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 September 30, 2000
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 November
20, 2000 was 8,940,950.
THE YORK GROUP, INC. AND SUBSIDIARIES
INDEX
PAGE
----
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 2000
(unaudited) and December 31, 1999 ............... 2
Condensed Consolidated Statements of Income (unaudited)-
Three and nine months ended September 30, 2000
and 1999 ........................................ 3
Condensed Consolidated Statements of Cash Flows (unaudited)-
Nine months ended September 30, 2000 and 1999 ... 4
Notes to Condensed Consolidated Financial Statements
(unaudited) ..................................... 5-8
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition ......................... 9-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
1
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
2000 1999
ASSETS --------- ---------
(UNAUDITED)
Current assets:
Cash and cash equivalents .................... $ 1,489 $ 17
Trade accounts and notes receivable, net
of allowance for doubtful accounts and
returns and allowances of $3,837 and
$4,331, respectively:
Stockholders and affiliates ............ 4,433 3,518
Other .................................. 25,842 31,492
Inventories, net ............................. 24,834 33,980
Prepaid expenses ............................. 2,861 2,225
Deferred tax assets .......................... 6,043 4,007
--------- ---------
Total current assets ................... 65,502 75,239
--------- ---------
Property, plant and equipment, net .............. 52,048 62,374
Goodwill, net ................................... 63,856 65,899
Deferred costs and other assets, net ............ 10,784 10,139
Assets held for sale ............................ 2,413 --
--------- ---------
Total assets ........................... $ 194,603 $ 213,651
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............ $ 66,426 $ 18,703
Accounts payable ............................. 15,269 15,520
Accrued expenses ............................. 12,377 13,494
--------- ---------
Total current liabilities .............. 94,072 47,717
--------- ---------
Long-term debt, net of current portion .......... 1,178 61,355
--------- ---------
Other noncurrent liabilities .................... 6,007 6,357
--------- ---------
Deferred tax liabilities ........................ 4,280 6,813
--------- ---------
Commitments and contingencies
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 shares
issued and outstanding .................... 89 89
Additional paid-in capital ................... 40,455 40,455
Cumulative foreign currency translation
adjustment ................................ (12) 267
Retained earnings ............................ 48,534 50,598
--------- ---------
Total stockholders' equity ............. 89,066 91,409
--------- ---------
Total liabilities and stockholders'
equity .............................. $ 194,603 $ 213,651
========= =========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
2
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Net sales (including sales to stockholders and
affiliates of $7,232 and $5,664 for the three
months ended September 30, 2000 and 1999,
respectively, and $24,398 and $26,050 for the
nine months ended September 30, 2000 and 1999,
respectively) ..................................... $ 42,895 $ 45,372 $ 145,607 $ 150,154
Cost of goods sold ................................... 34,071 30,763 106,315 102,261
--------- --------- --------- ---------
Gross profit ...................................... 8,824 14,609 39,292 47,893
--------- --------- --------- ---------
Other operating expenses ............................. 12,080 10,544 34,822 33,809
Plant closure and restructuring charges .............. 5,500 -- 6,450 --
--------- --------- --------- ---------
Total operating expenses .......................... 17,580 10,544 41,272 33,809
--------- --------- --------- ---------
Operating income (loss) ........................... (8,756) 4,065 (1,980) 14,084
Interest expense, net ................................ (1,716) (1,581) (5,205) (4,293)
Other income, net .................................... 2,170 -- 2,510 --
--------- --------- --------- ---------
Income (loss) before income taxes .................... (8,302) 2,484 (4,675) 9,791
Provision for (benefit from) income taxes ............ (4,792) 1,075 (2,969) 4,064
--------- --------- --------- ---------
Net income (loss) .................................... $ (3,510) $ 1,409 $ (1,706) $ 5,727
========= ========= ========= =========
Shares used in computing earnings per share:
Basic ............................................. 8,941 8,941 8,941 8,935
========= ========= ========= =========
Diluted ........................................... 8,941 9,032 8,941 9,028
========= ========= ========= =========
Earnings per share:
Basic ............................................. $ (0.39) $ 0.16 $ (0.19) $ 0.64
========= ========= ========= =========
Diluted ........................................... $ (0.39) $ 0.16 $ (0.19) $ 0.63
========= ========= ========= =========
The accompanying notes are an integral part of
these condensed consolidated financial statements.
