<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
March 26, 1996
THE LOEWEN GROUP INC.
(Exact name of registrant as specified in charter)
BRITISH COLUMBIA, CANADA 0-18429 98-0121376
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
4126 NORLAND AVENUE
BURNABY, BRITISH COLUMBIA V5G 3S8
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
604-299-9321
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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<PAGE> 2
Item 7 of the Registrant's Current Report on Form 8-K, dated March 26, 1996 and
amended by Amendment No. 1 on June 10, 1996, is hereby amended and restated in
its entirety to read as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
As reported in Item 2 of the Form 8-K of The Loewen Group Inc. ("the
Company") dated March 26, 1996 (the "Original Form 8-K") the Company purchased
certain net assets ("the Assets") from S.I. Acquisition Associates L.P.
("S.I."), of Donaldsonville, Louisiana, for total consideration of approximately
$145,000,000. S.I. concurrently acquired all the outstanding shares of Ourso
Investment Corporation, which included 15 funeral homes, two cemeteries and two
insurance companies.
(a) Financial Statements of Businesses Acquired:
In connection with the acquisition described in Item 2 of the Original Form
8-K, the financial statements required by Regulation S-X, Rule 3-05(b) are
provided herein pursuant to Item 7(a)(4)(iv) of Form 8-K. The financial
statements are prepared in accordance with accounting principles generally
accepted in the United States.
<PAGE> 3
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
WITH INDEPENDENT AUDITORS' REPORT THEREON
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Ourso Investment Corporation:
We have audited the accompanying consolidated balance sheet of Ourso
Investment Corporation and subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ourso
Investment Corporation and subsidiaries as of December 31, 1995, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
New Orleans, Louisiana
May 31, 1996
F-2
<PAGE> 5
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments (note 2)
Debt securities:
Available-for-sale, at market (amortized cost of $91,325,707)............. $ 94,957,833
Held-to-maturity, at amortized cost (market of $54,102,704)............... 51,386,621
Equity securities:
Common, at market (cost of $1,517,113).................................... 2,468,044
Preferred, at market (cost of $2,174,505)................................. 2,122,613
Mortgage loans, net of $100,000 allowance.................................... 3,865,662
Investment real estate....................................................... 147,600
Policy loans................................................................. 2,763,960
Temporary cash investments................................................... 22,262,111
------------
Total investments.................................................... 179,974,444
Cash........................................................................... 1,810,360
Trade accounts receivable, net of $73,502 allowance............................ 1,567,084
Accrued investment income...................................................... 1,193,390
Funeral merchandise inventory.................................................. 626,277
Prearranged funeral trust deposits............................................. 768,899
Cemetery contract receivables, net of $261,111 allowance....................... 2,349,993
Cash surrender value of life insurance policies................................ 3,616,486
Property and equipment, net (note 7)........................................... 18,306,195
Deferred policy acquisition costs, net (note 3)................................ 39,709,144
Value of business acquired, net (note 4)....................................... 12,014,951
Goodwill, net of $361,655 accumulated amortization............................. 1,744,817
Other assets................................................................... 619,343
------------
Total assets......................................................... $264,301,383
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities:
Policy benefit reserves...................................................... 132,983,308
Other policyholder funds..................................................... 3,300,923
------------
Total policy liabilities............................................. 136,284,231
Accrued expenses and other liabilities......................................... 6,289,668
Deferred prearranged funeral services revenue.................................. 768,899
Long-term debt (note 9)........................................................ 15,259,042
Deferred income taxes (note 10)................................................ 19,196,421
------------
Total liabilities.................................................... 177,798,261
------------
Shareholders' equity:
Class A common stock, voting, no par value, authorized, issued and
outstanding 20,000 shares................................................. 20,000
Class B common stock, nonvoting, no par value, authorized 200,000 shares,
197,297 issued and outstanding............................................ 197,297
Paid-in capital.............................................................. 782,703
Treasury stock, at cost, 270 shares.......................................... (57,313)
Unrealized gains on securities available-for-sale, net of taxes.............. 2,945,259
Retained earnings............................................................ 82,615,176
------------
Total shareholders' equity........................................... 86,503,122
------------
Total liabilities and shareholders' equity........................... $264,301,383
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 6
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Revenues:
Insurance premiums............................................................ $45,140,413
Net investment income (note 2)................................................ 11,418,039
Realized gains on sale of investments, net (note 2)........................... 1,556,710
Funeral....................................................................... 12,215,935
Cemetery...................................................................... 3,399,910
Other income.................................................................. 989,424
-----------
74,720,431
-----------
Benefits and expenses:
Benefits and claims........................................................... 15,120,358
Commissions................................................................... 10,658,622
Increase in policy benefit reserves........................................... 6,348,373
Amortization of deferred acquisition costs and value
of business acquired (notes 3 and 4)....................................... 7,429,338
Salaries and employee benefits................................................ 12,043,506
Other operating expenses (note 11)............................................ 16,412,217
-----------
68,012,414
-----------
Income before income taxes............................................ 6,708,017
Income taxes (note 10).......................................................... 1,810,911
-----------
Net income............................................................ $ 4,897,106
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 7
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
UNREALIZED
CLASS A CLASS B GAINS (LOSSES)
COMMON COMMON PAID-IN ON SECURITIES, RETAINED TREASURY
STOCK STOCK CAPITAL NET OF TAXES EARNINGS STOCK TOTAL
------- -------- -------- -------------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995...... $20,000 $197,297 $782,703 $ (6,372,187) $77,718,070 $(57,313) $72,288,570
Net income for 1995.............. -- -- -- -- 4,897,106 -- 4,897,106
