================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
------------------------
AMENDING THE
CURRENT REPORT ON FORM 8-K
FILED AUGUST 18, 1997
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 1, 1997
CARRIAGE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
76-0423828
DELAWARE 1-11961 (I.R.S. EMPLOYER
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) IDENTIFICATION NO.)
1300 POST OAK BLVD., SUITE 1500, HOUSTON, TX 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(281) 556-7400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
================================================================================
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 1, 1997, Carriage Services, Inc. (the "Company"), through its
wholly owned subsidiary, acquired substantially all the operating assets of
McNary-Moore Funeral Service. McNary-Moore Funeral Service operates one funeral
home in Colusa, California. This acquisition is referred to as the "Acquired
Business." Total consideration for the acquisition consisted of cash of
approximately $700,000 and deferred purchase price of approximately $150,000.
The consideration was determined through negotiations between the Company and
representatives of the Acquired Business. In connection with this acquisition,
the Company entered into customary employment, consulting and non-compete
agreements with certain employees and former owners of the Acquired Business.
The acquisition will be accounted for under the purchase method of accounting
for financial reporting purposes.
The Company is not aware of any pre-existing material relationships between
(i) the Acquired Business or any if its shareholders, on the one hand, and (ii)
the Company, any of the Company's affiliates, directors and officers or any
associate of such directors and officers, on the other.
The Company also completed the acquisition of several other businesses (the
"Other Acquisitions") since January 1, 1997. None of the Other Acquisitions
(other than ones previously filed on Form 8-K) is believed to be individually
material to the results of operations or financial condition of the Company.
However, the acquisition of the Acquired Business requires the filing of
financial statements and pro forma financial information pursuant to Rules
3-05(b)(1)(i) and 11-01(c) of Regulation S-X to the extent such businesses would
collectively constitute a "significant subsidiary" under such Rules.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This Form 8-K/A is being filed to include in the Current Report on
Form 8-K filed by the Registrant with the Securities and Exchange
Commission on August 18, 1997 the financial statements and pro forma
financial information required by Item 7.
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
PAGE
----
MCNARY-MOORE FUNERAL SERVICE, INC.
Auditor's Report................ 10
Comparative Balance Sheets as of
December 31, 1996 and 1995..... 11
Statements of Income and
Retained Earnings for the Years
Ended December 31, 1996
and 1995....................... 12
Statements of Cash Flows for the
Years Ended December 31, 1996
and 1995....................... 13
Notes to Financial Statements... 14
(b) PRO FORMA FINANCIAL INFORMATION
CARRIAGE SERVICES, INC.
Unaudited Pro Forma Consolidated
Balance Sheet -- June 30, 1997. 5
Unaudited Pro Forma Consolidated
Statement of Operations -- Six
Months Ended June 30, 1997..... 6
Unaudited Pro Forma Consolidated
Statement of Operations -- Year
Ended December 31, 1996........ 7
Notes to Unaudited Pro Forma
Consolidated Financial
Statements..................... 8
(c) EXHIBITS
None
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CARRIAGE SERVICES, INC.
By: /s/THOMAS C. LIVENGOOD
THOMAS C. LIVENGOOD
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Dated: October 14, 1997
3
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On August 1, 1997, Carriage Services, Inc. (the "Company"), through its
wholly owned subsidiary, acquired substantially all the operating assets of
McNary-Moore Funeral Service. McNary-Moore Funeral Service operates one funeral
home in Colusa, California. This acquisition is referred to as the "Acquired
Business." Total consideration for the acquisition consisted of cash of
approximately $700,000 and deferred purchase price of approximately $150,000.
The consideration was determined through negotiations between the Company and
representatives of the Acquired Business. In connection with this merger, the
Company entered into customary employment, consulting and non-compete agreements
with certain employees and former owners of the Acquired Business. The merger
will be accounted for under the purchase method of accounting for financial
reporting purposes.
The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of June
30, 1997 includes the accounts of the Company and reflects the McNary-Moore
acquisition as if such acquisition had occurred on June 30, 1997. The
accompanying Unaudited Pro Forma Consolidated Statements of Operations for the
six months ended June 30, 1997 and the year ended December 31, 1996 include the
accounts of the Company and reflects the McNary-Moore acquisition as if such
acquisition had been completed as of the beginning of each of the respective
periods. The accompanying Unaudited Pro Forma Consolidated Financial Statements
do not include the pro forma results of other businesses acquired by the Company
since January 1, 1997.
