<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 12, 1995
SERVICE CORPORATION INTERNATIONAL
--------------------------------------------------
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
TEXAS 1-6402-1 74-1488375
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(State or other jurisdiction of (Commission file (I. R. S. employer identification
incorporation or organization) number) number)
1929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
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(Address of principal executive offices) (Zip code)
</TABLE>
(713) 522-5141
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
(Note: The information in this Form 8-K repeats the information
presented under "Unaudited Pro Forma Combined Financial Information" in "Item
7. Financial Statements and Exhibits" of the Company's Form 8-K dated September
5, 1995, except that the information in this Form 8-K includes a revised
caption appearing on the Unaudited Pro Forma Combined Balance Sheet on page 5
hereof).
Unaudited Pro Forma Combined Financial Information
In July 1995, Service Corporation International (the "Company") entered
into an agreement with Lyonnaise des Eaux S.A. ("LDE"), a French company, to
purchase LDE's funeral service business. LDE's funeral service business is
comprised of an approximate 51% ownership interest in Omnium de Gestion et de
Financement S.A. ("OGF") which, in turn, owns approximately 65% of Pompes
Funebres Generales S.A. ("PFG") and, together with OGF, ("OGF/PFG"). On August
25, 1995, the Company acquired the approximately 51% interest in OGF for US
$233,358,000. The Company is making public tender offers for the remaining
shares of OGF and PFG with the intent to acquire 100% of the outstanding shares
of both companies. On August 30, 1995, the Company owned shares representing
70.0% of OGF and 75.3% of PFG. OGF/PFG is the largest funeral service
organization in Europe. OGF/PFG operates over 950 funeral service locations
that performed over 154,000 funerals throughout France in 1994. OGF/PFG also
operates funeral locations in Belgium, the Czech Republic, Italy, Singapore and
Switzerland that performed approximately 14,000 funerals in 1994. Included in
OGF/PFG operations is a coffin manufacturing business that sells the large
majority of its product to OGF/PFG funeral operations and a funeral insurance
business whose primary activity involves insurance policies sold in connection
with OGF/PFG's prearranged funeral business. The Company intends that OGF/PFG
will continue to operate their funeral service and related businesses. The
total purchase price for OGF and the portion of PFG not owned by OGF is
expected to be approximately US $607,206,000, based on a June 30, 1995
translation rate of US $.2062 to one French franc, consisting of US
$589,570,000 of cash, the assumption of US $12,004,000 of OGF/PFG debt and
associated expenses of US $5,632,000 (based on an August 25, 1995 translation
rate of US$.1969 to one French franc, the total purchase price would be
US$579,820,000. The net cost to the Company, taking into account the estimated
available excess cash balances of OGF/PFG, is expected to be approximately US
$424,026,000. In August 1995, the Company entered a 364-day revolving credit
agreement ("French Revolving Credit Agreement") with Societe Generale,
Southwest Agency, Credit Lyonnais Cayman Island Branch and Banque Nationale de
Paris, Houston Agency. The French Revolving Credit Agreement allows for
borrowings up to US $600,000,000 (which, at the option of the Company, can be
borrowed in French francs or US dollars) to provide short-term financing for
the purchase of OGF/PFG. The interest rate currently in effect is based on
PIBOR plus 25 basis points (5.98% at August 25, 1995).
In June 1995, the Company entered into an agreement to acquire
Gibraltar Mausoleum Corporation and four related Subchapter S Corporations
(collectively, "Gibraltar"). Gibraltar, a private funeral and cemetery company
based in Indianapolis, Indiana, owns and operates 23 funeral homes and 54
cemeteries. Subject to regulatory approval, the Company expects to complete the
Gibraltar transaction during the fourth quarter of 1995 for a purchase price of
approximately $268,895,000 consisting of 3,286,759 shares of Company common
stock (based on an average price of $35 per share on August 25, 1995),
$146,668,000 in cash, the assumption of $5,425,000 of Gibraltar debt and
associated expenses of $1,765,000. Such common stock of the Company is
registered with the Securities and Exchange Commission and will be issued under
the Company's existing shelf registration. The cash portion of the purchase
price will be borrowed under the Company's existing revolving credit facilities
(5.90% at August 25, 1995).
In July 1995, the Company entered into an agreement to acquire the
shares of Service Corporation International Canada ("SCIC") not already owned
by the Company. SCIC owns 74 funeral homes and three cemeteries in Canada. This
transaction will eliminate the approximate 31% minority ownership interest in
SCIC and will make SCIC a wholly owned subsidiary of the Company. This
transaction has been approved by the minority shareholders of SCIC and was
completed on September 5, 1995. The purchase price will be approximately US
$61,293,000 (based on a June 30, 1995 translation rate of US $.7287 to one
Canadian dollar) and will be financed through borrowings under the Company's
existing revolving credit facilities in Canadian dollars at an interest rate
based on a Canadian banker's acceptance rate plus 25 basis points (6.71% at
August 25, 1995).
2
<PAGE> 3
In the third quarter of 1994, the Company acquired the two largest
publicly traded funeral service providers in the United Kingdom, Great Southern
Group plc ("GSG") and Plantsbrook Group plc ("PG"). PG was an equity investee
of OGF before being purchased by the Company. GSG and PG owned a combined 534
funeral homes, 13 crematories and two cemeteries. The purchase price of
approximately US $508,000,000 was financed using a portion of the net proceeds
from the Company's December 1994 public offerings, consisting of common stock
(7,700,000 shares issued in December 1994 and 780,000 shares issued in January
1995 at a net price of $24.70 per share), $172,500,000 of preferred securities
of SCI Finance LLC (a wholly owned subsidiary of the Company) and $200,000,000
of 8.375% fixed rate notes due 2004, long-term fixed rate borrowings, other
revolving credit borrowings and debt assumed by the Company. Both GSG and PG
have been consolidated with the Company since September 1, 1994.
In addition to the acquisitions discussed above, during 1994 and the
six months ended June 30, 1995, the Company continued to acquire funeral and
cemetery operations in the United States, Australia, Canada and the United
Kingdom. During such period, the Company acquired 232 funeral homes and 52
cemeteries (the "1994 and 1995 Other Acquired Companies") in 120 separate
transactions for an aggregate purchase price of approximately US $515,000,000
in the form of combinations of cash, Company common stock, issued and assumed
debt, convertible debentures and retired loans receivable held by the Company's
finance subsidiary.
