UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K/A
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 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 December 17, 1997, Carriage Services, Inc. (the "Company"), through its
wholly owned subsidiary, acquired all outstanding shares of common stock of
Johnson Mortuary and Crematory, Inc. Johnson Mortuary and Crematory, Inc.
operates one funeral home in Kalispell, Montana. This acquisition is referred to
as the "Acquired Business." The consideration for the acquisition consisted of
cash of approximately $2.3 million. 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 merger and 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 and the acquisition
of the Other Acquisitions 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 since such business constitutes a "significant subsidiary" under
such Rules.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
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
December 31,1997 the financial statements and pro forma financial
information required by Item 7.
<TABLE>
<CAPTION>
JOHNSON MORTUARY AND CREMATORY, INC. PAGE
----
<S> <C>
Auditor's Report.......................................................... 10
Balance Sheets of September 30, 1997...................................... 11
Statement of Income for the Year Ended September 30, 1997................. 12
Statement of Retained Earnings for the Year Ended September 30, 1997...... 13
Statement of Cash Flows for the Years Ended September 30, 1997............ 14
Notes to Financial Statements............................................. 15
2
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION
CARRIAGE SERVICES, INC.
Unaudited Pro Forma Consolidated Balance Sheet -September 30, 1997........ 5
Unaudited Pro Forma Consolidated Statement of Operations - Nine Months Ended
September 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
</TABLE>
(C) EXHIBITS. None
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 23, 1998 By: /s/ THOMAS C. LIVENGOOD
-----------------------
Thomas C. Livengood
Executive Vice President and
Chief Financial Officer
3
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On December 17, 1997, Carriage Services, Inc. (the "Company"), through its
wholly owned subsidiary, acquired all outstanding shares of common stock of
Johnson Mortuary and Crematory, Inc. Johnson Mortuary and Crematory, Inc.
operates one funeral home in Kalispell, Montana. This acquisition is referred to
as the "Acquired Business." The consideration for the acquisition consisted of
cash of approximately $2.3 million. 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 Financial Statements have been
prepared based upon certain assumptions and include adjustments as detailed in
the Notes to Unaudited Consolidated Pro Forma Financial Statements. The
estimated fair market values reflected in the Unaudited 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 Businesses, nor do they assume increases in
corporate general and administrative expenses which may have resulted from the
Company managing the Acquired Businesses 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 September 30, 1997 and 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 Businesses. 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 entities are being or will be operated under the control of
the Company.
4
<PAGE>
CARRIAGE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 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 ....... $ 883 $ 120 $ (2,490) $ (1,487)
Accounts receivable --
Trade, net of allowance ........ 8,218 81 (13) 8,286
Other .......................... 1,042 -- -- 1,042
--------- ------- ---------- ---------
9,260 81 (13) 9,328
Inventories and other current
assets .............................. 5,109 45 8 5,162
--------- ------- ---------- ---------
Total current assets ........... 15,252 246 (2,495) 13,003
--------- ------- ---------- ---------
PROPERTY, PLANT AND EQUIPMENT, at
cost (net) ..................... 71,942 198 579 72,719
CEMETERY PROPERTY, at cost .......... 23,686 23,686
NAMES AND REPUTATIONS, net .......... 94,440 2 1,725 96,167
DEFERRED CHARGES AND OTHER
NONCURRENT ASSETS .............. 14,844 21 31 14,896
--------- ------- ---------- ---------
$ 220,164 $ 467 $ (160) $ 220,471
========= ======= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current
liabilities ......................... $ 6,867 $ 24 $ 57 $ 6,948
Current portion of long-term debt
and capital leases ............. 1,328 1,328
