UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 17, 1997
CARRIAGE SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11961 76-0423828
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
1300 POST OAK BLVD., SUITE 1500, HOUSTON, TX 77056
(Address of principal executive offices) (Zip Code)
(281) 556-7400
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 17, 1997, Carriage Services, Inc. (the "Company"), through its wholly
owned subsidiary, acquired all of the outstanding shares of common stock of
Redgate Funeral Service Corporation. Redgate Funeral Service Corporation
operates two funeral homes in Connecticut. This acquisition is referred to as
the "Acquired Business." Total consideration for the acquisition consisted of
cash of approximately $2.3 million and deferred purchase price of approximately
$200,000. 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 key employees and the former owner 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 its shareholder, 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
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
REDGATE FUNERAL SERVICE CORPORATION PAGE
Auditor's Report ................................................ 11
Balance Sheet as of December 31, 1996............................ 12
Statement of Income for the Year Ended December 31, 1996......... 13
Statement of Cash Flows for the Year Ended December 31, 1996..... 14
Notes to Financial Statements.................................... 15
(b) PRO FORMA FINANCIAL INFORMATION
CARRIAGE SERVICES, INC.
Unaudited Pro Forma Consolidated Balance Sheet -March 31, 1997.. 6
Unaudited Pro Forma Consolidated Statement of
Operations - Three Months Ended March 31, 1997................. 7
2
<PAGE>
Unaudited Pro Forma Consolidated Statement of
Operations - Year Ended December 31, 1996...................... 8
Notes to Unaudited Pro Forma Consolidated Financial Statements.. 9
(c) EXHIBITS
None
3
<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.
Dated: March 18, 1998 By: /s/ THOMAS C. LIVENGOOD
Thomas C. Livengood
Executive Vice President and
Chief Financial Officer
4
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On June 17, 1997, Carriage Services, Inc. (the "Company"), through its wholly
owned subsidiary, acquired all of the oustanding shares of common stock of
Redgate Funeral Service Corporation. Redgate Funeral Service Corporation
operates two funeral homes in Connecticut. This acquisition is referred to as
the "Acquired Business." Total consideration for the acquisition consisted of
cash of approximately $2.3 million and deferred purchase price of approximately
$200,000. 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 accompanying Unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1997 includes the accounts of the Company and reflects the Redgate
acquisition as if such acquisition had occurred on March 31, 1997. The
accompanying Unaudited Pro Forma Consolidated Statements of Operations for the
three months ended March 31, 1997 and the year ended December 31, 1996 include
the accounts of the Company and reflects the Redgate 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
included 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 March
31, 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.
5
<PAGE>
CARRIAGE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CARRIAGE ACQUIRED PRO FORMA TOTAL
SERVICES, INC. BUSINESS ADJUSTMENTS(1) PRO FORMA
-------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 2,727 $ 13 $ (2,316) $ 424
Accounts receivable --
Trade, net of allowance ........................... 7,334 98 (6) 7,426
Other ............................................. 1,651 -- -- 1,651
--------- ----- --------- ---------
8,985 98 (6) 9,077
Inventories and other current assets ............... 4,409 15 (1) 4,423
--------- ----- --------- ---------
Total current assets .............................. 16,121 126 (2,323) 13,924
--------- ----- --------- ---------
PROPERTY, PLANT AND EQUIPMENT,
at cost, net ........................................ 63,555 369 690 64,614
CEMETERY PROPERTY, at cost ............................. 22,748 -- -- 22,748
NAMES AND REPUTATIONS, net ............................. 87,740 45 1,459 89,244
DEFERRED CHARGES AND OTHER
NONCURRENT ASSETS ................................. 12,570 7 43 12,620
--------- ----- --------- ---------
$ 202,734 $ 547 $ (131) $ 203,150