Change in unrealized gains
(losses) on securities
available-for-sale, net of
taxes of $5,017,085............ -- -- -- 9,317,446 -- -- 9,317,446
------- -------- -------- -------------- ----------- -------- -----------
Balances at December 31, 1995.... $20,000 $197,297 $782,703 $ 2,945,259 $82,615,176 $(57,313) $86,503,122
======= ======== ======== ============ ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 8
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................................... $ 4,897,106
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs....................... (8,580,158)
Amortization of deferred policy acquisition costs......................... 6,325,489
Depreciation and amortization............................................. 1,283,735
Amortization of value of business acquired................................ 1,103,849
Realized gains on sale of investments, net................................ (1,556,710)
Decrease in receivables................................................... 185,557
Increase in accrued investment income..................................... (20,698)
Decrease in funeral merchandise inventory................................. 14,925
Decrease in cash surrender value of life insurance policies............... (333,542)
Decrease in other assets.................................................. 577,309
Increase in policy benefit reserves....................................... 6,348,373
Increase in other policyholder funds...................................... 637,989
Increase in accrued expenses and other liabilities........................ 241,178
Increase in deferred income taxes......................................... 279,256
------------
Net cash provided by operating activities............................ 11,403,658
------------
Cash flows from investing activities:
Proceeds from sale of available-for-sale debt securities..................... 1,046,875
Proceeds from maturity and principal repayments of available-for-sale debt
securities................................................................ 10,339,621
Cost of available-for-sale debt securities acquired.......................... (11,911,501)
Proceeds from sale of equity securities...................................... 12,270,984
Cost of equity securities acquired........................................... (6,933,045)
Proceeds from maturity and principal repayments of held-to-maturity debt
securities................................................................ 946,692
Proceeds from maturity and principal repayments of available-for-sale debt
securities................................................................ 1,259,521
Cost of held-to-maturity debt securities acquired............................ (2,874,916)
Proceeds from repayments of mortgage loans................................... 800,013
Policy loans, net............................................................ (75,818)
Cash received in acquisition................................................. 1,800,000
Purchases of property and equipment.......................................... (2,046,865)
Proceeds from the sale of property and equipment............................. 630,704
------------
Net cash provided by investing activities............................ 5,252,265
------------
Cash flows from financing activities:
Payments on long-term debt................................................... (4,572,993)
Borrowings on long-term debt................................................. 5,950,000
------------
Net cash provided by financing activities............................ 1,377,007
------------
Increase in cash and cash equivalents during the year........................ 18,032,930
Cash and cash equivalents, beginning of year................................. 6,039,541
------------
Cash and cash equivalents, end of year............................... $ 24,072,471
============
Supplemental cash flow disclosures:
Interest paid................................................................ $ 2,041,383
============
Income taxes paid............................................................ $ 811,864
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 9
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
Ourso Investment Corporation is a licensed insurance holding corporation
domiciled in Donaldsonville, Louisiana, with two distinct businesses: home
service life insurance and operation of funeral homes and cemeteries.
The life insurance business includes the sale of monthly debit ordinary and
monthly debit industrial life insurance through a home service distribution
system of approximately 500 captive agents throughout Louisiana. The funeral and
cemetery business includes the operation of fifteen funeral homes located in New
Orleans, Covington, Slidell, Baton Rouge and Shreveport, Louisiana, two
cemeteries, a florist and a limousine service. During 1995, the funeral
operations conducted approximately 4,000 funerals and cemetery operations
conducted approximately 1,000 interments.
The accompanying consolidated financial statements include the accounts of
Ourso Investment Corporation and its wholly-owned subsidiaries (the Company):
Security Industrial Insurance Company (including its subsidiary Security
Industrial Fire Insurance Company); Resthaven Gardens of Memory, Inc.; Delta
Cemetery Sales, Inc.; Good Citizens Realty Corporation; Moss Street Realty;
Security Industrial Funeral Home Corporation; the Jacob Schoen Funeral Home
Corporation; Wellman Funeral Parlors, Inc.; Hollabaugh-Spindle Mortuary, Inc.;
Key Florals, Ltd.; McMahon-Coburn, Inc.; Jacob Schoen and Son, Inc.; and Schoen
Funeral Home, Inc. The accompanying consolidated financial statements also
include the accounts of the Company's majority ownership interest in New Orleans
Limousine Service, Inc. and Woodlawn Memorial Park, Inc. These consolidated
financial statements have been prepared in accordance with U.S. generally
accepted accounting principles. All significant inter-company balances and
transactions have been eliminated in the consolidated financial statements.
(b) Investments
Investments are owned principally by the Company's insurance subsidiaries.
Debt securities include bonds, mortgage-backed securities, and collateralized
mortgage obligations. Equity securities include common and preferred stocks.
Debt securities which the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity and are carried at amortized
cost. Debt and equity securities which are held with the objective of trading to
generate profits on short-term differences in price are carried at fair value,
with changes in fair value reflected in the results of operations. At December
31, 1995, no securities were classified as trading. All other debt and equity
securities not classified as either held-to-maturity or trading are classified
as available-for-sale and are carried at fair value. Available-for-sale
securities may be sold in response to changes in interest rates and liquidity
needs. Unrealized holding gains and losses related to available-for-sale
investments, net of deferred federal income taxes, are reflected as a separate
component of shareholders' equity.
Fair values for debt and equity securities are based on quoted market
prices or dealer quotations. Where a quoted market price is not available, fair
value is measured utilizing quoted market prices for similar securities or by
using discounted cash flow models.
Purchases and sales of debt and equity securities are recorded on the trade
date. Realized gains and losses for securities are included in earnings and are
derived using the specific identification method for determining the cost of
securities sold. Dividend and interest income are recognized when earned.
A decline in market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a charge to
earnings and the establishment of a new cost basis for the security.