--------- ------- ---------- ---------
Total current liabilities ...... 8,195 24 57 8,276
PRENEED LIABILITIES, net ............ 7,692 7,692
LONG-TERM DEBT AND OBLIGATIONS UNDER
CAPITAL LEASES, net of current
portion ........................ 85,642 4 85,646
DEFERRED INCOME TAXES ............... 13,067 222 13,289
--------- ------- ---------- ---------
Total liabilities .............. 114,596 24 283 114,903
--------- ------- ---------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK .......... 16,285 16,285
STOCKHOLDERS' EQUITY:
Class A Common Stock ............ 55 55
Class B Common Stock ............ 50 50
Contributed capital ............. 93,439 93,439
Retained deficit ................ (4,261) (4,261)
Acquired Business equity ........ -- 443 (443) --
--------- ------- ---------- ---------
Total stockholders' equity ..... 89,283 443 (443) 89,283
--------- ------- ---------- ---------
$ 220,164 $ 467 $ (160) $ 220,471
========== ======== ========== =========
</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 NINE MONTHS ENDED SEPTEMBER 30, 1997
(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 ........................ $ 46,283 $ 618 $ -- $ 46,901
Cemetery ....................... 9,012 -- -- 9,012
----------- ----------- ----------- -----------
55,295 618 -- 555,913
Costs and expenses
Funeral ........................ 34,405 296 32 (2) 34,717
-- -- (20)(3) --
-- -- 4 (4) --
Cemetery ....................... 7,187 -- -- 7,187
----------- ----------- ----------- -----------
41,592 296 16 41,904
----------- ----------- ----------- -----------
Gross profit .................... 13,703 322 (16) 14,009
General and administrative expenses . 3,657 232 -- 3,889
----------- ----------- ----------- -----------
Operating income ................ 10,046 90 (16) 10,120
Interest expense, net ............... 4,028 (1) 127 (5) 4,154
----------- ----------- ----------- -----------
Income before income taxes and
extraordinary item ............. 6,018 91 (143) 5,966
Provision for income taxes .......... 2,357 -- (60)(6) 2,297
----------- ----------- ----------- -----------
Income before extraordinary item . 3,661 91 (83) 3,669
Extraordinary item:
Loss on early extinguishment of
debt, net of income tax
benefit of $159 ................ (195) -- -- (195)
----------- ----------- ----------- -----------
Net income
3,466 91 (83) 3,474
Preferred stock dividend
requirements ........................ 239 -- -- 239
----------- ----------- ----------- -----------
Net income available to common
stockholders
$ 3,227 $ 91 $ (83) $ 3,235
=========== =========== =========== ===========
Earnings per share:
Net income before extraordinary
item ............................ $ .31 $ .31
Extraordinary item per share
(.02) (.02)
----------- -----------
Net income ...................... .29 $ .29
=========== ===========
Weighted average number of common
and common equivalent shares
outstanding .................... 11,325 11,325
=========== ===========
</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)
CARRIAGE
SERVICES, ACQUIRED PRO FORMA TOTAL
INC. BUSINESS ADJUSTMENTS PRO FORMA
--------- ---------- ---------- -----------
Revenues, net
Funeral
$37,445 $ 752 $ -- $38,197
Cemetery ..................... 2,903 -- -- 2,903
------- -------- ------ -------
40,348 752 -- 41,100
Costs and expenses
Funeral ...................... 30,641 379 43 (2) 31,039
(29)(3)
5 (4)
Cemetery ..................... 2,541 -- -- 2,541
------- -------- ------ -------
33,182 379 19 33,580
------- -------- ------ -------
Gross profit .................. 7,166 373 (19) 7,520
General and administrative expenses 2,474 295 -- 2,769
------- -------- ------ -------
Operating income .............. 4,692 78 (19) 4,751
Interest expense, net ............. 4,347 (3) 151 (5) 4,495
------- -------- ------ -------
Income before income taxes and
extraordinary item ........... 345 81 (170) 256
Provision for income taxes ........ 138 -- (36)(6) 102
------- -------- ------ -------
Income before extraordinary item 207 81 (134) 154
Extraordinary item:
Loss on early extinguishment of
debt, net of income tax
benefit of $332 .............. (498) -- -- (498)
------- -------- ------ -------
Net income (loss)
(291) 81 (134) (344)
Preferred stock dividend
requirements ...................... 622 -- -- 622
------- -------- ------ -------
Net (loss) attributable to
common stockholders ..........
$ (913) $ 81 $(134) $ (966)
======= ======== ====== =======
(Loss) per share:
Net (loss) before extraordinary $ (.09) $ (.10)
item ..........................
