<PAGE> 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
------------------------
<TABLE>
<S> <C>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-6402-1
</TABLE>
------------------------
SERVICE CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 74-1488375
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1929 ALLEN PARKWAY 77019
HOUSTON, TEXAS (Zip code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: 713/522-5141
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------------------------------- --------------------------------------------
<S> <C>
Common Stock ($1 par value) New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
6.5% Convertible Subordinated New York Stock Exchange
Debentures due 2001
$3.125 Term Convertible Shares, New York Stock Exchange
Series A, of SCI Finance LLC,
a subsidiary of the registrant
10% Subordinated Debentures due 2000 American Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the common stock held by non-affiliates of
the registrant (assuming that the registrant's only affiliates are its officers
and directors) is $2,646,449,209 based upon a closing market price of $28.50 on
March 24, 1995 of a share of common stock as reported on the New York Stock
Exchange -- Composite Transactions Tape.
The number of shares outstanding of the registrant's common stock as of
March 24, 1995 was 95,916,424 (excluding treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its 1995
Annual Meeting of Shareholders (Part III)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS.
Service Corporation International was incorporated in Texas on July 5,
1962. The term "Company" or "SCI" includes the registrant and its subsidiaries,
unless the context indicates otherwise.
The Company is the largest provider of death care services and products in
the world. At December 31, 1994, the Company operated 1,471 funeral homes, 220
cemeteries and 102 crematories located in 41 states, the District of Columbia,
Australia, Canada and the United Kingdom. In addition, the Company provides
capital financing to independent funeral home and cemetery operators.
The Company has continued to expand through the acquisition of funeral
homes and cemeteries, both domestically and internationally. In 1994, the
Company acquired two of the largest publicly-traded United Kingdom funeral
service companies. Including these acquisitions, the Company in 1994 acquired
674 funeral homes, 28 cemeteries and 24 crematories. The Company has acquired
most of its present operations through acquisitions. For information regarding
acquisitions of funeral home and cemetery operations, see Note 3 to the
consolidated financial statements in Item 8 of this Form 10-K.
For financial information about the Company's industry segments, including
the identifiable assets of the Company by industry segments, see Note 15 to the
consolidated financial statements in Item 8 of this Form 10-K.
FUNERAL AND CEMETERY OPERATIONS
The Funeral and Cemetery Operations consist of the Company's funeral homes,
cemeteries and related businesses. The operations are organized into six
domestic regions and three foreign regions (Australia, Canada and the United
Kingdom), each of which is under the direction of a regional president. Canadian
operations are carried out by a public company which is approximately 70% owned
by the Company. Local funeral home and cemetery managers, under the direction of
the regional presidents, receive support and resources from headquarters in
Houston and have substantial autonomy with respect to the manner in which
services are conducted.
The majority of the Company's funeral homes and cemeteries within a region
are managed in groups called clusters. Clusters are established primarily in
metropolitan areas to take advantage of operational efficiencies, including the
sharing of service personnel, vehicles, preparation services, clerical staff and
certain building facility costs.
Funeral Homes. The funeral homes provide all professional services
relating to funerals, including the use of funeral facilities and motor
vehicles. Funeral homes sell caskets, burial vaults, cremation receptacles,
flowers and burial garments and certain funeral homes also operate crematories.
The Company owns 94 funeral home/cemetery combinations and operates 54 flower
shops engaged principally in the design and sale of funeral floral arrangements.
These flower shops provide floral arrangements to some of the Company's funeral
homes and cemeteries.
The Company markets prearranged funeral services. Funeral prearrangement is
a means through which a customer contractually agrees to the terms of a funeral
to be performed in the future. The funds collected from prearranged funeral
contracts are generally deposited into trust funds or are used to purchase life
insurance or annuity contracts issued by third party insurers. Funds paid on
prearranged funerals may not be withdrawn until death or cancellation by the
customer. At December 31, 1994, the Company's unfulfilled prearranged funeral
contracts, including accumulated trust fund earnings and increased benefits on
insurance products, amounted to $1,519,582,000 of which $137,418,000 is
estimated, based on actuarial assumptions, to be fulfilled in 1995. The
unfulfilled prearranged funeral contracts at December 31, 1993 were
$1,263,407,000. For additional information concerning prearranged funeral
activities, see Notes 4 and 7 to the consolidated financial statements in Item 8
of this Form 10-K.
The Company has multiple funeral homes and cemeteries in a number of
metropolitan areas. Within individual metropolitan areas, the funeral homes and
cemeteries operate under various names because most
1
<PAGE> 3
operations were acquired as existing businesses and continue to be operated
under the same name as before acquisition.
The death rate tends to be somewhat higher in the winter months and the
funeral homes generally experience a higher volume of business during those
months.
In April 1984, the Federal Trade Commission (FTC) comprehensive trade
regulation rule for the funeral industry became fully effective. The rule
contains minimum guidelines for funeral industry practices, requires extensive
price and other affirmative disclosures and imposes mandatory itemization of
funeral goods and services. A pre-existing consent order between the Company and
the FTC applicable to certain funeral practices of the Company was amended in
1984 to make the substantive provisions of the consent order consistent with the
funeral trade regulation rule. From time to time in connection with
acquisitions, the Company has entered into consent orders with the FTC which
have limited the Company's ability to make acquisitions in specified areas
and/or which have required the Company to dispose of certain operations. The
trade regulation rule and the consent orders have not had a materially adverse
effect on the Company's operations.
Cemeteries. The Company's cemeteries sell cemetery interment rights
(including mausoleum spaces and lawn crypts) and certain merchandise including
stone and bronze memorials and burial vaults. The Company's cemeteries also
perform interment services and provide management and maintenance of cemetery
grounds. Certain cemeteries also operate crematories.
Cemetery sales are often made on a pre-need basis pursuant to contracts
providing for monthly payments. A portion of the proceeds from cemetery sales is
generally required by law to be paid into perpetual care trust funds. Earnings
of perpetual care trust funds are used to defray the maintenance cost of
cemeteries. In addition, all or a portion of the proceeds from the sale of
pre-need cemetery merchandise may be required to be paid into trust funds. For
additional information regarding cemetery trust funds, see Note 1 to the
consolidated financial statements in Item 8 of this Form 10-K.
Death Care Industry. The funeral industry is characterized by a large
number of locally-owned, independent operations. The Company believes that there
are in excess of 22,000, 500, 1,200 and 4,000 funeral homes operating in the
United States, Australia, Canada and the United Kingdom, respectively. In order
to compete successfully, the Company's funeral homes must maintain competitive
prices, attractive, well-maintained and conveniently located facilities, a good
reputation and high professional standards. Heritage and tradition can provide
an established funeral home or cemetery with the opportunity for repeat business
from client families. Furthermore, an established firm can generate future
volume and revenues by marketing prearranged funeral services. Although the
Company is the largest company in the funeral service industry, the Company
currently owns less than 10% of the highly fragmented funeral service industry
in North America.
The cemetery industry is also characterized by a large number of
locally-owned independent operations. The Company's cemetery properties compete
with other cemeteries in the same general area. In order to compete
successfully, the Company's cemeteries must maintain competitive prices,
attractive and well-maintained properties, a good reputation, an effective sales
force and high professional standards.
FINANCIAL SERVICES OPERATION
In 1988, the Company formed Provident Services, Inc. ("Provident") to
provide capital financing to independent funeral home and cemetery operators.
The majority of Provident's loans are made to clients seeking to finance funeral
home or cemetery acquisitions. Additionally, Provident provides construction
loans for funeral home or cemetery improvement and expansion. Loan packages take
traditional forms of secured financing comparable to arrangements offered by
leading commercial banks. Provident's loans are generally made at interest rates
which fluctuate with the prime lending rate.
Provident had $209,000,000 in loans outstanding at December 31, 1994 and
unfunded loan commitments amounting to $10,068,000. Such loans outstanding
decreased from $250,000,000 in loans outstanding at December 31, 1993. Provident
obtains its funds primarily from the Company's variable interest rate bank
borrowings.
2
<PAGE> 4
Provident is in competition with banks and other lending institutions, many
of which have substantially greater resources than Provident. However, Provident
believes that its knowledge of the death care industry provides it with the
ability to make more accurate assessments of funeral home and cemetery industry
loans, thereby providing Provident a competitive advantage in making such loans.
EMPLOYEES
At December 31, 1994, the Company employed 12,619 persons on a full time
basis and 6,137 persons on a part time basis. Of the full time employees 12,121
were in the Funeral and Cemetery Operations, nine were in Financial Services and
489 were in corporate services. All of the Company's eligible United States
employees who so elect are covered by the Company's group health and life
insurance plans, and all eligible United States employees are participants in
retirement plans of the Company or various subsidiaries.
At December 31, 1994, 766 employees were covered by collective bargaining
agreements. Although disputes are experienced from time to time, in general,
relations with employees are considered satisfactory.
REGULATION
The Company's various operations are subject to regulations, supervision
and licensing under various federal, state, local and Australian, Canadian and
United Kingdom statutes, ordinances and regulations. The Company believes that
it is in substantial compliance with the significant provisions of such
statutes, ordinances and regulations. See discussion of FTC funeral industry
trade regulation and consent orders in "Funeral Homes" above.
ITEM 2. PROPERTIES.
The Company's executive headquarters are located at 1929 Allen Parkway,
Houston, Texas 77019, in a 12-story office building. A wholly-owned subsidiary
of the Company owns an undivided one-half interest in the building and its
parking garage. The property consists of approximately 1.3 acres, 250,000 square
feet of office space in the building and 160,000 square feet of parking space in
the garage. The Company leases all of the office space in the building pursuant
to a lease that expires June 30, 1995 providing for monthly rent of $87,000. The
rent is subject to escalation for all operating expenses above base year
operating expenses. One half of the rent is paid to the wholly-owned subsidiary
and the other half is paid to the owners of the remaining undivided one-half
interest. The Company owns and utilizes a three-story building at 1919 Allen
Parkway, Houston, Texas 77019 containing 43,000 square feet of office space. The
Company also owns the facilities of certain closed casket manufacturing
operations.
At December 31, 1994, the Company owned the real estate and buildings of
1,212 of its funeral home and cemetery locations and leased facilities in
connection with 479 of such operations. In addition, the Company leased three
aircraft pursuant to cancelable leases. At December 31, 1994, the Company
operated 5,389 vehicles, of which 3,087 were owned and 2,302 were leased. For
additional information regarding leases, see Note 8 to the consolidated
financial statements in Item 8 of this Form 10-K.
The Company's 220 cemeteries contain an aggregate of approximately 17,500
acres of which approximately 57% are developed.
The specialized nature of the Company's businesses requires that its
facilities be well maintained and kept in good condition. Management believes
that these standards are met.
ITEM 3. LEGAL PROCEEDINGS.
The Company is currently discussing with the staff of the Division of
Enforcement ("Staff") of the Securities and Exchange Commission ("Commission")
settlement of the matters arising out of the previously disclosed informal
investigation by the Staff with respect to the Company's disclosure about the
change in accountants. Such investigation was initially disclosed by the Company
in May 1993. The Staff has advised that it intends to recommend to the
Commission that it institute a cease and desist administrative proceeding
against the Company for alleged violations of Section 13(a) of the Securities
Exchange Act of 1934 with
3
<PAGE> 5
respect to the Company's disclosure in the March 31, 1993 Form 8-K, as amended,
relating to the change in the Company's accountants. The Company had previously
disclosed, initially in October 1994, that the Staff was considering such
recommendation against the Company. The Staff has advised that, depending upon
the outcome of the settlement discussions, the Staff will finalize its
recommendation to the Commission as to whether Mr. Robert L. Waltrip, Chairman
and Chief Executive Officer, Mr. L. William Heiligbrodt, President and Chief
Operating Officer, and Mr. Samuel W. Rizzo, Executive Vice President, would be
named as respondents in the proceeding. There is no assurance that the
settlement discussions between the Company and the Staff will be satisfactorily
concluded. In any event, the Commission will subsequently make the final
determinations on any action recommended by the Staff in these matters. Also see
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure in this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
Pursuant to General Instruction G to Form 10-K, the information regarding
executive officers of the Company called for by Item 401 of Regulation S-K is
hereby included in Part I of this report.
The following table sets forth as of March 24, 1995 the name and age of
each executive officer of the Company, the office held, and the date first
elected an officer.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
OFFICER NAME AGE POSITION OFFICER(1)
--------------------------------------- ---- -------------------------------------- ----------
<S> <C> <C> <C>
R. L. Waltrip.......................... (64) Chairman of the Board and Chief 1962
Executive Officer
L. William Heiligbrodt................. (53) President and Chief Operating Officer 1988
W. Blair Waltrip....................... (40) Executive Vice President Operations 1980
John W. Morrow, Jr. ................... (59) Executive Vice President 1989
Corporate Development
Jerald L. Pullins...................... (53) Executive Vice President 1992
European Operations
Samuel W. Rizzo........................ (59) Executive Vice President 1987
George R. Champagne.................... (41) Senior Vice President 1989
Chief Financial Officer
Glenn G. McMillen...................... (52) Senior Vice President Australia 1993
James M. Shelger....................... (45) Senior Vice President General Counsel 1987
and Secretary
Jack L. Stoner......................... (49) Senior Vice President Administration 1992
T. Craig Benson........................ (33) Vice President Operations; 1990
President -- Investment Capital
Corporation, a subsidiary of the
Company
Gregory L. Cauthen..................... (37) Vice President Treasurer 1995
Lowell A. Kirkpatrick, Jr. ............ (36) Vice President Corporate Development 1994
Richard T. Sells....................... (55) Vice President Prearranged Sales 1987
Vincent L. Visosky..................... (47) Vice President Operational Controller 1989
Henry M. Nelly, III.................... (50) President -- Provident Services, Inc., 1989
a subsidiary of the Company
</TABLE>
---------------
(1) Indicates the year a person was first elected as an officer although there
were subsequent periods when certain persons ceased being officers of the
Company.
4
<PAGE> 6
Unless otherwise indicated below, the persons listed above have been
executive officers or employees for more than five years.
Mr. Morrow was elected as an Executive Vice President in May 1991. From May
1990 to May 1991, Mr. Morrow was President of SCI Funeral Services, Inc., a
subsidiary of the Company. From February 1990 to May 1990, Mr. Morrow was
President and Chief Operating Officer of the Funeral Service Division of the
Company. From August 1989 to February 1990, Mr. Morrow was an officer of the
Company serving as Executive Vice President. Prior thereto, Mr. Morrow was
President and owner of J. W. Morrow Investment Company, a funeral home business,
and also provided consulting services to the Company.
Mr. Pullins joined the Company in September 1991 and was elected to his
present position in February 1992. Prior thereto from January 1987 through
August 1991, Mr. Pullins was President, Chief Executive Officer and Chief
Operating Officer of Sentinel Group, Inc., a funeral service company.
Mr. Stoner joined the Company in September 1991 and was elected to his
present position in August 1992. Prior thereto for more than five years, Mr.
Stoner was a general partner and Director of Tax of Ernst & Young (formerly
Arthur Young & Company), certified public accountants.
Mr. Cauthen joined the Company in February 1991 as Director/Taxation and
was promoted in March 1993 to Managing Director/Taxation. Prior to joining the
Company, Mr. Cauthen served as Vice President/ Taxes of First Interstate Bank
from August 1988 to February 1991.
