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 20, 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 20, 1997, Carriage Services, Inc. (the "Company"), through its wholly
owned subsidiary, acquired substantially all the operating assets of Allen J.
Harden Funeral Home, Inc. Allen J. Harden Funeral Home, Inc. operates one
funeral home in Mount Dora, Florida. This acquisition is referred to as the
"Acquired Business." Total consideration for the acquisition consisted of 13,000
shares of Company's Class A Common Stock, a promissory note of $220,000, cash of
approximately $1.3 million and deferred purchase price of approximately
$140,000. 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 was 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 merger or 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) are 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)(ii) 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
PAGE
----
ALLEN J. HARDEN FUNERAL HOME, 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 -March 31, 1997 ......... 5
Unaudited Pro Forma Consolidated Statement of Operations -
Three Months Ended March 31, 1997 .................................... 6
2
<PAGE>
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
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 June 20, 1997, Carriage Services, Inc. (the "Company"), through its wholly
owned subsidiary, acquired substantially all the operating assets of Allen J.
Harden Funeral Home, Inc. Allen J. Harden Funeral Home, Inc. operates one
funeral home in Mount Dora, Florida. This acquisition is referred to as the
"Acquired Business." Total consideration for the acquisition consisted of 13,000
shares of Company's Class A Common Stock, a promissory note of $220,000, cash of
approximately $1.3 million and deferred purchase price of approximately
$140,000. 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 owner 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 Allen J. Harden
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 Allen J. Harden 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.
4
<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
-------------- ---------- -------------- ----------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 2,727 $ 180 $ (1,483) $ 1,424
Accounts receivable --
Trade, net of allowance .......................... 7,334 50 (34) 7,350
Other ............................................ 1,651 -- -- 1,651
--------- -------- -------- ---------
8,985 50 (34) 9,001
Inventories and other current assets ............... 4,409 2 7 4,418
--------- -------- --------- ---------
Total current assets .............................. 16,121 232 (1,510) 14,843
--------- -------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, at
cost, net .......................................... 63,555 102 271 63,928
CEMETERY PROPERTY, at cost ............................. 22,748 -- -- 22,748
NAMES AND REPUTATIONS, net ............................. 87,740 45 1,353 89,138
DEFERRED CHARGES AND OTHER
NONCURRENT ASSETS ................................... 12,570 3 48 12,621
--------- -------- -------- ---------
$ 202,734 $382 $162 $ 203,278
========= ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other current
liabilities ....................................... $ 7,432 $ 48 $ (23) $ 7,457
Current portion of long-term
debt and capital leases ........................... 1,564 4 (5) 1,563
--------- -------- -------- ---------
Total current liabilities ......................... 8,996 52 (28) 9,020
PRENEED LIABILITIES, net ............................... 7,045 119 (119) 7,045
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES, net of
current portion ................................... 74,655 135 200 74,990
DEFERRED INCOME TAXES .................................. 10,522 -- -- 10,522
--------- -------- -------- ---------
Total liabilities ................................. 101,218 306 53 101,577
--------- -------- -------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ............................. 16,287 -- -- 16,287
STOCKHOLDERS' EQUITY:
Class A Common Stock ............................... 50 -- -- 50
Class B Common Stock ............................... 54 -- -- 54
Contributed capital ................................ 90,670 -- 185 90,855
Retained (deficit) ................................. (5,545) -- -- (5,545)
Acquired Business equity ........................... -- 76 (76) --
--------- -------- -------- ---------
Total stockholders' equity ........................ 85,229 76 109 85,414
--------- -------- -------- ---------
$ 202,734 $ 382 $ 162 $ 203,278
========= ======== ======== =========
</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 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 $ 181 $-- $ 15,469
Cemetery ........................................ 2,701 -- -- 2,701
------- ------- -------- --------
17,989 181 -- 18,170
Costs and expenses
Funeral ......................................... 10,620 43 8(2) 10,668
(2)(3)
(1)(4)
Cemetery ........................................ 2,226 -- -- 2,226
------- ------- -------- --------
12,846 43 5 12,894
------- ------- -------- --------
Gross profit ..................................... 5,143 138 (5) 5,276
General and administrative expenses .................. 1,021 63 -- 1,084
------- ------- -------- --------
Operating income ................................. 4,122 75 (5) 4,192
Interest expense, net ................................ 1,154 -- 44(5) 1,198
------- ------- -------- --------
Income before income taxes ........................ 2,968 75 (49) 2,994
Provision for income taxes ........................... 1,143 -- 10(6) 1,153
------- ------- -------- --------
Net income ........................................ 1,825 75 (59) 1,841
Preferred stock dividend
requirements ....................................... 181 -- -- 181
------- ------- -------- --------
Net income available to common
stockholders .................................... $ 1,644 $ 75 $ (59) $ 1,660
======= ======= ======== ========
Earnings per share:
Net income per common and common
equivalent share available 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.