The following unaudited pro forma combined balance sheet as of June
30, 1995 has been prepared assuming the acquisitions by the Company of 100% of
the outstanding shares of OGF/PFG, Gibraltar and the minority interest of SCIC
took place on June 30, 1995. The unaudited pro forma combined statements of
income for the year ended December 31, 1994 and the six months ended June 30,
1995 have been prepared assuming the acquisitions by the Company of 100% of the
outstanding shares of OGF/PFG, Gibraltar, the minority interest of SCIC, GSG,
PG and the Other Acquired Companies took place at January 1, 1994. Such
acquisitions are being accounted for under the purchase method of accounting.
The historical revenues and expenses of GSG and PG and the Other Acquired
Companies represent amounts recorded by those businesses for the period that
they were not owned by the Company during the year ended December 31, 1994 and
the six months ended June 30, 1995, respectively. The unaudited pro forma
combined financial information may not be indicative of results that would
actually have been obtained if these transactions had occurred on the dates
indicated or which may be obtained in the future.
For purposes of this unaudited pro forma combined financial
information, it is assumed that the net proceeds of the Company's December
1994 public offerings were first applied toward the purchase price of GSG and
PG (US $508,000,000 less US $31,258,000 of GSG and PG debt assumed by the
Company) with the excess net proceeds (US $95,205,000) used to repay amounts
outstanding under the Company's revolving credit facilities and to retire
commercial paper. In addition, the unaudited pro forma combined financial
information assumes that the acquisition of OGF/PFG is to be financed with
borrowings under the French Revolving Credit Agreement.
3
<PAGE> 4
The historical financial statements of GSG and PG for the period not
owned by the Company in 1994 were prepared in UK pound sterling in accordance
with United Kingdom generally accepted accounting principles ("UK GAAP"). The
historical financial statements of OGF/PFG as of June 30, 1995 and for the year
ended December 31, 1994 and the six months ended June 30, 1995 were prepared in
French francs in accordance with French generally accepted accounting
practices ("F GAAP"). This information has been adjusted to present the
historical financial statements in accordance with United States generally
accepted accounting principles ("US GAAP") and translated into US dollars at
the June 30, 1995 exchange rate for the balance sheet (US $.2062 to one French
franc, US $.1969 at August 25, 1995) and at the average exchange rate for the
respective statement of income periods presented (US $.1802 and US $.1983 for
the year ended December 31, 1994 and six months ended June 30, 1995,
respectively). The Company has not completed all appraisals and evaluations
necessary to finalize OGF/PFG's or Gibraltar's purchase price allocation, and
accordingly, actual adjustments that reflect appraisals and other evaluations
of the purchased assets and assumed liabilities may differ from the pro forma
adjustments.
4
<PAGE> 5
Service Corporation International
Unaudited Pro Forma Combined Balance Sheet
June 30, 1995
(Thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------------------- -----------------------------
The Combined
Company OGF/PFG Gibraltar Adjustments Total
--------- --------- --------- ------------- -----------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 20,251 $ 203,800 $ 1,276 $(183,180) (F11) $ 42,147
Receivables, net of allowances 347,790 59,013 67,021 (215) (G2) 435,758
(37,851) (G3)
Inventories 72,192 46,240 16,207 (13,776) (G4) 120,863
Other 7,814 33,171 - - 40,985
---------- ---------- -------- --------- ----------
Total current assets 448,047 342,224 84,504 (235,022) 639,753
Investments - insurance subsidiary - 531,726 - - 531,726
Prearranged funeral contracts 1,537,085 - 3,878 82,350 (G2) 1,623,313
Long-term receivables 615,355 - - 44,137 (G1) 701,372
37,851 (G3)
4,029 (G5)
Cemetery property, at cost 812,198 - 17,214 13,776 (G4) 1,142,675
286,987 (G10)
12,500 (C1)
Property, plant and equipment, at cost (net) 909,857 222,545 31,778 103,932 (F4) 1,268,112
Deferred charges and other assets 233,258 49,661 9,629 25,521 (F5) 298,660
(19,409) (F7)
Goodwill - 16,910 10,579 (10,579) (G13) -
(16,910) (F6)
Names and reputations (net) 888,975 - - 37,626 (C1) 1,043,833
117,232 (F9)
---------- ---------- -------- --------- ----------
Total assets $5,444,775 $1,163,066 $157,582 $ 484,021 $7,249,444
========== ========== ======== ========= ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 191,547 $ 132,802 $ 13,816 $ 1,765 (G11) $ 345,562
5,632 (F2)
Income taxes 32,351 6,700 - - 39,051
Current maturities of long-term debt 21,217 3,332 15,700 (15,700) (G9) 24,549
---------- ---------- -------- --------- ----------
Total current liabilities 245,115 142,834 29,516 (8,303) 409,162
Long-term debt 1,579,918 8,672 37,709 146,668 (G8) 2,208,366
(32,284) (G9)
61,293 (C1)
589,570 (F10)
(183,180) (F11)
Deferred income taxes 275,162 15,421 14,329 100,445 (G12) 442,268
5,500 (C1)
31,411 (F8)
Other liabilities 278,475 137,242 18,846 44,137 (G1) 388,492
4,029 (G5)
(16,667) (C1)
(79,107) (F3)
1,537 (F4)
Deferred prearranged funeral contracts 1,597,454 520,220 6,935 92,859 (G2) 2,217,468
Company-obligated, mandatorily redeemable,
convertible preferred securities of
SCI Finance LLC, whose principle asset is
a 6.25%, $216,315 note from the Company 172,500 - - - 172,500
Stockholders' equity 1,296,151 338,677 50,247 (50,247) (G6) 1,411,188
115,037 (G7)
(338,677) (F1)
---------- ---------- -------- --------- ----------
Total liabilities and stockholders'
equity $5,444,775 $1,163,066 $157,582 $ 484,021 $7,249,444
========== ========== ======== ========= ==========
</TABLE>
5
<PAGE> 6
SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1995
CANADA
(C1) To record the acquisition of the approximate 31% minority interest
of SCIC that the Company does not currently own. This includes
eliminating the minority interest, increasing long-term debt for
amounts assumed to be borrowed under the Company's existing
revolving credit facilities to finance this transaction, increasing
cemetery property to estimated fair value, recording deferred taxes
on the allocation of purchase price (at the Canadian statutory tax rate)
and allocating the excess of the purchase price over the estimated fair
value of SCIC net assets acquired to names and reputations.