Each officer of the Company is elected by the Board of Directors and holds
his office until his successor is elected and qualified or until his earlier
death, resignation or removal in the manner prescribed in the Bylaws of the
Company. Each officer of a subsidiary of the Company is elected by the
subsidiary's board of directors and holds his office until his successor is
elected and qualified or until his earlier death, resignation or removal in the
manner prescribed in the bylaws of the subsidiary. There is no family
relationship between any of the persons in the preceding table except that W.
Blair Waltrip is a son of R. L. Waltrip, that T. Craig Benson is a son-in-law of
R. L. Waltrip and that T. Craig Benson and W. Blair Waltrip are brothers-in-law.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has been traded on the New York Stock Exchange
since May 14, 1974. On December 31, 1994, there were 8,720 holders of record of
the Company's common stock.
The Company has declared 87 consecutive quarterly dividends on its common
stock since it began paying dividends in 1974. The dividend rate is currently
$.11 per share per quarter, or an indicated annual rate of $.44 per share. For
the three years ended December 31, 1994, dividends per share were $.42, $.40 and
$.39, respectively.
The table below shows the Company's quarterly high and low common stock
prices:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1994 1993 1992
------------- ------------- -------------
HIGH LOW HIGH LOW HIGH LOW
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First......................................... 28 24 3/4 21 5/8 17 7/8 18 3/8 15 5/8
Second........................................ 25 7/8 22 1/2 22 1/8 18 1/2 18 3/4 16 1/8
Third......................................... 26 5/8 24 7/8 25 1/4 20 3/4 18 1/2 16 3/8
Fourth........................................ 27 3/4 24 1/8 26 3/8 23 1/2 18 1/2 16 3/4
</TABLE>
SRV is the New York Stock Exchange ticker symbol for the common stock of
the Company. Options in the Company's common stock are traded on the
Philadelphia Stock Exchange under the symbol SRV.
5
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,*
-------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $1,117,175 $ 899,178 $ 772,477 $ 643,248 $ 563,156
Income before income taxes and
preferred dividend
requirement..................... 219,021 173,492 139,336 108,872 99,432
Income available to common
stockholders.................... 131,045 101,061 86,536 73,372 60,218
Income available to common
stockholders per share.......... 1.51 1.21 1.13 1.03 .85
Dividends per share............... .42 .40 .39 .37 .37
Total assets...................... 5,161,888 3,683,304 2,611,123 2,123,452 1,653,689
Long-term debt.................... 1,330,177 1,062,222 980,029 786,685 577,378
Convertible preferred shares of a
subsidiary...................... 172,500 -- -- -- --
Stockholders' equity.............. 1,196,622 884,513 683,097 615,776 434,323
Shares outstanding................ 94,857 84,859 76,905 75,981 68,801
Ratio of earnings to combined
fixed charges and preferred
stock dividends**............... 3.13 3.19 3.03 2.82 2.62
</TABLE>
---------------
* The year ended December 31, 1993 reflects a change in accounting principles
adopted January 1, 1993. The three years ended December 31, 1992 reflect
results as historically reported.
** For purposes of computing the ratio of earnings to combined fixed charges and
preferred stock dividends, earnings consist of income form continuing
operations before income taxes, less undistributed income of equity investees
which are less than 50% owned, plus the minority interest of majority-owned
subsidiaries with fixed charges and plus fixed charges (excluding capitalized
interest and preferred stock dividends). Combined fixed charges consist of
interest expense, whether capitalized or expensed, amortization of debt
costs, one-third of rental expense which the Company considers representative
of the interest factor in the rentals and preferred stock dividends. For
purposes of determining combined fixed charges and preferred stock dividends,
preferred stock dividends are calculated on the basis of the amount of
pre-tax income required to pay preferred stock dividends.
6
<PAGE> 8
SCI International Limited
SCI International Limited ("International") is a wholly-owned subsidiary of
the Company. International, through wholly owned subsidiaries, began operations
in mid 1993 and owns the Company's operations in Australia and the United
Kingdom as well as the Company's investment in Arbor Memorial Service, Inc. as
described in Item 7 of this Form 10-K. In late 1994, International borrowed
$216,315,000 from SCI Finance LLC ("Finance"), another subsidiary of the
Company, and used or intends to use such funds to repay short-term bank
borrowings which funded the Company's United Kingdom acquisitions. International
pays Finance an annual interest rate of 6.25% on the outstanding balance.
Set forth below is certain summary financial information for International.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1994 1993
---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues............................................................. $ 99,033 $ 17,345
---------- --------
Gross profit......................................................... $ 30,068 $ 5,185
---------- --------
Net income........................................................... $ 4,353 $ 2,806
---------- --------
Current assets....................................................... $ 215,104 $ 8,746
Non-current assets................................................... 885,417 91,982
---------- --------
Total assets......................................................... $1,100,521 $100,728
---------- --------
Current liabilities.................................................. $ 258,723 $ 7,787
Non-current liabilities.............................................. 805,939 70,084
---------- --------
Total liabilities.................................................... $1,064,662 $ 77,871
========= ========
Stockholder's equity................................................. $ 35,859 $ 22,857
========= ========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND AVERAGE SALES
PRICES)
OVERVIEW:
The majority of the Company's funeral homes and cemeteries are managed in
groups called clusters. Clusters are established primarily in metropolitan areas
to take advantage of operational efficiencies, particularly the sharing of
operating expenses such as service personnel, vehicles, preparation services,
clerical staff and certain building facility costs. Personnel costs, the largest
operating expense for the Company, is the cost component most beneficially
affected by clustering. The sharing of employees, as well as the other costs
mentioned, allow the Company's operations to more efficiently handle the
traditional wide fluctuations in the volume of funeral services and cemetery
interments performed in a given time period. The Company's acquisitions are
primarily concentrated within existing cluster areas or create new cluster area
opportunities. The Company has successfully implemented the cluster strategy in
the North American and Australian operations and is proceeding with
implementation in the recently acquired United Kingdom operations. The Company
has approximately 160 clusters in North America and Australia, which range in
size from two operations to 57 operations. There may be more than one cluster in
a given metropolitan area, depending upon the level and degree of shared costs.
7
<PAGE> 9
RESULTS OF OPERATIONS:
Year Ended 1994 Compared to 1993
Segment information for the Company's three lines of business are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------- PERCENTAGE
1994 1993 INCREASE INCREASE
---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Funeral..................... $ 754,408 $ 603,099 $151,309 25.1%
Cemetery.................... 343,521 280,421 63,100 22.5
Financial services.......... 19,246 15,658 3,588 22.9
---------- --------- --------
1,117,175 899,178 217,997 24.2
Costs and expenses:
Funeral..................... (531,803) (426,008) 105,795 24.8
Cemetery.................... (233,295) (200,682) 32,613 16.3
Financial services.......... (10,882) (9,168) 1,714 18.7
---------- --------- --------
(775,980) (635,858) 140,122 22.0
Gross profit margin and
percentage:
Funeral..................... 222,605 29.5% 177,091 29.4% 45,514 25.7
Cemetery.................... 110,226 32.1% 79,739 28.4% 30,487 38.2
Financial services.......... 8,364 43.5% 6,490 41.4% 1,874 28.9
---------- --------- --------
$ 341,195 30.5% $ 263,320 29.3% $ 77,875 29.6
========== ========= ========
</TABLE>
FUNERAL
Funeral revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------- PERCENTAGE
1994 1993 INCREASE INCREASE
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $627,365 $562,231 $ 65,134 11.6%
New clusters*................................... 58,419 15,162 43,257
-------- -------- -------- -----
Total clusters............................. 685,784 577,393 108,391 18.8%
United Kingdom.................................. 39,277 -- 39,277
Non-cluster and disposed operations............. 29,347 25,706 3,641
-------- -------- -------- -----
Total funeral revenues..................... $754,408 $603,099 $151,309 25.1%
======== ======== ======== =====
</TABLE>
The $65,134 increase in revenues at existing clusters was the result of an 8.0%
increase in funeral services performed (175,284 compared to 162,287) and a 3.3%
higher average sales price ($3,579 compared to $3,464). Included in this
increase were $46,896 in increased revenues from locations acquired since the
beginning of 1993. The death rate in North America has remained relatively
constant for several years and is expected to remain at this rate for at least
the near future; however, due to the increasing proportion of people over age 65
in the North American population, demand for funeral services should accelerate
in the decades to come. It is anticipated that the Company's near term revenue
growth will continue to be primarily generated from acquired operations (added
to existing clusters and the creation of new clusters) as well as higher average
sales prices from improved merchandising of funeral services and products as
well as periodic price increases. The Company believes that future growth
through acquisitions is likely. Despite being the largest company in the funeral
service industry, the Company currently owns less than 10% of the highly
fragmented funeral service industry in North America. The Company believes that
there are several thousand potential
---------------
* Represents new geographic cluster areas entered into since the beginning of
1993 for the period that those businesses were owned by the Company.
8
<PAGE> 10
acquisition candidates in North America. Additionally, the Company's recent
Australian and United Kingdom acquisitions demonstrate an increased focus on
international acquisition opportunities.
The majority of new cluster revenue represents the Company's Australian
operations which contributed $29,042 of the increase. The Company began
operations in Australia in the latter half of 1993. The United Kingdom
operations represent approximately four months of Company ownership.
During the year ended December 31, 1994, the Company sold approximately
$245,000 of prearranged funeral services compared to approximately $159,000 for
the same period in 1993. These prearranged funeral services are deferred and
will be reflected in funeral revenues in the periods that the funeral services
are performed. The current emphasis on sales of prearranged funerals is expected
to continue.
Funeral costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------- PERCENTAGE
1994 1993 INCREASE INCREASE
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $411,604 $367,285 $ 44,319 12.1%
New clusters*................................... 41,353 11,326 30,027
-------- -------- -------- -----
Total clusters............................. 452,957 378,611 74,346 19.6%
United Kingdom.................................. 29,909 -- 29,909
Non-cluster and disposed operations............. 20,129 18,916 1,213
Administrative overhead......................... 28,808 28,481 327
-------- -------- -------- -----
Total funeral costs and expenses........... $531,803 $426,008 $105,795 24.8%
======== ======== ======== =====
</TABLE>
The gross profit margin for existing clusters declined slightly to 34.4% from
34.7% last year. Acquisitions since the beginning of 1993, included in existing
clusters, accounted for $37,580 of the existing cluster cost increase and were
the reason for the existing cluster gross profit margin decline. Typically,
acquisitions will temporarily exhibit slightly lower gross profit margins than
those experienced by the Company's existing locations at least until such time
as these locations are assimilated into the Company's cluster management
strategy. This was especially noticeable given the large number of acquired
operations incorporated into existing clusters in 1994 and 1993. The gross
profit margin for those funeral operations in existing clusters that were
acquired before 1993 increased to 35.6% in 1994 from 34.7% last year due to the
increased revenues discussed above without a corresponding increase in personnel
and other operating costs.
The majority of new cluster costs represent the Company's Australian
operations which contributed $19,544 of the increase. Contributing to the
overall funeral gross profit margin improvement (29.5% compared to 29.4% last
year) were reduced administrative overhead costs when expressed as a percentage
of revenues.
CEMETERY
Cemetery revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------- PERCENTAGE
1994 1993 INCREASE INCREASE
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters................................ $309,332 $262,643 $ 46,689 17.8%
New clusters*.................................... 19,775 7,633 12,142
-------- -------- -------- ----
Total clusters.............................. 329,107 270,276 58,831 21.8%
United Kingdom................................... 3,316 -- 3,316
Non-cluster and disposed operations.............. 11,098 10,145 953
-------- -------- -------- ----
Total cemetery revenues..................... $343,521 $280,421 $ 63,100 22.5%
======== ======== ======== ====
</TABLE>
---------------
* Represents new geographic cluster areas entered into since the beginning of
1993 for the period that those businesses were owned by the Company.
9
<PAGE> 11
Revenues for existing clusters increased due to an increased volume of
sales and higher average sales prices for property and merchandise. Included in
the existing cluster increase were $16,395 in increased revenues from cemeteries
acquired since the beginning of 1993. The Company plans to continue to emphasize
the selling of preneed cemetery property and merchandise by maintaining an
active and well-trained sales force. Additionally, future growth through
acquisitions is considered likely. The majority of new cluster revenue
represents the Company's Australian operations which contributed $10,033 of the
increase.
Cemetery costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------- INCREASE PERCENTAGE
1994 1993 (DECREASE) INCREASE
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $195,886 $172,147 $ 23,739 13.8%
New clusters*................................... 9,706 3,962 5,744
--------- --------- ---------- ----------
Total clusters............................. 205,592 176,109 29,483 16.7%
United Kingdom.................................. 2,425 -- 2,425
Non-cluster and disposed operations............. 7,749 7,978 (229)
Administrative overhead......................... 17,529 16,595 934
--------- --------- ---------- ----------
Total cemetery costs and expenses.......... $233,295 $200,682 $ 32,613 16.3%
======== ======== ======== ========
</TABLE>
Costs at existing clusters increased $23,739 due to an increase of $12,296 from
cemeteries acquired since the beginning of 1993. Costs from existing cluster
cemeteries acquired before 1993 increased $11,443 due to the costs associated
with the increased revenues discussed above. The majority of new cluster costs
represent the Company's Australian operations which contributed $4,914 of the
increase.
The overall cemetery gross profit margin increase to 32.1% from 28.4% last
year reflects the strong revenue growth as well as continued cost control in all
major expense categories. The Company believes such gross profit margins are
attainable in the future with continued aggressive sales programs and cost
controls at both domestic and foreign cemeteries. Administrative overhead costs
have decreased to 5.1% of revenues this year compared to 5.9% last year.
FINANCIAL SERVICES
The Company's wholly-owned finance subsidiary, Provident Services, Inc.
("Provident") reported a slightly improved interest rate spread and reduced
administrative expense, when expressed as a percentage of revenue, which
increased the gross profit margin percentage to 43.5% this year from 41.4% last
year. The average outstanding loan portfolio during the current year was
approximately $235,000 with an average interest rate spread of 3.4% compared to
approximately $216,000 and 3.3%, respectively, last year.
OTHER INCOME AND EXPENSES
Expressed as a percentage of revenues, general and administrative expenses
were 4.6% in 1994 compared to 4.9% last year. These expenses increased by $7,994
or 18.3% during the year. Of the increase, $2,811 was attributable to personnel
expenses primarily relating to incentive compensation and retirement plan costs.
Professional fees increased $3,817 in the current year primarily from legal
costs associated with the investigation of the Company by the Commission
relating to the Company's change of accountants in 1993 and the Company's Form
8-K dated March 31, 1993, as amended in April 1993, reporting such change. The
remainder of the increase was derived primarily from corporate transportation
and travel costs.
Interest expense, which excludes the amount incurred through financial
service operations, increased $20,492 or 34.4% during the current year primarily
from borrowings incurred to fund the Company's ongoing acquisition program.
Increased borrowings and higher interest rates incurred under the existing lines
of credit
---------------
* Represents new geographic cluster areas entered into since the beginning of
1993 for the period that those businesses were owned by the Company.
10
<PAGE> 12
and commercial paper added $7,759. Also contributing to the increase was the
recognition of $8,311 in interest expense associated with the recent
acquisitions in the United Kingdom, $2,909 in increased interest expense from
the Company's various debenture issues and $838 from the December 1994 issuance
of $200,000 8.375% notes due in 2004.
