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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): MAY 18, 1995
SERVICE CORPORATION INTERNATIONAL
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(Exact name of registrant as specified in charter)
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<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)
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(713) 522-5141
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
Recent Developments
On May 18, 1995, Service Corporation International (the "Company") and Service
Corporation International (Canada) Limited ("SCIC") jointly announced that the
Company is considering a transaction whereby the shareholders of SCIC
(excluding the Company) will be given the opportunity to sell their shares of
SCIC to the Company for $21.50 Canadian (approximately US $15.72) per share in
cash. The Company currently owns 7,000,000 shares of SCIC, or approximately
69% of the 10,193,069 shares outstanding reported by SCIC on April 3, 1995.
Any such transaction would be subject to approval by the shareholders of SCIC
(including separate approval by shareholders other than the Company) as well as
a final determination by the Company to proceed with a transaction. For
additional information, see the Press Release which is attached hereto as
Exhibit 99.1.
As previously disclosed in its Form 10-Q Quarterly Report for the quarterly
period ended September 30, 1994, the Company is considering the desirability
and feasibility of an acquisition of Pompes Funebres Generales S.A. ("PFG"),
which is the largest operator of funeral homes in France. The Company has had,
and intends to continue to pursue, discussions with Lyonnaise des Eaux-Dumez
S.A., which controls approximately 66% of the stock of PFG, in regard to
various potential transactions. There can be no assurance that any transaction
involving the Company and PFG will ultimately occur or as to the terms of any
such transaction.
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Unaudited Pro Forma Combined Financial Information
In 1994 the Company acquired the two largest publicly- traded funeral service
providers in the United Kingdom ("UK"), Great Southern Group plc ("GSG") and
Plantsbrook Group plc ("PG"). These firms owned a combined 534 funeral homes,
13 crematories and two cemeteries. The purchase price of approximately
$508,000,000 was primarily funded by two short-term bank facilities in the UK
(subsequently repaid or refinanced with long-term securities in 1995), other
revolving credit agreement borrowings and debt assumed by the Company. Both
acquisitions were accounted for as purchases and the results of operations have
been consolidated with the Company since September 1, 1994.
In addition to the acquisitions of GSG and PG, during 1994, the Company
acquired funeral and cemetery operations in the United States, Australia and
Canada. Excluding GSG and PG during such period, the Company acquired 140
funeral homes and 26 cemeteries (the "Other Acquired Companies") in numerous
separate transactions for an aggregate purchase price of approximately
$306,000,000 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 Other Acquired Companies are being
accounted for under the purchase method of accounting.
The following unaudited pro forma information assumes that the acquisition by
the Company of all operations acquired during 1994 took place on January 1,
1994. This information also assumes that the net proceeds from the Company's
December 1994 public offerings of 8,480,000 shares of Company common stock
(including 780,000 shares issued in January 1995 pursuant to an underwriters
over allotment allocation), $200,000,000 of 8.375% notes and $172,500,000 of
6.25% convertible preferred shares of a subsidiary were issued at the beginning
of 1994 and such net proceeds (approximately $573,000,000) were used to
purchase GSG and PG with the excess net proceeds used to repay borrowings under
existing revolving credit agreements.
The historical income statements of GSG and PG for the approximate eight month
period not owned by the Company in 1994 were prepared in UK pound sterling in
accordance with the UK Companies Act of 1985. This information has been
adjusted to present the historical income statements in accordance with United
States generally accepted accounting principles ("US GAAP") and translated
into US dollars at the average exchange rate for the eight month period
presented. The historical income statements of the Other Acquired Companies
represent amounts recorded by those businesses for the periods that they were
not owned by the Company during the year ended December 31, 1994. The
historical income statements of the Australian and Canadian acquisitions were
converted to US GAAP.
This unaudited pro forma information may not be indicative of results that
would have actually resulted if these transactions had occurred on the dates
indicated or which may be obtained in the future.