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
SERVICES, ACQUIRED PRO FORMA TOTAL
INC. BUSINESS ADJUSTMENTS PRO FORMA
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues, net
Funeral ....................................... $ 37,445 $ 670 $ -- $ 38,115
Cemetery ...................................... 2,903 -- -- 2,903
-------- ------- -------- --------
40,348 670 -- 41,018
Costs and expenses
Funeral ....................................... 30,641 164 32(2) 30,824
(8)(3)
(5)(4)
Cemetery ...................................... 2,541 -- -- 2,541
-------- ------- -------- --------
33,182 164 19 33,365
-------- ------- -------- --------
Gross profit ................................... 7,166 506 (19) 7,653
General and administrative expenses ................ 2,474 281 -- 2,755
-------- ------- -------- --------
Operating income ............................... 4,692 225 (19) 4,898
Interest expense, net .............................. 4,347 14 210(5) 4,571
-------- ------- -------- --------
Income before income taxes and
extraordinary item ............................ 345 211 (229) 327
Provision for income taxes ......................... 138 -- (7)(6) 131
-------- ------- -------- --------
Income before extraordinary item ................ 207 211 (222) 196
Extraordinary item - loss on early
extinguishment of debt, net of income
tax benefit of $332 ............................ (498) -- -- (498)
-------- ------- -------- --------
Net income (loss) ............................... (291) 211 (222) (302)
Preferred stock dividend requirements .............. 622 -- -- 622
-------- ------- -------- --------
Net income (loss) attributable to
common stockholders ........................... $ (913) $ 211 $ (222) $ (924)
======== ======= ======== ========
(Loss) per share:
(Loss) per common and common
equivalent share before
extraordinary item attributable to
common stockholders ........................... (.09) (.09)
Extraordinary item ............................... (.10) (.10)
-------- --------
Net (loss) per common and common
equivalent share attributable to
common stockholders ........................... $ (.19) $ (.19)
======== ========
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
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 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 ..................................... $ 25
Property, plant and equipment ...................... 373
Deferred charges and other noncurrent
assets ........................................... 51
Names and reputations .............................. 1,398
Current liabilities ................................ (24)
-------
1,823
Consideration:
Promissory note .................................... (220)
Deferred purchase price ............................ (115)
Class A Common Stock issued ........................ (185)
-------
Cash used for acquisition ..................... $ 1,303
=======
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 $8,000 and
$32,000 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 $1,398,000 in names and reputations recorded in
conjunction with the acquisition of the Acquired Business.
(3) To record adjustment to depreciation expense of $2,000 and $8,000 for the
three months ended March 31, 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 adjustment to amortization expense relative to non-compete
agreements of $1,000 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 $44,000 and $210,000 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 March 31, 1997 and 40% for the year ended December 31,
1996. This adjustment reflects income tax expense of $10,000 for the three
months ended March 31, 1997 and income tax benefit of $7,000 for the year
ended December 31, 1996. 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>
DAVID LOGAN, CPA PA
CERTIFIED PUBLIC ACCOUNTANTS
3755 W. Old US Highway 441 - P.O. Box 1668 Mount Dora, FL 32757
Phone (352) 383-3500 - Fax (352)383-5441
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
November 12, 1997
To the Board of Directors
Allen J. Harden Funeral Home, Inc.
We have audited the accompanying balance sheet of Allen J. Harden Funeral Home,
Inc. as of December 31, 1996 and 1995 and the related statements of operations
and changes in retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of Allen J. Harden Funeral Home,
Inc.'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 Allen J. Harden Funeral Home,
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.
/s/ DAVID LOGAN, CPA PA
David Logan, CPA PA
10
<PAGE>
Allen J. Harden Funeral Home, Inc.