F-7
<PAGE> 10
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The future investment income from mortgage-backed securities and
collateralized mortgage obligations may be affected by the timing of principal
payments and the yields on reinvestment alternatives available at the time of
such payments. The cost for mortgage-backed securities and collateralized
mortgage obligations is adjusted for unamortized premiums and discounts, which
are amortized using the interest method over the estimated remaining term of the
securities, adjusted for anticipated prepayments. To the extent the estimated
lives of mortgage-backed securities and collateralized mortgage obligations
change as a result of changes in prepayment rates, the accumulated amortization
of premiums and accretion of discounts is adjusted retrospectively with a charge
or credit to current operations.
Mortgage loans and policy loans are carried at unpaid principal balances
less valuation allowances. The accrual of interest on mortgage loans is
discontinued when management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that collection of interest is doubtful. The Company provides valuation
allowances for impairments of mortgage loans on real estate based on a review by
management. Investment real estate is carried at the lower of cost or fair
value, net of estimated selling costs. Temporary cash investments are carried at
amortized cost, which approximates market value.
(c) Policy Benefit Reserves
Insurance policy benefit reserves represent liabilities for future
insurance policy benefits. Reserves for limited payment and traditional life
insurance contracts are computed using the net level premium method on the basis
of assumed investment yield, mortality, morbidity, persistency and expenses,
including a margin for adverse deviation, which generally vary by plan, year of
issue and policy duration. Reserve interest rates are 7.00%. Investment yield,
which is based on the Company's experience, averages approximately 7.00%.
Mortality, morbidity and withdrawal rate assumptions are based on the experience
of the Company and are periodically reviewed against both industry standards and
experience. These assumptions may be revised if it is determined that future
experience will differ substantially from that previously assumed.
In determining benefit reserves, the Company carries on a continuing review
of its overall position, its reserving techniques and reinsurance activities.
Since the reserves are based on estimates, the ultimate liability may be more or
less than such reserves. The effects of changes in such estimated reserves are
included in the results of operations in the period in which the estimates are
changed.
(d) Revenue Recognition -- Insurance
Life insurance premiums are recorded as premium revenue when earned.
Unearned premiums on life policies are calculated on a pro rata basis. Related
policy benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the contracts.
Policy and contract claims are determined on either a case or an aggregate
basis, as appropriate. Estimates are made for claims incurred but not reported
based on prior experience modified for current trends. Claim estimates are
continually revised as more information becomes available, and changes in
estimates are reflected in current operating results.
(e) Deferred Policy Acquisition Costs
Deferred policy acquisition costs represent the unamortized costs of
issuing new life insurance policies. These costs, all of which vary with and are
primarily related to the production of new business, consist principally of
commissions, certain underwriting and agency expenses and the cost of issuing
policies. Deferred acquisition costs for traditional life business are amortized
over the expected premium-paying periods of related policies, in proportion to
the ratio of the annual premium revenue to the total anticipated premium
revenue. Deferred policy acquisition costs are periodically reviewed for
recoverability. Deferred policy acquisition costs would be written off as a
charge to expense to the extent it is determined that future policy premiums and
investment income or gross profits would not be adequate to cover related losses
and expenses.
F-8
<PAGE> 11
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Value of Business Acquired
The value of business acquired represents the present value of the future
profits of purchased insurance in-force at the date of acquisitions. The asset
is actuarially-determined using the same assumptions that were used for
computing the related policy benefit reserves. The value of business acquired is
determined using an average interest rate of approximately 7.00% for the
business acquired. This asset is being amortized over the estimated life of the
insurance in-force at the date of acquisition in proportion to the expected
future premium cash flows of the business acquired. Periodically, actual and
assumed experience are compared to determine if any adjustment to the value of
business acquired is necessary. When a policy lapses or it is surrendered, the
remaining unamortized cost is written off. In the event of actual future lapses
or early withdrawals in excess of those assumed, deferred acquisition costs and
the value of business acquired may not be recoverable.
(g) Funeral Merchandise Inventory
Funeral merchandise inventory is valued at the lower of cost or market,
determined primarily on a specific identification basis, and net realizable
value.
(h) Property and Equipment
Property and equipment is recorded initially at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................... 10 to 40 years
Automobiles................................................... 5 years
Furniture, fixtures and equipment............................. 5 to 10 years
Computer hardware and software................................ 5 years
Leasehold improvements........................................ 31.5 years
</TABLE>
(i) Prearranged Funeral Trust Deposits
Prearranged funeral trust deposits at December 31, 1995, consist of amounts
deposited in accordance with state trusting laws with various financial
institutions together with accrued earnings. The Company will receive the
prearranged funeral trust amounts when the funeral services are performed. At
December 31, 1995, total prearranged funeral trust assets were approximately
equal to market value.
(j) Prearranged Funeral Services
Prearranged funeral services provide for future funeral services generally
determined by prices prevailing at the time the contract is signed. The payments
made under the contract are either placed in trust or are used to pay the
premiums of life insurance policies under which the Company is designated as
beneficiary.
Trust fund principal amounts and insurance contract amounts, together with
trust fund investment earnings retained in trust and annual insurance benefits,
are deferred until the service is performed. The Company estimates that trust
fund investment earnings and annual insurance benefits exceed the increase in
cost over time of providing the related services. Upon performance of the
specific funeral service, the Company recognizes the trust fund principal amount
or insurance contract amount together with the accumulated trust earnings and
annual insurance benefits as funeral revenues. Costs relating to the sale of
prearranged funeral services are expensed in the period incurred.
(k) Cemetery Operations
Pre-need sales of cemetery interment rights and other related products and
services are recorded as revenue when customer contracts are signed with
concurrent recognition of related costs. Allowances for
F-9
<PAGE> 12
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
customer cancellations and refunds are provided at the date of sale based on
management's estimate of expected cancellations. Actual cancellation rates in
the future may result in a change in management's estimate.