3
THE YORK GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
2000 1999
-------- --------
Cash flows from operating activities:
Net income (loss) ................................ $ (1,706) $ 5,727
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization .................. 8,862 7,961
Deferred income tax (benefit) .................. (4,569) (7)
Gain on disposition of property ................ (9) --
Write down of manufacturing facility ........... 2,750 --
Non-cash restructuring charges ................. 3,700
Provision for doubtful accounts ................ 373 109
Decrease (increase) in:
Trade accounts and notes receivable .......... 2,887 (1,986)
Inventories .................................. 7,410 635
Prepaid expenses ............................. (636) 566
Deferred costs and other assets .............. (757) (2,061)
Increase (decrease) in:
Accounts payable and accrued expenses ........ (1976) 2,700
Other liabilities ............................ (626) 107
-------- --------
Net cash provided by operating activities .... 15,703 13,751
-------- --------
Cash flows from investing activities:
Capital expenditures ............................. (2,530) (4,609)
Proceeds from sale of property ................... 1,391 --
Acquisitions, net of cash acquired of $507 in
1999 ............................................ -- (4,817)
-------- --------
Net cash used in investing activities ........ (1,139) (9,426)
-------- --------
Cash flows from financing activities:
Dividends paid ................................... (358) (1,072)
Repayments of long-term debt ..................... (59,080) (22,644)
Proceeds from issuance of long-term debt ......... 46,625 17,530
Proceeds from issuance of common stock ........... -- 65
-------- --------
Net cash used in financing activities ........ (12,813) (6,121)
-------- --------
Effects of exchange rate changes on cash ........... (279) --
-------- --------
Net increase (decrease) in cash and cash
equivalents ....................................... 1,472 (1,796)
Cash and cash equivalents, beginning of period ..... 17 3,449
-------- --------
Cash and cash equivalents, end of period ........... $ 1,489 $ 1,653
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Reductions of lease receivables through
application of earned rebates ................... $ 954 $ 999
======= ======
Goodwill adjustment ............................. $ 250 $ --
======= ======
The accompanying notes are an integral part of
these condensed consolidated financial statements.
4
THE YORK GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
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 in the United States 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, 1999 audited
consolidated financial statements and the notes thereto included in the
Company's 1999 Annual Report on Form 10-K. In the opinion of the Company, 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.
The Company has recorded certain restructuring and special charges during the
quarter ended September 30, 2000. These charges have been based upon the best
information available to management at the time of this report and involve
extensive use of estimates and assumptions. The reason for, and financial impact
of, these adjustments are described in Notes 4 and 8 and in the Management's
Discussion and Analysis of Results of Operations and Financial Condition.
Although management is not aware at this time of any additional restructuring or
special charges that will be required in the future, it is possible that as
management continues its review or as new information becomes available, the
restructuring and special charges taken thus far will be adjusted or additional
restructuring or special charges may be taken in future periods.
Certain reclassifications have been made to the 1999 financial information
contained herein to conform to the classifications presented in 2000.
5
2. DEBT
Effective May 12, 2000, certain of the financial covenants related to the
Company's term loan, revolving credit facility and Senior Notes were modified.
The Company has received certain debt covenant waivers effective through
December 15, 2000. It is unlikely that the Company will refinance its debt prior
to December 15, 2000. If the Company is unable to obtain continued waivers of
certain of its fourth quarter debt covenants, the Company projects that it will
be out of compliance with one or more of its debt covenants in the fourth
quarter of 2000. Because of the uncertainty surrounding the Company's ability to
obtain additional covenant waivers after December 15, 2000, an additional $9.8
million of long-term debt has been classified as current as of September 30,
2000. The Company has been advised by its independent public accountants that,
if this contingency has not been resolved prior to the completion of their audit
of the Company's financial statements for the year ending December 31, 2000,
their auditor's report on those financial statements may be modified as being
subject to the ultimate outcome of that contingency. Management believes that it
will ultimately be successful in obtaining covenant waivers or alternative
funding; however, there can be no assurance of such.