GIBRALTAR
(G1) To record Gibraltar's cemetery merchandise and service receivable
balances and related liabilities in accordance with the Company's
accounting policies. These merchandise and service receivable balances
were not afforded balance sheet recognition by Gibraltar.
(G2) To record Gibraltar's prearranged funeral contracts outstanding and the
related deferred prearranged funeral contract revenues in accordance with
the Company's accounting policies. These prearranged funeral contracts
were not afforded balance sheet recognition by Gibraltar.
(G3) To reclassify Gibraltar's receivables not due within one year to
long-term receivables. This entry conforms Gibraltar's unclassified
balance sheet to the Company's classified balance sheet format.
(G4) To reclassify Gibraltar's cemetery inventories not expected to be sold
within one year to cemetery property. This entry conforms Gibraltar's
unclassified balance sheet to the Company's classified balance sheet
format.
(G5) To reclassify amounts held in trust by Gibraltar related to sales of
preconstruction mausoleums. Gibraltar netted the trust deposits against
the related liability; however under the Company's accounting policies
these amounts would be shown separately on the balance sheet.
(G6) To eliminate the historical stockholders' equity of Gibraltar.
(G7) To reflect the net proceeds from the issuance of 3,286,759 shares of
Company common stock issued in the Gibraltar transaction at an assumed
price of $35 per share (based on an average stock price on August 25,
1995).
(G8) To reflect borrowings under the Company's existing revolving credit
agreements and/or through the issuance of commercial paper to finance a
portion of the purchase price of Gibraltar ($98,684,000) and the assumed
repayment of a portion of Gibraltar debt ($47,984,000).
(G9) To reflect the assumed repayment of Gibraltar debt.
(G10) To increase Gibraltar's cemetery property to estimated fair value.
6
<PAGE> 7
(G11) To accrue costs anticipated to be incurred in connection with the
acquisition of Gibraltar.
(G12) To provide for additional deferred income taxes for Gibraltar (at the
Company's marginal tax rate) resulting from differences in the carrying
values of net assets for financial statement and tax purposes.
(G13) To eliminate previously recorded Gibraltar goodwill.
OGF/PFG
(F1) To eliminate the historical stockholders' equity of OGF/PFG.
(F2) To accrue estimated costs anticipated to be incurred in connection with
the acquisition of OGF/PFG.
(F3) To eliminate OGF's historical minority interest in PFG. These unaudited
pro forma combined financials assume 100% ownership of both OGF and PFG,
which is the intent of the Company.
(F4) To increase OGF/PFG's land and buildings to estimated fair value.
(F5) To record as an intangible asset the present value of future profits of
OGF/PFG's life insurance subsidiary with respect to existing insurance
contracts.
(F6) To eliminate the previously recorded OGF/PFG goodwill.
(F7) To eliminate the previously recorded deferred acquisition costs of
OGF/PFG's life insurance subsidiary.
(F8) To provide for additional deferred income taxes (at the French statutory
tax rate) for OGF/PFG resulting from differences in the carrying values
of net assets for financial statement and tax purposes.
(F9) To allocate the excess of the purchase price over the estimated fair
value of OGF/PFG's net assets acquired to names and reputations.
(F10) To reflect the borrowings under the French Revolving Credit Agreement
for the OGF/PFG purchase.
(F11) To reflect the partial repayment of amounts borrowed under the French
Revolving Credit Agreement from cash that was acquired in the acquisition
of OGF/PFG.
7
<PAGE> 8
(8)
The following adjustments were made to the historical financials of OGF/PFG in
order to restate historical financial statements to US GAAP:
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in F GAAP US GAAP Balance Sheet
----------------------- -------------- ------------------------
<S> <C> <C> <C>
Cash and cash equivalents . . . . . . . . . . $ 202,886 $ 416 (1) $ 203,800
498 (3)
Receivables, net of allowance . . . . . . . . 55,746 3,267 (3) 59,013
Inventories . . . . . . . . . . . . . . . . . 46,240 - 46,240
Other . . . . . . . . . . . . . . . . . . . . 21,895 836 (5) 33,171
577 (6)
9,863 (3)
-------------- ------------ ------------
Total current assets . . . . . . . . . . . 326,767 15,457 342,224
Investments for prearranged funerals . . . . - 531,726 (3) 531,726
Property, plant and equipment at cost (net) . 182,778 4,199 (2) 222,545
(4,319) (4)
39,887 (3)
Deferred charges and other assets . . . . . . 47,311 2,350 (3) 49,661
Names and reputations . . . . . . . . . . . . 16,910 - 16,910
-------------- ------------ ------------
Total assets . . . . . . . . . . . . . . . $ 573,766 $ 589,300 $ 1,163,066
============== ============ ============
Accounts payable and accrued liabilities . . $ 114,521 $ 10,594 (4) $ 132,802
879 (6)
6,808 (3)
Income taxes . . . . . . . . . . . . . . . . 6,559 141 (3) 6,700
Current maturities of long-term debt . . . . 3,043 289 (2) 3,332
-------------- ------------ ------------
Total current liabilities . . . . . . . . 124,123 18,711 142,834
Long-term debt . . . . . . . . . . . . . . . 5,217 3,455 (2) 8,672
Deferred income taxes . . . . . . . . . . . . 2,384 1,028 (5) 15,421
(3,505) (6)
15,514 (3)
Other liabilities . . . . . . . . . . . . . . 140,730 150 (1) 137,242
61 (2)
(14,913) (4)
120 (5)
9,380 (6)
1,714 (3)
Deferred prearranged funeral contracts . . . - 520,220 (3) 520,220
Stockholders' equity . . . . . . . . . . . . 301,312 266 (1) 338,677
394 (2)
43,193 (3)
(312) (5)
(6,176) (6)
-------------- ------------ ------------
Total liabilities and stockholders' equity. $ 573,766 $ 589,300 $ 1,163,066
============== ============ ============
</TABLE>
-----------
*One French franc equivalent to $.2062, which represents the rate at June 30,
1995.