The accompanying Unaudited Pro Forma Consolidated Financial Statements have
been prepared based upon certain assumptions and include adjustments as detailed
in the Notes to Unaudited Pro Forma Consolidated Financial Statements. The
estimated fair market values reflected in the Unaudited Pro Forma Consolidated
Financial Statements are based on preliminary estimates and assumptions and are
subject to revision as more information regarding asset and liability valuations
becomes available. In management's opinion, the preliminary allocation reflected
herein is not expected to be materially different from the final allocation.
The Unaudited Pro Forma Consolidated Statements of Operations do not assume
any additional profitability resulting from the application of the Company's
revenue enhancement measures or cost reduction programs to the historical
results of the Acquired Business, nor do they assume increases in corporate
general and administrative expenses which may have resulted from the Company
managing the Acquired Business for the periods presented.
The following Unaudited Pro Forma Consolidated Financial Statements should
be read in conjunction with the Consolidated Financial Statements of the Company
and the related notes thereto as included in the Company's Form 10-Q as of June
30, 1997 and the Company's Form 10-K as of December 31, 1996. Such pro forma
information is based on historical data with respect to the Company and the
Acquired Business. The pro forma information is not necessarily indicative of
the results that might have occurred had such transactions actually taken place
at the beginning of the period specified and is not intended to be a projection
of future results. The pro forma information presented herein is provided to
comply with the requirements of the Securities and Exchange Commission. The pro
forma information does not reflect any adjustments to reflect the manner in
which the acquired entity is being or will be operated under the control of the
Company.
4
<PAGE>
CARRIAGE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CARRIAGE ACQUIRED PRO FORMA TOTAL
ASSETS SERVICES, INC. BUSINESS ADJUSTMENTS(1) PRO FORMA
-------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......... $ 1,873 $ 60 $ (779) $ 1,154
Accounts receivable --
Trade, net of allowance......... 7,847 18 2 7,867
Other........................... 1,394 -- -- 1,394
-------------- --------- -------------- ---------
9,241 18 2 9,261
Inventories and other current
assets.......................... 4,564 30 (6) 4,588
-------------- --------- -------------- ---------
Total current assets....... 15,678 108 (783) 15,003
-------------- --------- -------------- ---------
PROPERTY, PLANT AND EQUIPMENT, at
cost (net)......................... 67,537 39 587 68,163
CEMETERY PROPERTY, at cost........... 22,995 -- -- 22,995
NAMES AND REPUTATIONS, net........... 92,636 2 259 92,897
DEFERRED CHARGES AND OTHER NONCURRENT
ASSETS............................. 13,118 13 34 13,165
-------------- --------- -------------- ---------
$211,964 $ 162 $ 97 $ 212,223
============== ========= ============== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current
liabilities..................... $ 6,451 $ 13 $ 91 $ 6,555
Current portion of long-term debt
and capital leases.............. 1,354 -- 74 1,428
-------------- --------- -------------- ---------
Total current
liabilities............. 7,805 13 165 7,983
PRENEED LIABILITIES, net............. 7,637 -- -- 7,637
LONG-TERM DEBT AND OBLIGATIONS UNDER
CAPITAL LEASES, net of current
portion............................ 80,599 -- 81 80,680
DEFERRED INCOME TAXES................ 11,634 -- -- 11,634
-------------- --------- -------------- ---------
Total liabilities.......... 107,675 13 246 107,934
-------------- --------- -------------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK........... 16,286 -- -- 16,286
STOCKHOLDERS' EQUITY:
Class A Common Stock............... 53 -- -- 53
Class B Common Stock............... 52 -- -- 52
Contributed capital................ 92,128 -- -- 92,128
Retained deficit................... (4,230) -- -- (4,230)
Acquired Business equity........... -- 149 (149) --
-------------- --------- -------------- ---------
Total stockholders'
equity.................. 88,003 149 (149) 88,003
-------------- --------- -------------- ---------
$211,964 $ 162 $ 97 $ 212,223
============== ========= ============== =========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
5
<PAGE>
CARRIAGE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CARRIAGE ACQUIRED PRO FORMA TOTAL
SERVICES, INC. BUSINESS ADJUSTMENTS PRO FORMA
-------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues, net
Funeral......................... $ 30,919 $ 161 $-- $31,080
Cemetery........................ 6,131 -- -- 6,131
-------------- -------- ----------- ---------
37,050 161 -- 37,211
Costs and expenses
Funeral......................... 22,146 22 3(2) 22,180
7(3)
2(4)
Cemetery........................ 4,758 -- -- 4,758
-------------- -------- ----------- ---------
26,904 22 12 26,938
-------------- -------- ----------- ---------
Gross profit.................... 10,146 139 (12) 10,273
General and administrative
expenses........................... 2,187 117 -- 2,304
-------------- -------- ----------- ---------
Operating income................ 7,959 22 (12) 7,969