Balance Sheet
December 31, 1996 and 1995
1996 1997
---------- ---------
Assets
Current assets:
Cash and cash equivalents ...................... $ 123,951 $ 74,643
Accounts receivable ............................ 52,895 56,544
Allowance for doub~ful accounts ................ (15,000) (1,000)
Inventory ...................................... 9,502 5,124
--------- ---------
Total current assets ..................... 171,348 135,311
Property and equipment
Furniture & fixtures ....................... 40,389 39,961
Automotive equipment ....................... 105,477 46,500
--------- ---------
Total property and equipment ............. 145,866 86,461
Accumulated depreciation ................... (37,349) (15,246)
--------- ---------
108,517 71,215
Other assets
Goodwill (Net) ............................. 45,831 49,500
Non-Compete agreement (Net) ................ 5,000 15,000
--------- ---------
Total other assets ...................... 50,831 64,500
--------- ---------
Total assets ................................... $ 330,696 $ 271,026
========= =========
The Accompanying Notes are an Integra1 Part
of the Financial Statements
11
<PAGE>
Allen J. Harden Funeral Home, Inc.
Balance Sheet
December 31, 1996 and 1995
1996 1995
--------- ----------
Liabilities and stockholder's equity
Current liabilities:
Accounts payable ................................. $ 17,304 $ 28,736
Taxes withheld and payable ....................... 24,833 15,242
Accrued retirement contribution .................. 14,351 13,922
Deferred preneed revenue-
Amount due within one year ...................... 19,226 8,301
Notes payable-Amount due
within one year ................................. 3,900 3,536
--------- ---------
Total current liabilities .................. 79,614 69,737
Long term debt:
Deferred preneed-ITrust contracts ............ 87,607 25,470
Deferred preneed-STP contracts ............... 43,498 50,737
Note payable ................................. 125,000 125,000
Installment note payable ..................... 14,967 18,503
Less amounts due within one year:
Notes payable ............................... (3,900) (3,536)
Deferred preneed revenue .................... (19,226) (8,301)
--------- ---------
Total long term debt ...................... 247,946 207,873
Stockholder' s equity:
Common stock (1,000 shares authorized,
$5 par value, 100 shares issued and
outstanding) ................................ 500 500
Retained earnings(deficit) .................... 2,636 (7,084)
--------- ---------
Total stockholder's equity ................. 3,136 (6,584)
--------- ---------
Stockholder's equity ................... $ 330,696 $ 271,026
========= =========
The Accompanying Notes are an Integral Part
of the Financial Statements
12
<PAGE>
Allen J. Harden Funeral Home, Inc.
Statement of Operations and Retained Earnings
For the years ended December 31, 1996 and 1995
1996 1995
--------- ---------
Sales Revenue .................................. $ 670,374 $ 411,478
Direct Expenses ................................ 163,874 119,674
--------- ---------
Gross Profit ................................. 506,500 291,804
Operating Expenses:
Facilities ..................................... 46,430 42,970
Automotive ..................................... 30,048 16,524
Personnel ...................................... 121,719 128,998
Supplies ....................................... 9,912 10,396
Business Services .............................. 10,653 10,238
Promotion ...................................... 25,059 20,692
Miscellaneous Expense .......................... 9,644 3,410
Amortization ................................... 13,669 13,667
Interest expense ............................... 13,872 10,787
Bad debt expense ............................... 14,000 1,000
--------- ---------
Total Operating Expenses ................... 295,006 258,682
--------- ---------
Net income ..................................... 211,494 33,122
Retained Earnings-(Deficit)Beginning ........... (7,084) 70,198
Stockholder Distributions ...................... (201,774) (110,404)
--------- ---------
Retained Earnings-(Deficit)Ending .............. $ 2,636 $ (7,084)
========= =========
The Accompanying Notes are an Integral Part
of the Financial Statements
13
<PAGE>
Allen J. Harden Funeral Home, Inc.
Statement of Cash Flows
For the years ended December 31, 1996 and 1995
1996 1995
--------- ---------
Cash flows from operating activities:
Cash received from customers ........................ $ 760,514 $ 458,727
Cash paid to suppliers and employees ................ (432,619) (298,319)
Interest paid ....................................... (13,872) (10,787)
--------- ---------
Net cash provided (used) by operating activities .... 314,023 149,621
--------- ---------
Cash flows from investing activities:
Cash payments for the purchase of property .......... (59,405) (45,102)
--------- ---------
Net cash provided (used) by investing activities .... (59,405) (45,102)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt ............ 20,000
Principal payments on long-term debt ................ (3,536) (1,497)
Stockholder distributions ........................... (201,774) (110,404)
--------- ---------
Net cash provided (used) by financing activities .... (205,310) (91,901)
--------- ---------
Net increase (decrease) in cash and equivalents ........ 49,308 12,618
Cash and equivalents, beginning of year ................ 74,643 62,025
--------- ---------
Cash and cash equivalents, end of year ................. $ 123,951 $ 74,643
========= =========
The Accompanying Notes are an Integral Part
of the Financial Statements
14
<PAGE>
Allen J. Harden Funeral Home, Inc.