8
<PAGE> 9
(1) To record the effect of Statement of Financial Accounting Standards
("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
(2) To record capital leases to comply with FAS No. 13 "Accounting for
Leases".
(3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which
was recorded under the equity method of accounting by OGF/PFG, to comply
with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS
No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97
"Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments".
(4) To reclassify a portion of other liabilities to current liabilities and
eliminate negative goodwill in accordance with Accounting Principles
Board Opinion No. 16.
(5) To record FAS No. 109 "Accounting for Income Taxes".
(6) To record FAS No. 87 "Employers' Accounting for Pensions" and FAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions".
9
<PAGE> 10
Service Corporation International
Unaudited Pro Forma Combined Statement of Income
Year Ended December 31, 1994
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 Transactions
-----------------------------------------------
1994 Historical Pro Forma
--------------- ----------------------------
The GSG & PG and 1994
Company Other Acquired Combined
Historical Companies Adjustments Subtotal
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $1,117,175 $135,008 $1,146 (A) $1,253,329
Costs and expenses (775,980) (113,145) (770) (A) (885,195)
3,918 (B)
3,757 (C)
(217) (D)
(4,685) (E)
2,502 (F)
(291) (G)
(284) (H)
---------- -------- ------- ----------
Gross profit 341,195 21,863 5,076 368,134
General and administrative expenses (51,700) - - (51,700)
---------- -------- ------- ----------
Income from operations 289,495 21,863 5,076 316,434
Interest expense (80,123) (2,588) (165) (A) (86,057)
(3,860) (B)
936 (I)
1,451 (J)
4,379 (K)
(15,354) (L)
2,414 (M)
6,853 (N)
Dividends on preferred securities
of SCI Finance LLC (539) - (10,242) (O) (10,781)
Other income (expense) 10,188 201 - 10,389
Gain on sale of subsidiaries - - - -
---------- -------- ------- ----------
Income before income taxes 219,021 19,476 (8,512) 229,985
Provision for income taxes (87,976) (7,240) 3,015 (P) (92,201)
---------- -------- ------- ----------
Net income $131,045 $12,236 $(5,497) $137,784
========== ======== ======= ==========
Earnings per share:
Primary $1.51 $1.44
========== ==========
Fully diluted $1.43 $1.36
========== ==========
1,073 (Q)
Primary weighted average shares 86,926 7,974 (R) 95,973
========== ==========
1,156 (Q)
Fully diluted weighted 7,974 (R)
average shares 97,408 5,450 (S) 111,988
========== ==========
<CAPTION>
1995 Transactions
-------------------------------------------------------------------------
1994 Historical Pro Forma
--------------------------------------- --------------------------
Other
Acquired Combined
OGF/PFG Gibraltar Companies Adjustments Total
-------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $509,141 $96,270 $73,505 $ (4,993)(G1) $1,924,574
(1,902)(G2)
(5,301)(G3)
4,525 (G4)
Costs and expenses (471,390) (81,785) (65,401) 4,993 (G1) (1,479,374)
830 (G2)
7,134 (G3)
(3,260)(G4)
2,038 (G5)
159 (G6)
(1,435)(G7)
1,221 (O1)
(941)(C1)
(63)(C2)
1,594 (F1)
(2,561)(F2)
22,253 (F3)
(10,547)(F4)
(51)(F5)
682 (F6)
2,351 (F7)
-------- ------- ------- -------- -----------
Gross profit 37,751 14,485 8,104 16,726 445,200
General and administrative expenses - - - - (51,700)
-------- ------- ------- -------- -----------
Income from operations 37,751 14,485 8,104 16,726 393,500
Interest expense (5,667) (3,279) (1,175) (620)(G4) (134,016)
3,465 (G8)
(6,747)(G9)
(8,742)(O1)
(3,530)(C3)
(31,429)(F8)
9,765 (F9)
Dividends on preferred securities
of SCI Finance LLC - - - - (10,781)
Other income (expense) (12,408) (83) - 2,227 (C4) 13,843
(6,681)(F10)
20,399 (F11)
Gain on sale of subsidiaries 57,474 - - (57,474)(F12)
-------- ------- ------- -------- -----------
Income before income taxes 77,150 11,123 6,929 (62,641) (262,546)
Provision for income taxes (21,176) (4,219) (2,702) 496 (G10) (104,613)
1,581 (C5)
2,933 (O2)
10,675 (F13)
-------- ------- ------- -------- -----------
Net income $55,974 $6,904 $4,227 $(46,956) $157,933
======== ======= ======= ======== ==========
Earnings per share:
Primary $1.59
===========
Fully diluted $1.50
===========
180 (O3)
Primary weighted average shares 3,287 (G11) 99,440
===========
Fully diluted weighted 194 (O3)
average shares 3,287 (G11) 115,469
===========
</TABLE>
10
<PAGE> 11
SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
1994 TRANSACTIONS
(A) To record the acquisition of five separate businesses acquired at
various dates by PG between January 1, 1994 and August 31, 1994 as
if such acquisitions had occurred on January 1, 1994. Internally
generated funds were used for the purchase of these businesses;
however, for purposes of the unaudited pro forma combined statement
of income, imputed interest expense, calculated on the purchase
price, has been included at a rate of 6%, which approximated the
Company's UK borrowing rate for the year 1994.
(B) To record a reduction to costs and expenses for the 1994 Other
Acquired Companies based on results actually achieved by the Company
for the periods subsequent to acquisition in the amount of
$7,019,000 offset in part by additional costs and expenses of
$3,101,000 resulting from the effect of applying purchase accounting
adjustments, primarily amortization and depreciation.
Interest expense was added for debt and convertible debentures,
issued in the purchase of the 1994 Other Acquired Companies, at
stated rates. In addition, interest expense has been added for the
cash portion of the purchase price assumed to be borrowed by the
Company at the Company's weighted average borrowing rate of 4.60%
for the year ended December 31, 1994 under its existing revolving
credit facilities. At August 25, 1995, the borrowing rate was 5.90%.