A portion of the proceeds from cemetery sales is required by Louisiana
state law to be paid into perpetual or endowment care trust funds. Cemetery
revenue is recorded net of the amount to be deposited to perpetual or endowment
care trust funds. Earnings of perpetual or endowment care trust funds are used
to defray the maintenance costs of cemeteries. Additionally, as permitted under
Louisiana state law, a portion of the proceeds from the sale of pre-need
merchandise and services is either paid into trust funds or used to purchase the
merchandise specified under the sales contract.
(l) Goodwill
Goodwill, which represents the remaining unamortized amount paid for
funeral and cemetery operations acquired, is equivalent to the excess of the
purchase price over the fair value of identifiable net assets acquired, as
determined by management. Amortization is provided on a straight-line basis over
40 years. The Company monitors the recoverability of goodwill, as well as other
long-lived assets, based on projections of future undiscounted operating income
and cash flows of acquired businesses.
(m) Income Taxes
The Company files a consolidated federal income tax return which includes
all of its subsidiaries except for Woodlawn Memorial Park and New Orleans
Limousine. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are established
when necessary to reduce the deferred tax assets to the amounts expected to be
realized.
(n) Reinsurance
Reinsurance receivables and prepaid reinsurance premiums, which are
insignificant, are accounted for and reported separately as assets, net of
valuation allowance.
(o) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
The most significant estimates susceptible to significant change are those
used in determining the liability for policy benefit reserves. Although
considerable variability is inherent in these estimates, management believes
that the liability is adequate. The estimates are continually reviewed and
adjusted as necessary. Such adjustments are reflected in current operations.
(p) Accounting Standards Issued But Not Yet Adopted
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (FAS 121). FAS
121 provides guidance for the recognition of impairment losses related to
long-lived assets and certain identifiable intangible assets. The Statement,
which is effective for fiscal years
F-10
<PAGE> 13
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
beginning after December 15, 1995, requires that assets be reviewed for
impairment when events or changes in circumstances indicate the carrying amount
of an asset may not be recoverable. The Company has determined that adoption of
the provisions of FAS 121 will have no material effect on its financial
condition and results of operations.
(q) Statement of Cash Flows
For purposes of the consolidated statement of cash flows, the Company
considers all temporary cash investments with original maturities of three
months or less to be cash and cash equivalents.
(2) INVESTMENTS
The amortized cost, gross unrealized gains, gross unrealized losses and
fair values of the Company's debt and equity securities, by type, as of December
31, 1995, are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Available-for-sale
Debt securities:
U.S. Treasury and agency
obligations...................... $ 588,166 $ 72,066 $ -- $ 660,232
States and political
subdivisions..................... 4,586,993 197,586 -- 4,784,579
Corporate securities............... 1,184,446 11,969 -- 1,196,415
Collateralized mortgage
obligations...................... 77,877,330 2,912,169 (180,853) 80,608,646
Mortgage-backed securities......... 7,088,772 620,000 (811) 7,707,961
----------- --------- --------- ----------
91,325,707 3,813,790 (181,664) 94,957,833
----------- --------- --------- ----------
Equity securities:
Common stock.......................... 1,517,113 976,373 (25,442) 2,468,044
Preferred stock....................... 2,174,505 130,902 (182,794) 2,122,613
----------- --------- --------- ----------
3,691,618 1,107,275 (208,236) 4,590,657
----------- --------- --------- ----------
Total available-for-sale................ $95,017,325 4,921,065 (389,900) 99,548,490
=========== ========= ========= ==========
Held-to-maturity
Debt securities:
States and political
subdivisions..................... 15,392,318 713,414 (3,148) 16,102,584
Collateralized mortgage
obligations...................... 34,110,512 1,735,223 (23,428) 35,822,307
Mortgage-backed securities......... 1,883,791 294,022 -- 2,177,813
----------- --------- --------- ----------
Total held-to-maturity.................. $51,386,621 $2,742,659 $ (26,576) $54,102,704
=========== ========= ========= ==========
</TABLE>
F-11
<PAGE> 14
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and fair value of debt securities at December 31, 1995,
by expected maturity are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE TOTAL
------------------------- ------------------------- --------------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Due in 1 year or less........ $ -- $ -- $ 410,604 $ 430,780 $ 410,604 $ 430,780
Due after 1 year through 5
years...................... 313,475 323,086 1,043,479 1,075,747 1,356,954 1,398,833
Due after 5 years through 10
years...................... 1,886,410 2,004,582 1,577,909 1,655,525 3,464,319 3,660,107
Due after 10 years........... 13,192,433 13,774,916 3,327,613 3,479,174 16,520,046 17,254,090
Mortgage-backed securities
and collateralized mortgage
obligations................ 35,994,303 38,000,120 84,966,102 88,316,607 120,960,405 126,316,727
----------- ----------- ----------- ----------- ------------ ------------
Total debt securities........ $51,386,621 $54,102,704 $91,325,707 $94,957,833 $142,712,328 $149,060,537
=========== =========== =========== =========== ============ ============
</TABLE>
Net investment income consisted of the following for the year ended
December 31, 1995:
<TABLE>
<S> <C>
Debt securities:
U.S. Treasury and agency obligations.................................. $ 233,922
States and political subdivisions..................................... 1,180,416
Corporate securities.................................................. 126,797
Mortgage-backed securities............................................ 945,694
Collateralized mortgage obligations................................... 8,231,000
Other................................................................. 175,559
-----------
Total debt securities......................................... 10,893,388
Equity securities..................................................... 486,213
Mortgage loans........................................................ 408,257
Policy loans.......................................................... 193,562
Real estate........................................................... 9,712
Temporary cash investments............................................ 161,883
-----------
Gross investment income....................................... 12,153,015
Less investment expenses................................................ (734,976)
-----------
Net investment income......................................... $11,418,039
==========
</TABLE>
Proceeds, gross realized gains and gross realized losses from the sale of
available-for-sale debt securities for the year ended December 31, 1995, are as
