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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2003
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Commission file number 001-14067
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FOREVER ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
TEXAS 36-3427454
- --------------------------------- -----------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
10 S. BRENTWOOD
CLAYTON, MISSOURI 63105
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(Address of principal executive offices)
(Zip Code)
(314) 726-3371
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). / / Yes /X/ No
Number of shares
Title of class outstanding as of May 15, 2003
- ---------------------------------------- ----------------------------------
Common stock, $0.01 par value 6,934,934
FOREVER ENTERPRISES, INC.
FORM 10-Q
INDEX
Page
----
PART I. FINANCIAL INFORMATION.................................................................3
Item 1. Financial Statements..................................................................3
Condensed Consolidated Balance Sheets (Unaudited) - March 31, 2003 and
December 31, 2002.....................................................................3
Condensed Consolidated Statements of Operations (Unaudited) - Three Months
Ended March 31, 2003 and 2002.........................................................5
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months
Ended March 31, 2003 and 2002.........................................................6
Notes to Condensed Consolidated Financial Statements (Unaudited)......................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations...........................................................................12
Cautionary Statement Regarding Forward-Looking Statements............................12
Overview.............................................................................12
Results of Operations................................................................15
Liquidity and Capital Resources......................................................17
Item 3. Quantitative and Qualitative Disclosure About Market Risk............................21
Item 4. Controls and Procedures..............................................................21
PART II. OTHER INFORMATION....................................................................22
Item 1. Legal Proceedings....................................................................22
Item 6. Exhibits and Reports on Form 8-K.....................................................22
SIGNATURES.............................................................................................23
EXHIBIT INDEX..........................................................................................28
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOREVER ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
MARCH 31, DECEMBER 31,
2003 2002
-------------- --------------
Cash and cash equivalents $ 23,614,305 $ 22,793,038
Fixed maturity securities 70,989,269 73,982,062
Equity securities 1,651,918 1,119,705
Policyholder loans 1,559,275 1,560,215
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Total cash and investments 97,814,767 99,455,020
------------- -------------
Trade accounts receivable, net 8,016,998 7,707,948
Inventories 192,818 190,432
Cemetery property, net 3,922,749 3,964,644
Fixed assets, net 8,705,750 8,517,264
Due from reinsurer 109,974,654 105,830,127
Deferred policy acquisition costs, net 1,628,538 1,678,079
Due premium 6,482,333 8,088,002
Intangible assets 10,766,768 10,929,872
Deferred cost of reinsurance 1,751,385 1,776,051
Deferred tax assets, net 1,798,817 1,532,322
Receivable from related party 9,221,565 8,033,095
Other assets 5,502,579 5,286,866
------------- -------------
Total assets $ 265,779,721 $ 262,989,722
============= =============
(continued on next page)
-3-
FOREVER ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
2003 2002
-------------- --------------
LIABILITIES:
Lines of credit $ 1,990,522 $ 2,248,959
Accounts payable and accrued liabilities 14,693,241 13,622,553
Policy liabilities:
Future policy benefits 160,540,841 158,277,834
Policyholder deposits 46,553,211 46,642,051
Deferred preneed revenues 8,122,495 7,328,554
Payable to affiliates 5,403,358 4,117,081
Notes payable 25,596,286 26,133,714
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Total liabilities 262,899,954 258,370,746
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SHAREHOLDERS' EQUITY:
Preferred stock ($.01 par value; 1,000,000 shares authorized;
none issued) -- --
Common stock ($.01 par value; 30,000,000 shares authorized;
6,934,934 issued and outstanding) 69,349 69,349
Additional paid-in capital 8,611,026 8,587,931
Accumulated deficit (4,862,234) (3,307,932)
Accumulated other comprehensive loss (938,374) (730,372)
------------- -------------
Total shareholders' equity 2,879,767 4,618,976
------------- -------------
Total liabilities and shareholders' equity $ 265,779,721 $ 262,989,722
============= =============
The accompanying notes are an integral
part of the unaudited condensed
consolidated financial statements.
-4-
FOREVER ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
2003 2002
-------------- -------------
Premium income $ 1,818,766 $ 1,644,305
Net investment income and realized gains (loss) (159,228) 1,119,580
Cemetery revenue 2,707,359 2,082,868
Commission and expense allowance 3,979,490 3,435,373
Management fee income 1,189,270 1,068,019
Other revenue 223,831 243,508
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Total revenues 9,759,488 9,593,653
-------------- -------------
Benefits incurred 2,292,701 2,624,252
Insurance commissions 3,297,123 3,155,118
Cost of cemetery revenues 807,103 539,198
Selling, general and administrative expenses 3,306,720 2,412,049
Other expense (income) 811,910 (27,687)
Interest expense 419,474 351,486
-------------- -------------
Income (loss) before income taxes (1,175,543) 539,237
Income tax expense 378,759 133,100
-------------- -------------
Net income (loss) $ (1,554,302) $ 406,137
============== =============
Net income (loss) per share:
Basic $ (0.22) $ 0.06
Diluted (0.22) 0.06
Weighted average shares outstanding:
Basic 6,934,934 6,934,934
Diluted 6,934,934 7,201,032
The accompanying notes are an integral
part of the unaudited condensed
consolidated financial statements.