Extraordinary item per share (.10) (.10)
------ -------
Net (loss) .................... $ (.19) $(.20)
====== =======
Weighted average number of common .
and common equivalent shares .
outstanding .................. 4,869 4,869
====== =======
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
September 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
September 30, 1997 was as follows:
1997
--------------
(in thousands)
Current Assets $ 121
Property, Plant and Equipment 777
Deferred Charges and Other Non-current Assets 52
Names and Reputations 1,727
Other Liabilities (303)
--------------
2,374
Consideration:
Debt (4)
--------------
Cash used for acquisition $ 2,370
==============
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 nine months ended September 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 $32,000 and
$43,000 for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively, is resultant from the amortization, over a
40 year life, of the $1,727,000 in names and reputations recorded in
conjunction with the acquisition of the Acquired Business.
(3) To record adjustment to depreciation expense of $20,000 and $29,000 for the
nine months ended September 30, 1997 and the year ended December 31, 1996,
respectively. 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.
8
<PAGE>
(4) To record amortization expense relative to non-compete agreements of $4,000
and $5,000 for the nine months ended September 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 $127,000 and $151,000 for the nine
months ended September 30, 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
nine months ended September 30, 1997 and 40% for the year ended December
31, 1996. This adjustment reflects income tax benefits of $60,000 and
$36,000 for the nine months ended September 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>
Board of Directors
of Johnson Mortuary, Inc.
We have audited the accompanying balance sheet of Johnson Mortuary & Crematory,
Inc. (a Montana corporation) as of September 30, 1997, and the related
statements of income, retained earnings, and cash flows for the year 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 Johnson Mortuary & Crematory,
Inc. as of September 30, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
JORDAHL & SLITER PLLC
Kalispell, Montana
February 13, 1998
10
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS:
Cash ...................................................... $119,761
Accounts receivable, less allowance for doubtful
accounts of $24,080 ............................. 81,628
Inventory ................................................. 38,021
Prepaid expense ........................................... 6,776
--------
Total current assets ............................ 246,186
--------
PROPERTY AND EQUIPMENT, at cost:
Land ...................................................... 20,624
Buildings and improvements ................................ 260,680
Furniture and fixtures .................................... 187,075
Motor equipment ........................................... 252,949
--------
721,328
Less accumulated depreciation ............................. 523,735
--------
197,593
--------
OTHER ASSETS:
Goodwill, less accumulated amortization of $21,137 ........ 1,687
Deposits .................................................. 7,000
Notes receivable - shareholder ............................ 14,672
--------
23,359
--------
TOTAL ASSETS ........................................................ $467,138
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................... $ 13,261
Accrued expenses .......................................... 10,438
--------
Total current liabilities ....................... 23,699
--------
STOCKHOLDERS' EQUITY:
Common stock ($100 par), 500 shares authorized,
issued and outstanding .......................... 50,000
Retained earnings ......................................... 393,439
--------
443,439
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................... $467,138
========
See accompanying notes.
11
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1997
SALES ...................................................... $824,530
--------
COST OF SALES:
Cemetery ......................................... 33,427
Clothing ......................................... 1,910
Flowers .......................................... 9,010
Hair dressing .................................... 350
Merchandise ...................................... 117,605
Ministers ........................................ 9,960
Music ............................................ 6,350
Opening graves ................................... 19,965
Other ............................................ 8,981
Outside services ................................. 16,629
Salaries and wages ............................... 132,729
Supplies ......................................... 23,513
Telephone ........................................ 6,020
Transportation ................................... 9,109
--------
395,558
--------
GROSS PROFIT ............................................... 428,972
--------
GENERAL EXPENSES ........................................... 309,342
--------
INCOME FROM OPERATIONS ..................................... 119,630
OTHER INCOME:
Interest income .................................. 2,101
--------
INCOME BEFORE TAXES ........................................ 121,731
PROVISION FOR TAXES ........................................ 10
--------
NET INCOME ................................................. $121,721
========
See accompanying notes.
12
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Accumulated Adjustments Accounts:
Balance, October 1, as previously reported ............... $ 167,303
Prior period adjustment .................................. 22,417
--------
Restated balance, October 1 .............................. 189,720
Taxable Income ........................................... 122,144
Nondeductible expenses and timing differences ............ (423)
Distributions ............................................ (80,000)
--------
Balance, September 30 .................................... 231,441
Accumulated Earnings and Profits:
Balance, October 1 and September 30 ...................... 161,998
--------
Total Retained Earnings, September 30 .......................... $ 393,439
=========
See accompanying notes.