follows:
<TABLE>
<S> <C>
Proceeds from sales.................................................... $1,046,875
=========
Gross realized gains................................................... 97,446
Gross realized losses.................................................. (619)
----------
Net............................................................ $ 96,827
=========
</TABLE>
F-12
<PAGE> 15
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of net pretax realized investment gains for the year ended
December 31, 1995 is as follows:
Net gains on sales of investments:
<TABLE>
<S> <C>
Net gains on sales of investments:
Debt securities:
States and political subdivisions................................... $ 28,985
Corporate securities................................................ 67,842
----------
Total debt securities.......................................... 96,827
Equity securities...................................................... 1,454,296
Real estate............................................................ 5,587
----------
Net pretax realized investment gains................................... $1,556,710
=========
</TABLE>
The Company attempts to manage prepayment and extension risks by purchasing
planned amortization class (PAC) and other collateralized mortgage obligation
tranches that provide some cash flow stability. PAC's are subject to less
prepayment and extension risk than other collateralized mortgage obligation
tranches because early repayments of the underlying mortgages are applied first
to other support tranches to preserve the PAC's originally scheduled cash flows
as much as possible, and cash flows applicable to other support tranches are
applied first to the PAC if the PAC's actual cash flows are received later than
originally anticipated. The Target Amortization Class (TAC) tranche has
protection similar to PACs for higher than expected prepayment levels
(decreasing interest rate environments), but has minimal protection when
payments fall below a predefined speed. The sequential tranche is not supported
by other tranches, and for this reason, its associated prepayment risk and
extension risk can vary as interest rates fluctuate. Support tranches generally
exhibit greater cash flow instability because they absorb cash flow variations
for TAC and PAC tranches. As of December 31, 1995, the Company's amortized cost
of its collateralized mortgage obligation holdings in PACs and TACs,
sequentials, and other support tranches was $49,808,320, $28,727,879, and
$33,451,643, respectively.
During 1995, the Company's available-for-sale debt and equity securities
appreciated $13,930,499 and $404,030, respectively. The held-to-maturity debt
securities appreciated $7,215,030 in 1995.
The Company's investment in mortgage loans consists primarily of loans
secured by single family residential real estate located in Louisiana. The
Company has recorded a general valuation allowance of $100,000 at December 31,
1995 to provide for mortgage loan credit losses. No mortgage loans were on
nonaccrual, nor were any mortgage loans considered impaired, as of and for the
year ended December 31, 1995.
Investments with an amortized cost of $377,307 at December 31, 1995 were on
deposit with various regulatory agencies as required by law.
(3) DEFERRED POLICY ACQUISITION COSTS
A summary of changes in unamortized deferred policy acquisition costs for
the year ended December 31, 1995, is as follows:
<TABLE>
<S> <C>
Beginning balance, January 1, 1995:..................................... $37,454,475
-----------
Deferred during 1995:
Commissions........................................................ 7,080,480
Other expenses..................................................... 1,499,678
-----------
Total deferred................................................ 8,580,158
Amortized during 1995................................................. (6,325,489)
-----------
Ending balance, December 31, 1995....................................... $39,709,144
===========
</TABLE>
F-13
<PAGE> 16
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) VALUE OF BUSINESS ACQUIRED
A summary of changes in costs assigned to the value of business acquired is
as follows:
<TABLE>
<S> <C>
Beginning balance, January 1, 1995:..................................... $ 9,213,800
Additions from 1995 acquisition....................................... 3,905,000
Amortized during 1995, net of interest earned......................... (1,103,849)
-----------
Ending balance, December 31, 1995....................................... $12,014,951
===========
</TABLE>
The Company accounts for these costs in a manner consistent with deferred
policy acquisition costs. The Company's interest rate used to amortize these
costs is 7.00% for the asset. Periodically, the Company performs the "net
liability" premium deficiency test to analyze potential impairments.
Under current assumptions, amortization of these costs for the next five
years is as follows:
<TABLE>
<S> <C>
1996............................................. $1,184,558
1997............................................. 1,166,197
1998............................................. 1,151,614
1999............................................. 1,140,822
2000............................................. 1,133,844
===========
</TABLE>
(5) REINSURANCE
In the normal course of business, the Company, through its life insurance
subsidiary, cedes reinsurance with primarily one company. The Company also cedes
a portion of its business through a number of minor reinsurance agreements as a
result of acquired insurance in-force. Life insurance in-force ceded to
reinsurers and the respective reserve credits taken by the Company for amounts
to reinsurers as of December 31, 1995 is $10,242,197 and $85,524, respectively.
The Company's maximum retention on one life (in the case of individual life
insurance) is $17,000. Due to the low average face amount of insurance of the
Company's insurance in-force, the Company's need to diversify its risk through
reinsurance is minimal. In the event a reinsurer is unable to meet its
obligations, the Company would reassume the liability. The likelihood of a
material reinsurance liability being reassumed by the Company is considered to
be remote. The amounts paid or deemed to have been paid in connection with ceded
reinsurance contracts are recorded as reinsurance receivables. The Company does
not assume insurance from other insurers except in the acquisition of other
insurance companies.
During 1995, the Company acquired through a reinsurance assumption
agreement, the business of Transworld Life Insurance Company for an adjusted
purchase price of $3,905,000. In connection with the agreement, the Company
assumed policy benefit reserves of $5,705,000.
(6) REGULATORY REQUIREMENTS AND RESTRICTIONS
The Company is required to report its results of operations and financial
position to state insurance regulatory authorities in conformity with statutory
accounting practices prescribed or permitted by the Louisiana Department of
Insurance, which differ in certain respects from generally accepted accounting
principles. Statutory income for the year ended 1995 and statutory capital at
December 31, 1995 of the Company's life insurance subsidiary were $4,234,898 and
$18,110,655, respectively.