-5-
FOREVER ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities $ (448,055) $ (885,092)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of available-for-sale investments 20,031,185 10,951,496
Cost of investments purchased (17,534,918) (10,351,879)
Purchase of fixed assets (441,536) (529,975)
Purchase of intangible assets (5,500) --
Purchase of marketing/purchasing agreements -- (10,400,000)
Other, net 15,956 161,822
------------ ------------
Net cash provided by (used in) investing activities 2,065,187 (10,168,536)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 183,357 10,250,000
Repayment of long-term debt (720,785) (194,421)
Credit line proceeds 37,878 535,561
Repayment of credit line (296,315) (653,036)
------------ ------------
Net cash provided by (used in) financing activities (795,865) 9,938,104
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 821,267 (1,115,524)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 22,793,038 7,568,099
------------ ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 23,614,305 $ 6,452,575
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
INCOME TAXES PAID $ 550,000 $ 133,100
============ ============
INTEREST PAID $ 298,141 $ 161,833
============ ============
The accompanying notes are an integral
part of the unaudited condensed
consolidated financial statements.
-6-
FOREVER ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
-----------
NOTE 1 -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements
include the accounts of Forever Enterprises, Inc. and its direct and
indirect wholly-owned subsidiaries, Forever Network, Inc., Memorial Service
Life Insurance Company and Lincoln Memorial Life Insurance Company. We
account for our fifty-percent investment in Mount Washington Forever, L.L.C.
under the equity method. These condensed consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and notes required by accounting
principles generally accepted in the United States for complete financial
statements. All intercompany accounts and transactions have been eliminated
in consolidation. Certain prior period amounts have been reclassified to
conform with the current period presentation.
The accompanying condensed consolidated financial statements and
notes thereto are unaudited and should be read in conjunction with our
audited financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2002 filed with the Securities and Exchange
Commission. The unaudited interim condensed consolidated financial
statements have been prepared on the same basis as the annual consolidated
financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly our financial position as of March 31, 2003 and the results
of operations and cash flows for the three months ended March 31, 2003. The
results for the three months ended March 31, 2003 are not necessarily
indicative of the results to be expected for the year ending December 31,
2003.
NOTE 2 -- NOTES PAYABLE
As of March 31, 2003 and December 31, 2002, we had a note payable
to Allegiant Bank in the amount of $1,952,170 and $1,974,257, respectively,
which matures on January 5, 2006. Payments of $19,117 of principal and
interest at the "corporate market" interest rate (5.0% per annum at March
31, 2003) are due monthly until the principal balance is paid in full. The
"corporate market" interest rate is based upon an index developed by
Allegiant Bank.
We also have a $250,000 revolving line of credit from Allegiant
Bank at rates similar to the primary credit agreement discussed above. The
balance outstanding was $250,000 at March 31, 2003 and December 31, 2002.
This line of credit is renewable on a yearly basis subject to Allegiant
Bank's discretion.
We have a $2,000,000 revolving line of credit from Merrill Lynch
Business Financial Services, Inc., which matures on March 31, 2004. Interest
is due monthly on the unpaid balance equal to the sum of 2.4% and the Dealer
Commercial Paper rate for 30-day high-grade unsecured notes (3.58% per annum
at March 31, 2003) as published in The Wall Street Journal. The balance
outstanding was $1,740,522 and $1,998,959 as of March 31, 2003 and December
31, 2002, respectively.
We have a note payable to Employers Reassurance Corporation in the
amount of $11,500,000 as of March 31, 2003 and December 31, 2002. Principal
payments of varying amounts are due annually on each anniversary date.
Interest on this note is payable annually in arrears on each anniversary
date at a rate equal to the five-year Treasury note plus 150 basis points
(4.28% per annum at March 31, 2003).
-7-
We have a note payable to National Prearranged Services, Inc. in
conjunction with the Management Agreement entered into on January 1, 2002 in
the amount of $10,000,000 (see Note 6). The balance of this note was
$7,459,783 and $8,031,272 as of March 31, 2003 and December 31, 2002,
respectively. Payments of $246,483 of principal and interest are due monthly
until the principal balance of the note is paid in full. This notes bears
interest at the rate of 8.5% per annum.
We have a note payable to Lincoln Memorial Services, Inc. in the
amount of $4,414,986 and $4,542,195 as of March 31, 2003 and December 31,
2002, respectively. Payments of $70,528 of principal and interest are due
monthly with a final payment due on November 1, 2007. This note bears
interest at a rate equal to 7.5% per annum.
We have a term loan credit agreement with Southwest Bank of St.
Louis in the principal amount of $2,000,000, of which $119,347 and $85,990
was outstanding as of March 31, 2003 and December 31, 2002, respectively.
This agreement bears interest at a floating rate equal to the prime rate of
Southwest Bank plus 1.5% (5.75% per annum as of March 31, 2003). Payments of
interest are due monthly through May 1, 2004. Beginning June 1, 2004,
principal payments are due on the first day of each month based on a
ten-year amortization. This note is payable in full on December 6, 2007.
In conjunction with our purchase of Forever All Faiths in November
2002, we entered into a note payable effective January 1, 2003 with
Allegiant Bank, Trustee under Trust for National Prearranged Services, Inc.
Pre-Need Plans dated 7/24/89 - Trust IV ("Trust IV"), in the principal
amount of $150,000. Payments of $3,006 of principal and interest are due
monthly beginning February 1, 2003 until the principal balance is paid in
full. This note bears interest at the rate of 7.5% per annum.