(C) To eliminate corporate expenses, consisting primarily of duplicate
personnel expenses, related to the acquisitions of GSG and PG.
(D) To record the additional depreciation expense (based on 50 year
useful life and straight-line depreciation) on GSG's funeral home
buildings resulting from the estimated change in fair value over
historical cost.
(E) To record the amortization of names and reputations (based on 40
year straight-line amortization) created from the acquisition of PG
by the Company.
(F) To eliminate the historical GSG and PG goodwill amortization
expense.
(G) To record the additional cost of GSG's cemetery and cremation
memorialization interment rights sold.
(H) To record the estimated additional amortization expense
from the expenses associated with the December 1994 issuances
of preferred securities of SCI Finance LLC and $200,000,000 fixed rate
notes of the Company.
(I) To reverse imputed interest expense recorded in the Company's
historical financial statements, related to the acquisition of GSG
and PG, that would not have occurred if these acquisitions had been
completed on January 1, 1994.
11
<PAGE> 12
(J) To reverse interest expense recorded in the Company's historical
financial statements related to amounts borrowed under the Company's
revolving credit agreements to partially fund the acquisitions of
GSG and PG. This indebtedness would not have been necessary if the
acquisition of GSG and PG had been funded with proceeds from the
December 1994 public offerings.
(K) To record the estimated reduction in interest expense resulting from
the assumed partial repayment of $95,205,000 of indebtedness under
the Company's revolving credit agreements. Such repayment funds
were derived from the net proceeds of the December 1994 public
offerings available after the purchase of GSG and PG. The reduction
was calculated using the Company's weighted average borrowing rate
of 4.60% for the year ended December 31, 1994 under its revolving
credit agreements and commercial paper borrowings.
(L) To record approximately 11 months of additional interest expense on
the December 1994 $200,000,000 notes at annual interest rate of
8.375%.
(M) To record the estimated reduction in net interest expense achieved
from a cross currency hedging transaction entered into by the
Company in December 1994 as if such transaction had been entered
into on January 1, 1994. This transaction effectively converts
$272,500,000 of U.S. fixed rate indebtedness into floating rate UK
pound sterling indebtedness, raising SCI's total UK pound sterling
exposure to $472,500,000, which is comparable to the size of the
acquisitions of GSG and PG.
(N) To reverse interest expense recorded in the Company's historical
financial statements related to amounts borrowed under two bank
facilities secured to temporarily fund the GSG and PG acquisitions.
This indebtedness would not have been necessary if the acquisition
of GSG and PG had been funded with proceeds from the December 1994
public offerings.
(O) To record the additional dividends at 6.25% on the preferred securities
of SCI Finance LLC issued in December 1994 in order to present a full
year of dividends.
(P) To record the tax effect of the pro forma adjustments.
(Q) To give effect to the additional time period during which the
Company common stock (in the case of the primary and fully diluted
weighted average number of shares) and convertible debt (in the case
of the fully diluted weighted average number of shares) issued
during the period between January 1, 1994 and December 31, 1994 in
respect to the acquisition of the 1994 Other Acquired Companies
would have been outstanding if all of such acquisitions had occurred
as of January 1, 1994.
(R) To record the additional impact from the issuance of 7,700,000
shares in December 1994 and 780,000 shares in January 1995.
(S) To record the additional impact on the fully diluted weighted
average number of shares of the preferred securities of SCI Finance LLC
issued in December 1994.
12
<PAGE> 13
1995 TRANSACTIONS
1995 OTHER ACQUIRED COMPANIES
(O1) To record a reduction to costs and expenses for the 1995 Other Acquired
Companies based on results actually achieved by the Company for the
periods subsequent to acquisition in the amount of $3,983,000 offset in
part by additional costs and expenses of $2,762,000 resulting from the
effect of applying purchase accounting adjustments, primarily
amortization and depreciation.
Interest expense was added for debt and convertible debentures, issued in
the purchase of the 1995 Other Acquired Companies, at stated rates. In
addition, interest expense has been added for the cash portion of the
purchase price assumed to be borrowed by the Company at the Company's
weighted average borrowing rate of 4.60% for the year ended December 31,
1994 under its existing revolving credit facilities. At August 25, 1995,
the borrowing rate was 5.90%.
(O2) To record the tax effect for the 1995 Other Acquired Companies pro forma
adjustments.
(O3) To give effect to the additional time period during which the Company
common stock (in the case of the primary and fully diluted weighted
average number of shares) and convertible debt (in the case of the fully
diluted weighted average number of shares) issued during the period
between January 1, 1994 and December 31, 1994 in respect to the
acquisition of the 1995 Other Acquired Companies would have been
outstanding if all of such acquisitions had occurred as of January 1,
1994.
CANADA
(C1) To record the additional amortization of names and reputations (based on
40 year straight-line amortization) created from the acquisition of the
SCIC minority interest.
(C2) To record the additional cost of SCIC's cemetery interment rights sold.
(C3) To record the estimated interest expense for the purchase price of the
SCIC minority interest ($61,293,000) assumed to have been borrowed by the
Company under its existing revolving credit facilities. The calculation
was based on a weighted average annual three month Canadian banker's
acceptance borrowing rate plus 25 basis points for the year ended
December 31, 1994 (5.76%). At August 25, 1995, the borrowing rate was
6.71%.
(C4) To eliminate the 1994 SCIC minority interest charge.
(C5) To record the tax effect for SCIC's minority interest pro forma
adjustments.
GIBRALTAR
(G1) To eliminate Gibraltar intercompany revenues and costs relating to
cemetery construction activities.
13
<PAGE> 14
(G2) To conform Gibraltar's prearranged funeral accounting to the Company's.
The revenue adjustment includes $1,306,000 of revenue relating to
earnings on amounts held in trust which Gibraltar recognized currently
which would be deferred under the Company's accounting policies and
$596,000 of revenue recognized by Gibraltar relating to certain
prearranged funeral payments not required to be held in trust which would
also be deferred under the Company's accounting policies. The adjustment
to costs and expenses for $830,000 relates to prearranged funeral selling
expenses that would be capitalized under the Company's accounting
policies but were recognized currently by Gibraltar.