Other income (expense) declined in the current year primarily from fewer
sales of excess real estate and businesses in 1994. The provision for income
taxes reflected a 40.2% effective tax rate for 1994 as compared to a 40.6%
effective tax rate in the prior year.
RESULTS OF OPERATIONS:
Year Ended 1993 Compared to 1992
For purposes of management's discussion and analysis of results of
operations, all comparisons to 1992 reflect the pro forma effects of applying
the new accounting principles discussed in note 2 to the consolidated financial
statements as if the changes had occurred on December 31, 1991. The following
table presents the condensed pro forma results for the year ended 1992:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
UNAUDITED
AS REPORTED PRO FORMA
1993 1992
----------- ---------
<S> <C> <C>
Revenues:
Funeral............................................................ $ 603,099 $ 532,914
Cemetery........................................................... 280,421 217,100
Financial services................................................. 15,658 10,741
---------- ---------
899,178 760,755
Costs and expenses:
Funeral............................................................ (426,008) (379,223)
Cemetery........................................................... (200,682) (164,188)
Financial services................................................. (9,168) (6,632)
---------- ---------
(635,858) (550,043)
---------- ---------
Gross profit......................................................... $ 263,320 $ 210,712
========== =========
Income before income taxes........................................... $ 173,492 $ 127,993
Income taxes......................................................... (70,400) (48,500)
---------- ---------
Income before cumulative effect of change in accounting principles... $ 103,092 $ 79,493
========== =========
</TABLE>
In 1993, total funeral revenues increased $70,185 or 13.2% over 1992.
Funeral revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------- INCREASE PERCENTAGE
1993 1992* (DECREASE) INCREASE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $548,771 $497,092 $ 51,679 10.4%
New clusters**.................................. 28,376 2,259 26,117
-------- -------- --------
Total clusters............................. 577,147 499,351 77,796 15.6%
Non-cluster and disposed operations............. 25,952 33,563 (7,611)
-------- -------- -------- ----
Total funeral revenues..................... $603,099 $532,914 $ 70,185 13.2%
======== ======== ======== ====
</TABLE>
---------------
* Unaudited pro forma.
** Represents new geographic cluster areas entered into since the beginning of
1992 for the period that those businesses were owned by the Company.
11
<PAGE> 13
The $51,679 increase in revenues at existing clusters was the result of
10,193 or 6.9% more funeral services performed and a $111 or 3.3% higher average
sales price. Included in this increase is $29,281 in revenues from locations
acquired during the two year period.
During 1993, the Company sold approximately $159,000 of prearranged funeral
services compared to approximately $119,000 for 1992. These prearranged funeral
services are deferred and will be reflected in funeral revenues in the periods
that the funeral services are performed.
Total funeral costs and expenses increased $46,785 or 12.3% in 1993.
Funeral costs and expenses were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------- INCREASE PERCENTAGE
1993 1992* (DECREASE) INCREASE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $357,118 $324,893 $ 32,225 9.9%
New clusters**.................................. 21,571 1,755 19,816
-------- -------- -------- ----
Total clusters........................ 378,689 326,648 52,041 15.9%
Non-cluster and disposed operations............. 18,838 27,654 (8,816)
Administrative overhead......................... 28,481 24,921 3,560
-------- -------- -------- ----
Total funeral costs and expenses...... $426,008 $379,223 $ 46,785 12.3%
======== ======== ======== ====
</TABLE>
Existing cluster funeral costs, expressed as a percentage of revenues, were
65.1% which was slightly lower than the 65.4% recorded in 1992. This operating
margin improvement was achieved despite the large number of acquisitions which
occurred during the two year period. Typically, acquisitions will temporarily
exhibit slightly lower operating margins than the Company's more established
locations. These acquisitions accounted for $19,548 of the existing cluster cost
increase. The improved gross profit margin reflects, as a percentage of
revenues, reduced personnel costs (the largest funeral expense item) and
merchandise costs. As a percentage of revenues, administrative overhead costs
related to funeral operations remained at 4.7% in both years.
Total cemetery revenues increased $63,321 or 29.2% over 1992. Cemetery
revenues were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------- INCREASE PERCENTAGE
1993 1992* (DECREASE) INCREASE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $254,343 $202,709 $ 51,634 25.5%
New clusters**.................................. 14,818 946 13,872
-------- -------- -------- ----
Total clusters........................ 269,161 203,655 65,506 32.2%
Non-cluster and disposed operations............. 11,260 13,445 (2,185)
-------- -------- -------- ----
Total cemetery revenues............... $280,421 $217,100 $ 63,321 29.2%
======== ======== ======== ====
</TABLE>
Revenues for the existing clusters increased due to increased sales volume,
higher average contract prices and additional earnings from cemetery perpetual
care and merchandise trust funds. Included in the existing cluster increase were
$40,059 in increased revenues from cemeteries acquired during the two year
period.
12
<PAGE> 14
Total cemetery costs and expenses increased $36,494 or 22.2% over the prior
year. Cemetery costs and expenses were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------- INCREASE PERCENTAGE
1993 1992* (DECREASE) INCREASE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters............................... $167,635 $141,178 $ 26,457 18.7%
New clusters**.................................. 8,414 892 7,522
-------- -------- -------- ----
Total clusters............................. 176,049 142,070 33,979 23.9%
Non-cluster and disposed operations............. 8,038 10,437 (2,399)
Administrative overhead......................... 16,595 11,681 4,914
-------- -------- -------- ----
Total cemetery costs and expenses.......... $200,682 $164,188 $ 36,494 22.2%
======== ======== ======== ====
</TABLE>
The entire increase in existing cluster costs results from increased costs
at cemeteries acquired during the two year period. There was no increase in
costs at other cemeteries included in existing clusters despite the sales
increase discussed above. Cost containment in the areas of selling and
maintenance expenses contributed to the lack of increase. Cemetery costs,
expressed as a percentage of revenues, at existing clusters decreased to 65.9%
this year from 69.6% in 1992. Administrative overhead costs have increased
slightly, when expressed as a percentage of revenue, to 5.9% currently from 5.4%
in 1992.
Financial service revenues and costs increased in 1993 as a result of
increased loans outstanding and improved interest rate spreads. The average
outstanding loan portfolio during 1993 was approximately $216,000 with an
average interest rate spread of 3.3% compared to approximately $144,000 and
2.6%, respectively, in 1992.
General and administrative expenses increased by $5,013 or 13.0%. The
increase is primarily attributable to compensation expense in connection with
performance-based vesting of restricted stock grants to Company management.
Vesting is based on a formula primarily tied to earnings per share growth.
Interest expense, which excludes the amount incurred through financial
service operations, increased $5,729 or 10.6% during 1993. In February 1993, the
Company issued $150,000 of 7.875% debentures due in 2013. The proceeds were
primarily used to repay existing credit agreement borrowings. Also in February
1993, the Company called the $100,000 6.5% convertible debentures originally
issued in 1986. Holders of the debentures converted $97,164 into Company common
stock at $17.33 per share (5,607,000 shares) with the remaining $2,836 redeemed
in cash. Additionally, interest expense was reduced by decreased average
interest rates on amounts borrowed under the Company's credit agreements during
1993 compared to 1992.
Other income includes the recognition of gains from the sale of excess real
estate and existing businesses during both periods.
The effective tax rate has increased to 40.6% from 37.9% during 1992
primarily due to the enactment of the Omnibus Budget Reconciliation Act of 1993
in August 1993 which increased corporate tax rates retroactively to January 1,
1993. As a result of the new law, the Company's 1993 tax expense increased
$2,431 from increased deferred income taxes and $1,700 from the higher corporate
tax rate on 1993 earnings.
---------------
* Unaudited pro forma.
** Represents new geographic cluster areas entered into since the beginning of
1992 for the period that those businesses were owned by the Company.
13
<PAGE> 15
FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1994:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In December 1994 the Company sold, through underwritten public offerings,
7,700,000 common shares at a net $24.70 per share, $200,000, 8.375% ten-year
notes due in 2004 and $172,500, 6.25% term convertible preferred shares of a
Company subsidiary. In January 1995, an additional 780,000 common shares were
sold at a net $24.70 per share pursuant to an underwriters over-allotment
provision. All of these securities were sold pursuant to a $1,000,000 shelf
registration of securities filed with the Commission in November 1994. The net
proceeds of these offerings were used in the Company's acquisition program or
were used to repay existing bank debt. Presently, the Company may issue an
additional $411,260 of securities under this shelf registration; however, there
are no current plans for such issuance.
The Company's current ratio is 1.25:1 at December 31, 1994 compared to
2.22:1 at December 31, 1993. This decline is caused by $204,759 of short-term
bank borrowings used to fund the Company's recent United Kingdom acquisitions as
well as $48,660 of medium-term notes payable within one year. Cash and cash
equivalents have increased $197,519 due primarily from the issuance, in December
1994, of the $172,500 term convertible preferred shares of a Company subsidiary
discussed above. The Company repaid the $204,759 short-term bank borrowings with
available cash in the first quarter of 1995.
Long-term debt has increased to $1,330,177 this year compared to $1,062,222
last year due primarily to the issuance of the $200,000 ten-year notes discussed
above and $199,011 of additional bank borrowings used to fund the United Kingdom
acquisition which were permanently refinanced in January 1995 with 8.72%
fixed-rate, seven-year amortizing notes issued through a private offering.
Primarily as the result of the issuance of the $200,000 ten-year notes,
borrowings or issuances of commercial paper under the Company's $700,000 primary
bank revolving credit agreements were reduced to $239,300 at December 31, 1994
compared to $385,000 at December 31, 1993. Including the impact of interest rate
swaps (discussed in note 6 to the consolidated financial statements) the
Company's overall debt outstanding is represented by 55% in fixed interest rate
debt and 45% in variable interest rate debt, after the refinancing of the
$199,011 and the repayment of the $204,759 of bank borrowings in the first
quarter of 1995 discussed above. The Company believes that debt service is
manageable at the current levels of debt outstanding. Interest rate coverage for
1995 should approximate the 3.42 coverage experienced in 1994. This interest
rate coverage level has been consistent, despite higher levels of debt
outstanding, for several years. The Company believes that the acquisition of
funeral and cemetery operations funded primarily with debt is a prudent business
strategy given the stable cash flow generated and the impressive non-failure
rate exhibited by these businesses. These acquired firms are capable of
servicing the additional debt and providing a sufficient return on the Company's
investment.
The remaining increases in other long-term assets and liabilities are
primarily the result of acquisition activity in 1994 (see note 3 to the
consolidated financial statements).
The increase in stockholders' equity in 1994 was the result of issuing
7,700,000 common shares discussed above. The remainder of the increase in
stockholders' equity resulted primarily from higher retained earnings generated
from the Company's net income after payment of common dividends.
Cash flows continue to be impacted by the Company's aggressive acquisition
of funeral homes and cemeteries. In addition, capital expenditures, including
new construction of facilities and major improvements to existing properties,
continue to require a significant amount of cash. Funds generated from the
earnings of existing funeral and cemetery operations, together with unused lines
of credit and $411,260 of available securities under the $1,000,000 shelf
registration mentioned above or other available borrowings, are expected to be
sufficient for the Company to continue its current acquisition and operating
policies. At December 31, 1994, the Company had available approximately $544,000
of borrowing ability under its various credit lines.
In addition to the sources of cash, the Company has 12,149,000 shares of
common stock, $69,342 of guarantees of promissory notes and $74,382 of
convertible debentures registered with the Commission to be used exclusively for
future acquisitions.
14
<PAGE> 16
PREARRANGED FUNERAL SERVICES
The Company has a marketing program to sell prearranged funeral contracts
and the funds collected are generally held in trust (45% of total funds) or are
used to purchase a life insurance or annuity contract (55% of total funds). The
principal amount of these prearranged funeral contracts will be received in cash
by a Company funeral home at the time the funeral is performed. Earnings on
trust funds and increasing benefits under insurance funded contracts also
increase the amount of cash to be received and are intended to cover future
increases in the cost of providing a price guaranteed funeral service. Marketing
costs incurred with the sale of prearranged funeral contracts are a current use
of cash which is partially offset with cash retained, pursuant to state laws,
from amounts trusted and certain commissions earned by the Company for sales of
insurance products. The Company believes prearrangements add stability to the
funeral service industry and will stimulate future revenue growth. Prearranged
funeral services fulfilled as a percent of the total funerals performed annually
approximates 20% and is expected to grow, thereby making the total number of
funerals performed more predictable.
CREMATIONS
In recent years there has been steady, gradual growth in the number of
cremations that have been chosen as an alternative to traditional methods of
disposal of human remains. According to industry studies, cremations currently
account for approximately 20% of all dispositions in the United States. The
Company's North American operations perform substantially more cremations than
the national average. In 1994, slightly over 30% of all families served by the
Company's North American funeral homes selected the cremation alternative. The
Company has a significant number of operating locations in Florida and all along
the west coast of North America where the cremation alternative continues to
gain acceptance. Based on industry studies, the Company believes that cremations
account for approximately 60% to 70% of all dispositions of human remains in
Australia and in the United Kingdom. Though a cremation typically results in
less sales dollars than a traditional funeral service, the Company believes that
funeral operations which are predominantly cremation businesses typically have
higher gross profit margin percentages than those exhibited at traditional
funeral operations.
FOREIGN MATTERS
The Company is considering the desirability and feasibility of an
acquisition of Pompes Funebres Generales S.A. ("PFG"), which operates
approximately 150 funeral homes or similar facilities and 750 other retail
outlets in France and is the largest operator of funeral homes in France.
Although the Company has had, and intends to continue, exploratory discussions
with Lyonnaise des Eaux-Dumez S.A. ("Lyonnaise"), which controls approximately
66% of the stock of PFG, in regard to various potential transactions, Lyonnaise
has advised the Company that it has no intention of selling its interest in PFG.
In light of the statement by Lyonnaise that it has no intention of selling its
interest in PFG, 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.
The Company has acquired approximately 9.7% of the Class A common stock and
approximately 19.9% of the Class B common stock of Arbor Memorial Services Inc.
("Arbor"). Arbor owns 44 cemeteries and 21 crematoriums in Canada. The Company,
which acquired its position in Arbor as a strategic investment, is continuing to
consider means to build its relationship with Arbor and may continue to increase
its investment in Arbor. The Company has been advised by the Arbor stockholder
who owns a majority of the Class A common stock that he was not currently
interested in a transaction involving a sale of control of Arbor.
15
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND RELATED SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Accountants.................................................... 17
Consolidated Statement of Income for the three years ended December 31, 1994.......... 19
Consolidated Balance Sheet as of December 31, 1994 and 1993........................... 20
Consolidated Statement of Cash Flows for the three years ended December 31, 1994...... 21
Consolidated Statement of Stockholders' Equity for the three years ended December 31,
1994................................................................................ 22
Notes to Consolidated Financial Statements............................................ 23
Financial Statement Schedule:
II -- Valuation and Qualifying Accounts............................................... 42
</TABLE>
All other schedules have been omitted because the required information is
not applicable or is not present in amounts sufficient to require submission or
because the information required is included in the consolidated financial
statements or the related notes thereto.