========= ===== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other
current liabilities ................................ $ 7,432 $ 47 $ (35) $ 7,444
Current portion of long-term
debt and capital leases ........................... 1,564 31 (28) 1,567
--------- ----- --------- ---------
Total current liabilities ......................... 8,996 78 (63) 9,011
PRENEED LIABILITIES, net ............................... 7,045 -- -- 7,045
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES, net of
current portion ................................... 74,655 516 (295) 74,876
DEFERRED INCOME TAXES .................................. 10,522 -- 180 10,702
--------- ----- --------- ---------
Total liabilities ................................. 101,218 594 (178) 101,634
--------- ----- --------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ............................. 16,287 -- -- 16,287
STOCKHOLDERS' EQUITY:
Class A Common Stock ............................... 50 17 (17) 50
Class B Common Stock ............................... 54 -- -- 54
Contributed capital ................................ 90,670 -- -- 90,670
Retained deficit ................................... (5,545) -- -- (5,545)
Acquired Business equity (deficit) ................. -- (64) 64 --
--------- ----- --------- ---------
Total stockholders' equity ............................. 85,229 (47) 47 85,229
--------- ----- --------- ---------
$ 202,734 $ 547 $ (131) $ 203,150
========= ===== ========= =========
</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 THREE MONTHS ENDED MARCH 31, 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 ............................................. $ 15,288 $318 $-- $ 15,606
Cemetery ............................................ 2,701 -- -- 2,701
-------- ---- -------- --------
17,989 318 -- 18,307
Costs and expenses
Funeral ............................................. 10,620 58 9(2) 10,686
(3)(3)
2 (4)
Cemetery ............................................ 2,226 -- -- 2,226
-------- ---- -------- --------
12,846 58 8 12,912
-------- ---- -------- --------
Gross profit ......................................... 5,143 260 (8) 5,395
General and administrative expenses ...................... 1,021 232 -- 1,253
-------- ---- -------- --------
Operating income ..................................... 4,122 28 (8) 4,142
Interest expense, net .................................... 1,154 17 5(5) 1,176
-------- ---- -------- --------
Income before income taxes ............................ 2,968 11 (13) 2,966
Provision for income taxes ............................... 1,143 -- (2)(6) 1,141
-------- ---- -------- --------
Net income ............................................ 1,825 11 (11) 1,825
Preferred stock dividend
requirements .......................................... 181 -- -- 181
-------- ---- -------- --------
Net income available to common
stockholders ........................................ $ 1,644 $ 11 $ (11) $ 1,644
======== ==== ======== ========
Earnings per share:
Net income per common and common
equivalent share attributable
to common stockholders ............................... $ .16 $ .16
======== ========
Weighted average number of common
and common equivalent shares
outstanding ................... 10,586 10,586
======== ========
</TABLE>
See the accompanying Notes to Unaudited Pro Forma
Consolidated Financial Statements.
7
<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
SERVICES, ACQUIRED PRO FORMA TOTAL
INC. BUSINESS ADJUSTMENTS PRO FORMA
-------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues, net
Funeral ............................................ $ 37,445 $ 1,132 $-- $ 38,575
Cemetery ........................................... 2,903 -- -- 2,903
-------- ------- -------- --------
40,348 1,132 -- 41,480
Costs and expenses
Funeral ............................................ 30,641 201 37(2) 30,884
5(4)
Cemetery ........................................... 2,541 -- -- 2,541
-------- ------- -------- --------
33,182 201 42 33,425
-------- ------- -------- --------
Gross profit ........................................ 7,166 931 (42) 8,055
General and administrative expenses ..................... 2,474 789 -- 3,263
-------- ------- -------- --------
Operating income .................................... 4,692 142 (42) 4,792
Interest expense, net ................................... 4,347 58 21(5) 4,426
-------- ------- -------- --------
Income from continuing operations before