(G3) To conform Gibraltar's cemetery accounting to the Company's. This
includes an adjustment to reclassify $5,301,000 of revenues and costs and
expenses relating to contract cancellations. In addition, this adjustment
includes a reduction of Gibraltar historical costs and expenses for
$1,833,000, representing reduced cost accruals for certain cemetery
sales.
(G4) To record the acquisition of five separate businesses acquired at various
dates by Gibraltar between January 1, 1994 and December 31, 1994 as if
such acquisitions had occurred on January 1, 1994.
(G5) To eliminate Gibraltar corporate expenses consisting primarily of former
owner salaries and duplicate home office personnel expenses.
(G6) To eliminate the historical Gibraltar goodwill amortization expense.
(G7) To record the additional cost of Gibraltar's cemetery interment rights
sold.
(G8) To eliminate the interest expense on Gibraltar debt assumed to be repaid
by the Company.
(G9) To record additional interest expense for the cash portion of the
purchase price assumed to be borrowed by the Company under its existing
revolving credit facilities. The Company's weighted average borrowing
rate for such revolving credit facilities was 4.60% for the year ended
December 31, 1994. At August 25, 1995, the borrowing rate was 5.90%.
(G10) To record the tax effect of Gibraltar's pro forma adjustments.
(G11) To reflect the issuance of 3,286,759 shares in respect to the acquisition
of Gibraltar that would have been outstanding if the acquisition had
occurred on January 1, 1994. The shares were assumed to be issued at
$35 per share representing the average stock price on August 25, 1995.
OGF/PFG
(F1) To eliminate the historical OGF/PFG goodwill amortization expense.
(F2) To record the amortization of names and reputations (based on 40 year
straight-line amortization) created from the acquisition of OGF/PFG by
the Company.
(F3) To eliminate OGF/PFG's historical depreciation expense which was
calculated using shorter depreciable asset lives than does the Company
under its accounting policies. Additionally, OGF/PFG, for certain assets,
used accelerated depreciation
14
<PAGE> 15
methods. The Company uses a straight-line method of depreciation expense
recognition.
(F4) To record the depreciation expense on OGF/PFG's property, plant and
equipment using the Company's depreciation policies based on the current
fair value.
(F5) To record the amortization of the present value of future profits related
to OGF/PFG's life insurance subsidiary, net of the amount allocated to
policyholders, under French insurance regulations.
(F6) To eliminate the amortization of deferred acquisition costs related to
the life insurance subsidiary which were recorded in OGF/PFG's historical
income statement.
(F7) To eliminate historical OGF/PFG expenses that will not continue under the
Company's ownership. Such costs are primarily the result of OGF/PFG
personnel whose positions were permanently eliminated in anticipation of
the acquisition of OGF/PFG by the Company.
(F8) To record interest expense on amounts borrowed under the French Revolving
Credit Agreement ($589,570,000) at 6.10% which represents the weighted
average three month PIBOR borrowing rate plus 25 basis points for the
year ended December 31, 1994 applied to a French franc balance as of June
30, 1995 and translated at a weighted average exchange rate for the year
ended December 31, 1994. At August 25, 1995, the borrowing rate was
5.98%.
(F9) To eliminate interest expense on amounts borrowed under the French
Revolving Credit Agreement that the Company intends to repay with
$183,180,000 of OGF/PFG cash acquired. OGF/PFG received substantially
all of this cash from the sale, in 1994, of its investment in PG to the
Company. The reduction was calculated using a weighted average annual
interest rate of 6.10%, which represents the weighted average three
month PIBOR borrowing rate plus 25 basis points for the year ended
December 31, 1994 applied to a French franc balance as of June 30, 1995
and translated at the weighted average exchange rate for the year ended
December 31, 1994. At August 25, 1995, the borrowing rate was 5.98%.
(F10) To eliminate OGF/PFG historical interest income earned on OGF/PFG excess
cash ($183,180,000) that the Company intends to use to partially repay
borrowings under the French Revolving Credit Agreement.
(F11) To eliminate OGF's year ended 1994 charge for the minority interest in
PFG assuming acquisition of 100% of PFG by the Company.
(F12) To eliminate the gain on sale of PG. The Company purchased PG, which was
an equity investee of OGF, in 1994.
(F13) To record the tax effect of the OGF/PFG pro forma adjustments.
15
<PAGE> 16
The following adjustments were made to the historical financials of GSG and PG
in order to restate historical financial statements to US GAAP (included in the
unaudited pro forma combined statement of income for the year ended December
31, 1994 in the column captioned "1994 Historical - GSG & PG and Other Acquired
Companies"):
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in UK GAAP* US GAAP Statement of Income
----------------------- --------------------- ------------------------
GSG PG GSG PG GSG PG
--------- ---------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . $ 33,714 $ 52,484 $ - $ - $33,714 $ 52,484
Costs and expenses . . . . . (26,682) (40,365) (184)(1) (205)(1) (27,254) (42,684)
(388)(2) (2,114)(2)
Interest expense and other . . (731) (405) - - (731) (405)
Provision for income taxes . . (2,079) (3,689) 60 (1) 67 (1) (2,019) (3,622)
-------- -------- ------ ------- ------- ---------
Net income . . . . . . . . . $ 4,222 $ 8,025 $ (512) $(2,252) $ 3,710 $ 5,773
======== ======== ====== ======= ======= =========
</TABLE>
---------------
*One UK pound sterling equivalent to $1.52, which represents the average
exchange rate for the eight months ended August 31, 1994.
(1) To depreciate buildings straight-line over 50 years for GSG and PG.
(2) To amortize PG's historical goodwill balance straight-line over 40 years.