NOTE 3 -- INVESTMENTS
The cost or amortized cost, gross unrealized gains and losses, and
estimated fair value of fixed maturity and equity securities
available-for-sale as of March 31, 2003 were as follows:
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ----------- ------------ ------------
Fixed maturity securities:
Corporate bonds $ 26,989,696 $ 572,275 $ (3,761,886) $ 23,800,085
Mortgage backed securities 37,570,239 1,292,198 (41,544) 38,820,893
U.S. government 8,205,551 183,217 (20,477) 8,368,291
------------ ----------- ------------ ------------
Total fixed maturity securities 72,765,486 2,047,690 (3,823,907) 70,989,269
Equity securities:
Preferred stock 1,223,074 109,830 (138,566) 1,194,338
Common stock 2,172,251 -- (1,714,671) 457,580
------------ ----------- ------------ ------------
Total equity securities 3,395,325 109,830 (1,853,237) 1,651,918
------------ ----------- ------------ ------------
Total $ 76,160,811 $ 2,157,520 $ (5,677,144) $ 72,641,187
============ =========== ============ ============
We hold derivative financial instruments for the purpose of hedging
the risks of certain identifiable and anticipated transactions. In general,
the type of risk hedged is related to the variability of future earnings and
cash flows caused by movements in interest rates. In hedging our interest
rate risk in our investment portfolio, we, from time to time, hold the
following types of derivatives:
Type of Derivative Type of Transaction Being Hedged
- ------------------ --------------------------------
Futures contracts Fair value of fixed-rate debt
Generally, we enter into hedging relationships such that changes in
the fair values or cash flows of items and transactions being hedged are
expected to be offset by corresponding changes in the values of the
derivatives. At March 31, 2003, hedging relationships exist for
fixed-maturity investments.
We hold forward foreign currency contracts to hedge interest rate
changes. For the three months ended March 31, 2003, foreign currency losses
of $839,160 are included in "Net investment income and realized gains
(loss)" on our consolidated statements of operations.
-8-
NOTE 4 -- SEGMENT INFORMATION
We conduct and manage our business through two segments,
cemetery/funeral operations and life insurance operations. The following
tables summarize the results of our operations by our business segments.
Costs and revenues that are not related to operating segments are included
in the column "Corporate."
THREE MONTHS ENDED MARCH 31, 2003
CEMETERY INSURANCE CORPORATE INTERSEGMENT TOTAL
-------- --------- --------- ------------ -----
Revenues $ 2,930,936 $ 5,713,638 $ 1,417,840 $ (302,926) $ 9,759,488
Loss before income taxes (629,165) (467,577) (78,801) -- (1,175,543)
Total assets at quarter-end 17,943,036 221,046,996 32,504,559 (5,714,870) 265,779,721
THREE MONTHS ENDED MARCH 31, 2002
CEMETERY INSURANCE CORPORATE INTERSEGMENT TOTAL
-------- --------- --------- ------------ -----
Revenues $ 2,326,376 $ 6,279,433 $ 1,247,557 $ (259,713) $ 9,593,653
Income (loss) before income taxes 360,618 199,824 (21,205) -- 539,237
Total assets at quarter-end 16,104,748 208,350,106 29,677,506 (4,864,283) 249,268,077
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
Effective January 1, 2003, we entered into a lease agreement for
office space and funeral home operations in Austin, Texas. This lease is
accounted for as an operating lease. Future minimum lease payments under the
terms of this operating lease at March 31, 2003 were $67,500. This lease
agreement expires on December 31, 2003.
We are party to a guaranty agreement with Commerce Bank N.A. to
secure a $2,000,000 promissory note with and between Mount Washington
Forever, L.L.C. and Commerce Bank N.A. to finance the construction of a new
mausoleum at the Mt. Washington Forever Cemetery. The balance of the
promissory note was $774,289 and $768,081 as of March 31, 2003 and December
31, 2002, respectively.
NOTE 6 -- RELATED PARTY TRANSACTIONS
On January 1, 2002, we entered into a Management Agreement with
National Prearranged Services, Inc. ("NPS"), whereby, we agreed to provide
all necessary personnel to supervise NPS' field sales force in return for a
monthly management fee equal to a percentage of the net sales revenues of
NPS as payment for the services provided. As consideration to NPS for
entering into this Management Agreement, we entered into a promissory note
in the amount of $10.0 million. Due to the nature of the agreement and the
relationship of the parties involved, this agreement has an estimated useful
life of 20 years, although the agreement will be re-evaluated by the parties
every five years (December 31, 2005 will be the first evaluation date). The
balance of this note was $7,459,783 and $8,031,272 as of March 31, 2003 and
December 31, 2002, respectively. Management fees, which have been recorded
as "Other
-9-
income" on our consolidated statements of operations, were $866,000 and
$763,000 for the three month periods ended March 31, 2003 and 2002,
respectively.
We entered into agreements in 2002 in connection with our
acquisition of a funeral home in Missouri. Payments of $16,667 (of which
equal amounts of $4,944 are payable to Messrs. Brent D. Cassity, our chief
executive office, J. Tyler Cassity, our president, and J. Douglas Cassity,
the father of Messrs. Brent and Tyler Cassity) are payable monthly until the
balance is paid in full. Amounts payable under these agreements were
$542,088 and $573,820 as of March 31, 2003 and December 31, 2002,
respectively, and are included in "Accounts payable and accrued liabilities"
on our consolidated balance sheet.
We have a note payable to Lincoln Memorial Services, Inc. in the
amount of $4,414,986 and $4,542,195 as of March 31, 2003 and December 31,
2002, respectively. Payments of $70,528 of principal and interest are due
monthly with a final payment due on November 1, 2007. This note bears
interest at a rate equal to 7.5% per annum.
We also provide and receive administrative and other services
to/from related parties. Management fees charged to related parties, which
have been recorded as "Management fee income" on our consolidated statements
of operations, were $268,000 and $245,000 for the quarters ended March 31,
2003 and 2002, respectively. Management fees incurred with related parties,
which are included in "Other expenses" on our consolidated statements of
operations, were $122,000 and $90,000 for the quarters ended March 31, 2003
and 2002, respectively. These fees reflect an allocation based on actual
costs incurred.