6
3. 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 (loss)
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 September 30, 2000 the Company had
options outstanding for the purchase of an aggregate of 892,378 shares of common
stock, which were antidilutive and excluded from shares used in computing
diluted EPS for the three and nine month periods ended September 30, 2000,
respectively.
A reconciliation of weighted-average shares outstanding to shares used in
computing diluted EPS is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- ---------------
2000 1999 2000 1999
----- ----- ----- -----
(in thousands)
Weighted-average shares outstanding ......... 8,941 8,941 8,941 8,935
Dilutive securities consisting of options
and convertible debt ...................... -- 91 -- 93
----- ----- ----- -----
Shares used in computing diluted EPS ........ 8,941 9,032 8,941 9,028
===== ===== ===== =====
4. WRITE DOWN OF MANUFACTURING FACILITIES
During the three months ended June 30, 2000 the Company recorded a charge of
approximately $1.0 million for the write down of its closed Aiken, SC foundry to
reflect that facility's estimated fair value.
In September 2000, the Company recorded $5.5 million of restructuring charges to
reflect asset write-downs and other costs primarily associated with the
previously announced closure of its casket assembly plant in Richmond, Indiana
and the Company's manufacturing and processing facility in Lawrenceville,
Georgia. Charges of $4.4 million are for the write-down of inventories, real
estate, equipment, goodwill and other intangible assets. The remaining $1.1
million relates to employee severance costs and other post-shutdown expenses.
The carrying value of the Company's closed foundry operations and casket
assembly plants are classified as assets held for sale.
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. Certain reclassifications have been made to the 1999 segment information
to conform to the classification presented in 2000.
7
Interim financial information regarding the Company's segments is presented
below:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
(in thousands)
Net sales:
Caskets ........................... $ 30,101 $ 31,516 $ 105,052 $ 107,411
Commemorative Products ............ 10,125 10,715 32,413 34,196
All Other ......................... 2,669 3,141 8,142 8,547
--------- --------- --------- ---------
Consolidated net sales ......... $ 42,895 $ 45,372 $ 145,607 $ 150,154
========= ========= ========= =========
Operating income:
Caskets ........................... $ (4,721) $ 6,186 $ 9,801 $ 19,825
Commemorative Products ............ 850 1,850 3,012 6,481
All Other ......................... (4,885) (3,970) (14,793) (12,222)
--------- --------- --------- ---------
Consolidated operating income
(loss) ....................... $ (8,756) $ 4,065 $ (1,980) $ 14,084
========= ========= ========= =========
6. SUPPLEMENTAL INFORMATION
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------- --------
(in thousands)
Inventories:
Raw materials ............................. $ 6,515 $ 9,295
Work in process ........................... 2,525 3,130
Finished goods ............................ 15,794 21,555
-------- --------
Inventories, net .................... $ 24,834 $ 33,980
======== ========
Property, plant and equipment:
Land and improvements ..................... $ 2,854 $ 4,746
Buildings and improvements ................ 16,693 21,058
Equipment ................................. 67,656 66,317
Construction-in-progress .................. 2,901 4,724
-------- --------
90,104 96,845
Less: accumulated depreciation ............ (38,056) (34,471)
-------- --------
Property, plant and equipment, net .. $ 52,048 $ 62,374
======== ========
7. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements" (SAB 101), which provides guidance related
to revenue recognition based on interpretations and practices followed by the
SEC. Management believes that the Company's revenue recognition policy is in
accordance with SAB 101.
8. SPECIAL CHARGES
During the quarter ended September 30, 2000, the Company recorded special
pre-tax charges to continuing operations totaling $4.0 million. The principal
adjustments to the Company's continuing operations for the third quarter of 2000
may be categorized as follows:
INVENTORIES AND RELATED ACCRUALS
The Company recorded charges of approximately $3.1 million to reduce
inventories, increase cost of sales and adjust inventory-related accruals to
reflect both the results of recently completed inventory observations as well as
changes in management's estimate of potential losses at locations yet to be
physically counted.
OTHER ADJUSTMENTS
The Company recorded a $0.3 million charge to appropriately state the Company's
sales rebates accrual as a result of a change in management's estimate of the
liability to the Company's customers. An additional $0.4 million charge reflects
a change in management's estimate of the collectibility of certain disputed
accounts receivable balances. A $0.2 million charge was also recorded to
recognize certain fixed asset disposals.