16
<PAGE> 17
The following adjustments were made to the historical financials of OGF/PFG
in order to restate historical financial statements to US GAAP:
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in F GAAP US GAAP Statement of Income
----------------------- -------------- ------------------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $ 500,884 $ 8,257 (3) $ 509,141
Costs and expenses . . . . . . . . . . . . (467,825) 472 (2) (471,390)
18 (5)
(4,055) (3)
Other income (expense) . . . . . . . . . . (18,044) (129) (1) (18,075)
(384) (2)
136 (3)
350 (4)
(4) (5)
Gain on sale of subsidiaries. . . . . . . . 57,474 - 57,474
Provision for income taxes . . . . . . . . (18,927) (1,019) (4) (21,176)
(6) (5)
(1,224) (3)
-------------- ------------ ------------
Net income . . . . . . . . . . . . . . . . $ 53,562 $ 2,412 $ 55,974
============== ============ ============
</TABLE>
---------------
*One French franc equivalent to $.1802, which represents the average exchange
rate for the year ended December 31, 1994.
(1) To record the effect of Statement of Financial Accounting Standards
("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
(2) To record capital leases to comply with FAS No. 13 "Accounting for
Leases".
(3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which
was recorded under the equity method of accounting by OGF/PFG, to comply
with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS
No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No.
97 "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments".
(4) To record FAS No. 109 "Accounting for Income Taxes".
(5) To record FAS No. 87 "Employers' Accounting for Pension" and FAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions".
17
<PAGE> 18
Service Corporation International
Unaudited Pro Forma Combined Statement of Income
Six Months Ended June 30, 1995
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
-----------------------------------
The Other Pro Forma
Company Acquired Pro Forma Combined
Historical OGF/PFG Gibraltar Companies Adjustments Total
---------- ------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $701,762 $272,632 $45,556 $18,439 $ (843) (G1) $1,034,319
(3,227) (G2)
Costs and expenses (479,105) (257,606) (38,031) (16,370) 362 (G1) (778,180)
4,222 (G2)
1,019 (G3)
112 (G4)
(718) (G5)
479 (O1)
(470) (C1)
(32) (C2)
857 (F1)
(1,409) (F2)
12,670 (F3)
(6,822) (F4)
(52) (F5)
362 (F6)
2,352 (F7)
-------- -------- ------- ------- ------- ----------
Gross profit 222,657 15,026 7,525 2,069 8,862 256,139
General and administrative expenses (23,471) - - - - (23,471)
-------- -------- ------- ------- ------- ----------
Income from operations 199,186 15,026 7,525 2,069 8,862 232,668
Interest expense (52,809) (1,901) (2,361) (308) 2,144 (G6) (79,028)
(4,503) (G7)
(2,714) (O1)
(2,467) (C3)
(20,468) (F8)
6,359 (F9)
Dividends on preferred securities
of SCI Finance LLC (5,391) - - - - (5,391)
Other income (expense) 3,073 4,111 (47) - 1,451 (C4) 5,305
3,185 (F10)
(6,468)(F11)
-------- -------- ------- ------- ------- ----------
Income before income taxes 144,059 17,236 5,117 1,761 (14,619) 153,554
Provision for income taxes (56,039) (8,857) (2,121) (685) 872 (O2) (60,700)
1,100 (C5)
602 (G8)
4,428 (F12)
-------- -------- ------- ------- ------- ----------
Net income $88,020 $8,379 $2,996 $1,076 $(7,617) $ 92,854
======== ======== ======= ======= ======= ==========
Earnings per share:
Primary $0.91 $ 0.93
======== ==========
Fully diluted $0.85 $ 0.86
======== ==========
3,287 (G9)
Primary weighted average shares 96,729 147 (O3) 100,163
======== ==========
Fully diluted weighted average 3,287 (G9)
shares 112,611 147 (O3) 116,045
======== ==========
</TABLE>
----------------------
See note (F13) to this unaudited pro forma combined statement of income for
the six months ended June 30, 1995.
18
<PAGE> 19
SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1995
1995 OTHER ACQUIRED COMPANIES
(O1) To record a reduction to costs and expenses for the 1995 Other Acquired
Companies based on results actually achieved by the Company for the
periods subsequent to acquisition in the amount of $1,860,000 offset in
part by additional costs and expenses of $1,381,000 resulting from the
effect of applying purchase accounting adjustments, primarily
amortization and depreciation.
Interest expense was added for debt and convertible debentures, issued in
the purchase of the 1995 Other Acquired Companies, at stated rates. In
addition, interest expense has been added for the cash portion of the
purchase price assumed to be borrowed by the Company at the Company's
weighted average borrowing rate of 6.14% for the six months ended June
30, 1995, under its existing revolving credit facilities. At August 25,
1995, the borrowing rate was 5.90%.
(O2) To record the tax effect for the 1995 Other Acquired Companies pro forma
adjustments.
(O3) To give effect to the additional time period during which the Company
common stock (in the case of the primary and fully diluted weighted
average number of shares) and convertible debt (in the case of the fully
diluted weighted average number of shares) issued during the period
between January 1, 1995 and June 30, 1995 in respect to the acquisition
of the 1995 Other Acquired Companies would have been outstanding for the
six months ended June 30, 1995 if all of such acquisitions had occurred
as of January 1, 1994.
CANADA
(C1) To record the additional amortization of names and reputations (based on
40 year straight-line amortization) created from the acquisition of the
SCIC minority interest.
(C2) To record the additional costs of SCIC's cemetery interment rights sold.
(C3) To record the estimated interest expense for the purchase price of the
SCIC minority interest ($61,293,000) assumed to have been borrowed by the
Company under its existing revolving credit facilities. The calculation
was based on a weighted average annual three month Canadian banker's
acceptance borrowing rate plus 25 basis points for the six months ended
June 30, 1995 (8.05%). At August 25, 1995, the borrowing rate was 6.71%.
(C4) To eliminate the 1995 SCIC minority interest charge.
(C5) To record the tax effect for SCIC's minority interest pro forma
adjustments.
19
<PAGE> 20
GIBRALTAR
(G1) To conform Gibraltar's prearranged funeral accounting to the Company's.
The revenue adjustment includes $604,000 of revenue relating to earnings
on amounts held in trust which Gibraltar recognized currently which would
be deferred under the Company's accounting policies and $239,000 of
revenue recognized by Gibraltar relating to certain prearranged funeral
payments not required to be held in trust which would also be deferred
under the Company's accounting policies. The adjustment to costs and
expenses for $362,000 relates to prearranged funeral selling expenses
that would be capitalized under the Company's accounting policies but
were recognized currently by Gibraltar.