Interest expense, net................ 2,570 -- 4(5) 2,574
-------------- -------- ----------- ---------
Income before income taxes...... 5,389 22 (16) 5,395
Provision for income taxes........... 2,075 -- 2(6) 2,077
-------------- -------- ----------- ---------
Net income...................... 3,314 22 (18) 3,318
Preferred stock dividend
requirements....................... 210 -- -- 210
-------------- -------- ----------- ---------
Net income attributable to
common stockholders........... $ 3,104 $ 22 $ (18) $ 3,108
============== ======== =========== =========
Income per share:
Net income per common and common
equivalent share attributable
to common stockholders........ $ .28 $ .28
============== =========
Weighted average number of common and
common equivalent shares
outstanding........................ 11,110 11,110
============== =========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
6
<PAGE>
CARRIAGE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CARRIAGE ACQUIRED PRO FORMA TOTAL
SERVICES, INC. BUSINESS ADJUSTMENTS PRO FORMA
-------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues, net
Funeral......................... $ 37,445 $ 360 $-- $37,805
Cemetery........................ 2,903 -- -- 2,903
-------------- --------- ----------- ---------
40,348 360 -- 40,708
Costs and expenses
Funeral......................... 30,641 57 6(2) 30,722
14(3)
4(4)
Cemetery........................ 2,541 -- -- 2,541
-------------- --------- ----------- ---------
33,182 57 24 33,263
-------------- --------- ----------- ---------
Gross profit.................... 7,166 303 (24) 7,445
General and administrative
expenses........................... 2,474 232 -- 2,706
-------------- --------- ----------- ---------
Operating income................ 4,692 71 (24) 4,739
Interest expense, net................ 4,347 -- 8(5) 4,355
-------------- --------- ----------- ---------
Income before income taxes and
extraordinary item............ 345 71 (32) 384
Provision for income taxes........... 138 -- 15(6) 153
-------------- --------- ----------- ---------
Income before extraordinary
item.......................... 207 71 (47) 231
Extraordinary item -- loss on early
extinguishment
of debt, net of income tax benefit
of $332............................ (498) -- -- (498)
-------------- --------- ----------- ---------
Net income (loss)............... (291) 71 (47) (267)
Preferred stock dividend
requirements....................... 622 -- -- 622
-------------- --------- ----------- ---------
Net income (loss) attributable
to common stockholders........ $ (913) $ 71 $ (47) $ (889)
============== ========= =========== =========
(Loss) per share:
(Loss) per common and common
equivalent
share before extraordinary
item attributable to common
stockholders.................. (.09) (.08)
Extraordinary item.............. (.10) (.10)
-------------- ---------
Net (loss) per common and common
equivalent share attributable
to common stockholders........ (.19) (.18)
============== =========
Weighted average number of common and
common equivalent shares
outstanding........................ 4,869 4,869
============== =========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma Consolidated Financial
Statements.
7
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of June
30, 1997 gives effect to the acquisition of the Acquired Business. The estimated
fair market values reflected herein are based on preliminary estimates and
assumptions and are subject to revision as more information becomes available.
In management's opinion, the preliminary allocation is not expected to be
materially different from the final allocation.
(1) To record the elimination of assets and liabilities not acquired or
assumed by the Company and record the total consideration (including estimated
transaction costs) and the preliminary allocation of total consideration to the
identifiable net assets of the acquired business.
The effect of the Acquired Business on the Consolidated Balance Sheet at
June 30, 1997 was as follows:
1997
--------------
(IN THOUSANDS)
Current Assets.......................... $ 48
Property, Plant and Equipment........... 626
Deferred Charges and Other Noncurrent
Assets................................ 46
Names and Reputations................... 257
Current Liabilities..................... (105)
--------------
872
Consideration:
Debt.................................... (153)
--------------
Cash used for acquisition.......... $ 719
==============
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS ADJUSTMENTS
The accompanying Unaudited Pro Forma Consolidated Statements of Operations
for the year ended December 31, 1996 and six months ended June 30, 1997 give
effect to the acquisition of the Acquired Business.
(2) To record adjustment to amortization expense relative to the Company's
new basis in net assets acquired in conjunction with the acquisition of the
Acquired Business as if it had occurred as of the beginning of each of the
respective periods presented. The amortization expense of $3,000 and $6,000 for
the six months ended June 30, 1997 and the year ended December 31, 1996,
respectively, is resultant from the amortization, over a 40 year life, of the
$257,000 in names and reputations recorded in conjunction with the acquisition
of the Acquired Business.