Amounts receivable from National Heritage Enterprises and its
affiliates, which are included in "Receivable from related party" on our
consolidated balance sheets, were $9,961,040 and $8,492,518 as of March 31,
2003 and December 31, 2002, respectively. Amounts payable to National
Heritage Enterprises and its affiliates, which are included in "Payable to
related party" on our consolidated balance sheets, were $5,696,033 and
$4,552,570 as of March 31, 2003 and December 31, 2002, respectively.
NOTE 7 -- NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 143,
Accounting for Asset Retirement Obligations, which is effective for fiscal
years beginning after June 15, 2002. SFAS No. 143 requires, among other
things, that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. We adopted
SFAS No. 143 on January 1, 2003. We do not believe that the adoption of SFAS
No. 143 will have a significant impact on our financial statements.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which is effective for exit or
disposal activities that are initiated after December 15, 2002. SFAS No. 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. We adopted SFAS No.
146 on January 1, 2003. We do not believe that the adoption of SFAS No. 146
will have a significant impact on our financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
statement No. 123, which provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. SFAS No. 148 is effective for fiscal
years beginning after December 15, 2003. We adopted SFAS No. 148 on January
1, 2003, which resulted in no effect on our financial position, results of
operations or cash flows.
-10-
NOTE 8 -- INCOME (LOSS) PER SHARE OF STOCK
Income (loss) per share of stock is computed using the weighted
average number of common shares outstanding during the applicable period.
Diluted income (loss) per share of stock is computed using the weighted
average number of common shares outstanding and dilutive potential common
shares (primarily outstanding stock options). Weighted average shares of
common stock and dilutive potential common shares used in the calculation of
basic and diluted income (loss) per share are summarized as follows:
QUARTER ENDED
-------------
MARCH 31, 2003 MARCH 31, 2002
-------------- --------------
Weighted average shares outstanding (basic EPS) 6,934,934 6,934,934
Dilutive potential common shares -- 266,098
Weighted average shares outstanding and
dilutive potential common shares (diluted EPS) 6,934,934 7,201,032
Dilutive potential common shares included in the diluted income (loss) per
share calculation were determined using the treasury stock method. Under the
treasury stock method, outstanding stock options are dilutive when the
average market price of a company's common stock exceeds the option price
during a period. In addition, proceeds from the assumed exercise of dilutive
options along with the related tax benefit are assumed to be used to
repurchase common shares at the average market price of such stock during
the period. For the three months ended March 31, 2003, potential common
shares of 492,185 were considered to be anti-dilutive and were excluded from
the calculation of diluted loss per share.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements are based on the beliefs of our
management as well as on assumptions made by and information currently
available to us at the time such statements were made. We can give no
assurance that the expectations indicated by such forward-looking statements
will be realized. If any of management's assumptions should prove incorrect,
or if any of the risks and uncertainties underlying such expectations should
materialize, our actual results may differ materially from those indicated
by the forward-looking statements.
All predictions as to future results contain a measure of
uncertainty and, accordingly, actual results could differ materially. The
following factors that are not within our control and that may have a direct
bearing on operating results include, but are not limited to: general
economic conditions and other factors, including prevailing interest rate
levels and stock market performance, which may affect our ability to sell
our products, the market value of our investments and the lapse rate and
profitability of our policies; our ability to achieve anticipated levels of
operational efficiencies for acquired companies or properties, as well as
through other cost-saving initiatives; mortality, morbidity, and other
factors which may affect the profitability of our insurance products; the
financial well-being of end consumers of our products; changes in the
federal income tax laws and regulations which may affect the cost of or
demand for our products; increasing competition in the sale of our products;
technological change; regulatory changes or actions, including those
relating to regulation of financial services affecting (among other things)
sales and underwriting of insurance products to fund obligations under
pre-need contracts, regulation of the sale, underwriting and pricing of
insurance products and regulation of the sale and pricing of funeral home
operations and products; litigation, including its inherent uncertainty;
environmental matters; the availability and terms of future acquisitions, if
any; changes in accounting principles or new accounting standards; and other
unforeseen circumstances. A number of these factors are discussed in this
and our other filings with the Securities and Exchange Commission.
Additionally, we may not be successful in identifying, acquiring
and integrating other companies or their businesses, implementing improved
management and accounting information systems and controls and may be
dependent upon additional capital and equipment purchases for future growth.
There may be other risks and uncertainties that management is not able to
predict.
When used in this report, the words "projects," "anticipates,"
"believes," "estimates," "expects," "intends," and similar expressions, as
they relate to us are intended to identify forward-looking statements,
although there may be certain forward-looking statements not accompanied by
such expressions.
OVERVIEW
We, through our subsidiaries, own and operate combination funeral
home and cemetery properties, market and produce multimedia LifeStories(TM),
operate an Internet marketing site, and operate life insurance companies
that principally issue insurance contracts to fund pre-need funeral
contracts. Our life insurance operations are conducted through our
wholly-owned life insurance subsidiaries.
-12-
Forever Network, Inc., directly and through its subsidiaries, owns
and operates funeral homes and cemetery properties, markets Forever
LifeStories(TM) to individuals and groups, and archives the digital
interactive LifeStories(TM), which can be viewed at company cemetery/funeral
homes or privately in the home and on the Internet at www.forevernetwork.com.
In addition, the Internet site provides valuable information to consumers on
memorial products and services and markets related merchandise and services
to the growing population of visitors to the site.