income taxes and extraordinary item ................ 345 84 (63) 366
Provision for income taxes .............................. 138 -- 8(6) 146
-------- ------- -------- --------
Net income from continuing operations before
extraordinary item .................................. 207 84 (71) 220
Loss from discontinued operations, net of tax
benefit .............................................. -- (270) 108(6) (162)
-------- ------- -------- --------
Net income (loss) before extraordinary item .......... 207 (186) 37 58
-------- ------- -------- --------
Extraordinary item - loss on early
extinguishment of debt, net of income tax
benefit of $332 .................................... (498) -- -- (498)
-------- ------- -------- --------
Net income (loss) .................................... (291) (186) 37 (440)
Preferred stock dividend requirements ................... 622 -- -- 622
-------- ------- -------- --------
Net income (loss) attributable to common
stockholders ....................................... $ (913) $ (186) $ 37 $ (1,062)
======== ======= ======== ========
(Loss) per share:
(Loss) per common and common equivalent
share before extraordinary item
attributable to common stockholders ................ (.09) (.12)
Extraordinary item .................................... (.10) (.10)
-------- --------
Net (loss) per common and common equivalent
share attributable to common stockholders .......... $ (.19) $ (.22)
======== ========
Weighted average number of common and common
equivalent shares outstanding ...................... 4,869 4,869
======== ========
</TABLE>
See the accompanying Unaudited Notes to Pro Forma
Consolidated Financial Statements
8
<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 March
31, 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 March
31, 1997 was as follows:
1997
--------------
(in thousands)
Current assets .................................. $ 106
Property, plant and equipment ................... 1,059
Deferred charges and other non-current assets ... 50
Names and reputations ........................... 1,504
Current liabilities ............................. (15)
Other liabilities ............................... (180)
-------
2,524
Consideration:
Debt ............................................ (221)
-------
Cash used for acquisition .................. $ 2,303
=======
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 three months ended March 31, 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 $ 9,000 and
$37,000 for the three months ended March 31, 1997 and the year ended
December 31, 1996, respectively, is resultant from the amortization, over a
40 year life, of the $1,504,000 in names and reputations recorded in
conjunction with the acquisition of the Acquired Business.
(3) To record adjustment to depreciation expense of $3,000 for the three months
ended March 31, 1997. 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.
9
<PAGE>
(4) To record amortization expense relative to non-compete agreements of $2,000
and $5,000 for the three months ended March 31, 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 $5,000 and $21,000 for the three
months ended March 31, 1997 and the year ended December 31, 1996,
respectively, which would have been incurred by the 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
three months ended June 31, 1997 and 40% for the year ended December 31,
1996. This adjustment reflects income tax expense of $2,000 and $100,000
for the three months ended March 31, 1997 and the year ended December 31,
1996, respectively. Of the net adjustment of $100,000 for the year ended
December 31, 1996, a tax benefit of $108,000 is attributable to loss from
discontinued operations. 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.
10
<PAGE>
[LOGAN & SCHMIDT, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Redgate Funeral Service Corporation
We have audited the accompanying balance sheets of REDGATE FUNERAL SERVICE
CORPORATION as of December 31, 1996 and the related statement of income and
statement of cash flows for the year then ended. These financial statements are
the responsibility of the Companies' 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 from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of REDGATE FUNERAL SERVICE
CORPORATION as of December 31, 1996 and the results of its operations for the
year then ended in conformity with generally accepted accounting principles.