(3) To record additional depreciation expense of $7,000 and $14,000 for
the six months ended June 30, 1997 and the year ended December 31, 1996,
respectively, relative to the Company's increased basis in property and
equipment resultant from the acquisition of the Acquired Business as it had
occurred at the beginning of each of the respective periods presented. Pro forma
depreciation expense has been recorded based on the Company's estimate of the
useful lives of the acquired assets using the Company's depreciation methods.
(4) To record amortization expense relative to non-compete agreements of
$2,000 and $4,000 for the six months ended June 30, 1997 and the year ended
December 31, 1996, respectively. These agreements are amortized over the term of
the agreements.
(5) To record additional interest expense of $4,000 and $8,000 for the six
months ended June 30, 1997 and the year ended December 31, 1996, respectively,
which would have been incurred by the
8
<PAGE>
CARRIAGE SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
Company assuming the acquisition of the Acquired Business had occurred as of the
beginning of each of the respective periods presented.
(6) To record the income tax expense as if the effective rate is 38.5% for
the six months ended June 30, 1997 and 40% for the year ended December 31, 1996.
This adjustment reflects income tax expense of $2,000 and $15,000 for the six
months ended June 30, 1997 and the year ended December 31, 1996, respectively.
The Company's management believes that this is the effective rate that would be
indicative of the Company's normal tax position assuming the acquisition was
made as of the beginning of the respective periods presented.
9
<PAGE>
AUDITOR'S REPORT
Board of Directors and Stockholders
of McNary-Moore Funeral Service, Inc.
Colusa, California
We have audited the accompanying balance sheets of McNary-Moore Funeral
Service, Inc. (a California corporation) as of December 31, 1996 and 1995, and
the related statements of income and retained earnings and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of McNary-Moore Funeral
Service, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
BARTIG, BASLER & RAY, CPAs, INC.
July 3, 1997
10
<PAGE>
MCNARY-MOORE FUNERAL SERVICE, INC.
COMPARATIVE BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
ASSETS
Current Assets
Cash (Note 2)................... $ 65,130 $ 114,380
Accounts receivable -- Net of
allowance for
bad debts (Note 3)............ 42,271 41,689
Inventory (Note 4).............. 31,803 29,944
Prepaid expense (Note 5)........ 14,431 14,326
---------- ----------
Total Current Assets.......... 153,635 200,339
---------- ----------
Fixed Assets
Property and equipment -- Net of
allowance for depreciation
(Note 6)....................... 40,367 41,319
---------- ----------
Other Assets
Memberships..................... 500 500
Goodwill........................ 2,000 2,000
---------- ----------
Total Other Assets............ 2,500 2,500
---------- ----------
Total Assets............... $ 196,502 $ 244,158
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable................ $ 8,461 $ 9,642
Taxes payable................... 3,577 5,952
Salaries payable................ 7,668 15,242
Deferred rental income.......... 1,140 690
---------- ----------
Total Current Liabilities..... 20,846 31,526
---------- ----------
Stockholders' Equity
Capital stock, par value $50,
1,500 shares
authorized, 1,200 shares
issued and outstanding......... 60,000 60,000
Additional paid-in capital...... 4,068 4,068
Retained earnings............... 111,588 148,564
---------- ----------
Total Stockholders' Equity.... 175,656 212,632
---------- ----------
Total Liabilities and
Stockholders' Equity.... $ 196,502 $ 244,158
========== ==========
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
MCNARY-MOORE FUNERAL SERVICE, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Sales, Net of Discounts Allowed...... $ 360,387 100.0% $ 395,732 100.0%
Cost of Sales........................ 57,097 15.8 68,766 17.4
---------- ------- ---------- -------
Gross Profit on Sales................ 303,290 84.2 326,966 82.6
Operating Expenses................... 244,037 67.7 246,762 62.3
---------- ------- ---------- -------
Net Income from Operations........... 59,253 16.5 80,204 20.3
Other Income......................... 11,654 3.2 10,576 2.7
---------- ------- ---------- -------
Net Income........................... 70,907 19.7% 90,780 22.9%
======= =======
Retained Earnings, Beginning of
Year............................... 148,564 106,941
Dividends Paid....................... (107,883) (49,157)
---------- ----------
Retained Earnings, End of Year....... $ 111,588 $ 148,564
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
MCNARY-MOORE FUNERAL SERVICE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
Cash Flows from Operating Activities
Net income...................... $ 70,907 $ 90,780
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation............... 2,315 2,274
(Increase) decrease in:
Accounts receivable........ (582) (15,477)
Inventory.................. (1,859) (2,962)
Prepaid expenses........... (105) 3,248
Increase (decrease) in:
Accounts payable........... (1,181) 1,772
Taxes payable.............. (2,375) 1,873
Salaries payable........... (7,573) 8,525
Deferred rental income..... 450 (225)
---------- ----------
Net Cash Provided by
Operating
Activities......... 59,997 89,808
---------- ----------
Cash Flows from Investing Activities
Purchase buildings and
improvements................... (397) --
Purchase of fixtures, furniture
and equipment.................. (967) (7,983)
---------- ----------
Net Cash Flows from
Investing
Activities......... (1,364) (7,983)
---------- ----------
Cash Flows from Financing Activities
Dividends paid.................. (107,883) (49,157)
---------- ----------
Net Increase (Decrease) in Cash...... (49,250) 32,668
Cash at Beginning of Year............ 114,380 81,712
---------- ----------
Cash at End of Year.................. $ 65,130 $ 114,380
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash Paid During the Year
Interest........................ $ -- $ --
Income Taxes.................... -- --
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
MCNARY-MOORE FUNERAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING
The Corporation's financial records are maintained on the accrual basis of
accounting. Under the accrual basis, revenues are recognized when earned and
expenses are recognized when incurred without regard to when payment is received
or paid.