13
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 121,721
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization ......................... 54,222
Bad debt provision .................................... 12,197
(Increase) decrease in:
Accounts receivable ......................... (51,989)
Inventory ................................... (7,695)
Prepaid expense ............................. 189
Deposits .................................... 1,671
Increase in:
Accounts payable and accrued expenses ....... 5,278
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................ 135,594
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................... (14,277)
Notes receivable - shareholder ............................ 2,133
---------
NET CASH USED BY INVESTING ACTIVITIES ............................ (12,144)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ............................................ (80,000)
---------
NET CASH USED BY FINANCING ACTIVITIES ............................ (80,000)
---------
NET INCREASE IN CASH ............................................. 43,450
CASH AT BEGINNING OF YEAR ........................................ 76,311
---------
CASH AT END OF YEAR .............................................. $ 119,761
=========
See accompanying notes
14
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
Johnson Mortuary & Crematory, Inc. is a licensed funeral home incorporated in
1960, which grants credit to customers, substantially all of whom are residents
of Northwest Montana.
INVENTORY
The inventory is recorded at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is computed by using the
straight-line method over the following estimated useful lives.
Description Useful Life
------------------------------------ ------------------
Building and improvements 15 - 39 years
Furniture and fixtures 5 - 10 years
Motor equipment 3 - 6 years
Maintenance and repairs are charged to expense as incurred, whereas, the costs
of additions and improvements are capitalized.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
AMORTIZATION OF GOODWILL
Goodwill is being amortized by the straight-line method over 40 years.
COMPENSATED ABSENCES
Compensated absences have not been accrued because the amount cannot be
reasonably estimated.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense was $22,772 for
the year ended September 30, 1997.
15
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
NOTES TO THE FINANCIAL STATEMENTS - Cont.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cont.
INCOME TAXES
The Company elected S Corporation status effective October 1, 1989. Earnings and
losses after that date are included in the personal income tax returns of the
stockholders and taxed depending on their personal tax strategies. Accordingly,
the Company will incur income tax obligations only to the extent of the
"built-in gains" tax at the time of the election.
NOTE 2 - ACCOUNTS RECEIVABLE:
Trade accounts receivable $105,708
Less allowance for doubtful accounts 24,080
--------------
$ 81,628
==============
NOTE 3 - NOTE RECEIVABLE - SHAREHOLDER:
The note bears interest at 4.5% per annum and has no fixed repayment term. The
note is secured by ten shares of the Company's stock. This note has been paid
subsequent to September 30, 1997.
NOTE 4 - PROVISION FOR INCOME TAXES:
The provision for income taxes is the applicable state license tax for an S
corporation.
NOTE 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Operating activities reflect the following cash paid during the year:
Interest paid $ 240
==============
Income taxes paid $ 10
==============
NOTE 6 - RETIREMENT PLAN:
The Company has a Simplified Employee Pension Plan, which covers all employees
as they become eligible. Contributions by the Company are at the discretion of
the Board of Directors. The total contribution for the year ended September 30,
1997 was $ 12,555.
NOTE 7 - SUBSEQUENT EVENT:
On December 17, 1997, 100% of the outstanding stock of the Company was sold to
Carriage Services of Houston, Texas.
16
<PAGE>
JOHNSON MORTUARY & CREMATORY, INC.
NOTES TO THE FINANCIAL STATEMENTS - Cont.
NOTE 8 - PRIOR PERIOD ADJUSTMENT:
Effective October 1, 1996, the Company changed its basis of accounting from the
income tax basis to the accrual basis of accounting. The accrual basis of
accounting is a generally accepted accounting principle (GAAP), while the income
tax basis of accounting is another comprehensible basis of accounting used for
income tax reporting. The change is shown as a prior period adjustment to the
beginning balance of the accumulated adjustment account and is made up of the
following:
Conversion of depreciation
Using book lives and methods vs. tax lives
and methods $ 36,027
Amortization of goodwill and organization
expenses (20,574)
Prepaid insurance 6,964
----------------
$ 22,417
================