LOGAN & SCHMIDT, P.A
November 2O, 1997
11
<PAGE>
REDGATE FUNERAL SERVICE CORPORATION
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash in Bank ................................................. $ 22,018
Inventory .................................................... 15,424
Accounts Receivable .......................................... 120,020
Prepaid Expenses ............................................. 5,322
---------
Total Current Assets ....................................... 162,784
---------
FIXED ASSETS:
Land ......................................................... 136,277
Buildings .................................................... 333,245
Leasehold Improvements ....................................... 22,116
Furniture and Equipment ...................................... 84,754
Automotive Equipment ......................................... 148,183
Less: Accumulated Depreciation .............................. (336,720)
---------
Total Fixed Assets ......................................... 387,855
---------
OTHER ASSETS:
Loan Fees, Net of $1,374
Accumulated Amortization .................................... 6,420
Lease Deposit ................................................ 1,000
Goodwill ..................................................... 45,000
---------
Total Other Assets ......................................... 52,420
---------
Total Assets ............................................... $ 603,059
---------
LIABILITIES AND STOCKHOLDERS' EOUITY
CNNNENT LIABILITIES:
Accounts Payable ............................................. $ 57,045
Payroll, Sales, and Other Accrued Taxes ...................... 1,573
Current Maturities - Long-Term Debt .......................... 41,579
---------
Total Current Liabilities .................................. 100,197
---------
LONG-TERM DEBT:
Notes Payable - Vehicles ..................................... 33,464
Note Payable - Bank .......................................... 11,667
Sewer Assessment - Payable ................................... 8,373
Note Payable - Stockholder ................................... 47,874
Mortgage Payable ............................................. 468,483
---------
Total Long-Term Debt ....................................... 569,861
---------
STOCKHOLDERS' EQUITY:
Common Stock ................................................. 17,033
Retained Earnings
Beginning of Year .......................................... $ 102,004
Net Loss ................................................... (186,036)
---------
End of Year (Deficit) ...................................... (84,032)
---------
Total Stockholders' Equity ................................. (66,999)
---------
Total Liabilities and Stockholders' Equity ................. $ 603,059
=========
See notes to financial statements.
12
<PAGE>
REDGATE FUNERAL SERVICE CORPORATION
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
SALES ......................................................... $ 1,008,680
COST OF SALES:
Caskets and Vaults ......................................... 154,518
Other Funeral Costs ........................................ 46,130
---------
Total Cost of Sales ....................................... 200,648
---------
GROSS PROFIT .................................................. 808, 032
OPERATING EXPENSES:
Personnel Expense .......................................... 476,101
Vehicle Expense ............................................ 68,117
Facility Expense ........................................... 103,109
Advertising and Promotion .................................. 24,159
Business Services .......................................... 104,492
-----------
Total Operating Expense .................................. 775,978
-----------
INCOME FROM OPERATIONS ........................................ 32,054
OTHER INCOME (EXPENSES):
Trade Embalming ............................................ 121,860
Service Charge Income ...................................... 1,751
Other Income ............................................... 914
Bad Debt Expense ........................................... (3,464)
Interest Expense ........................................... (57,774)
Covenant Not to Compete Payments ........................... (11,000)
-----------
Total Other Income (Expenses) ............................ 52,287
---------
Income from Continuing Operations
before Income Taxes ........................................ 84,341
Federal and State Taxes on Earnings ........................... --
---------
Income from Continuing Operations ............................. 84,341
DISCONTINUED OPERATIONS:
Loss on Disposition of Leasehold Improvements .............. (270,377)
---------
NET LOSS ...................................................... $ (186,036)
===========
See notes to financial statements
13
<PAGE>
REDGATE FUNERAL SERVICE CORPORATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ..................................................... $(186,036)
Adjustments To Reconcile Change in Net Loss
to Net Cash Provided by Operating Activities
Depreciation and Amortization ........................... 33,558
Increase in Receivables ................................. (27,680)
Increase in Inventory ................................... (216)
Increase in Prepaid Expenses ............................ (1,533)
Decrease in Accounts Payable ............................ (2,394)
Decrease in Accrued Taxes ............................... (209)
Loss on Disposition ..................................... 270,377
Decrease in Deposits .................................... (6,251)
---------
Total Adjustment ...................................... 265,652
---------
Cash Flows Provided by Operating Activities ........... 79,616
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Disposition of Automobile ...................... 19,750
Principal Payments - Notes Payable ........................... (99,717)
New Borrowing ................................................ 72,987
Sewer Assessment ............................................. 8,890
---------
Cash Flows Required by Financing Activities ................ 1,910
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of Property and Equipment ......................... (70,925)
---------
NET INCREASE IN CASH ............................................ 10,601
CASH, Beginning of Year ......................................... 11,417
---------
CASH, End of Year ............................................... $ 22,018
=========
See notes to financial statements.