Statement of Cash Flows
For the years ended December 31, 1996 and 1995
1996 1995
--------- ---------
Reconciliation of net income to net cash
provided by operating activities:
Net Income .......................................... $ 211,494 $ 33,122
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 35,772 24,991
(Increase) decrease in accounts receivable ....... 17,649 (5,556)
(Increase) decrease in inventories ............... (4,378) 61
Increase (decrease) in accounts payable .......... (11,901) 18,936
Increase (decrease) in accrued liabilities ....... 10,489 25,262
Increase (decrease) in deferred preneed .......... 54,898 52,805
--------- ---------
Total adjustments ................................ 102,529 116,499
--------- ---------
Net cash provided (used) by operating activities .... $ 314,023 $ 149,621
========= =========
Non cash investing activity:
Book value of vehicles traded in .................... $ 8,200 $-0-
The Accompanying Notes are an Integral Part
of the Financial Statements
15
<PAGE>
Allen J. Harden Funeral Home, Inc.
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY - Allen J. Harden Funeral Home, Inc. (the Company) was
incorporated under the laws of the State of Florida on June 23, 1994. The
Company was originally named Mount Dora Funeral Home, Inc. and the name was
changed to Allen J. Harden Funeral Home, Inc. in July, 1994. The Company
acquired the assets of Joe E. and Anita Humphrey d/b/a Mount Dora Funeral Home
pursuant to a contract for sale and purchase of business dated July 1, 1994.
The Company owns and conducts a funeral home business located at 1704 North
Donnelly Street in Mount Dora, Florida.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Management estimates that the fair value
of the Company's financial instruments at December 31, 1996 and 1995 did not
differ materially from the carrying values reported in the accompanying balance
sheets.
CASH EQUIVALENTS - For purposes of the statements of cash flows, the Company
considers all short-term instruments purchased with a maturity of three months
or less to be cash equivalents. Cash equivalents include money market accounts.
INVENTORIES - Inventories are stated at the lower of cost determined on a
first-in, first-out basis or market.
S CORPORATION INCOME TAX STATUS - The Company, with the consent of its
shareholders, has elected under the Internal Revenue Code to be an S
corporation. In lieu of corporation income taxes, the shareholders of an S
corporation are taxed on their proportionate share of the Company's taxable
income. Therefore, no provision or liability for federal or state income taxes
has been included in the financial statements.
16
<PAGE>
Allen J. Harden Funeral Home, Inc.
Notes to Financial Statements
ADVERTISING - The Company follows the policy of charging advertising costs to
expense as incurred. Advertising expense was $14,102 and $13,937 for the years
ended December 31, 1996 and 1995 respectively.
PROPERTY- EQUIPMENT AND DEPRECIATION - Property and equipment are stated at
cost. Depreciation is computed over the estimated useful life of the assets
using the straight line method. Useful lives are as follows:
Furniture and equipment 7 years
Automotive equipment 5 years
Depreciation expense amounted to $22,105 and $11,324 for the years ended
December 31, 1996 and 1995 respectively.
GOODWILL AND AMORTIZATION - Terms of the July 1, 1994 contract for purchase of
the business allocated $55,000 to business goodwill. This amount is being
amortized by the straight line method over 15 years. Amortization of Goodwill
amounted to $3,667 for each of the years ended December 31, 1996 and 1995.
NONCOMPETE AGREEMENT - Terms of the July 1, 1994 contract for purchase of the
business allocated $30,000 to a noncompete agreement with the previous owner.
The agreement is applicable for three years within a radius of 25 miles. The
amount is being amortized over three years. Amortization of the agreement
amounted to $10,000 for each of the years ended December 31, 1996 and 1995.
PRENEED PROGRAMS - In addition to sales of funeral merchandise and services at
the time of need, the Company also markets funeral services and products on a
preneed basis. Preneed funeral contracts are arrangements where the Company
agrees to furnish funeral merchandise and services in the future for a fee paid
currently.
Proceeds from the sale of preneed funeral contracts are not recognized as
revenues until the time the funeral service is performed. The Company sold 56
and 45 preneed funeral contracts in the years ended December 31, 1996 and 1995,
respectively. At December 31, 1996, the Company had a backlog of 171 preneed
funeral contracts to be delivered in the future (81 of which were assumed from
the previous owner). Deferred preneed revenue does not include amounts
distributed to the previous owner on contracts assumed by the Company.