Substantially all of our life insurance policies are issued to fund
prearranged funeral contracts sold by National Prearranged Services, Inc.
and National Prearranged Services Agency, Inc. National Prearranged
Services, Inc. is an affiliated company that collects all payments for
prearranged funeral contracts and remits such amounts to us either directly
or through assumed reinsurance.
In August 2000, we entered into a coinsurance agreement with
Employers Reassurance Corporation whereby we ceded a significant portion of
our in-force policies. This coinsurance agreement includes experience refund
provisions whereby we may earn additional ceding commissions in varying
amounts each year through 2010, subject to the mortality experience of the
policies not exceeding certain levels. This coinsurance agreement does not
relieve us from our obligations to our policyholders and, accordingly, the
net cost of the coinsurance agreement of approximately $80,000 was deferred
and is being amortized over the remaining life of the underlying insurance
policies. Approximately $82.6 million of the reinsurance receivable as of
March 31, 2003 was related to the agreement with Employers Reassurance
Corporation.
In November 2000, we entered into various coinsurance agreements
with North America Life Insurance Company of Texas ("NAL") whereby we ceded
blocks of certain direct written life insurance policies and all of our
assumed life insurance and annuity policies. As of March 31, 2003,
segregated funds of approximately $64.8 million were in a trust account for
the benefit of the reinsurer. The funds withheld are presented net of
amounts due from the reinsurer in our consolidated financial statements. We
also entered into a 100% coinsurance agreement with NAL in September 2000,
whereby substantially all of the policies issued by us that are sold by NPS
and NPS Agency are ceded to NAL. This agreement was modified in August 2001,
at which time we also entered into a coinsurance agreement with Hannover
Life Reassurance Company of America ("Hannover"), whereby all of the
policies issued by us that are sold by NPS are ceded to Hannover. These
coinsurance agreements do not relieve us from our obligations to our
policyholders and, accordingly, the cost of the coinsurance agreements was
deferred and is being amortized over the remaining life of the underlying
insurance policies. The unamortized deferred cost as of March 31, 2003 was
approximately $1.8 million. Approximately $27.4 million of the reinsurance
receivable as of March 31, 2003 was related to the agreements with NAL and
Hannover.
The arrangements with Employers Reassurance Corporation, North
America Life Insurance Company of Texas and Hannover Reassurance Life
Company of America were made to allow us to shift our focus from the
insurance operations to the cemetery operations of our company.
Our business strategy is to develop the Forever Brand as the
consumer's first choice for memorialization, through Funeral Homes,
Cemeteries and LifeStories(TM) to become the recognized leader in
revolutionizing the way we document and remember lives. Our goal is for the
Forever Brand to represent unparalleled value, innovation and customer
service. We plan to grow our business and our brand by acquiring
cemetery/funeral home combination properties in targeted metropolitan areas,
aggressively marketing the multimedia LifeStory(TM) product and services,
and further developing our Internet marketing business. No assurance can be
given that we will be successful in completing any acquisition, or that any
acquisition, once completed, will ultimately enhance our results of
operations.
-13-
We will seek to increase the number of quality cemetery/funeral
home combination properties we own and operate and to expand our permanent
archive of digital LifeStories(TM). Our plan is to acquire properties in or
near major metropolitan areas to allow us to advertise and market the
Forever products and services to large populations. We seek properties with
enough inventory and/or land to accommodate future sales and/or construction
of Forever mausoleums/chapels to create inventory and service space. The
targeted properties could possibly be distressed in some way. We believe
properties that lack an aggressive marketing approach are ideal. Established
properties with a large heritage of families will also allow us to market
our LifeStory(TM) and other services to existing client family members,
expanding our market potential. We also may pursue properties in the form of
undeveloped land in a current or developing population center that can
support a funeral home/mausoleum structure, and that provide a suitable
supply of saleable cemetery land.
We plan to increase the scope and awareness of our Forever
LifeStory(TM) business through the active marketing of this service to
individuals and groups through our company-owned properties and through
various other organizations and groups.
We believe that acquiring and developing cemetery/funeral home
properties in major metropolitan areas will facilitate our LifeStory(TM) and
Internet business strategy. Our website stores and displays thousands of
individual family archives, or LifeStories(TM), each containing film and
video clips, photos, written and spoken words, all collected and preserved
permanently. The website also educates consumers about memorial products,
services and providers, and markets Forever products and services. We
believe that the current environment provides excellent opportunities to
acquire cemetery properties at attractive prices due to the financial
distress of several large cemetery/funeral home conglomerates. We also
believe more properties are available for acquisition, the prices for
properties are declining and the competition for acquiring these properties
is very small. Management believes that execution of this strategy will
allow us to develop further the Forever Brand as a leader in providing
unique and valuable memorialization products and services, helping us to
achieve the company mission by changing the way we document and remember
lives.
We believe we are well positioned to enhance the profitability of
the businesses and properties we acquire. With respect to our
cemetery/funeral home operations, we believe we can apply tested and proven
marketing processes to produce significant revenue and market share growth.
Efficient management of property operations, combined with aggressive new
marketing initiatives, should allow for greatly enhanced profitability on
newly acquired properties. The growing interest in organizing and preserving
family memories, use of the Internet for information gathering, and commerce
on the World Wide Web should provide the platform for successful results on
our LifeStory(TM) and Internet strategy.
-14-
RESULTS OF OPERATIONS
The following presents management's discussion and analysis of our
consolidated financial condition and results of operations as of the dates
and for the periods indicated. This discussion should be read in conjunction
with the other information set forth in this Quarterly Report on Form 10-Q,
including our unaudited condensed consolidated financial statements and the
accompanying notes thereto.