The primary items reconciling statutory basis shareholders' equity to
generally accepted accounting principles (GAAP) basis shareholders' equity
include deferred policy acquisition costs and value of business acquired, net of
amortization, which are specifically disallowed under the statutory basis of
accounting; differences between statutory basis policy benefit reserves and
those established under GAAP; deferred federal
F-14
<PAGE> 17
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income taxes, which are not permitted under statutory accounting practices; the
asset valuation reserve and interest maintenance reserve, which are statutory
basis only investment reserves; non-admitted assets which are disallowed for
statutory purposes; preferred stocks, which are carried at market under GAAP and
cost under the statutory basis of accounting; and bonds available-for-sale which
are carried at market for GAAP and amortized cost for statutory purposes.
The Company is subject to various regulatory restrictions which limit the
maximum amount of annual dividends or other distributions, including loans or
cash advances, available to the Company without prior approval of insurance
regulatory authorities. In accordance with state insurance regulation, the
Company can pay dividends to shareholders limited to the lesser of net income or
10% of statutory capital reported in the preceding year.
The National Association of Insurance Commissioners' (NAIC) Model Rule Risk
Based Capital (RBC) calculation serves as a benchmark for the regulation of life
insurance companies by state regulators. RBC provides for surplus formulas
similar to target surplus formulas used by commercial rating agencies. The
formulas specify various weighting factors that are applied to financial
balances or various levels of activity based on the perceived degree of risk,
and are set forth in the RBC requirements. Such formulas focus on four general
types of risk: 1) asset or default risk, 2) insurance or underwriting risk, 3)
interest rate risk with respect to the company's liabilities and obligations
(asset/liability matching), and 4) all other business risks (management,
regulatory action, and contingencies). The amount determined under such formulas
is called the authorized control level RBC (ACLC). RBC requirements establish a
framework for linking various levels of regulatory corrective action to the
relationship of the life insurance company's Total Adjusted Capital to the
calculated ACLC.
The Company has calculated its RBC in accordance with the NAIC Model Rule
and the RBC rules as adopted by its state of domicile, Louisiana. The RBC, as
calculated by the Company, exceeded all levels requiring company or regulatory
action.
(7) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 consist of the following:
<TABLE>
<S> <C>
Buildings and improvements............................................. $ 11,667,557
Land................................................................... 7,150,527
Automobiles............................................................ 2,238,939
Furniture, fixtures and equipment...................................... 4,191,992
Computer hardware and software......................................... 901,259
Cemetery developed land and lawn crypts................................ 442,436
Cemetery undeveloped land.............................................. 352,147
Cemetery mausoleums.................................................... 472,439
Leasehold improvements................................................. 1,318,586
------------
28,735,882
Less accumulated depreciation and amortization......................... (10,429,687)
------------
$ 18,306,195
============
</TABLE>
(8) PROFIT-SHARING PLAN
The Company has a noncontributory profit-sharing plan which covers
substantially all employees. Under the plan agreement, the Company is obligated
to make annual contributions not less than two percent of net income for the
year and may amend or terminate the plan at its discretion. The Company's
contribution expense was $533,287 in 1995.
F-15
<PAGE> 18
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) LONG-TERM DEBT
Long-term debt at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
Note payable to bank, due December 31, 2003, interest at Chase Manhattan
Bank prime (8.75% at December 31, 1995)............................... $ 7,981,610
Note payable to bank, due July 1, 2005, interest at Chase Manhattan Bank
prime (8.75% at December 31, 1995).................................... 4,310,208
Note payable to bank, due June 15, 1996, interest at Chase Manhattan
Bank prime (8.75% at December 31, 1995)............................... 1,575,156
Note payable to bank, due October 15, 1996, interest at Chase Manhattan
Bank prime (8.75% at December 31, 1995)............................... 961,315
Note payable to bank, due May 1, 2000, interest at 9.50%................ 375,000
First mortgage note payable to individual, due June 15, 1998, interest
at 3.00%.............................................................. 55,753
-----------
15,259,042
Less current portion.................................................... (2,791,837)
-----------
$12,467,205
===========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996.................................................................... $ 2,791,837
1997.................................................................... 2,791,837
1998.................................................................... 2,700,753
1999.................................................................... 2,617,891
2000.................................................................... 2,413,255
Thereafter.............................................................. 1,943,469
-----------
$15,259,042
==========
</TABLE>
(10) INCOME TAXES
Income tax provision from continuing operations for federal and state as of
December 31, 1995 consisted of:
<TABLE>
<S> <C>
Current taxes............................................................ $1,531,655
Deferred taxes........................................................... 279,256
----------
$1,810,911
=========
</TABLE>
Total income tax expense for the year ended December 31, 1995, differs from
the amount computed by applying the U.S. federal income tax rate of 34 percent
to income before tax as follows:
<TABLE>
<S> <C>
Computed "expected" tax expenses......................................... $2,280,726
Increase in cash surrender value of life insurance policies.............. (204,221)
Amortization of goodwill and value of business acquired.................. 358,588
Small life insurance company deduction................................... (525,713)
Tax-exempt interest...................................................... (113,787)
Other, net............................................................... 15,318
----------
Total.......................................................... $1,810,911
=========
</TABLE>
F-16
<PAGE> 19
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1995, are
presented as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Miscellaneous accrued expense......................................... $ 931,549
Value of business acquired............................................ 520,500
Section 481 adjustment -- deferred and uncollected premiums........... 480,170
-----------
Gross deferred tax assets............................................. 1,932,219
-----------
Deferred tax liabilities:
Deferred policy acquisition costs..................................... 10,963,110
Unrealized gain on available-for-sale securities...................... 1,585,098
Deferred revenue -- cemeteries........................................ 702,168
Policy reserve differences............................................ 7,768,000
Deferred and uncollected premiums..................................... 61,244
Other................................................................. 49,020
-----------
Gross deferred tax liabilities........................................ 21,128,640
-----------
Net deferred tax liability............................................ $19,196,421
===========
</TABLE>
The Company has determined a valuation allowance is not necessary as of
December 31, 1995, based on its analysis of future deductible amounts. At
December 31, 1995, the Company had income taxes payable of $354,540.
