IRC
and, therefore, believes the Plan is qualified and the related trust is tax
exempt.
5. Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
6. Transactions with Parties-In-Interest
The mutual funds and common trust fund that the Master Trust invests in are
managed by the Plan Trustee, Putnam Investments. The Master Trust also invests
in common stock of the Parent Company.
7. Year 2000 (Unaudited)
The Company has determined that it will be necessary to take certain steps in
order to ensure that the Plan's information systems are prepared to handle Year
2000 dates. The Company is taking a two-phase approach. The first phase
addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the Year 2000 modifications. The Company anticipates substantially completing
this phase of the project by September 1999. Costs associated with modifying
software and equipment are estimated to be $2.2 million and will be paid by the
Company.
11
<PAGE>
Golden Comprehensive Security Program
Notes to Financial Statements (continued)
7. Year 2000 (Unaudited) (continued)
For the second phase of the project, Plan management established formal
communications with its third-party service providers to determine that they
have developed plans to address their own Year 2000 problems as they relate to
the Plan's operations. All third-party service providers have indicated that
they will be Year 2000 compliant by the end of 1999. If modification of data
processing systems of either the Plan, the Company, or its service providers is
not completed timely, the Year 2000 problem could have a material impact on the
operations of the Plan. Plan management has not developed a contingency plan,
because they are confident that all systems will be Year 2000 ready.
8. Reconciliation of Financial Statements to Form 5500
The following reconciles net assets available for benefits per the financial
statements to the Form 5500:
<TABLE>
December 31,
1998 1997
----------------------------------
<S> <C> <C>
Net assets available for benefits per financial statements $59,012,478 $60,712,152
Employer contribution receivable (54,358) (627,131)
Participant contribution receivable (172,413) (144,030)
Payable to third parties 105,285 105,285
----------------------------------
Net assets available for benefits per the Form 5500 $58,890,992 $60,046,276
==================================
</TABLE>
The following reconciles contributions per the financial statements to the Form
5500 for the year ended December 31, 1998:
<TABLE>
<S> <C>
Contributions per financial statements $3,722,976
Less: Contribution receivables at December 31, 1998 (226,771)
Add: Contribution receivables at December 31, 1997 771,161
-----------------
Contributions per the Form 5500 $4,267,366
=================
</TABLE>
Differences between the financial statements and the Form 5500 are due to the
financial statements being prepared on the accrual basis and the Form 5500
prepared on the cash basis.
12