(G2) To conform Gibraltar's cemetery accounting to the Company's. This
includes an adjustment to reclassify $3,227,000 of revenues and costs and
expenses relating to contract cancellations. In addition, this adjustment
includes a reduction of Gibraltar's historical costs and expenses for
$995,000, representing reduced cost accruals for certain cemetery sales.
(G3) To eliminate Gibraltar corporate expenses consisting primarily of
former owner salaries and duplicate home office personnel expenses.
(G4) To eliminate the historical Gibraltar goodwill amortization expense.
(G5) To record the additional cost of Gibraltar's cemetery interment rights
sold.
(G6) To eliminate the interest expense on Gibraltar debt assumed to be repaid
by the Company.
(G7) To record additional interest expense for the cash portion of the
purchase price assumed to be borrowed by the Company under its existing
revolving credit facilities. The Company's weighted average borrowing
rate for such revolving credit facilities was 6.14% for the six months
ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.90%.
(G8) To record the tax effect of Gibraltar's pro forma adjustments.
(G9) To reflect the issuance of 3,286,759 shares in respect to the acquisition
of Gibraltar that would have been outstanding if the acquisition had
occurred as of January 1, 1995. The shares were assumed to be issued at
$35 per share representing the average stock price on August 25, 1995.
OGF/PFG
(F1) To eliminate the historical OGF/PFG goodwill amortization expense.
(F2) To record the amortization of names and reputations (based on 40 year
straight-line amortization) created from the acquisition of OGF/PFG by
the Company.
(F3) To eliminate OGF/PFG's historical depreciation expense which was
calculated using shorter depreciable asset lives than does the Company
under its accounting policies. Additionally, OGF/PFG, for certain assets,
used accelerated depreciation methods. The Company uses a straight-line
method of depreciation expense recognition.
20
<PAGE> 21
(F4) To record the depreciation expense on OGF/PFG's property, plant and
equipment using the Company's depreciation policies based on the current
fair value.
(F5) To record the amortization of the present value of future profits related
to OGF/PFG's life insurance subsidiary, net of the amount allocated to
policyholders, under French insurance regulations.
(F6) To eliminate the amortization of deferred acquisition costs related to
the life insurance subsidiary which were recorded in OGF/PFG's historical
income statement.
(F7) To eliminate historical OGF/PFG expenses that will not continue under the
Company's ownership. Such costs are primarily the result of OGF/PFG
personnel whose positions were permanently eliminated and professional
expenses incurred in anticipation of the acquisition of OGF/PFG by the
Company.
(F8) To record interest expense on amounts borrowed under the French Revolving
Credit Agreement ($589,570,000) at 7.22% which represents the weighted
average three month PIBOR borrowing rate plus 25 basis points for the six
months ended June 30, 1995 applied to a French franc balance as of June
30, 1995 and translated at the weighted average exchange rate for the six
months ended June 30, 1995. At August 25, 1995, the borrowing rate was
5.98%.
(F9) To eliminate interest expense on amounts borrowed under the French
Revolving Credit Agreement that the Company intends to repay with
$183,180,000 of OGF/PFG cash acquired. OGF/PFG received substantially all
of this cash from the sale, in 1994, of its investment in PG to the
Company. The reduction was calculated using a weighted average annual
interest rate of 7.22%, which represents the weighted average three
month PIBOR borrowing rate plus 25 basis points for the six months ended
June 30, 1995 applied to a French franc balance as of June 30, 1995 and
translated at the weighted average exchange rate for the six months
ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.98%.
(F10) To eliminate OGF's six month charge for the minority interest in PFG
assuming acquisition of 100% of PFG by the Company.
(F11) To eliminate OGF/PFG historical interest income earned on OGF/PFG excess
cash ($183,180,000) that the Company intends to use to partially repay
borrowings under the French Revolving Credit Agreement.
(F12) To record the tax effect of the OGF/PFG pro forma adjustments.
(F13) The earnings of OGF/PGF's life insurance subsidiary for the six
months ended June 30, 1995 included realized losses on sales of portfolio
debt securities. The net effect of the debt security sales, after profit
participation by policyholders, was a loss before income taxes of
approximately US $7,950,000. On August 25, 1995, the Company adopted a
policy with respect to OGF/PFG's life insurance subsidiary to hold all
debt securities to maturity. Had the Company's investment policy been in
effect during the period, such security sales would not have occurred.
21
<PAGE> 22
The following adjustments were made to the historical financials of OGF/PFG
in order to restate historical financial statements to US GAAP:
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in F GAAP US GAAP Statement of Income
----------------------- -------------- ------------------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 275,318 $ 78 (1) $ 272,632
(2,764) (3)
Costs and expenses . . . . . . . . . . . . . (254,536) 260 (2) (257,606)
(755) (5)
(2,575) (3)
Other income (expense) . . . . . . . . . . . 3,901 (29) (1) 2,210
(200) (2)
(1,500) (3)
(133) (4)
171 (5)
Provision for income taxes . . . . . . . . . (9,020) (104) (4) (8,857)
267 (5)
-------------- ------------ ------------
Net income . . . . . . . . . . . . . . . . . $ 15,663 $ (7,284) $ 8,379
============== ============ ============
</TABLE>
--------------
*One French franc equivalent to $.1983, which represents the average exchange
rate for the six months ended June 30, 1995.
(1) To record the effect of Statement of Financial Accounting Standards
("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
(2) To record capital leases to comply with FAS No. 13 "Accounting for
Leases".
(3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which
was recorded under the equity method of accounting by OGF/PFG, to comply
with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS
No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97
"Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments". The earnings of OGF/PFG's life insurance subsidiary for
the six months ended June 30, 1995 included realized losses on sales of
debt securities. The net effect of the debt security sales, after profit
participation by policyholders, was a loss before income taxes of
approximately US $7,950,000.
(4) To record FAS No. 109 "Accounting for Income Taxes".
(5) To record FAS No. 87 "Employers' Accounting for Pension" and FAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions".
22
<PAGE> 23
SIGNATURE
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 thereunto duly authorized.
September 12, 1995
SERVICE CORPORATION INTERNATIONAL
/s/ George R. Champagne
--------------------------------------
George R. Champagne
Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
23