Our financial highlights were as follows:
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
2003 2002
-------------- -------------
STATEMENTS OF OPERATIONS DATA:
Premium income $ 1,818,766 $ 1,644,305
Net investment income and realized gains (loss) (159,228) 1,119,580
Cemetery revenue 2,707,359 2,082,868
Commission and expense allowance 3,979,490 3,435,373
Management fee income 1,189,270 1,068,019
Other revenue 223,831 243,508
------------- ------------
Total revenues 9,759,488 9,593,653
------------- ------------
Benefits incurred 2,292,701 2,624,252
Insurance commissions 3,297,123 3,155,118
Cost of cemetery revenues 807,103 539,198
Selling, general and administrative expenses 3,306,720 2,412,049
Other expense (income) 811,910 (27,687)
Interest expense 419,474 351,486
------------- ------------
Income (loss) before income taxes (1,175,543) 539,237
Income tax expense 378,759 133,100
------------- ------------
Net income (loss) $ (1,554,302) $ 406,137
============= ============
Income (loss) per share
Basic $ (0.22) $ 0.06
Diluted (0.22) 0.06
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
BALANCE SHEETS DATA:
Trade accounts receivable, net $ 8,016,998 $ 7,707,948
Cemetery property, net 3,922,749 3,964,644
Total assets 265,779,721 262,989,722
Total policy liabilities 207,094,052 204,919,885
Deferred preneed revenues 8,122,495 7,328,554
Shareholders' equity 2,879,767 4,618,976
We conduct and manage our business through two segments,
cemetery/funeral operations and life insurance operations. The following
tables and narratives summarize the results of our operations by our
business segments. Costs and revenues that are not related to operating
segments are included in the column "Corporate."
THREE MONTHS ENDED MARCH 31, 2003
CEMETERY INSURANCE CORPORATE INTERSEGMENT TOTAL
-------- --------- --------- ------------ -----
Revenues $ 2,930,936 $ 5,713,638 $ 1,417,840 $ (302,926) $ 9,759,488
Loss before income taxes (629,165) (467,577) (78,801) -- (1,175,543)
Total assets at quarter-end 17,943,036 221,046,996 32,504,559 (5,714,870) 265,779,721
-15-
THREE MONTHS ENDED MARCH 31, 2002
CEMETERY INSURANCE CORPORATE INTERSEGMENT TOTAL
-------- --------- --------- ------------ -----
Revenues $ 2,326,376 $ 6,279,433 $ 1,247,557 $ (259,713) $ 9,593,653
Income (loss) before income taxes 360,618 199,824 (21,205) -- 539,237
Total assets at quarter-end 16,104,748 208,350,106 29,677,506 (4,864,283) 249,268,077
Cemetery Operations. Cemetery revenues increased approximately
$605,000, or 26.0%, in the first quarter of 2003 compared to the quarter
ended March 31, 2002. Sales for the first quarter of 2003 increased compared
to the first quarter of 2002 due primarily to the inclusion of three new
cemetery and funeral home properties, which were acquired in the second and
fourth quarters of 2002, along with more effective marketing and increased
sales of certain cemetery and memorialization products and services.
Cost of sales increased $268,000, or 49.6%, from $539,000 in the
quarter ended March 31, 2002 to $807,000 in the quarter ended March 31, 2003
due primarily to the inclusion of three new properties as noted above. Cost
of sales as a percentage of revenues increased to 27.5% for the three months
ended March 31, 2003 compared to 23.2% for the three months ended March 31,
2002 due to a less favorable product and service mix sold.
Selling, general and administrative expenses increased $1.1
million, or 78.0%, from $1.3 million in the quarter ended March 31, 2002 to
$2.4 million in the quarter ended March 31, 2003, due to the addition of
three new properties and a more aggressive marketing approach. As a
percentage of revenues, selling, general and administrative costs increased
to 82.5% in the quarter ended March 31, 2003 from 58.4% in the quarter ended
March 31, 2002 due to the high costs associated with the start-up of three
new facilities.
Income (loss) before income taxes decreased from income of $361,000
in the quarter ended March 31, 2002 to a loss of $629,000 in the quarter
ended March 31, 2003. Operating income as a percentage of revenues declined
due to the higher costs noted above.
Total assets increased from $16.1 million in the first quarter of
2002 to $17.9 million in the first quarter of 2003.
Minority Interest Cemetery Operations. Forever Enterprises, Inc.
currently has a 50% interest in Mount Washington Forever, L.L.C., and is
responsible for all aspects of the cemetery's marketing and operations. We
account for our investment in Mount Washington Forever, L.L.C. on the equity
method. Our equity in the earnings (losses) of Mount Washington for the
three months ended March 31, 2003 was not recognized in consolidated
earnings because our net equity investment in Mount Washington remains in a
deficit position.
In conjunction with the construction of a new mausoleum at Mount
Washington, we entered into a guaranty agreement with Commerce Bank, N.A.
The guaranty agreement is discussed further in Note 5 of this report.
Insurance Operations. Insurance revenues declined approximately
$566,000, or 9.0%, in the quarter ended March 31, 2003 compared to the
quarter ended March 31, 2002. The decline was primarily attributable to
realized losses on investments, as discussed below.
-16-
Our premium income increased approximately $300,000, or 16.9%, in
the quarter ended March 31, 2003 compared to the quarter ended March 31,
2002. The increase was due to an increase in the number of policies written.
Expense allowance on reinsurance ceded increased to $4.0 million
for the quarter ended March 31, 2003 from $3.4 million for the quarter ended
March 31, 2002, due to the increase in policies written.
Our net investment income and realized gains decreased
approximately $1.4 million in the quarter ended March 31, 2003 compared to
the quarter ended March 31, 2002. The decrease in investment income was due
primarily to realized losses on futures trading.