8
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. The
Company is also a major manufacturer of bronze 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. 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 SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Third quarter 2000 sales were $42.9 million compared to $45.4 million for the
same period in 1999. Casket Segment sales were $30.1 million compared to $31.5
million in 1999, a decrease of $1.4 million. This decline is despite the fact
that finished casket unit volumes have increased 1.5% over the same period last
year. The lower net sales dollars per unit sold is primarily due to higher sales
discounts and rebate costs which include $0.3 million of special charges
discussed in Note 8, as well as lower component sales to other casket
manufacturers and an unfavorable sales mix between Company-owned and independent
distributors. Finished casket units sold to independent distributors increased
more than 3% year-over-year while comparable units sold through Company-owned
distribution declined 1% compared to the third quarter of 1999. Sales of the
Commemorative Products Segment were $10.1 million in the third quarter of 2000
compared to $10.7 million in 1999. The decline reflects the continued effect of
a loss of business attributable to performance factors and customer service
levels during the Company's plant consolidation efforts in late 1999 and early
2000. Sales from the All Other Segment, primarily consisting of York
Merchandising Systems(TM), decreased $0.5 million compared to the comparable
period in 1999.
Third quarter 2000 gross profit was $8.8 million compared to $14.6 million in
1999, and decreased as a percentage of sales to 20.6% from 32.0% in 1999. Casket
Segment gross profit decreased approximately $4.7 million to $5.7 million,
primarily due to special charges of $3.3 million for inventory and fixed assets
write-downs and $0.3 million additional sales rebate expenses as described in
Note 8. Also negatively affecting Casket Segment gross profit are higher sales
discount and rebate expenses, exclusive of special charges noted above, the
unfavorable sales mix between Company-owned and independent distributors, as
well as increased vehicle, fuel and freight costs. The decline was partially
offset by the effects of cost reduction efforts that were undertaken during the
latter part of 1999 and throughout 2000. Commemorative Products segment gross
profit decreased $0.4 million to $3.8 million, reflecting the decline in sales
and a higher mix of lower margin marker sales to the Veteran Administration. The
All Other Segment reported a $0.7 million loss at the gross profit level,
compared to breakeven in 1999 when second quarter production delays were
recovered during the third quarter of 1999.
Other operating expenses for the third quarter of 2000 were $17.6 million
compared to $10.5 million in 1999. Plant closure and restructuring charges
primarily relating to the Company's previously announced closing of a casket
assembly plant in Richmond, Indiana and its fabric plant in Lawrenceville,
Georgia account for $5.5 million of the change from the prior year. Special
charges of $0.4 million for accounts receivable write-downs (see Note 8),
increased expenses attributable to the Company's Enterprise Resource Planning
(ERP) system, as well as higher expenses for headquarters staffing, employee
medical and workers compensation benefits and fleet operations account for the
balance of the year-over-year change.
Net interest expense increased $.1 million from 1999, reflecting higher interest
rates, an increase in deferred finance fee amortization and the effect of
interest capitalization relative to the Company's ERP system expenditures in
1999, partially offset by lower debt levels in 2000. Interest paid during the
third quarter of 2000 and 1999 was $1.3 million and $1.3 million, respectively.
Other income reflects a favorable litigation settlement with one of the
Company's former suppliers.
9
The Company's effective income tax rate increased to 57.7% from 43.3% in 1999,
reflecting the effect of non-deductible expenses, primarily goodwill
amortization, and a year-to-date pretax loss. Cash paid for income taxes during
the third quarter of 1999 was $.4 million. In the third quarter of 2000 no cash
was paid for income taxes.
In the third quarter of 2000 the Company recorded a net loss of $3.5 million,
compared to net income of $1.4 million in 1999. Both basic and diluted earnings
(loss) per share were $(.39) in 2000 compared to $.16 in 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Many of the factors that affected the third quarter results also had an impact
on year-to-date results. Refer to the third quarter comparison for additional
discussion.