16
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Service Corporation International
We have audited the accompanying consolidated balance sheet of Service
Corporation International as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. We have also audited the financial statement schedule for the
years ended December 31, 1994 and 1993, listed in the index at item 8 of this
Form 10-K. These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Service
Corporation International as of December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for prearranged
funeral contracts and cemetery sales and income taxes.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 10, 1995
17
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Service Corporation International
We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Service Corporation International for the
year ended December 31, 1992. Our audit also included the financial statement
schedule for the year ended December 31, 1992 listed in the index at Item 8.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 consolidated results of operations
of Service Corporation International and its cash flows for the year ended
December 31, 1992, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule for the year
ended December 31, 1992, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Houston, Texas
February 8, 1993
18
<PAGE> 20
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
---------- --------- ---------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues................................................ $1,117,175 $ 899,178 $ 772,477
Costs and expenses...................................... (775,980) (635,858) (550,422)
---------- --------- ---------
Gross profit............................................ 341,195 263,320 222,055
General and administrative expenses..................... (51,700) (43,706) (38,693)
---------- --------- ---------
Income from operations.................................. 289,495 219,614 183,362
Interest expense........................................ (80,123) (59,631) (53,902)
Other income (expense).................................. 9,649 13,509 9,876
---------- --------- ---------
(70,474) (46,122) (44,026)
---------- --------- ---------
Income before income taxes.............................. 219,021 173,492 139,336
Provision for income taxes.............................. (87,976) (70,400) (52,800)
---------- --------- ---------
Income before cumulative effect of change in accounting
principles............................................ 131,045 103,092 86,536
Cumulative effect of change in accounting principles
(net of income tax)................................... -- (2,031) --
---------- --------- ---------
Net income.............................................. $ 131,045 $ 101,061 $ 86,536
========= ========= =========
Earnings per share:
Primary
Income before cumulative effect of change in
accounting principles............................ $ 1.51 $ 1.24 $ 1.13
Cumulative effect of change in accounting
principles (net of income tax)................... -- (.03) --
---------- --------- ---------
Net income............................................ $ 1.51 $ 1.21 $ 1.13
========= ========= =========
Fully diluted
Income before cumulative effect of change in
accounting principles.............................. $ 1.43 $ 1.19 $ 1.07
Cumulative effect of change in accounting principles
(net of income tax)................................ -- (.02) --
---------- --------- ---------
Net income............................................ $ 1.43 $ 1.17 $ 1.07
========= ========= =========
Weighted average number of shares and equivalents....... 86,926 83,372 76,856
========= ========= =========
</TABLE>
(See notes to consolidated financial statements)
19
<PAGE> 21
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 218,341 $ 20,822
Receivables, net of allowances.................................... 291,135 236,786
Inventories....................................................... 60,897 45,211
Other............................................................. 21,436 9,640
---------- ----------
Total current assets...................................... 591,809 312,459
---------- ----------
Prearranged funeral contracts....................................... 1,418,104 1,244,866
Long-term receivables............................................... 529,843 500,062
Cemetery property, at cost.......................................... 748,639 417,050
Property, plant and equipment, at cost (net)........................ 832,401 606,826
Deferred charges and other assets................................... 230,336 174,345
Names and reputations (net)......................................... 810,756 427,696
---------- ----------
$5,161,888 $3,683,304
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.......................... $ 154,770 $ 96,881
Income taxes...................................................... 39,084 18,695
Current maturities of long-term debt.............................. 277,709 24,982
---------- ----------
Total current liabilities................................. 471,563 140,558
---------- ----------
Long-term debt...................................................... 1,330,177 1,062,222
Deferred income taxes............................................... 238,088 146,968
Other liabilities................................................... 233,356 185,636
Deferred prearranged funeral contract revenues...................... 1,519,582 1,263,407
Commitments and contingencies....................................... -- --
Convertible preferred shares of subsidiary (stated at liquidation
value of $50 per share)........................................... 172,500 --
Stockholders' equity:
Common stock, $1 per share par value, 200,000,000 shares
authorized, 94,857,060 and 84,859,110, respectively, issued
and outstanding................................................ 94,857 84,859
Capital in excess of par value.................................... 718,858 517,902
Retained earnings................................................. 381,509 284,879
Foreign translation adjustment.................................... 1,398 (3,127)
---------- ----------
Total stockholders' equity................................ 1,196,622 884,513
---------- ----------
$5,161,888 $3,683,304
========== ==========
</TABLE>
(See notes to consolidated financial statements)
20
<PAGE> 22
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1993 1992
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 131,045 $ 101,061 $ 86,536
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 76,077 58,214 47,369
Undistributed earnings of trusts...................... -- -- (17,959)
Provision for deferred income taxes................... 27,490 29,235 13,324
Gains from dispositions (net)......................... (2,143) (7,076) (3,237)
Cumulative effect of change in accounting
principles......................................... -- 2,031 --
Change in assets and liabilities net of effects from
acquisitions:
(Increase) in receivables.......................... (103,935) (35,520) (10,962)
Change in prearranged funeral contracts and
associated deferred revenues..................... 42,446 (14,464) --
(Increase) decrease in other assets................ (35,983) 1,967 528
Increase (decrease) in other liabilities........... 27,606 (9,826) 28,514
Other.............................................. (159) 5,332 1,411
--------- --------- ---------
Net cash provided by operating activities............... 162,444 130,954 145,524
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures.................................. (81,090) (59,585) (66,820)
Proceeds from sales of property and equipment......... 13,294 24,006 18,812
Acquisitions.......................................... (307,587) (175,753) (117,737)
Loans issued by finance subsidiary.................... (48,320) (102,328) (136,959)
Principal payments received on loans by finance
subsidiary......................................... 76,288 41,652 44,280
Change in investments and other....................... (5,042) (2,367) (23,000)
--------- --------- ---------
Net cash used in investing activities................... (352,457) (274,375) (281,424)
--------- --------- ---------
Cash flows from financing activities:
(Payments) borrowings under bank revolving credit..... (108,200) 37,500 194,403
Senior notes issued................................... 200,000 -- --
Subordinated debentures issued........................ -- 150,000 --
Payments of debt...................................... (31,896) (24,283) (32,008)
Convertible preferred shares of subsidiary issued..... 172,500 -- --
Common stock issued................................... 189,726 -- --
Repurchase of common stock............................ -- (1,637) (6,569)
Dividends paid........................................ (36,013) (32,887) (29,629)
Exercise of stock options and other................... 1,415 4,297 2,534
--------- --------- ---------
Net cash provided by financing activities............... 387,532 132,990 128,731
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.... 197,519 (10,431) (7,169)
Cash and cash equivalents at beginning of year.......... 20,822 31,253 38,422
--------- --------- ---------
Cash and cash equivalents at end of year................ $ 218,341 $ 20,822 $ 31,253
========= ========= =========
</TABLE>
(See notes to consolidated financial statements)
21
<PAGE> 23
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
IN
EXCESS
OF UNREALIZED FOREIGN
COMMON PAR RETAINED (DEPRECIATION) TRANSLATION
STOCK VALUE EARNINGS OF INVESTMENTS ADJUSTMENT
------- -------- -------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991........... $75,981 $369,942 $168,371 $ -- $ 1,482
Add (deduct):
Net income........................... 86,536
Repurchase of common stock........... (398) (1,974) (4,197)
Common stock issued:
Stock option exercises and
stock grants.................... 589 9,150
Acquisitions...................... 733 12,120
Dividends on common stock ($.39 per
share)............................ (30,213)
Unrealized depreciation of
investments....................... (1,254)
Foreign translation adjustment....... (3,771)
------- -------- -------- -------------- -----------
Balance at December 31, 1992........... 76,905 389,238 220,497 (1,254) (2,289)
Add (deduct):
Net income........................... 101,061
Repurchase of common stock........... (66) (388) (1,183)
Common stock issued:
Stock option exercises and
stock grants.................... 995 18,899
Acquisitions...................... 1,418 17,432 (1,422)
Debenture conversion.............. 5,607 92,721
Dividends on common stock ($.40 per
share)............................ (34,074)
Unrealized depreciation of
investments....................... 1,254
Foreign translation adjustment....... (838)
------- -------- -------- -------------- -----------
Balance at December 31, 1993........... 84,859 517,902 284,879 -- (3,127)
Add (deduct):
Net income........................... 131,045
Retirement of common stock........... (32) (773)
Common stock issued:
Common stock offering............. 7,700 182,026
Stock option exercises and
stock grants.................... 226 3,675
Acquisitions...................... 2,033 7,458 2,729
Debenture conversion.............. 71 1,222
Dividends on common stock ($.42 per
share)............................ (37,144)
Foreign translation adjustment....... 4,525
Gain on sale of subsidiary stock and
other............................. 7,348
------- -------- -------- -------------- -----------
Balance at December 31, 1994........... $94,857 $718,858 $381,509 $ -- $ 1,398
======= ======== ======== ========== ========
</TABLE>
(See notes to consolidated financial statements)
22
<PAGE> 24
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE ONE
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Service Corporation International and all majority-owned
subsidiaries (the "Company"). Significant intercompany balances and transactions
have been eliminated in consolidation. Certain reclassifications of prior years
have been made to conform to current period classifications.
Cash Equivalents: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories: Inventories, consisting of funeral merchandise and cemetery
property and merchandise, are stated at cost, which is not in excess of market,
determined using average cost.
Depreciation and Amortization: Depreciation of property, plant and
equipment is provided using the straight line method over the estimated useful
lives of the various classes of assets. Property, plant and equipment are
depreciated over their useful lives ranging from seven to 50 years for property
and plant while equipment is depreciated over a period from three to 20 years.
For the three years ended December 31, 1994, depreciation expense was $35,546,
$26,757 and $24,497, respectively. Maintenance and repairs are charged to
expense whereas renewals and major replacements are capitalized. Prepaid
management, consultative and non-competition agreements, primarily with former
owners and key employees of businesses acquired are amortized over the lives of
the respective contracts.
Funeral Operations: Funeral revenue is recognized when the funeral service
is performed. The Company's trade receivables consist primarily of funeral
services already performed. An allowance for doubtful accounts has been provided
for those accounts based on historical experience. The Company sells price
guaranteed prearranged funeral contracts through various programs providing for
future funeral services at prices prevailing when the agreement is signed.
Payments under these contracts are generally placed in trust (pursuant to state
law) or are used to pay premiums on life insurance policies issued by third
party insurers. Unperformed price guaranteed prearranged funeral contracts are
included in the consolidated balance sheet as a long-term asset with a
corresponding credit to deferred prearranged funeral contract revenue.
Allowances for customer cancellations are provided at the date of sale which
reduces both the asset and deferred revenue based on historical experience.
Prearranged funeral trust earnings and increasing insurance benefits are accrued
and deferred until the service is performed and are intended to cover future
increases in the cost of providing a price guaranteed funeral service. Included
in deferred prearranged funeral contract revenues are net obtaining costs,
including sales commissions and certain other direct marketing costs, applicable
to prearranged funeral contracts which are deferred and will be expensed when
the service is performed. The aggregate costs deferred as of December 31, 1994
and 1993 were $53,962 and $32,518, respectively.
Cemetery Operations: All cemetery interment right sales, together with
associated merchandise, are recorded to income at the time contracts are signed.
Costs related to the sales of interment rights include property and other costs
related to cemetery development activities which are charged to operations using
the specific identification method. Allowances for customer cancellations are
provided at the date of sale based upon historical experience. Costs related to
merchandise are based on actual costs incurred or estimates of future costs
necessary to purchase the merchandise, including provisions for inflation when
required. Pursuant to state law, all or a portion of the proceeds from the sale
of cemetery merchandise may also be required to be paid into trust funds until
such merchandise is purchased by the Company for the customer. Merchandise funds
trusted at December 31, 1994 and 1993 were $176,071 and $133,583, respectively,
which approximates fair value. The Company recognizes income on these
merchandise trusts in current cemetery revenues as trust earnings accrue to
defray inflation costs recognized related to the unpurchased cemetery
merchandise. Additionally, a portion of the proceeds from the sale of cemetery
property is required by state law to be paid
23
<PAGE> 25
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
into perpetual care trust funds. Earnings from these trusts are recognized in
current cemetery revenues and are intended to defray cemetery maintenance costs.
Perpetual care funds trusted at December 31, 1994 and 1993 were $216,706 and
$197,969, respectively, which approximates fair value. The principal of such
perpetual care trust funds generally cannot be withdrawn by the Company and
therefore is not included in the consolidated balance sheet. For the three years
ended December 31, 1994, the earnings recognized from all cemetery trusts were
$24,456, $23,721 and $18,910, respectively.
Names and Reputations: The excess of purchase price over the fair value of
identifiable net assets acquired in transactions accounted for as a purchase are
included in "Names and reputations" and generally amortized on a straight line
basis over 40 years which, in the opinion of management, is not necessarily the
maximum period benefited. Many of the Company's acquired funeral homes have been
providing high quality service to client families for many years and such
loyalty often forms the basic valuation of a funeral business. The amortization
charged against income was $15,495, $10,339 and $9,601 for the three years ended
December 31, 1994, respectively. Fair values are determined by management or
independent appraisals.
Derivatives: Derivative financial instruments are periodically entered into
by the Company to hedge exposure to fluctuations in interest and foreign
exchange rates. The Company does not trade in financial instruments and is not a
party to leveraged derivatives. These financial instruments are with major
financial institutions and the Company does not anticipate any credit risk
because of nonperformance. While the hedging transactions are subject to risk of
loss from changes in interest rates and foreign exchange currency rates, such
losses would generally be offset by gains on the exposures being hedged. The
amounts exchanged by the parties are normally based on the notional amounts and
other terms of the derivatives, which relate to interest rates and foreign
exchange rates. The value of derivatives is derived from those underlying
parameters. Income and expense are accrued in the same category as that arising
from the related asset or liability, therefore amounts to be paid or received
under interest rate swap agreements are recognized as a charge or credit to
interest expense in the periods in which they accrue. Net deferred gains and
losses on the early termination of interest rate swaps ($1,093 in net losses)
are being amortized into interest expense over the remaining lives of the
original agreement.
NOTE TWO
CHANGE IN ACCOUNTING PRINCIPLES
Effective January 1, 1993, the Company changed the following accounting
principles:
(a) All price guaranteed prearranged funeral contracts are included in
the consolidated balance sheet as a long-term asset with a corresponding
credit to deferred prearranged funeral contract revenues. Insurance funded
contracts were previously disclosed in a note to the consolidated financial
statements and certain trust funded contracts were previously included
under other captions in the consolidated balance sheet. This change had no
effect on the existing policy of recognizing revenue when the funeral
service is performed.
(b) Prearranged funeral trust earnings previously recognized as
current income are now deferred until the funeral service is performed.
Increasing benefits under insurance funded contracts are now accrued and
deferred until the funeral service is performed.
(c) All sales of cemetery interment rights and other related products
are recorded as revenues when customer contracts are signed with concurrent
recognition of related costs. Allowances for customer cancellations are
provided at the date of sale based upon historical experience. Previously,
certain sales were generally deferred under accounting principles
prescribed for sales of real estate. Under the Company's application of
this method of accounting for sales of real estate, revenues and costs were
deferred until 20% of the contract amount had been collected.
24
<PAGE> 26
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Funds held in perpetual care cemetery trusts were previously
included on the consolidated balance sheet, whereas now such amounts are
excluded.
The accounting changes were made principally for the following reasons and
are described below in the order referred to above.
(a) The Company believes this accounting is more informative and
provides better disclosure of the future economic events because the
activity is all reported on the consolidated balance sheet.