Our benefit expenses decreased approximately $287,000, or 10.7%, in
the quarter ended March 31, 2003 compared to the quarter ended March 31,
2002. This decrease was due to a lower than expected mortality experience on
retained business.
Operating income (loss) decreased $667,000 from income of $200,000
for the first quarter of 2002 to a loss of $468,000 for the first quarter of
2003 due to the investment losses discussed above.
Total assets increased $12.7 million from $208.3 million at March
31, 2002 to $221.0 million at March 31, 2003 due primarily to an increase in
the amount due from reinsurers.
Corporate. Revenues increased approximately $170,000, or 13.6%, in
the quarter ended March 31, 2003 compared to the quarter ended March 31,
2002 due to a slight increase in management fee revenues.
Selling, general and administrative expenses decreased $190,000, or
19.6%, from $973,000 in the quarter ended March 31, 2002 to $783,000 in the
quarter ended March 31, 2003 due to more efficient utilization of resources.
Operating losses increased $58,000 in the quarter ended March 31,
2003 compared to the quarter ended March 31, 2002.
Consolidated. Operating income (loss) for the quarter ended March
31, 2003 decreased $1.7 million, compared to the first quarter of 2002. Net
income (loss) per basic share decreased to a loss of $0.22 per share for the
first quarter of 2003 compared to income of $0.06 per share for the first
quarter of 2002. The decrease in operating income for the first quarter of
2003 compared to the first quarter of 2002 was primarily due to increased
expenses from our cemetery operations along with decreased earnings from our
insurance operations.
LIQUIDITY AND CAPITAL RESOURCES
We expect to secure any significant capital required for
acquisition of additional cemetery properties and development of our
LifeStory(TM) business and the Internet through debt and/or equity
financing. Otherwise, we believe cash generated from our operations and from
our management agreement with National Prearranged Services (see Note 6)
will provide working capital for our operations. With new cemetery
properties, the initial capital required for the purchase and working
capital is anticipated to be sufficient to allow the property to achieve
positive cash flow within 12 to 18 months. Because we are able to
significantly increase the volume of pre-need revenues at new properties,
and much of those revenues are financed over time and/or deferred until the
time of need (death), we have
-17-
a natural and budgeted delay in profitability and positive cash flow. Our
cemetery property in St. Louis, Missouri, which has been actively marketed
since 1997, generates significant positive cash flow from operations and
represents the type of relative financial performance expected on our
current and future properties. Similar positive trends are being experienced
at our cemetery properties in Kansas City, Missouri and Los Angeles,
California and we anticipate both properties being able to sustain positive
cash flow and contribute to earnings for the remainder of 2003. Financing
alternatives related to the build-up of our trade receivables may provide
opportunities for "bridge" cash financing until we reach positive sustaining
cash flow at certain properties. We believe that any operating cash
requirements for our current cemetery properties will be funded through
working capital on hand or lines of credit.
Capital projects at new cemetery properties for mausoleum/funeral
home combination buildings and other saleable inventory features are
expected to be funded through use of cash generated from pre-construct sales
and/or debt financing and should require little or no additional capital
investment. Certain other improvements would be accomplished and funded
through use of existing personnel and working capital resources and lines of
credit.
We have invested significant capital to develop and enhance our
LifeStory(TM) business and Internet site capabilities at our website
www.forevernetwork.com. The LifeStory(TM) program is an important part of
our cemetery/funeral home business as well as a central feature to our brand
strategy, and is currently contributing to profitability at the cemetery
locations and through individual programs. The Forever Network website is
currently averaging more than 80,000 hits (visits) per day.
Our insurance subsidiaries are restricted by state insurance laws
as to the amount of dividends that they may pay to us without prior notice
to, or in some cases prior approval from, their respective state insurance
departments. These restrictions on dividend distributions are based on
statutory capital and surplus and operating earnings. Statutory surplus and
statutory operating results are determined according to statutes adopted by
each state in which the subsidiaries do business. Statutory surplus bears no
direct relationship to equity as determined under accounting principles
generally accepted in the United States of America. As of March 31, 2003,
approximately $4.0 million was available for transfer to us by our
subsidiaries by dividend, loan or advance. Effective April 13, 2003, our
subsidiary Memorial Service Life Insurance Company declared a dividend
payable to Forever Enterprises, Inc. for the full amount of $4.0 million. We
anticipate receiving such dividend prior to June 30, 2003.
Our cash requirements for the remainder of 2003 and in the future
will depend upon mortality experience, acquisitions, timing of expansion
plans and capital expenditures. Our insurance subsidiaries generally
generate sufficient cash receipts from premium collections and investment
income to satisfy their obligations. We believe that the investment
portfolio of our insurance subsidiaries provides sufficient liquidity to
meet their operating cash requirements. We believe that anticipated revenue
from operations should be adequate for the working capital requirements of
our existing businesses over the next 12 months.
We anticipate the management agreement between Forever Enterprises,
Inc. and National Prearranged Services, Inc. will provide cash in excess of
that necessary to meet our monthly repayment obligations under said
agreement.
On September 27, 2002, we entered into a letter of intent to
purchase a single-location cemetery property located in the Southwest United
States. The purchase price and working capital, if agreeable terms are
secured, are expected to be funded largely through owner financing with the
balance being funded through additional debt arrangements with an outside
lender. We are currently performing our due diligence investigation. If due
diligence proves favorable, execution of a definitive agreement and closing
are expected to occur during the second quarter of 2003.