Sales were $145.6 million, a decline of $4.5 million from 1999. Casket Segment
sales were $105.1 million compared to $107.4 million in 1999. This comparison is
significantly impacted by higher sales discount and rebate levels including
special charges increasing sales rebate expenses by $0.3 million (see Note 8),
and reduced component sales to other casket manufacturers account for most of
the balance of this difference. Sales of the Commemorative Products Segment
decreased to $32.4 million from $34.2 million in 1999. All Other Segment sales
decreased $0.4 million compared to the same period in 1999.
Gross profit was $39.3 million compared to $47.9 million in 1999, and gross
margin declined from 32.0% to 27.0%. This difference reflects higher sales
discount and rebate costs, including the special charges discussed in Note 8, as
well as special charges for inventory write-downs, lower sales volume and
significant inefficiencies stemming from first quarter plant consolidation
activities in the Commemorative Products segment.
Total operating expenses increased $7.5 million, reflecting the $1.0 million
facility write-down in the third quarter, $5.5 million of plant closure and
restructuring charges in the third quarter and special charges of $0.4 million
relating to the write-down of certain accounts receivable (see Note 8).
Net interest expense increased $0.9 million, reflecting higher interest rates
and amortization of deferred finance fees. Interest paid during the nine month
periods ended September 30, 2000 and 1999 was $4.6 million and $4.3 million,
respectively.
The company's effective tax rate increased to 63.5% from 41.5% in 1999. Cash
paid for income taxes during the nine month periods ended September 30, 2000 and
1999 was $1.7 million and $2.8 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $1.5 million at September 30, 2000. During the
nine month period ended September 30, 2000, cash flows from operations totaled
approximately $15.7 million, cash used in investing activities totaled
approximately $1.1 million and cash used in financing activities totaled
approximately $12.8 million.
Capital expenditures were $2.5 million and $3.2 million in the nine months ended
September 30, 2000 and 1999, respectively. The Company expects its annual 2000
capital expenditures to be significantly below the $5.0 million that was
originally budgeted. Major 2000 expenditures include routine maintenance and
replacement projects, with no significant individual projects currently planned.
Long-term debt, including current maturities, at September 30, 2000, totaled
$67.6 million, which primarily consisted of $13.4 million of senior notes (the
"Senior Notes"), $25.0 million outstanding on the Company's bank term loan,
$22.1 million outstanding on the Company's revolving credit facility,
subordinated promissory notes totaling $3.8 million issued in conjunction with
an acquisition, capital lease obligations totaling $2.0 million and deferred
acquisition purchase cost of $0.8 million. Effective May 12, 2000, certain of
the financial covenants related to the Company's term loan, revolving credit
facility and Senior Notes were modified. The Company has received certain debt
covenant waivers effective through December 15, 2000. It is unlikely that the
Company will refinance its debt prior to December 15, 2000. If the Company is
unable to obtain continued waivers of certain of its fourth quarter debt
covenants, the Company projects that it will be out of compliance with one or
more of its debt covenants in the fourth quarter of 2000. Because of the
uncertainty surrounding the Company's ability to obtain additional covenant
waivers after December 15, 2000, an additional $9.8 million of long-term debt
has been classified as current as of September 30, 2000. The Company has been
advised by its independent public accountants that, if this contingency has not
been resolved prior to the completion of their audit of the Company's financial
statements for the year ending December 31, 2000, their auditor's report on
those financial statements may be modified as being subject to the ultimate
outcome of that contingency. Management believes that it will ultimately be
successful in obtaining covenant waivers or alternative funding; however, there
can be no assurance of such.
10
Management believes that current cash balances, cash flows from operations, the
remaining borrowing capacity available under the revolving credit facility and
the Company's access to other resources of capital markets are sufficient to
meet the Company's anticipated capital expenditures and other operating
requirements for the foreseeable future. There can be no assurance that the
Company will be successful in obtaining debt or equity financing or refinancing,
if any, on terms that are favorable.
INFLATION
Inflation has not had a material net impact on the Company over the past three
years 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 of caskets 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, casket and
memorialization products 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
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 or refinancing on terms
that are acceptable to the Company, the Company's ability to obtain future
covenant waivers, the company's success in executing its refinancing plan,
changes in demand for the Company's products and services that 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.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed on October 6, 2000
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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.
November 20, 2000 THE YORK GROUP, INC.
By: /s/ DAN E. MALONE
Dan E. Malone
Vice President and Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
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