(b) Funeral trust earnings and increasing benefits under insurance
contracts are intended to cover increases in the future costs of providing
price guaranteed funeral services. Accrued trust earnings were previously
recognized in current income and a provision was made for the estimated
effect of inflation on the costs of merchandise purchased by the Company.
Trust earnings are now deferred until performance of the funeral service
and increasing benefits under insurance funded contracts will be accounted
for similarly. The Company believes this policy will better match revenues
and costs because the total funds (principal and accrued earnings)
available to satisfy the contract will be included in revenues when the
funeral service is performed together with all costs related to performance
of the service.
(c) This method of cemetery accounting has been adopted because all
significant remaining obligations of the Company have been satisfied in the
period the contract is signed. Related costs are provided based on actual
costs incurred, firm commitments or reliable estimates. Historical
experience is the basis for making appropriate allowances for customer
cancellations and will be adjusted when required.
(d) Cemetery perpetual care trusts are excluded from the consolidated
balance sheet because the Company generally does not have the right to
withdraw the principal.
On an unaudited pro forma basis retroactive application using the changed
accounting principles on the year ended December 31, 1992, resulted in $79,493
of net income and $1.03 and $.99 primary and fully diluted earnings per share,
respectively. The cumulative effect of these changes resulted in an after tax
charge of $2,031 or $.03 per share on January 1, 1993.
The Company also adopted Statement of Financial Accounting Standards
("FAS") 109 "Accounting for Income Taxes" effective January 1, 1993 with no
material impact on the financial position or results of operations.
NOTE THREE
ACQUISITIONS
In 1994 the Company acquired the two largest publicly-traded funeral
service providers in the United Kingdom, Great Southern Group plc and
Plantsbrook Group plc. These firms owned a combined 534 funeral homes, 13
crematories and two cemeteries. The purchase price of approximately $508,000 was
primarily funded by two short-term bank facilities in the United Kingdom
(subsequently repaid or refinanced with long-term securities in 1995), other
revolving credit 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.
25
<PAGE> 27
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table is a summary of acquisitions made during the two years
ended December 31, 1994 accounted for as purchases:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Number acquired:
Funeral homes............................................... 674 124
Cemeteries.................................................. 28 21
Purchase price................................................ $814,493 $220,532
</TABLE>
The purchase price in both years consisted primarily of combinations of
cash, Company stock, issued and assumed debt and the retirement of loans
receivable issued by the Company's finance subsidiary, Provident Services, Inc.
("Provident").
The effect of acquisitions on the consolidated balance sheet at December
31, was as follows:
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
Current assets................................................ $ 43,754 $ 19,356
Prearranged funeral contracts................................. 126,721 59,932
Long-term receivables......................................... (9,363) 15,699
Cemetery property............................................. 323,633 137,563
Property, plant and equipment................................. 195,289 80,547
Deferred charges and other assets............................. 4,721 (3,109)
Names and reputations......................................... 398,583 32,090
Current liabilities........................................... (265,573) (11,895)
Long-term debt................................................ (249,133) (28,444)
Deferred income taxes and other liabilities................... (104,935) (49,156)
Deferred prearranged funeral contract revenues................ (143,890) (59,402)
Stockholders' equity.......................................... (12,220) (17,428)
--------- --------
Cash used for acquisitions.................................. $ 307,587 $175,753
========= ========
</TABLE>
The following unaudited pro forma information assumes that the acquisition
by the Company of all operations acquired during 1993 and 1994 took place on
January 1, 1993. This information also assumes that the net proceeds from the
Company's December 1994 public offerings of Company common stock, 8.375% notes
and convertible preferred shares of a subsidiary were issued at the beginning of
1993 and such proceeds were used to repay portions of the Company's existing
revolving credit lines and temporary United Kingdom bank borrowings. 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.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $1,253,329 $1,183,763
========== ==========
Net income.................................................. $ 137,784 $ 119,354*
========== ==========
Primary earnings per common share........................... $ 1.44 $ 1.26*
========== ==========
</TABLE>
---------------
* Before cumulative adjustment for change in accounting principles.
26
<PAGE> 28
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE FOUR
PREARRANGED FUNERAL CONTRACTS
At December 31, 1994, amounts due from trust funded contracts ($639,727)
and amounts due from insurance funded contracts ($778,377) are available to the
Company at the time the funeral services are performed and are shown net of
estimated cancellations. The cancellation rate is based on historical experience
equivalent to approximately 8% of the total balance. Accumulated earnings from
trust funds and increasing insurance benefits have been included to the extent
that they have accrued through December 31, 1994. The cumulative total has been
reduced by allowable cash withdrawals for trust earning distributions and
amounts retained by the Company pursuant to various state laws.
NOTE FIVE
INCOME TAXES
The provision for income taxes includes United States income taxes,
determined on a consolidated return basis, foreign and state and local income
taxes.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes:
United States.................................... $198,961 $157,004 $130,971
Foreign.......................................... 20,060 16,488 8,365
-------- -------- --------
$219,021 $173,492 $139,336
======== ======== ========
Provision for income taxes:
Current:
United States.................................... $ 43,290 $ 29,449 $ 31,432
Foreign.......................................... 9,443 6,083 4,257
State and local.................................. 7,753 5,633 3,787
-------- -------- --------
60,486 41,165 39,476
-------- -------- --------
Deferred:
United States.................................... 25,282 26,245 11,119
Foreign.......................................... (219) (512) (120)
State and local.................................. 2,427 3,502 2,325
-------- -------- --------
27,490 29,235 13,324
-------- -------- --------
Total provision.................................... $ 87,976 $ 70,400 $ 52,800
======== ======== ========
</TABLE>
During the three years ended December 31, 1994, tax expense resulting from
allocating certain tax benefits directly to capital in excess of par totaled
$1,223, $1,197 and $339, respectively.
27
<PAGE> 29
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The differences between the U.S. federal statutory tax rate and the
Company's effective rate are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Computed tax provision at the applicable federal
statutory income tax rate........................... $76,658 $60,722 $47,375
State and local taxes, net of federal income tax
benefits............................................ 6,617 5,930 4,034
Dividends received deduction and tax exempt
interest............................................ (1,425) (1,767) (2,129)
Amortization of names and reputations................. 3,807 3,426 3,226
Enacted tax rate increase for deferred income taxes... -- 2,431 --
Foreign tax rate difference........................... 2,144 (26) 1,308
Other................................................. 175 (316) (1,014)
------- ------- -------
Provision for income taxes.......................... $87,976 $70,400 $52,800
======= ======= =======
Total effective tax rate.............................. 40.2% 40.6% 37.9%
======= ======= =======
</TABLE>
In August 1993, the Omnibus Budget Reconciliation Act of 1993 (the "Act")
was enacted and among other changes, the Act increased the top United States
corporate income tax rate to 35% from 34% effective January 1, 1993. The
provision for income taxes for the year ended December 31, 1993 includes an
adjustment to deferred taxes under FAS 109 of $2,431 related to this increase in
the corporate tax rate.
Deferred tax assets and liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Receivables, principally due to sales of cemetery interment
rights and related products.................................. $ 85,532 $ 75,064
Inventories and cemetery property, principally due to purchase
accounting adjustments....................................... 173,430 79,029
Property, plant and equipment, principally due to depreciation
and to purchase accounting adjustments....................... 72,194 65,454
Other.......................................................... -- 1,547
-------- --------
Deferred tax liabilities..................................... 331,156 221,094
-------- --------
Deferred revenue on prearranged funeral contracts, principally
due to earnings from trust funds............................. (42,704) (45,833)
Accrued liabilities............................................ (17,577) (11,644)
Carry-forwards and foreign tax credits, principally related
to acquired subsidiaries..................................... (11,592) (6,987)
-------- --------
Deferred tax assets.......................................... (71,873) (64,464)
-------- --------
Valuation allowance.......................................... 5,390 1,748
-------- --------
Net deferred income taxes.................................... $264,673 $158,378
======== ========
</TABLE>
Current refundable income taxes and foreign current deferred tax assets are
included in other current assets, with current taxes payable and current
deferred taxes being reflected as "Income taxes" on the consolidated balance
sheet.
United States income taxes have not been provided on $60,881 of
undistributed earnings of foreign subsidiaries since it is the Company's
intention to reinvest such earnings indefinitely.
28
<PAGE> 30
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1994, the Company has United States foreign tax credit
carry-forwards of $3,736 and federal net operating loss carry-forwards of $2,745
principally related to acquired subsidiaries which will expire in the years 1998
through 2009.
Various subsidiaries have state operating loss carry-forwards of $41,260
with expiration dates through 2009.
The Company believes that some uncertainty exists with respect to future
realization of these tax credit and loss carry-forwards, therefore a valuation
allowance has been established for the carry-forwards not expected to be
realized. The increase in the valuation allowance is primarily attributable to
the foreign tax credits.
Actual cash disbursements for income taxes and other tax assessments during
the three years ended December 31, 1994, totaled $69,555, $46,557 and $33,973
respectively.
NOTE SIX
DEBT
Debt at December 31, was as follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Bank revolving credit agreements, $471,700 available at
December 31, 1994......................................... $ 276,800 $ 385,000
United Kingdom bank borrowings repaid or refinanced in
1995...................................................... 403,770 --
8.375% notes due in 2004.................................... 200,000 --
Medium term notes, maturity through 2019, fixed average
interest rate of 9.7%..................................... 234,700 248,000
6.5% convertible subordinated debentures, due in 2001,
conversion price of $20.74 per common share,
redeemable after August, 1995............................. 172,500 172,500
7.875% debentures, due in 2013.............................. 150,000 150,000
8% convertible debentures, due in 2006, conversion price is
$18 per common share...................................... 14,939 16,082
5.0% convertible debentures interest rates range from
4% -- 5%, due through 2004, conversion price ranges from
$22.50 -- $33.84.......................................... 25,618 12,897
Mortgage notes payable with maturities through 2013, average
interest rate is 8.1%..................................... 69,684 63,769
Other....................................................... 59,875 38,956
---------- ----------
Total debt.................................................. 1,607,886 1,087,204
Less current maturities..................................... (277,709) (24,982)
---------- ----------
Total long-term debt.............................. $1,330,177 $1,062,222
========== ==========
</TABLE>
The Company's primary revolving credit agreements provide for borrowings up
to $700,000. The 364 day portion supporting commercial paper issues for $450,000
expires on July 26, 1995 and contains provisions for renewals. At the end of any
term, the outstanding balance may be converted into a two year term loan. The
committed loan portion for $250,000 expires July 22, 1997. The Company may in
July of each year, commencing in 1995, extend the term of the $250,000 agreement
for a year with the consent of all participating banks. The interest rates are
based generally on various indices determined by the Company. In addition, the
Company pays a quarterly facility fee ranging from .08% to .125% on the
commitment amount. The terms of these revolving credit agreements include
various covenants which provide, among other things,
29
<PAGE> 31
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for the maintenance of a certain level of consolidated net worth, the
maintenance of certain ratios and restrictions on certain payments. At December
31, 1994 $239,300 was outstanding under these agreements. The average interest
rates incurred for amounts borrowed under these agreements for the two years
ended December 31, 1994 were 4.6% and 3.5%, respectively.
The Company's Canadian subsidiary has a US $21,500 line of credit with a
Canadian bank and has borrowed US $16,500 at December 31, 1994. This line
requires the payment of a .25% commitment fee on the unused balance and expires
on July 30, 1995. Interest rates are based on various indices determined by the
Company. The Company's Australian subsidiary has a US $27,000 line of credit
with an Australian bank and has borrowed US $21,000 at December 31, 1994. This
line requires a .15% commitment fee on the unused balance and expires March 31,
1995. Interest rates are calculated at .55% above quoted bank bill buying rates.
To accommodate the Company's 1994 United Kingdom acquisitions, two short
term facilities were secured providing the Company with borrowings up to US
$446,000. The interest on these facilities is calculated at a rate equal to the
United Kingdom pound sterling LIBOR rate plus 20 basis points. Both facilities
expire in 1995. Amounts outstanding under these two facilities were repaid in
the first quarter of 1995.
At December 31, 1994 current maturities include $204,759 (6.16% weighted
average interest rate) of the United Kingdom bank borrowings that were repaid
during the first quarter of 1995 ($199,011 of such borrowings were classified as
long-term and were permanently refinanced in January 1995 with 8.72% fixed rate,
seven-year amortizing notes issued through a private offering).
In December 1994, the Company issued, through an underwritten public
offering, $200,000 in notes at an original discount price of 99.247%. The notes
are considered senior debt and are not redeemable by the Company prior to
maturity. The Company used the net proceeds of this issue to repay existing debt
outstanding under the Company's bank revolving credit agreements.
The Company has outstanding $234,700 in medium term notes with maturities
from five months to 25 years which are not callable prior to maturity. The
average remaining maturity for the notes is approximately 14 years. In 1995,
$48,660 of medium term notes are scheduled to be repaid.
In October 1991, the Company issued $172,500 of convertible subordinated
debentures with a conversion price of $20.74 and subordinated to certain present
and future indebtedness of the Company.
The $150,000 of 7.875% debt was issued in February 1993 and is considered
senior debt and is not redeemable prior to maturity.
The Company also has a bank line of credit for $100,000 (all available at
December 31, 1994) at rates similar to the primary revolving credit agreements.
This line may be withdrawn at any time at the option of the bank.
Some of the Company's facilities and cemetery properties are pledged as
collateral for the mortgage notes.
Additionally, at December 31, 1994, the Company had $36,227 letters of
credit outstanding primarily to guarantee funding of certain insurance claims.
The aggregate principal payments on debt for the five years subsequent to
December 31, 1994, excluding amounts due to banks under revolving credit loan
agreements are: 1995-$277,709; 1996-$23,496; 1997-$51,603; 1998-$19,529; and
1999-$21,815.
Cash interest payments for the three years ended December 31, 1994 totaled
$77,334, $61,062 and $60,590, respectively.
30
<PAGE> 32
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DERIVATIVES:
In 1993, the Company entered a currency swap agreement with a bank that
hedged the borrowings and net investment related to the Company's initial
investment in Australia. As part of this agreement, the Company pays the bank a
blended interest rate (6.84% at December 31, 1994) on Australian dollar $110,000
and receives a floating interest rate (5.12% at December 31, 1994) on US
$73,590. On December 29, 2000 the Company will pay Australian dollar $110,000 to
the bank and receive US $73,590. In 1994, the Company entered a currency swap
agreement with a bank that hedged the borrowings and net investment related to
an additional Australian acquisition. Under this agreement, the Company pays the
bank a fixed interest rate of 6.61% on Australian dollar $32,715 and receives a
variable interest rate (4.11% at December 31, 1994) on US $23,414. On March 1,
1999 the Company will pay Australian dollar $32,715 to the bank and receive US
$23,414. In 1994, the Company entered into an interest rate swap agreement with
a bank having a notional amount of US $150,000. This agreement was partially
unwound by the Company in May 1994 by paying the bank a fee of $4,693. Such fee
will be amortized into interest expense through February 1, 1999. Subsequently,
under this agreement, the Company pays a floating interest rate (5.31% at
December 31, 1994) on US $75,000 and receives a 5.36% fixed interest rate on US
$75,000. This agreement terminates February 1, 1999.