(11) OTHER OPERATING EXPENSES
The significant components of other operating expenses for the year ended
December 31, 1995 consisted of the following:
<TABLE>
<S> <C>
Funeral merchandise inventory cost...................................... $ 2,470,130
Marketing............................................................... 1,932,814
Policyholder dividends.................................................. 1,846,701
Interest on long-term debt.............................................. 1,578,651
Depreciation and amortization........................................... 1,283,735
Professional fees....................................................... 1,270,314
Office supplies and expenses............................................ 1,144,611
Litigation costs........................................................ 700,000
Cemetery cost of sales.................................................. 472,547
Other................................................................... 3,712,714
-----------
$16,412,217
==========
</TABLE>
(12) CONTINGENCIES
The Company, in the normal course of business, is a defendant in various
lawsuits. During 1995, the Company settled a lawsuit from a former employee for
$700,000. In the opinion of management, the effects, if any, of any remaining
lawsuits are not expected to be material to the Company's financial position or
results of operations.
F-17
<PAGE> 20
OURSO INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) OPERATING LEASES
The Company is obligated under twenty-four district office leases related
to its insurance operations and three ground leases related to one of its
funeral home locations. The Company is responsible for any ad valorem taxes,
repairs and maintenance, and other expenses related to the property. Future
minimum lease payments are as follows:
<TABLE>
<S> <C>
1996............................................. $ 211,797
1997............................................. 183,115
1998............................................. 122,238
1999............................................. 50,060
2000............................................. 43,000
Thereafter....................................... 712,500
----------
$1,322,710
==========
</TABLE>
Total rent expense for the year ended December 31, 1995 was $263,737.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following information relates to estimated fair values of the Company's
financial instruments as of December 31, 1995.
The fair values for debt and equity securities are disclosed in note 3.
For cash and temporary cash investments, trade accounts receivable, accrued
investment income, prearranged funeral trust deposits, cemetery contract
receivables, cash surrender value of life insurance policies, other assets,
other policyholder funds, and accrued expenses and other liabilities, the
carrying amounts approximate fair value because of the short maturity of such
financial instruments.
Because the Company's mortgage and policy loans carry an interest rate that
approximates market, the carrying value approximates the estimated fair value.
For long-term debt, the carrying value approximates the estimated fair value at
December 31, 1995 because the long-term debt bears a floating interest rate.
(15) SEGMENTED INFORMATION
The following information corresponds to the Company's major industry
segments as of December 31, 1995:
<TABLE>
<CAPTION>
FUNERAL CEMETERY INSURANCE CONSOLIDATED
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue.......................... $ 13,037,266 3,399,910 58,283,255 74,720,431
Depreciation and amortization.... 1,180,731 83,118 7,449,224 8,713,073
Net income before taxes.......... 189,963 50,538 6,467,516 6,708,017
Total assets..................... 23,894,983 4,256,317 236,150,083 264,301,383
Capital expenditures............. 1,905,049 134,239 7,577 2,046,865
</TABLE>
(16) SUBSEQUENT EVENT
On March 26, 1996, the Company's shareholders sold all outstanding shares
of capital stock to a corporation owned by an unrelated third party.
F-18
<PAGE> 21
ITEM 7.(B)
Pro Forma Financial Information:
Appropriate adjustments have been made to reflect the preliminary purchase
price allocations used in recording this acquisition. This pro-forma information
does not purport to be indicative of the results of operations that would have
resulted had the acquisition been in effect for the entire year, and is not
intended to be a projection of future results or trends.
The unaudited pro-forma consolidated financial information has been
expressed in United States dollars and in accordance with accounting principles
generally accepted in Canada. The unaudited pro-forma consolidated financial
information should be read in conjunction with the notes thereto.
F-19
<PAGE> 22
The following unaudited pro-forma consolidated balance sheet as of December
31, 1995 has been prepared assuming the acquisition of the Assets took place on
December 31, 1995.
THE LOEWEN GROUP INC.
UNAUDITED PRO-FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
OURSO PRO-FORMA PRO-FORMA
HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and term deposits.................. $ 39,454 $ 1,810 $ (1,673)A $ 39,591
Receivables, net of allowances.......... 115,953 3,362 (1,567)A 117,748
Inventories............................. 27,489 1,276 -- 28,765
Prepaid expenses........................ 8,185 -- -- 8,185
---------- -------- -------- ----------
191,081 6,448 (3,240) 194,289
Prearranged funeral services.............. 245,854 769 -- 246,623
Long-term receivables, net of
allowances.............................. 167,367 1,749 -- 169,116
Investments............................... 86,815 -- -- 86,815
Insurance invested assets................. 97,024 175,131 7,512B 279,667
Cemetery property, at cost................ 369,022 617 17,854B 387,493
Property and equipment.................... 551,965 17,039 11,108B 580,112
Names and reputations..................... 424,944 13,010 27,339B 465,293
Deferred income taxes..................... 61,959 (9,609) 9,120B 61,470
Other assets.............................. 66,949 4,236 (3,616)A 67,569
---------- -------- -------- ----------
2,262,980 209,390 66,077 2,538,447
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current indebtedness.................... 38,546 -- -- 38,546
Accrued settlements..................... 53,000 -- -- 53,000
Accounts payable and accrued
liabilities.......................... 80,058 2,750 (1,006)A 81,802
Long-term debt, current portion......... 69,671 2,792 (2,792)A 69,671
---------- -------- -------- ----------
241,275 5,542 (3,798) 243,019
Long-term debt............................ 864,838 12,467 (11,936)A
144,921B 1,010,290
Other liabilities......................... 136,433 4,641 1,068B 142,142
Insurance policy liabilities.............. 84,898 113,231 8,562B 206,691
Deferred prearranged funeral service
revenue................................. 245,854 769 -- 246,623
Preferred securities of subsidiary........ 75,000 -- -- 75,000
Shareholders' equity
Share capital........................... 490,055 943 (943)B 490,055
Share capital issuable under legal
settlements.......................... 72,000 -- -- 72,000
Retained earnings....................... 36,439 71,797 (71,797)B 36,439
Foreign exchange adjustment............. 16,188 -- -- 16,188
---------- -------- -------- ----------
614,682 72,740 (72,740) 614,682
---------- -------- -------- ----------
$2,262,980 $ 209,390 $ 66,077 $2,538,447
========== ======== ======== ==========
</TABLE>
See accompanying notes to unaudited pro-forma consolidated balance sheet.