-18-
In the event that our plans or assumptions change, or if the
resources available to meet unanticipated changes in business conditions
prove to be insufficient to fund operations, we could be required to seek
additional financing prior to that time, or to curtail certain proposed
activities.
Changes in our consolidated balance sheet between December 31, 2002
and March 31, 2003 reflect growth through operations, changes in the fair
value of actively managed fixed maturity and equity securities, changes in
the investment portfolio mix and changes in our insurance business strategy.
Due from reinsurer increased approximately $4.1 million due to an
increase in new business written in relation to the blocks of business ceded
to Employers Reassurance Corporation, Hannover Life Reassurance Company of
America and North America Life Insurance Company.
Total cash and investments decreased $1.6 million from $99.4
million at December 31, 2002 to $97.8 million at March 31, 2003 due to
decreased investments held. Changes in the separate components of invested
assets were due to the portfolio mix of our invested assets and changes in
the fair market value of balances in actively managed fixed maturity and
equity securities.
Intangible assets decreased approximately $163,000 from $10.9
million at December 31, 2002 to $10.7 million at March 31, 2003. The
decrease was due primarily to amortization of the NPS Management Agreement
described in Note 6.
Future policy benefits increased approximately $2.2 million from
$158.3 million at December 31, 2002 to $160.5 million at March 31, 2003.
This increase was due to the growth of our reinsured business.
Policyholder deposits of $46.5 million at March 31, 2003 decreased
slightly from $46.6 million at December 31, 2002, due to withdrawals and
surrenders of existing annuity policies and the absence of the issuance of
new annuity policies. Policyholder deposits are comprised primarily of
annuities acquired with the block of business from Woodmen Accident & Life,
World Insurance Company, and Funeral Security Life Insurance Company.
Notes payable decreased approximately $537,000 from $26.1 million
at December 31, 2002 to $25.6 million at March 31, 2003 due primarily to the
repayment of long-term debt.
-19-
ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 143,
Accounting for Asset Retirement Obligations, which is effective for fiscal
years beginning after June 15, 2002. SFAS No. 143 requires, among other
things, that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. We adopted
SFAS No. 143 on January 1, 2003. We do not believe that the adoption of SFAS
No. 143 will have a significant impact on our financial statements.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which is effective for exit or
disposal activities that are initiated after December 15, 2002. SFAS No. 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. We adopted SFAS No.
146 on January 1, 2003. We do not believe that the adoption of SFAS No. 146
will have a significant impact on our financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
statement No. 123, which provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. SFAS No. 148 is effective for fiscal
years beginning after December 15, 2003. We adopted SFAS No. 148 on January
1, 2003, which resulted in no effect on our financial position, results of
operations or cash flows.
-20-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes from the information provided
in our Annual Report on Form 10-K for the year ended December 31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
The Company's certifying officers have established and maintained
disclosure controls and procedures to ensure that material information is
made known to them for purposes of complying with applicable laws and
regulations. With the assistance and periodic review of our outside legal
counsel and our independent auditors, we continually evaluate the
effectiveness of the design and operation of our internal controls and
procedures over financial reporting and disclosure pursuant to Exchange Act
Rule 13a-14.
Based upon this evaluation, our Chief Executive Officer and Chief
Financial Officer determined that, as of March 31, 2003, our disclosure
controls and procedures were adequate to ensure that information required to
be disclosed by us in the reports filed or submitted by us under the
Exchange Act is recorded, processed, and summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. There have been no significant changes in our internal controls or in
other factors since March 31, 2003 that could significantly affect our
internal controls.
-21-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Hollywood Forever Cemetery was named as defendant in a lawsuit
filed by a former employee during 2001 in state court in Los Angeles,
California, for wrongful discharge. The amount being sought was
approximately $300,000. Our motion for summary judgment was granted in
December 2002, subsequent to which the plaintiff filed an appeal. There has
been no action since the appeal. We deny liability and intend to vigorously
defend the suit.
Forever Enterprises, Inc. has been named as defendant in a lawsuit
filed in 2003 by a former licensed insurance agent for National Prearranged
Services, Inc. The case was filed in state court in Travis County, Texas,
for breach of contract, retaliation and misrepresentation. Forever
Enterprises, Inc. maintains it is not a proper party. The amount being
sought is undetermined. This case is currently in discovery with no trial
date set. We deny liability and intend to vigorously defend the suit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See Exhibit Index attached hereto.
(b) Reports on Form 8-K.
We did not file any Current Reports on Form 8-K during the
quarter ended March 31, 2003.
-22-
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FOREVER ENTERPRISES, INC.
(Registrant)
Dated: May 15, 2003 By: /s/ Brent D. Cassity
------------------------------------------
Brent D. Cassity, Chief Executive Officer
Dated: May 15, 2003 By: /s/ J. Tyler Cassity
------------------------------------------
J. Tyler Cassity, President
Dated: May 15, 2003 By: /s/ Michael R. Butler
------------------------------------------
Michael R. Butler, Chief Financial Officer
-23-
CERTIFICATIONS
I, Brent D. Cassity, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of Forever
Enterprises, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
(4) The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors (or
persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
-24-
(6) The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
May 15, 2003 /s/ Brent D. Cassity
---------------------------
Brent D. Cassity
Chief Executive Officer
-25-
CERTIFICATIONS
I, Michael R. Butler, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of Forever
Enterprises, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
(4) The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors (or
persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
-26-
(6) The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
May 15, 2003 /s/ Michael R. Butler
--------------------------
Michael R. Butler
Chief Financial Officer
-27-
EXHIBIT INDEX
Ex. No. Description
------- -----------
99.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, is filed herewith.
99.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, is filed herewith.
-28-