In December 1994, the Company entered into a currency swap agreement with a
bank that provides for the Company to pay the bank a variable interest rate
(7.61% at December 31, 1994) on United Kingdom pound sterling L128,139 and
receive a fixed interest rate of 8.488% on US $200,000. On December 15, 2004 the
Company will pay United Kingdom pound sterling L128,139 to the bank and receive
US $200,000. Additionally, in December 1994, the Company entered into another
currency swap agreement whereby the Company pays the bank a variable interest
rate (7.08% at December 31, 1994) on United Kingdom pound sterling L46,450 and
receives a fixed interest rate of 7.973% on US $72,500. On December 15, 2004 the
Company will pay United Kingdom pound sterling L46,450 to the bank and receive
US $72,500.
As of December 31, 1994, the cost to terminate the above agreements, based
on information supplied by the participating banks, was estimated to be $15,200.
In connection with the US $199,011 private offering mentioned above, the
Company and a bank entered into a swap transaction under which the bank paid
United Kingdom pound sterling L127,712 to the Company in January 1995 and became
obligated to pay the Company US $19,291 in principal and interest (8.72% fixed
interest rate) every six months through January 2002. The Company paid US
$199,011 to the bank in January 1995 and became obligated to pay the bank United
Kingdom pound sterling L10,202 principal and interest (9.638% fixed interest
rate) every six months, and scheduled amounts every six months of principal and
interest to repay United Kingdom pound sterling L25,542 based on a floating
interest rate (7.763% at January 31, 1995). This agreement settles January 27,
2002. All of the agreements entered into in December 1994 and January 1995 hedge
the borrowings and net investment related to the Company's investment in the
United Kingdom.
After the refinancing of the $199,011 and repayment of the $204,759 of
United Kingdom bank borrowings, both in the first quarter of 1995, and giving
effect for all of the above interest rate swaps, the Company's total debt has
been converted into approximately $779,000 of fixed interest rate debt at an
average interest rate of 8.8% and $624,000 of variable interest rate debt at an
average interest rate of 7.1%.
NOTE SEVEN
DEFERRED PREARRANGED FUNERAL CONTRACT REVENUES
"Deferred prearranged funeral contract revenues" on the consolidated
balance sheet includes the contract amount of all price guaranteed prearranged
funeral service contracts as well as the accrued trust earnings and increasing
insurance benefits earned through December 31, 1994. The Company will continue
to defer
31
<PAGE> 33
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional accruals of trust earnings and insurance benefits as they are earned
until the performance of the funeral service. Upon performance of the funeral
service, the Company will recognize the fixed contract price as well as total
accumulated trust earnings and increasing insurance benefits as funeral
revenues.
The recognition in future funeral revenues is estimated to occur in the
following years based on actuarial assumptions as follows:
<TABLE>
<S> <C>
1995..................................................... $ 137,418
1996..................................................... 126,804
1997..................................................... 116,750
1998..................................................... 107,285
1999..................................................... 98,409
2000 through 2004........................................ 378,498
2005 and thereafter...................................... 554,418
----------
$1,519,582
==========
</TABLE>
NOTE EIGHT
COMMITMENTS
The annual payments for operating leases (primarily for funeral home
facilities and transportation equipment) are as follows:
<TABLE>
<S> <C>
1995....................................................... $ 37,742
1996....................................................... 35,259
1997....................................................... 25,648
1998....................................................... 21,612
1999....................................................... 16,261
Thereafter................................................. 26,813
</TABLE>
The majority of these operating leases contain one of the following
options: (a) purchase the property at the fair value at date of exercise, (b)
purchase the property for a value determined at the inception of the lease or
(c) renew for the fair rental value at the end of the primary term of the lease.
Some of the equipment leases contain residual value exposures. For the three
years ended December 31, 1994, rental expense was $36,244, $33,673 and $24,754,
respectively.
The Company has entered into management, consultative and noncompetition
agreements (generally for five to 10 years) with certain officers of the Company
and former owners and key employees of businesses acquired. During the three
years ended December 31, 1994, $48,053, $36,138 and $27,594, respectively, were
charged to expense. At December 31, 1994, the maximum estimated future expense
under all remaining agreements is $185,947 including $15,702 with certain
officers of the Company.
In 1990, the Company entered into a five year minimum purchase agreement
with a major casket manufacturer. The agreement contains provisions to increase
the minimum annual purchases for normal price increases and the maintenance of
product quality. The agreement was amended in 1992 to provide for an extension
to 1998 with a cumulative minimum purchase commitment of $228,000 required
subject to certain annual casket price adjustments. During the three years ended
December 31, 1994, the Company purchased $47,098, $41,200 and $36,656,
respectively, under this agreement.
32
<PAGE> 34
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE NINE
CONVERTIBLE PREFERRED SHARES OF SUBSIDIARY
In December 1994 a subsidiary of the Company issued, through an
underwritten public offering, 3,450,000 shares of 6.25% convertible preferred
shares. These shares are non-voting, carry a liquidation value of $50 per share
and are convertible into Company common stock at a conversion price of $30.09
per share at any time unless previously redeemed. Liquidation may occur after
December 5, 1999 unless earlier redemption is permitted based on Company common
stock price performance. The proceeds from this offering were used in 1995 to
repay bank debt incurred in connection with the United Kingdom acquisitions.
NOTE TEN
STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of preferred stock, $1
per share par value. No shares were issued as of December 31, 1994. At December
31, 1994, 200,000,000 common shares of one dollar par value were authorized,
94,857,060 shares were issued and outstanding (84,859,110 at December 31, 1993),
net of 16,875 shares held, at cost, in treasury (18,830 at December 31, 1993).
In December 1994 the Company sold, through an underwritten public offering,
7,700,000 common shares at a net $24.70 per share. In January 1995, an
additional 780,000 common shares were sold, also at a net $24.70 per share,
pursuant to an underwriters over-allotment provision. The net proceeds of these
offerings were used to repay existing bank debt.
During the year ended December 31, 1993, the Company purchased 66,319
shares of its common stock for $1,637.
The fully diluted earnings per share calculation assumes full conversion
into common stock of the Company's various convertible securities.
The Company has a stockholder approved plan whereby shares of the Company's
common stock may be issued pursuant to the exercise of stock options granted to
officers and key employees. The plan allows for options to be granted as either
non-qualified or incentive stock options. The options are granted with an
exercise price equal to the then current market price of the Company's common
stock and are generally exercisable at a rate of 33 1/3% each year (generally
starting one year from grant date). At December 31, 1994 and 1993, 477,494 and
729,267 shares, respectively, were reserved for future option grants under this
plan.
In 1994, shareholders approved the 1993 Long-Term Incentive Stock Option
Plan which provides for 4,650,000 common stock options to be granted to certain
officers and key employees of the Company. These options are granted with an
exercise price equal to the then-current market price of the Company's common
stock and contain accelerated vesting provisions if the Company's common stock
price meets certain targeted prices within four years after the date of grant.
If the targeted common stock prices are not met within the allotted four years,
the options will vest 13 years after date of grant. In 1994, shareholders
approved the November 1993 granting of 4,000,000 of these options to five
officers of the Company at an exercise price of $25.75 per share. For any
accelerated vesting to occur, the price for common stock would have to reach at
least $50 per share for a period of at least 20 consecutive trading days within
the four-year period starting in November 1993.
33
<PAGE> 35
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following sets forth certain stock option information:
<TABLE>
<CAPTION>
OPTION PRICE
OPTIONS PER SHARE
-------- -------------
<S> <C> <C>
Outstanding at December 31, 1991................................... 1,526,045 $ 8.00-18.17
Granted.......................................................... 58,410 8.75-17.06
Exercised........................................................ (214,637) 9.25-16.67
Cancelled........................................................ (104,224) 10.08-18.17
-------- -------------
Outstanding at December 31, 1992................................... 1,265,594 8.00-17.17
-------- -------------
Granted.......................................................... 267,250 14.17-26.00
Exercised........................................................ (401,387) 9.25-18.81
Cancelled........................................................ (25,002) 14.17-18.81
--------- -------------
Outstanding at December 31, 1993................................... 1,106,455 8.00-26.00
--------- -------------
Granted.......................................................... 4,285,750 10.08-26.94
Exercised........................................................ (171,202) 8.75-18.81
Cancelled........................................................ (33,977) 8.00-26.94
--------- -------------
Outstanding at December 31, 1994................................... 5,187,026 $ 9.25-26.94
========= =============
Exercisable at December 31, 1994................................... 733,848 $ 9.25-26.00
========= =============
</TABLE>
At December 31, 1994, the Company has reserved 1,416,881 shares of its
common stock under stockholder approved plans for restricted stock grants to be
awarded to key employees and non-employee directors. These plans contain a
restriction period of not less than six months and not more than 10 years,
during which time the recipient will be prohibited from disposition of the
awarded common stock and also a requirement that the employee recipient remain
employed by the Company and the non-employee director continue to serve as a
director prior to lapse of the restricted period. For the three years ended
December 31, 1994, 66,100, 652,481 and 405,925 shares were awarded under these
plans, respectively.
The Board of Directors has adopted a preferred share purchase rights plan
and has declared a dividend of one preferred share purchase right for each share
of common stock outstanding. The rights become exercisable in the event of
certain attempts to acquire 20% or more of the common stock of the Company and
entitle the rights holders to purchase certain securities of the Company or the
acquiring company. The rights, which are redeemable by the Company for $.01 per
right, expire in July 1998 unless extended.
NOTE ELEVEN
RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all United States employees, a supplemental retirement plan for
certain current and former key employees (SERP), a supplemental retirement plan
for officers and certain key employees (Senior SERP), and a retirement plan for
non-employee directors (Directors' Plan).
For the pension plan, retirement benefits are generally based on years of
service and compensation. The Company annually contributes to the pension plan
an actuarially determined amount consistent with the funding requirements of the
Employee Retirement Income Security Act of 1974. Assets of the pension plan
consist primarily of bank money market funds, fixed income investments,
marketable equity securities and mortgage notes. The marketable equity
securities include shares of Company common stock with a value of $3,736 at
December 31, 1994. Most foreign employees are covered by any one of various
plans which are not material to the financial condition or results of operations
of the Company.
34
<PAGE> 36
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Retirement benefits under the SERP are based on years of service and
average monthly compensation, reduced by benefits under the pension plan and
Social Security. The Senior SERP provides retirement benefits based on years of
service and position. The Directors' Plan will provide an annual benefit to
directors following their retirement, based on a vesting schedule. The Company
purchased various life insurance policies on the participants in the SERP,
Senior SERP and Directors' Plan with the intent to use the proceeds or any cash
value buildup from such policies to assist in funding, at least to the extent of
such assets, these plans' funding requirements.
The net cost for the four plans described above were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the period............. $ 6,179 $ 6,719 $ 5,737
Interest cost on projected benefit obligation................. 7,686 6,886 5,753
Return on plan assets......................................... (5,252) (4,311) (3,945)
Net amortization and deferral of gain......................... 2,056 1,201 1,315
------- ------- -------
$10,669 $10,495 $ 8,860
======= ======= =======
</TABLE>
The plans' funded status at December 31, was as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------- ----------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Vested benefit obligation....................... $64,022 $ 30,010 $58,229 $ 25,902
======= ======== ======= ========
Accumulated benefit obligation.................. $67,675 $ 30,128 $63,556 $ 26,099
======= ======== ======= ========
Projected benefit obligation.................... $74,280 $ 30,144 $71,223 $ 26,310
Plans' assets at fair value..................... 69,030 -- 67,993 --
------- ---------- ------- ----------
Plans' assets in deficit of projected benefit
obligation.................................... (5,250) (30,144) (3,230) (26,310)
Unrecognized net loss from past experience and
effects of changes in assumptions............. 15,668 2,296 10,271 4,128
Prior service cost not yet recognized in net
periodic pension cost......................... (2,755) 13,940 (2,966) 12,685
------- ---------- ------- ----------
Accrued pension cost............................ 7,663 (13,908) 4,075 (9,497)
Adjustment for additional minimum liability..... -- (16,220) -- (16,602)
------- ---------- ------- ----------
Retirement plan asset (liability)............... $ 7,663 $(30,128) $ 4,075 $(26,099)
======= ======== ======= ========
</TABLE>
The following assumed rates were used in the determination of the plans'
funded status:
<TABLE>
<CAPTION>
1994 1993
--------------------- ---------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Discount rate used to determine obligations........ 8.5% 8.5% 7.5% 7.5%
Assumed rate of compensation increase.............. 5.5 5.5 4.5 4.5
Assumed rate of return on plan assets.............. 5.0 -- 4.5 --
</TABLE>
35
<PAGE> 37
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE TWELVE
FINANCIAL INSTRUMENTS
DERIVATIVES:
The Company has entered into various derivative financial instruments with
major financial institutions to hedge fluctuation exposures in interest and
foreign exchange rates. See notes 1 and 6 for further information, including
current costs to terminate such transactions.
CREDIT RISK:
Provident is a party to financial instruments with off-balance sheet risk.
The financial instruments result from loans made in the normal course of
business to meet the financing needs of borrowers who are principally
independent funeral home and cemetery operators. These financial instruments
also include loan commitments of $10,068 at December 31, 1994 ($19,499 at
December 31, 1993) to extend credit. Provident evaluates each borrower's credit
worthiness and the amount loaned and collateral obtained, if any, is determined
by this evaluation.
The Company grants customers credit in the normal course of business and
the credit risk with respect to these trade receivables are generally considered
minimal because of the wide geographic area served. Procedures are in effect to
monitor the credit worthiness of customers and bad debts have not been
significant in relation to the volume of revenues.
Prearranged funeral contracts generally do not subject the Company to
collection risk because customer payments are either placed in state supervised
trusts or used to pay premiums on life insurance contracts. Insurance funded
contracts are subject to supervision by state insurance departments and are
protected in the majority of states by insurance guaranty acts.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following disclosure of the estimated fair value of financial
instruments has been determined by the Company using available market
information and appropriate valuation methodologies. The carrying amounts of
cash and cash equivalents, trade receivables and accounts payable approximate
fair values due to the short term maturities of these instruments. It is not
practicable to estimate the fair value of receivables due on cemetery contracts
without incurring excessive costs because of the large number of individual
contracts with varying terms. The carrying amounts of prearranged funeral
contracts and the related deferred prearranged funeral revenue approximates
their fair value. These contracts are of a long-term duration, averaging ten
years before performance. The carrying amounts and fair values of the Company's
fixed rate long-term borrowings are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
8.375% notes........................................... $200,000 $197,319
Medium term notes...................................... $234,700 $244,692
Debentures............................................. $190,557 $171,590
Mortgage notes payable................................. $ 69,684 $ 66,731
</TABLE>
The fair value of the above long-term borrowings was estimated by
discounting the future cash flows, including interest payments, using rates
currently available for debt of similar terms and maturity, based on the
Company's credit standing and other market factors. The Company's 6.5% $172,500
convertible debentures are redeemable after August, 1995 at a price of $20.74,
substantially below the common stock market price of $27.75 at December 31,
1994. Because of this conversion price to market price differential, no
36
<PAGE> 38
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fair value has been provided. The carrying value of the revolving credit
agreements approximate fair value because the rates on such agreements are
variable, based on current market. Substantially all of the Company's remaining
long-term debt and receivables carry variable interest rates and their carrying
amounts approximate fair value.