14
<PAGE>
REDGATE FUNERAL SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
ORGANIZATION/NATURE OF OPERATIONS:
Redgate Funeral Service Corporation operates two funeral homes:
one in Trumbull, CT and one in Monroe, CT. It performs personal and
professional services related to funerals at its funeral homes.
Effective June 17, 1997, the stock of Redgate Funeral Service Corporation was
sold to Carriage Funeral Holdings, Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUES - Revenue is recognized upon performance of funeral services and sale
of related funeral merchandise.
INVENTORIES - Inventories are stated at cost determined by using the first-in,
first-out (FIFO) method.
FIXED ASSETS - Fixed assets are recorded at cost at the date of acquisition.
Major additions and improvements are capitalized while minor replacements,
maintenance and repairs which do not improve or extend the life of the related
assets are charged to operations as incurred. Depreciation of fixed assets is
calculated on the straight-line basis over the estimated useful lives of the
assets as follow:
Buildings 40 years
Improvements 5-31 years
Furniture/Equipment 5-10 years
Automotive Equipment 5 years
Depreciation expense included in operating expenses for the year was $33,247.
INCOME TAXES - The Company has incurred operating losses in prior years as well
as the year ended December 31, 1996, therefore there is no Federal or State
income taxes due. The Corporation's 1996 income tax return shows a net operating
loss carryover to future years of $379,728.
USE OF ESTIMATES - The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts and disclosures in the
financial statements. Although actual results could differ from those estimates,
no significant estimates have been made in the preparation of the Company's
financial statements.
15
<PAGE>
COMPENSATED ABSENCES - Vacation time is paid to all
full-time employees when taken. Unused vacation time is not paid when an
employee terminates, therefore, no accruals are made in the financial
statements.
NOTES PAYABLE:
Notes payable to finance companies secured by
automotive equipment with net book values of $81,417.
Monthly payments of $2,561 (principal and interest)
through 2000 are required. Interest rates on loans
are 7.17% to 9.99% .............................................. $ 56,911
Note payable to bank, secured by personal guarantee
of officer. Monthly payments of $833 plus interest
at 9% through 1999 .............................................. 21,667
Note payable to officer, unsecured. The loan contains
no payment provisions. Payments to the officer have
been made based on available cash flow. During 1996
the principal reduction of the loan was $46,878 ................ 47,874
Mortgage note payable to bank, secured by 1st
mortgage on 4 Gorham P1.,Trumbull, CT and personal
guarantee of officer. Monthly payments of $4,518
(principal and interest) are required through
July 1998 when the loan matures. Interest adjusts
annually based on U.S. Treasury securities ....................... 476,615
Principal payments are required in future years as follows:
December 31, 1997 $ 41,579
December 31, 1998 37,835
December 31, 1999 21,826
December 31, 2000 15,187
December 31, 2001 11,992
After 2001 426,772
16
<PAGE>
OPERATING LEASES:
The Company has three operating lease obligations.
- Lease of 1996 Cadillac Hearse requiring monthly payments
of $943 through June 1999.
- Lease of telephone equipment requiring monthly payments of $129
through February 1998.
- Lease of land and building for Monroe, CT funeral home from officer. A
formal lease does not exist, the Corporation pays monthly rent to the
officer in the amount of approximately $2,400 per month. The monthly
lease payments equal the officer's monthly loan payment on the real
estate mortgage on the property.
Future years lease obligations are as follows:
December 31, 1997 $41,664
December 31, 1998 40,374
December 31, 1999 34,458
DISCONTINUED OPERATIONS:
In late 1995, the Company closed the funeral home it operated in Fairfield, Ct.
The Company had made improvements to the facility, which was owned by the
principal stockholders of the Company. The remaining unamortized leasehold
improvements in the amount of $270,377 were written off in 1996. There was no
other income or expense associated with the discontinuation of operations.
17