Management estimates that trusted portion of the contracts will cover the
Company's cost of providing the service.
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<PAGE>
Allen J. Harden Funeral Home, Inc.
Notes to Financial Statements
PRENEED TRUST FUNDS - Preneed contracts are regulated by Chapter 497 of Florida
Statutes which specify certain minimum trusting requirements under terms of a
revocable trust instrument. Trusting requirements include:
70% of retail services must be trusted.
The greater of 30% of retail or 110% of wholesale cost of merchandise must
be trusted.
100% of cash advance items must be trusted.
The Company has established trusts in connection with the sales of preneed
funeral contracts in accordance with Florida Statutes. Trust earnings are not
recognized until the funeral service is performed. Since the Company does not
have access to the trust fund principal or earnings, the related assets and
liabilities are not reflected on the Company's balance sheet. Trust balances are
as follows:
1996 1995
------------ -----------
Contracts written by Allen J.
Harden Funeral Home, Inc.:
Securities Trust Plan (STP) ................... $ 71,194 $ 83,196
Suntrust (I-Trust) ............................ 120,898 35,419
Contracts written by the previous owner and
assumed by Allen J. Harden Funeral Home, Inc.:
Securities Trust Plan (STP) ................... 69,730 67,924
---------- ---------
Trust balances ................................ $ 261,822 $ 186,539
---------- ---------
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<PAGE>
Allen J. Harden Funeral Home, Inc.
Notes to Financial Statements
NOTE 2 - DEFERRED PRENEED REVENUE
Nontrusted portions of preneed contracts have been distributed to the Company
and are included in cash and cash equivalents. Proceeds are not recognized as
revenue until the funeral service is provided. The following is a summary of
deferred preneed revenue:
1996 1995
-------- -------
Trust Contracts ............................. $ 87,607 $25,470
STP Contracts ............................... 43,498 50,737
-------- -------
131,105 76,207
Estimated amount due
within one year ............................. 19,226 8,301
-------- -------
$111,879 $67,906
-------- -------
NOTE 3 - LONG TERM DEBT
Long term debt consists of the
following at December 31:
1996 1995
-------- --------
Note payable to a bank, payable
in 60 monthly installments of
$409 including interest at 8.0%,
collateralized by automotive equipment .... $ 14,967 $ 18,503
Note payable to an individual,
interest at 8.0% is payable quarterly,
unsecured, personally guaranteed
by Allen J. Harden note is due
January 1, 2000 ........................... 125,000 125,000
-------- --------
139,967 143,503
Less amount due within
one year ............................... 3,900 3,536
$136,067 $139,967
-------- --------
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<PAGE>
Allen J. Harden Funeral Hoine1 Inc.
Notes to Financial Statements
Maturity of long term debt is as follows:
Year ended December 31:
1997 3,900
1998 4,171
1999 4,517
2000 127,379
NOTE 4 - RETIREMENT PLAN
On December 2, 1995 the Company established a Simplified Employee Pension Plan
for the benefit of eligible employees. Employees must be at least twenty one
years old and worked in at least three of the immediately preceding five years.
Participants may contribute a portion of their compensation, up to 15%, to the
plan. Company contributions are discretionary. Contributions were $8,408 and
$13,922 for the years ended December 31, 1996 and 1995 respectively.
NOTE 5 - LEASE
The Company leases the building under terms of a three year lease dated July 1,
1994 which provides for an option to extend for an additional two years. The
basic monthly rental amount is $1,656 to which is added sales tax, personal
property taxes, and real estate taxes in excess of $500. The option to extend
was exercised to December 31, 1997 at which time the rent is on a month to month
basis. Rent expense under the lease amounted to $23,035 and $25,054 for the
years ended December 31, 1996 and 1995 respectively. The following is a schedule
of noncancelable lease commitments under the original and extended lease:
Year ended December 31
1997 $19,872
NOTE 6 - CONTINGENCY
The Company agreed to assume responsibility for all prepaid funeral arrangements
entered into by the previous owner prior to July 30, 1994. Management believes
that all such arrangements are known and that the trusted portion of the
contracts will cover the Company's cost of providing the service.
20
<PAGE>
Allen J. Harden Funeral Home, Inc.
Notes to Financial Statements
NOTE 7 - SUBSEQUENT EVENT - SALE OF THE BUSINESS
On June 20th, 1997 the Company and its shareholder entered into an asset
purchase agreement with Carriage Funeral Holdings, Inc. Terms of the contract
provide for transfer of a substantial portion of the Company's assets along with
other assets of the shareholder for a total acquisition amount of $1,592,500.
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