NOTE THIRTEEN
SUPPLEMENTARY INFORMATION
The detail of certain balance sheet accounts at December 31, was as
follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Cash and cash equivalents:
Cash......................................................... $ 24,976 $ 6,393
Commercial paper and temporary investments................... 193,365 14,429
-------- --------
$218,341 $ 20,822
======== ========
Receivables and allowances:
Current:
Trade accounts............................................ $132,211 $ 85,924
Cemetery contracts........................................ 124,873 101,954
Loans and other notes..................................... 76,093 81,216
-------- --------
333,177 269,094
======== ========
Less:
Allowance for contract cancellations and doubtful accounts... 20,156 14,786
Unearned finance charges and valuation discounts............. 21,886 17,522
-------- --------
42,042 32,308
-------- --------
$291,135 $236,786
======== ========
Long-term
Cemetery contracts........................................... $153,212 $126,389
Loans and other notes........................................ 245,017 277,149
Trusted cemetery merchandise sales........................... 176,071 133,583
-------- --------
574,300 537,121
======== ========
Less:
Allowance for contract cancellations and doubtful accounts... 16,086 14,054
Unearned finance charges and valuation discounts............. 28,371 23,005
-------- --------
44,457 37,059
-------- --------
$529,843 $500,062
======== ========
</TABLE>
Interest rates on cemetery contracts and loans and other notes receivable
range from 3.0% to 12.5% at December 31, 1994. Included in loans and other notes
receivable are $12,189 in notes with officers and employees of the Company, the
majority of which are collateralized by real estate, and $20,060 in notes with
other related parties.
37
<PAGE> 39
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
---------- ---------
<S> <C> <C>
Cemetery property:
Undeveloped land (including capitalized interest and development
expenditures).................................................. $ 450,722 $ 299,520
Developed land, lawn crypts and mausoleums........................ 297,917 117,530
---------- ---------
$ 748,639 $ 417,050
========== =========
Property, plant and equipment:
Land.............................................................. $ 245,285 $ 186,521
Buildings and improvements........................................ 587,180 461,539
Operating equipment............................................... 173,369 104,921
Leasehold improvements............................................ 30,351 17,715
---------- ---------
1,036,185 770,696
---------- ---------
Less: accumulated depreciation.................................... (203,784) (163,870)
---------- ---------
$ 832,401 $ 606,826
========== =========
Accounts payable and accrued liabilities:
Trade payables.................................................... $ 25,988 $ 22,220
Dividends......................................................... 10,044 8,913
Payroll........................................................... 33,051 9,319
Interest.......................................................... 22,706 14,903
Insurance......................................................... 17,765 13,115
Other............................................................. 45,216 28,411
---------- ---------
$ 154,770 $ 96,881
========== =========
</TABLE>
NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------ ------- ------
<S> <C> <C> <C>
Common stock issued under restricted stock plans................ $1,724 $14,393 $6,938
Notes receivable exchanged for preferred stock investment....... -- 2,520 3,830
Minimum liability under retirement plans........................ (382) 12,642 187
Debenture conversion............................................ 1,293 97,164 --
Cumulative effect of change in accounting principles............ -- 2,031 --
Property distributed from prearranged funeral trust............. 9,920 -- --
</TABLE>
NOTE FOURTEEN
PROSPECTIVE ACCOUNTING CHANGES
FAS 114 "Accounting by Creditors for Impairment of a Loan", which was
amended by FAS 118, becomes effective in 1995. This FAS requires present value
computations for impaired loans when determining allowances for loan losses.
Adoption of this standard is not expected to materially affect the Company's
financial position or results of operations.
38
<PAGE> 40
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE FIFTEEN
MAJOR SEGMENTS OF BUSINESS
The Company conducts funeral and cemetery operations in the United States,
Australia, Canada and the United Kingdom and offers financial services in the
United States.
<TABLE>
<CAPTION>
FINANCIAL
FUNERAL CEMETERY SERVICES CORPORATE CONSOLIDATED
--------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
1994............................... $ 754,408 $343,521 $ 19,246 $ -- $ 1,117,175
1993............................... 603,099 280,421 15,658 -- 899,178
1992............................... 551,940 209,796 10,741 -- 772,477
Income from operations:
1994............................... 222,605 110,226 8,364 (51,700) 289,495
1993............................... 177,091 79,739 6,490 (43,706) 219,614
1992............................... 172,117 45,829 4,109 (38,693) 183,362
Identifiable assets:
1994............................... 3,115,053 1,417,081 213,257 416,497 5,161,888
1993............................... 2,299,177 952,844 253,314 177,969 3,683,304
1992............................... 1,351,066 908,012 191,695 160,350 2,611,123
Depreciation and amortization:
1994............................... 54,028 9,969 120 11,960 76,077
1993............................... 37,130 8,506 197 12,381 58,214
1992............................... 33,214 7,701 429 6,025 47,369
Capital expenditures:(1)
1994............................... 212,660 384,402 -- 2,950 600,012
1993............................... 107,046 165,408 -- 5,241 277,695
1992............................... 78,519 101,887 -- 7,060 187,466
Number of operating locations at year
end:
1994............................... 1,471 220 -- -- 1,691
1993............................... 792 192 -- -- 984
1992............................... 674 176 -- -- 850
</TABLE>
---------------
(1) Includes $518,922, $218,110 and $120,646 for the three years ended December
31, 1994, respectively, for purchases of property, plant, and equipment and
cemetery property of acquired businesses.
39
<PAGE> 41
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Geographic segment information is as follows:
<TABLE>
<CAPTION>
UNITED UNITED OTHER
STATES KINGDOM* FOREIGN CONSOLIDATED
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenues:
1994....................................... $ 975,971 $ 42,613 $ 98,591 $ 1,117,175
1993....................................... 848,534 -- 50,644 899,178
1992....................................... 739,119 -- 33,358 772,477
Income from operations:
1994....................................... $ 245,230 $ 10,266 $ 33,999 $ 289,495
1993....................................... 202,845 -- 16,769 219,614
1992....................................... 172,298 -- 11,064 183,362
Identifiable assets:
1994....................................... $4,168,636 $683,612 $309,640 $ 5,161,888
1993....................................... 3,495,056 -- 188,248 3,683,304
1992....................................... 2,543,576 -- 67,547 2,611,123
Number of operating locations at year end:
1994....................................... 975 536 180 1,691
1993....................................... 858 -- 126 984
1992....................................... 808 -- 42 850
</TABLE>
---------------
* United Kingdom operations began in September 1994.
NOTE SIXTEEN
RELATED PARTY TRANSACTIONS
Subsidiaries of J. P. Morgan & Co. Incorporated ("Morgan") currently
beneficially own more than 10% of the Company's common stock. Morgan and the
Company have entered into (and in certain instances, unwound) various foreign
currency and/or interest rate swap agreements during 1994 and 1993.
Additionally, Morgan participated as lead underwriter on the December 1994
public offerings of common stock, 8.375% notes and the convertible preferred
shares of a subsidiary. In the 1994 acquisition of one of the United Kingdom
acquisitions, Morgan acted as an advisor and also provided a loan used by the
Company (repaid in 1995) in the acquisitions of both United Kingdom
acquisitions. For the year ended December 31, 1994, Morgan received $10,747 in
fees from the Company. During the year ended December 31, 1993 Morgan paid the
Company a net $2,551 primarily relating to payments received to unwind certain
interest rate swap agreements. Morgan neither received nor paid any fees to the
Company during the year ended December 31, 1992.
40
<PAGE> 42
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SEVENTEEN
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
1994............................. $261,258 $262,862 $277,814 $315,241 $1,117,175
1993............................. 224,371 217,049 211,432 246,326 899,178
1992............................. 200,746 187,099 183,940 200,692 772,477
Gross profit:
1994............................. 89,542 76,741 76,914 97,998 341,195
1993............................. 71,471 61,920 56,597 73,332 263,320
1992............................. 63,700 50,972 46,426 60,957 222,055
Net income:
1994............................. 37,445 30,195 28,603 34,802 131,045
1993............................. 27,217 24,333 19,807 29,704 101,061
1992............................. 25,170 19,872 17,096 24,398 86,536
Primary earnings per common share:
1994............................. .44 .35 .33 .39 1.51
1993............................. .34 .29 .23 .35 1.21
1992............................. .33 .26 .22 .32 1.13
Fully diluted earnings per share:
1994............................. .41 .33 .32 .37 1.43
1993............................. .32 .28 .23 .34 1.17
1992............................. .31 .25 .22 .29 1.07
</TABLE>
41
<PAGE> 43
SERVICE CORPORATION INTERNATIONAL
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) OF PERIOD
------------------------------------- ---------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
(THOUSANDS)
Current --
Allowance for contract
cancellations and doubtful
accounts:
Year ended December 31, 1994.... $ 14,786 $7,658 $ 4,155 $(6,443) $ 20,156
Year ended December 31, 1993.... 7,778 9,983(3) 1,725 (4,700) 14,786
Year ended December 31, 1992.... 5,143 4,456 2,815 (4,636) 7,778
Due After One Year --
Allowance for contract
cancellations and doubtful
accounts:
Year ended December 31, 1994.... 14,054 1,969 1,830 (1,767) 16,086
Year ended December 31, 1993.... 5,001 6,858(3) 3,935 (1,740) 14,054
Year ended December 31, 1992.... 8,764 191 660 (4,614) 5,001
</TABLE>
---------------
(1) Uncollected receivables written off, net of recoveries
(2) Primarily acquisitions and dispositions of operations
(3) Includes the cumulative effect of changing accounting principles effective
January 1, 1993.
42
<PAGE> 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Ernst & Young LLP, Certified Public Accountants ("E&Y"), served as the
independent accountants for the Company for the fiscal year ended December 31,
1992. E&Y was dismissed as the independent accounting firm for the Company
effective March 25, 1993, with Coopers & Lybrand L.L.P., Certified Public
Accountants ("Coopers"), having been so engaged as of that date. The decision to
change the independent accounting firm for the Company was recommended by
management and by the Audit Committee of the Board of Directors of the Company
and was approved by the Board of Directors.
The report of E&Y dated February 8, 1993 on the consolidated financial
statements of the Company as of December 31, 1992 and 1991 and for the three
years in the period ended December 31, 1992 contained no adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principle. Similarly, the report of Coopers dated
March 10, 1995 on the consolidated financial statements of the Company as of
December 31, 1994 and 1993 and for the years then ended contained no adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principle.
As previously reported by the Company in, among other places, its Form 8-K
dated March 31, 1993, from time to time during the several years preceding
January 1, 1993, meetings were held between members of senior management of the
Company and local and national office partners of E&Y regarding potential
accounting policies for reporting pre-need funeral and cemetery sales. The
Company and E&Y did not reach agreement on any new method of accounting for such
sales. The Company has previously reported that, in the Company's opinion,
during the two years ended December 31, 1992 and the first quarter of 1993,
there was no reportable "disagreement" between the Company and E&Y regarding any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of E&Y, would have caused E&Y to make reference to the subject of
the disagreement in connection with its report.
As also previously reported by the Company in, among other places, an
amendment, dated April 6, 1993, to the Company's Form 8-K, dated March 31, 1993,
E&Y, however, has stated that it believes that a reportable "disagreement"
occurred between it and the Company. Accordingly, at the request of E&Y, the
Company included the following (references to E&Y and the Company have been
conformed to the usage in this Form 10-K) in its proxy statements dated April
12, 1993 and 1994 for the 1993 and 1994 annual meetings of stockholders.
"On several occasions over the years, the Company has proposed that
its accounting policy for pre-need funeral services be changed to a method
whereby revenue would be recognized at the date a pre-need funeral contract
is signed, accompanied by appropriate provision for the estimated cost of
providing such services. E&Y's consistent position has been that the
Company's proposed accounting policy would not be acceptable under
generally accepted accounting principles.
"At a meeting on April 1, 1992 held to discuss this issue, a
reportable disagreement occurred in that Company management stated that if
E&Y would not support the Company's proposed accounting they would find
another firm that would. This disagreement was communicated to the
Company's Audit Committee at its August 13, 1992 meeting.
"Moreover, on February 19, 1993 (after completion of the 1992 audit),
Company management presented the accounting proposal set forth in a
December 28, 1992 'Invitation to Comment' prepared by Patrick B. Collins,
CPA, and asked E&Y to support this proposed accounting method. That
'Invitation to Comment' advocates recognition of revenue for pre-need
funeral services at the time of sale rather than when the services are
performed, and solicits comments from interested parties concerning this
and other matters. On February 26, 1993 and again on March 2, 1993, E&Y
informed Company management that it would be unable to support the proposal
presented in the 'Invitation to Comment.'
"On March 16, 1993, management informed E&Y that the Company was no
longer pursuing the accounting method advocated in the 'Invitation to
Comment' but rather was considering a modified approach. E&Y informed
management that at least one element of the modified
approach -- amortization of a portion of deferred revenue that would be
associated with the fixed cost of maintaining funeral homes -- was, in
E&Y's view, not acceptable under generally accepted accounting principles."
43
<PAGE> 45
The modified approach referred to above by E&Y is also referred to in the third
paragraph from the end of this Item 9, except that at the time of its discussion
with Coopers the element E&Y noted as being objectionable was no longer being
considered.
Following such disclosure, the Company filed a second amendment to such
Form 8-K, in which the Company took issue with certain of E&Y's statements.
Further, as previously reported, the Company has disputed that a reportable
"disagreement" was communicated by E&Y to the Audit Committee on August 13,
1992. In response to the second amendment to such Form 8-K, E&Y responded (which
response was included in a third amendment) that there was nothing in the second
amendment of which E&Y was unaware at the time it stated its position disclosed
in the April 6, 1993 amendment.
The Company is currently discussing with the Staff of the Commission
settlement of the matters arising out of the previously disclosed informal
investigation by the Staff with respect to the Company's disclosure about the
change in accountants. Such investigation was initially disclosed by the Company
in May 1993. The Staff has advised that it intends to recommend to the
Commission that it institute a cease and desist administrative proceeding
against the Company for alleged violations of Section 13(a) of the Securities
Exchange Act of 1934 with respect to the Company's disclosure in the March 31,
1993 Form 8-K, as amended, relating to the change in the Company's accountants.
The Company had previously disclosed, initially in October 1994, that the Staff
was considering such recommendation against the Company. The staff has advised
that, depending upon the outcome of the settlement discussions, the Staff will
finalize its recommendation to the Commission as to whether Mr. Robert L.
Waltrip, Chairman and Chief Executive Officer, Mr. L. William Heiligbrodt,
President and Chief Operating Officer, and Mr. Samuel W. Rizzo, Executive Vice
President, would be named as respondents in the proceeding. There is no
assurance that the settlement discussions between the Company and the Staff will
be satisfactorily concluded. In any event, the Commission will subsequently make
the final determinations on any action recommended by the Staff in these
matters.
On March 25, 1993, the Company's Board of Directors approved the
recommendation of management and the Audit Committee that Coopers be engaged as
the Company's new independent accountants. During the two fiscal years ended
December 31, 1992 and the interim period of 1993, Coopers was not consulted by
the Company on the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the financial statements of the Company. During the interim
period of 1993, as part of the proposal process, Coopers indicated its general
agreement with the Company's desire to modify its accounting policies for
pre-need funeral and cemetery sales so that such policies more accurately
reflect the economics of these sales. In this connection, the Company expressed
to Coopers its desire to improve the financial reporting for pre-need funeral
sales by including in the balance sheet, as a long term asset and corresponding
deferred revenue, all pre-need funeral contracts whether funded by insurance or
trust funds. Revenue from funeral services would be recognized when the services
are performed, which is consistent with the Company's then and current policy.
