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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): January 15, 1998
CRESCENT OPERATING, INC
(Exact name of Registrant as specified in its Charter)
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Delaware 333-25223 75-2701931
(State of Organization) (Commission File Number) (IRS Employer Identification Number)
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306 West 7th Street
Suite 1025
Fort Worth, Texas 76102
(Address of Principal Executive (Zip Code)
Offices)
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(817) 339-1020
(Registrant's telephone number, including area code)
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
Crescent Operating, Inc. ("Crescent Operating") was formed on April 1,
1997. On May 9, 1997, the Company acquired (i) all of the stock of Moody-Day,
Inc., a construction equipment sales, leasing and servicing company and (ii) a
1.21% interest in Hicks Muse Tate & Furst Equity Fund II, LP, a private venture
capital fund (together with Moody-Day, Inc., the "Carter-Crowley Asset
Group"). To date, all of the Company's financial statements have been prepared
on the basis that the Carter-Crowley Asset Group was the Company's predecessor
(the "Predecessor"). The fiscal year end for each of Crescent Operating and
the Predecessor (collectively, the "Company") is December 31.
(a) Previous Independent Accountants
(i) On January 15, 1998, Crescent Operating dismissed Arthur
Andersen LLP ("Arthur Andersen") as its principal independent accountants.
(ii) The reports of Arthur Andersen on the financial statements of
the Predecessor, for the fiscal years ended December 31, 1996 and December 31,
1995, and the initial balance sheet of Crescent Operating, as of April 3, 1997,
did not contain an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
The audit with respect to the financial statements for the fiscal year ended
December 31, 1997 has not yet been completed.
(iii) The decision to change accountants was recommended by the
Executive Committee of the Board of Directors of Crescent Operating and was
approved by the Audit Committee of the Board of Directors. The Audit Committee
of the Board of Directors consists of two independent directors.
(iv) During the two most recent fiscal years and the interim period
from January 1, 1998 through January 15, 1998, there were no disagreements
between the Company and Arthur Andersen on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.
(v) There were no "reportable events" with respect to the Company
within the past two fiscal years and the interim period from January 1, 1998
through January 15, 1998. "Reportable Events," as described in Item
304(a)(1)(v) of Regulation S-K, include:
(A) The Company's former accountants having advised the Company that
the internal controls necessary for the Company to develop reliable financial
statements do not exist;
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(B) The Company's former accountants having advised the Company
that information has come to their attention (i) that has led them to no longer
be able to rely on management's representations, or (ii) that has made them
unwilling to be associated with the financial statements prepared by management;
(C)(1) The Company's former accountants having advised the Company
of the need to expand significantly the scope of their audit, or that
information has come to their attention during the fiscal years ended December
31, 1996 and December 31, 1995 and the interim period between January 1, 1998
and January 15, 1998, that if further investigated may: (i) materially impact
the fairness or reliability of either: a previously issued audit report on the
underlying financial statements; or the financial statements issued or to
be issued covering the fiscal period(s) subsequent to the date of the most
recent financial statements covered by an audit report (including information
that may prevent them from rendering an unqualified audit report on those
financial statements), or (ii) cause them to be unwilling to rely on
management's representations or be associated with the Company's financial
statements, and
(C)(2) Due to the Company's former accountants' dismissal, or for
any other reason, the accountants did not so expand the scope of their audit or
conduct such further investigation; or
(D)(1) The Company's former accountants having advised the Company
that information has come to their attention that they have concluded
materially impacts the fairness or reliability of either: (i) a previously
issued audit report or the underlying financial statements, or (ii) the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by an
audit report (including information that, unless resolved to their
satisfaction, would prevent them from rendering an unqualified audit report on
those financial statements), and
(D)(2) Due to the Company's former accountants' dismissal, or for
any other reason, the issue has not been resolved to the accountants'
satisfaction prior to their dismissal.
(b) New Independent Accountants
(i) On January 15, 1998, Crescent Operating engaged Ernst & Young LLP
("E&Y") as its new independent accountants to serve as the principal
accountants to audit the Company's financial statements.
(ii) During the two most recent fiscal years and the interim period from
January 1, 1998 through January 15, 1998, the Company did not consult E&Y
regarding:
(1) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements; or
2
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(2) any matter that was either the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a
reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
(iii) Crescent Operating has provided a copy of the information
contained in this Form 8-K to Arthur Andersen, and Arthur Andersen, in
accordance with the Company's request, has furnished the Company with a letter
addressed to the Securities and Exchange Commission stating that it agrees with
the information contained in this Form 8-K. A copy of such letter is filed as
an exhibit hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits
16. Letter from Arthur Andersen LLP to the Securities and Exchange
Commission, pursuant to Item 304(a)(3) of Regulation S-K.
-3-
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 22, 1998 CRESCENT OPERATING, INC.
By: /s/ JEFFREY L. STEVENS
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Jeffrey L. Stevens
Treasurer, Chief Financial
Officer and Secretary
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EXHIBIT INDEX
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Exhibit No. Description
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16 Consent of Arthur Andersen LLP
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EXHIBIT 16
[ARTHUR ANDERSEN LETTERHEAD]
January 22, 1998
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 11-3
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Crescent Operating, Inc. (Registrant) - Form 8-K
Gentlemen:
We have read Item 4 included in the attached Form 8-K dated January 22, 1998,
of Crescent Operating, Inc. to be filed with the Securities and Exchange
Commission, and are in agreement with the statements contained therein.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
Attachment