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SERVICE CORPORATION INTERNATIONAL
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(Thousands, except per share amounts)
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H I S T O R I C A L P R O F O R M A
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Other Acquired
The Company GSG and PG Companies Adjustments Combined Total
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Revenues . . . . . . . . . . . . $ 1,117,175 $ 86,198 $ 48,810 $ 1,146 (A) $ 1,253,329
Costs and expenses . . . . . . . (775,980) (69,938) (43,207) (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 16,260 5,603 5,076 368,134
General and administrative expense (51,700) - - - (51,700)
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Income from operations . . . . . 289,495 16,260 5,603 5,076 316,434
Interest expense . . . . . . . . (80,123) (1,337) (1,251) (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 convertible preferred
shares of subsidiary . . . . . . (539) - - (10,242) (O) (10,781)
Other income . . . . . . . . . . 10,188 201 - - 10,389
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Income before income taxes . . . 219,021 15,124 4,352 (8,512) 229,985
Provision for income taxes . . . (87,976) (5,641) (1,599) 3,015 (P) (92,201)
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Net income . . . . . . . . . . . $ 131,045 $ 9,483 $ 2,753 $ (5,497) $ 137,784
============== ============== ================ ============== ===============
Earnings per share:
Primary . . . . . . . . . . . . . $ 1.51 $ 1.44
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Fully diluted . . . . . . . . . . $ 1.43 $ 1.38
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Primary weighted average number
of shares . . . . . . . . . . . . 86,926 1,073 (Q) 95,973
============== 7,974 (R)
===============
Fully diluted weighted average
number of shares . . . . . . . . 97,408 83 (Q) 110,915
============== 7,974 (R)
5,450 (S)
===============
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SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(A) To record the acquisition of 5 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 Other Acquired
Companies based on results actually achieved by the Company for the
periods subsequent to acquisition, offset in part by additional costs
and expenses 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 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 under its revolving credit agreements.
(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 additional 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 additional amortization expense resulting from the cost
and expenses associated with the December 1994 issuance of convertible
preferred shares of a subsidiary and $200,000,000 notes.
(I) To reverse estimated interest expense recorded in the Company's
historical financials, related to the acquisition of GSG and PG, that
would not have occurred if these acquisitions had been completed on
January 1, 1994.
(J) To reverse interest expense recorded in the Company's historical
financials 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 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 annual interest rate for such revolving
credit agreement borrowings.
(L) To record the additional interest expense on the December 1994
$200,000,000 notes at an annual interest rate of 8.375%.
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(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
financials related to amounts borrowed under two UK 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 convertible
preferred shares of a subsidiary issued in December 1994.
(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 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 of the convertible preferred shares of
a subsidiary issued in December 1994.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(C) Exhibits - the following is the exhibit being filed with
this report:
99.1 - Service Corporation International
Press Release dated May 18, 1995
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.
May 23, 1995
SERVICE CORPORATION INTERNATIONAL
/s/ George R. Champagne
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George R. Champagne
Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
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(LOGO) NEWS EXHIBIT 99.1
SERVICE CORPORATION INTERNATIONAL P.O. BOX 130548, 1929 ALLEN PARKWAY
HOUSTON, TEXAS 77219-0548
713/522-5141
LISTED: NYSE/TICKER SYMBOL: SRV
FOR IMMEDIATE RELEASE
SERVICE CORPORATION INTERNATIONAL CONSIDERS
PURCHASE OF MINORITY SHARES OF SCI CANADA
HOUSTON, TEXAS, May 18, 1995...Service Corporation International (SCI) and
Service Corporation International (Canada) Limited (SCIC) jointly announced
today that SCI is considering a transaction whereby the shareholders of SCIC
(excluding SCI) will be given the opportunity to sell their shares of SCIC to
SCI for $21.50 (Canadian) per share in cash. If such transaction is completed,
SCIC will become a wholly-owned subsidiary of SCI.
SCI owns 7 million shares of SCIC, or approximately 69 percent of the
10,193,069 shares outstanding reported by SCIC on April 3, 1995. SCIC shares
closed on May 17, 1995 at $19.00 (Canadian), near the stock's all time high of
$19.75 (Canadian). Since the beginning of 1995, the stock has closed at an
average price of $16.62 (Canadian).
A special committee of SCIC directors who are independent of SCI will be
appointed to consider any such proposal and to report to the entire board. It
is expected that the committee will retain its own independent financial
advisor to prepare a formal valuation of the SCIC shares. Following review by
the committee and the board, any such transaction would be subject to approval
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SCI/SCIC - Page 2
by the shareholders of SCIC (including separate approval by shareholders other
than SCI). SCI will not make a final determination to proceed with any
transaction until the valuation of SCIC has been completed and other key terms
have been settled with the SCIC Board of Directors.
SCIC currently owns and operates 74 funeral homes and three cemeteries in
British Columbia, Alberta, Ontario and Quebec. The company is traded under the
ticker symbol SVK on the Toronto Stock Exchange.
Service Corporation International is the largest funeral and cemetery service
organization in the world. With 1,524 funeral homes, 238 cemeteries and 102
crematories on March 31, 1995, SCI affiliates currently provide funeral and
cemetery services in over 1,100 cities throughout the United States, Canada,
Australia and the United Kingdom. SCI's stock is traded on the New York Stock
Exchange. The company's ticker symbol is SRV.
# # #
For additional information contact:
SERVICE CORPORATION INTERNATIONAL:
George Champagne or Todd Matherne (Investor) 713-525-5546
Bill Barrett (Media) 713-525-5497
SERVICE CORPORATION INTERNATIONAL (CANADA) LIMITED:
Jack Gordon 604-294-9338