B. INVENTORY
Inventory is stated at cost using the first-in, first-out method of
valuation.
C. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful life of the assets.
D. INCOME TAXES/YEAR END
Under the provisions of Subchapter S of the Internal Revenue Code, the
Corporation has elected not to be subject to the federal income tax. As a result
and by consent of the shareholders to the election, the shareholders are liable
for the federal income tax on the income of the Corporation whether distributed
or not. Therefore, no provision has been made in the financial statements for
federal income tax.
The balance in retained earnings represents undistributed income that has
been previously taxed to the shareholders.
E. TRUST FUNDS
The Corporation is liable for performance under prepaid financial
arrangements as evidenced by funds on deposit in savings accounts in the names
of corporate officers and other trustees for McNary-Moore Funeral Service, Inc.
The amounts of $192,191 and $131,617 at December 31, 1996 and 1995,
respectively, represented savings accounts deposits and offsetting liability
accounts to individuals for prepaid funerals. These amounts are considered trust
funds and are not reflected in the balance sheets of the Corporation.
NOTE 2: CASH
1996 1995
---------- ----------
Petty Cash........................... $ 75 $ 75
Cash in bank -- Commercial........... 16,678 27,224
Cash in bank -- Savings.............. 48,377 87,080
---------- ----------
Total........................... $ 65,130 $ 114,379
========== ==========
14
<PAGE>
MCNARY-MOORE FUNERAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable on December 31 consisted of the following:
1996 1995
--------- ---------
Accounts receivable.................. $ 37,425 $ 37,434
Accommodation items.................. 4,610 3,949
Sundry accounts receivable........... 236 306
--------- ---------
Total........................... 42,271 41,689
Less allowance for bad debts......... -- --
--------- ---------
Total........................... $ 42,271 $ 41,689
========= =========
NOTE 4: INVENTORY
Inventory on December 31 consisted of the following:
1996 1995
--------- ---------
Merchandise.......................... $ 30,583 $ 28,424
Supplies............................. 1,220 1,520
--------- ---------
Total........................... $ 31,803 $ 29,944
========= =========
NOTE 5: PREPAID EXPENSES
Prepaid expenses on December 31 consisted of the following:
1996 1995
--------- ---------
Insurance............................ $ 7,604 $ 7,903
Taxes and licenses................... 3,892 3,871
Other................................ 2,935 2,552
--------- ---------
Total........................... $ 14,431 $ 14,326
========= =========
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment are summarized by major classifications as follows:
1996 1995
------------ ------------
Land................................. $ 24,986 $ 24,986
Buildings and improvements........... 111,988 111,591
Fixtures, furniture and equipment.... 53,900 53,834
Automobiles.......................... 38,267 38,267
------------ ------------
Total........................... 229,141 228,678
Less allowance for depreciation...... (188,774) (187,359)
------------ ------------
Total........................... $ 40,367 $ 41,319
============ ============
15
<PAGE>
MCNARY-MOORE FUNERAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7: PENSION PLAN
The Corporation contributes to SEP/IRA plans for substantially all of its
employees. The contributions and costs are determined as 4.5 percent of each
covered employee's salary and totaled $5,633 for the year ended December 31,
1996 and $5,016 for the year ended December 31, 1995.
NOTE 8: SUBSEQUENT EVENT
Subsequent to year end, an offer was accepted to sell substantially all the
assets of the Corporation with the exception of certain parcels of real
property. The pending sale and transfer was intended to occur as of July 31,
1997.
16