F-20
<PAGE> 23
THE LOEWEN GROUP INC.
NOTES TO UNAUDITED PRO-FORMA BALANCE SHEET
DECEMBER 31, 1995
(A) To eliminate net assets retained by S.I.
(B) To record purchase price adjustments resulting from the Company's basis in
the acquired assets and long-term debt paid off at acquisition.
F-21
<PAGE> 24
The following unaudited pro-forma consolidated statement of operations
reflects the consolidated results of the Company's operations assuming the
acquisition of the Assets took place on January 1, 1995.
THE LOEWEN GROUP INC.
UNAUDITED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
OURSO PRO-FORMA PRO-FORMA
HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue...................................... $ 599,939 $ 73,400 $ 1,460A $ 674,799
Costs and expenses........................... 373,131 67,148 (701)A
591 B
(1,638)C 438,531
--------- ------- ------- ---------
226,808 6,252 3,208 236,268
General and administrative................... 67,652 -- -- 67,652
Depreciation and amortization................ 40,103 2,388 (635)B 41,856
--------- ------- ------- ---------
Earnings from operations..................... 119,053 3,864 3,843 126,760
Interest on long-term debt................... 50,913 1,579 (1,579)D
10,486 E 61,399
Litigation related finance costs............. 19,914 -- -- 19,914
Legal settlements............................ 165,000 -- -- 165,000
--------- ------- ------- ---------
Earnings (loss) before dividends on preferred
securities of subsidiary and income
taxes...................................... (116,774) 2,285 (5,064) (119,553)
Dividends on preferred securities of
subsidiary................................. 7,088 -- -- 7,088
--------- ------- ------- ---------
Earnings (loss) before income taxes.......... (123,862) 2,285 (5,064) (126,641)
Income taxes................................. (47,178) (109) (1,825)F (49,112)
--------- ------- ------- ---------
Net earnings (loss) for the year............. $ (76,684) $ 2,394 $(3,239) $ (77,529)
--------- ------- ------- ---------
Earnings per share:
Basic earnings (loss) per share.............. $ (1.69) (1.71)
Fully diluted earnings (loss) per share...... $ (1.69) (1.71)
Weighted average number of shares used for
the computation of basic and fully diluted
earnings per share (thousands of shares):
Basic...................................... 45,291 45,291
Fully diluted.............................. 45,291 45,291
</TABLE>
See accompanying notes to unaudited pro-forma consolidated statement of
operations.
F-22
<PAGE> 25
THE LOEWEN GROUP INC.
NOTES TO UNAUDITED PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(A) To adjust the amortization of realized and unrealized gains and losses on
insurance invested assets and the change in insurance policy liabilities as
if the acquisition occurred January 1, 1995.
(B) To adjust cost of sales and depreciation and amortization expense resulting
from the Company's cost basis in the acquired businesses.
(C) To eliminate executive compensation and benefits for an executive not
employed after the acquisition and legal costs that would not have been
incurred by the Company.
(D) To eliminate historical interest expense on debt which was repaid upon
acquisition.
(E) For purposes of the unaudited pro-forma statement of operations and
pro-forma adjustments, the Company has assumed the acquisition was financed
through $80 million of borrowings from the 1996 issuance of senior
guaranteed notes ("the 1996 notes") and the remainder from the Company's
multi-currency revolving term credit facility.
(F) To record the income tax effect of pro-forma adjustments based on the
Company's statutory rate.
F-23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 7, 1996
THE LOEWEN GROUP INC.
/s/ DWIGHT K. HAWES
--------------------------------------
Name: Dwight K. Hawes
Title: Vice-President, Finance
F-24
<PAGE> 27
ITEM 7.
(c) Exhibits
23.1 Consent of KPMG Peat Marwick LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Boards of Directors
The Loewen Group Inc.
Loewen Group International, Inc.
We consent to the incorporation by reference in the registration statements
on Forms S-8 (Nos. 33-95496, 33-79602, 33-79604, 33-79606, 33-72808, 33-42892,
and 333-07033) and the registration statement on Form S-3 (No. 333-07175) of The
Loewen Group Inc. and the registration statement on Form S-4 (Reg. Nos.
333-03135 and 333-03135-01) of Loewen Group International, Inc. and The Loewen
Group Inc. of our report, dated May 31, 1996, with respect to the consolidated
financial statements of Ourso Investment Corporation and subsidiaries as of
December 31, 1995, and for the year then ended, which report appears in this
Current Report on Form 8-K of The Loewen Group Inc.
/s/ KPMG PEAT MARWICK LLP
New Orleans, Louisiana
July 3, 1996