The Company also discussed with Coopers deferring funeral trust earnings until
the service is performed. Under the Company's prior policy, these trust earnings
were recognized in current income. Additionally, the Company expressed its views
that accounting for pre-need cemetery sales using the accounting principles
prescribed for sales of real estate may not be the most appropriate method of
accounting. Coopers orally expressed their general agreement with these concepts
but were not asked to and did not express an opinion on any specific transaction
or accounting change, either orally or in writing.
The accounting principles adopted by the Company in 1993 for reporting
pre-need funeral and cemetery sales are set forth, among other places, in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993
filed with the Commission. Coopers has issued a preferability letter with
respect to such principles. A copy of such letter is filed as an Exhibit to the
Company's Form 10-Q for the quarter ended March 31, 1993. As indicated above,
Coopers has issued an unqualified opinion with respect to the Company's
consolidated financial statements as at and for the periods ended December 31,
1993 and 1994.
The Company provided the foregoing to E&Y, and E&Y advised the Company that
it had nothing further to add beyond its statement as previously reported.
44
<PAGE> 46
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by PART III (Items 10, 11, 12 and 13) has been
omitted as the Company intends to file with the Commission not later than 120
days after the close of its fiscal year a definitive Proxy Statement pursuant to
Regulation 14A. Such information is set forth in such Proxy Statement (i) with
respect to Item 10 under the captions "Election of Directors" and "Compliance
with Section 16(a) of the Exchange Act", (ii) with respect to Items 11 and 13
under the captions "Cash Compensation", "Stock Options", "Retirement Plans",
"Executive Employment Agreements", "Other Compensation", "Director
Compensation", "Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions" and (iii) with respect to Item 12 under the caption
"Voting Securities and Principal Holders." The information as specified in the
preceding sentence is incorporated herein by reference. Notwithstanding anything
set forth in this Form 10-K, the information under the caption "Compensation
Committee Report on Executive Compensation" and under the captions "Overview of
Executive Compensation" and "Performance Graphs" in such Proxy Statement are not
incorporated by reference into this Form 10-K.
The information regarding the Company's executive officers called for by
Item 401 of Regulation S-K has been included in PART I of this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1)-(2) Financial Statements and Schedules:
The financial statements and schedules are listed in the accompanying
Index to Financial Statements and Related Schedules at page 16 of this
report.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index at pages 47-50
are filed as part of this report.
(b) Reports on Form 8-K:
During the quarter ended December 31, 1994, the Company filed a Form
8-K dated October 18, 1994 reporting under "Item 5. Other Events" the
status of the informal Commission investigation (see Items 3 and 9 of this
Form 10-K for additional information) and proforma financial information
concerning the acquisitions of Great Southern Group plc, Plantsbrook Group
plc and other acquired companies. The Company also filed a Form 8-K dated
November 14, 1994 reporting under "Item 5. Other Events" historical
financial information of Great Southern Group plc and Plantsbrook Group
plc.
(c) Included in (a) above.
(d) Included in (a) above.
45
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Service Corporation International, has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SERVICE CORPORATION INTERNATIONAL
Dated: March 31, 1995 By: JAMES M. SHELGER
----------------------------------
(James M. Shelger,
Senior Vice President, General
Counsel and Secretary)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------------- --------------------------------- ---------------
<C> <S> <C>
R. L. WALTRIP* Chairman of the Board and Chief
(R. L. Waltrip) Executive Officer
GEORGE R. CHAMPAGNE Senior Vice President Chief
------------------------------------------------- Financial Officer (Principal
(George R. Champagne) Financial Officer)
WESLEY T. McRAE Managing Director -- Financial
------------------------------------------------- Reporting (Principal Accounting
(Wesley T. McRae) Officer)
ANTHONY L. COELHO*
(Anthony L. Coelho)
DOUGLAS M. CONWAY*
(Douglas M. Conway)
JACK FINKELSTEIN*
(Jack Finkelstein)
A. J. FOYT, JR.*
(A. J. Foyt, Jr.)
JAMES J. GAVIN, JR.*
(James J. Gavin, Jr.)
March 31, 1995
JAMES H. GREER*
(James H. Greer)
L. WILLIAM HEILIGBRODT*
(L. William Heiligbrodt)
Directors
B. D. HUNTER*
(B. D. Hunter)
JOHN W. MECOM, JR.*
(John W. Mecom, Jr.)
CLIFTON H. MORRIS, JR.*
(Clifton H. Morris, Jr.)
SAMUEL W. RIZZO*
(Samuel W. Rizzo)
E. H. THORNTON, JR.*
(E. H. Thornton, Jr.)
W. BLAIR WALTRIP*
(W. Blair Waltrip)
EDWARD E. WILLIAMS*
(Edward E. Williams)
*By JAMES M. SHELGER
-------------------------------------------------
(James M. Shelger, as Attorney-In-Fact
for each of the Persons indicated)
</TABLE>
46
<PAGE> 48
EXHIBIT INDEX
PURSUANT TO ITEM 601 OF REG. S-K
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------------- ------------------------------------------------------------------------
<S> <C>
3.1 -- Restated Articles of Incorporation, as amended. (Incorporated by
reference to Exhibit 3.1 to Registration Statement No. 2-50721 on
Form S-1).
3.2 -- Articles of Amendment to Restated Articles of Incorporation.
(Incorporated by reference to Exhibit (4)(i)l to Form 10-Q for the
fiscal quarter ended July 31, 1982).
3.3 -- Articles of Amendment to Restated Articles of Incorporation.
(Incorporated by reference to Exhibit 3.1 to Form 10-Q for the fiscal
quarter ended July 31, 1983).
3.4 -- Articles of Amendment to Restated Articles of Incorporation.
(Incorporated by reference to Exhibit 4.7 to Registration Statement
No. 33-8727 on Form S-3).
3.5 -- Articles of Amendment to Restated Articles of Incorporation, dated
September 11, 1987. (Incorporated by reference to Exhibit 4.1 to
Amendment No. 3 to Registration Statement No. 33-16678 on Form S-4).
3.6 -- Statement of Resolution Establishing Series of Shares of Series C
Junior Participating Preferred Stock, dated August 5, 1988.
(Incorporated by reference to Exhibit 3.1 to Form 10-Q for the fiscal
quarter ended July 31, 1988).
3.7 -- Articles of Amendment to Restated Articles of Incorporation.
(Incorporated by reference to Exhibit 3.8 to Registration Statement
No. 33-47097 on Form S-4).
3.8 -- Bylaws, as amended. (Incorporated by reference to Exhibit 3.7 to Form
10-K for the fiscal year ended December 31, 1991).
4.1 -- Rights Agreement dated as of July 18, 1988 between the Company and
Texas Commerce Bank National Association. (Incorporated by reference
to Exhibit 1 to Form 8-K dated July 18, 1988).
4.2 -- Amendment, dated as of May 10, 1990, to the Rights Agreement, dated
as of July 18, 1988, between the Company and Texas Commerce Bank
National Association. (Incorporated by reference to Exhibit 1 to Form
8-K dated May 10, 1990).
4.3 -- Agreement Appointing a Successor Rights Agent under Rights Agreement,
dated as of June 1, 1990, by the Company and Ameritrust Company
National Association. (Incorporated by reference to Exhibit 4.1 to
Form 10-Q for the fiscal quarter ended June 30, 1990).
4.4 -- Undertaking to furnish instruments related to long-term debt.
10.1 -- Retirement Plan For Non-Employee Directors. (Incorporated by
reference to Exhibit 10.1 to Form 10-K for the fiscal year ended
December 31, 1991).
10.2 -- Supplemental Executive Retirement Plan, and form of Supplemental
Executive Retirement Plan Trust. (Incorporated by reference to
Exhibit 19.1 to Form 10-Q for the fiscal quarter ended March 31,
1989).
10.3 -- First Amendment to the Supplemental Executive Retirement Plan; Second
Amendment to the Supplemental Executive Retirement Plan; and Third
Amendment to the Supplemental Executive Retirement Plan.
(Incorporated by reference to Exhibit 10.3 to Form 10-K for the
fiscal year ended December 31, 1991).
10.4 -- Agreement dated May 14, 1992 between the Company, R. L. Waltrip and
related parties relating to life insurance. (Incorporated by
reference to Exhibit 10.4 to Form 10-K for the fiscal year ended
December 31, 1992).
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------------- ------------------------------------------------------------------------
<S> <C>
10.5 -- Employment Agreement, dated November 11, 1991, as amended and
restated as of August 12, 1992, and further amended as of May 12,
1993, between the Company and R. L. Waltrip. (Incorporated by
reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended
September 30, 1993).
10.6 -- Non-Competition Agreement and Amendment to Employment Agreement,
dated November 11, 1991, among the Company, R. L. Waltrip and Claire
Waltrip. (Incorporated by reference to Exhibit 10.8 to Form 10-K for
the fiscal year ended December 31, 1992).
10.7 -- Employment Agreement, dated November 11, 1991, as amended and
restated as of August 12, 1992, and further amended as of May 12,
1993, between the Company and L. William Heiligbrodt. (Incorporated
by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter
ended September 30, 1993).
10.8 -- Employment Agreement, dated November 11, 1991, as amended and
restated as of August 12, 1992, and further amended as of May 12,
1993, between the Company and Samuel W. Rizzo. (Incorporated by
reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended
September 30, 1993).
10.9 -- Supplemental Agreement, dated February 16, 1995, between the Company
and Samuel W. Rizzo.
10.10 -- Employment Agreement, dated November 11, 1991, as amended and
restated as of August 12, 1992, and further amended as of May 12,
1993, between the Company and W. Blair Waltrip. (Incorporated by
reference to Exhibit 10.4 to Form 10-Q for the fiscal quarter ended
September 30, 1993).
10.11 -- Employment Agreement, dated November 11, 1991, as amended and
restated as of August 12, 1992, and further amended as of May 12,
1993, between the Company and John W. Morrow, Jr. (Incorporated by
reference to Exhibit 10.5 to Form 10-Q for the fiscal quarter ended
September 30, 1993).
10.12 -- Form of Employment Agreement pertaining to officers (other than the
officers referenced in the seven preceding exhibits). (Incorporated
by reference to Exhibit 10.6 to Form 10-Q for the fiscal quarter
ended September 30, 1993).
10.13 -- Salary Continuation Agreement dated April 1, 1991 between the Company
and Robert L. Waltrip. (Incorporated by reference to Exhibit 10.17 to
Form 10-K for the fiscal year ended December 31, 1991).
10.14 -- Forms of two Salary Continuation Agreements applicable to officers of
the Company (other than the officer referenced in the preceding
exhibit). (Incorporated by reference to Exhibit 10.19 to Form 10-K
for the fiscal year ended December 31, 1991).
10.15 -- Form of First Amendment to Salary Continuation Agreement (amending
the Salary Continuation Agreements of L. William Heiligbrodt, W.
Blair Waltrip, Samuel W. Rizzo and John W. Morrow). (Incorporated by
reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended
September 30, 1994).
10.16 -- Form of 1986 Stock Option Plan. (Incorporated by reference to Exhibit
10.21 to Form 10-K for the fiscal year ended December 31, 1991).
10.17 -- Amended 1987 Stock Plan. (Incorporated by reference to Appendix A to
Proxy Statement dated April 1, 1991).
10.18 -- First Amendment to Amended 1987 Stock Plan. (Incorporated by
reference to Exhibit 10.23 to Form 10-K for the fiscal year ended
December 31, 1994).
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------------- ------------------------------------------------------------------------
<S> <C>
10.19 -- Service Corporation International (Canada) Limited Stock Option Plan.
(Incorporated by reference to Exhibit 10.17 to Form 10-K for the
fiscal year ended December 31, 1994).
10.20 -- 1993 Long-Term Incentive Stock Option Plan. (Incorporated by
reference to Annex A to proxy statement dated April 12, 1994).
10.21 -- Service Corporation International ECI Stock Option Plan.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q for the
fiscal quarter ended September 30, 1994).
10.22 -- Summary of 1995 Long Term Cash Performance Plan.
10.23 -- Agreement for Reorganization, dated August 15, 1989 among Morrow
Partners, Inc., J.W. Morrow Investment Company, John W. Morrow, Jr.,
Billy Dee Davis and the Company; Agreement-Not-To-Compete, dated
August 15, 1989, between John W. Morrow, Jr., Morrow Partners, Inc.
and the Company, and; Lease dated August 15, 1989, by John W. Morrow,
Jr. and Crawford-A. Crim Funeral Home, Inc. (Incorporated by
reference to Exhibit 10.27 to Form 10-K for the fiscal year ended
December 31, 1989).
10.24 -- Casket Supply and Requirements Agreement, dated October 31, 1990,
between York Acquisition Corp. and SCI Funeral Services, Inc., and;
First Amendment to Casket Supply and Requirements Agreement, dated
December 30, 1992. (Incorporated by reference to Exhibit 10.27 to
Form 10-K for the fiscal year ended December 31, 1992).
10.25 -- Supplemental Executive Retirement Plan for Senior Officers (as
Amended and Restated Effective as of December 31, 1993).
(Incorporated by reference to Exhibit 10.21 to Form 10-K for the
fiscal year ended December 31, 1994).
10.26 -- First Amendment to Supplemental Executive Retirement Plan for Senior
Officers.
10.27 -- ISDA Master Agreement dated February 4, 1993; Amendment to the Master
Agreement dated August 12, 1993; Confirmation dated August 13, 1993;
Confirmation dated November 1, 1993 and Notice of Exercise; all of
which are between Morgan Guaranty Trust Company of New York
("Morgan") and the Company. (Incorporated by reference to Exhibit
10.22 to Form 10-K for the fiscal year ended December 31, 1994).
10.28 -- Sterling Note, dated September 2, 1994, issued by Service Corporation
International plc to Morgan; guaranty, dated September 2, 1994,
between the Company and Morgan.
10.29 -- Letter, dated December 2, 1994 amending the ISDA Master Agreement
(filed in Exhibit 10.27 above) and the Sterling Note and guaranty
(filed as Exhibit 10.28 above), between the Company and Morgan;
Letter dated December 13, 1994 regarding the ISDA Master Agreement
(filed in Exhibit 10.27 above).
10.30 -- Confirmation dated May 18, 1994; Confirmation dated January 18, 1994;
Confirmation dated January 18, 1994; Confirmation dated January 18,
1994; all of which are between Morgan and the Company.
11.1 -- Computation of Earnings Per Share.
12.1 -- Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
16.1 -- Letter from Ernst & Young LLP dated March 30, 1995 containing its
statement with respect to Item 9 of Form 10-K: Changes In and
Disagreements with Accountants on Accounting and Financial
Disclosure.
21.1 -- Subsidiaries of the Company.
</TABLE>
49
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------------- ------------------------------------------------------------------------
<S> <C>
23.1 -- Consent of Independent Accountants (Coopers & Lybrand L.L.P.).
23.2 -- Consent of Independent Auditors (Ernst & Young LLP).
24.1 -- Directors' Powers of Attorney.
27.1 -- Financial Data Schedule.
</TABLE>
In the above list, the management contracts or compensatory plans or
arrangements are set forth in Exhibits 10.1 through 10.22, 10.25 and 10.26.
50
<PAGE> 1
EXHIBIT 4.4
AGREEMENT TO FURNISH INSTRUMENTS
WITH RESPECT TO LONG-TERM DEBT
Pursuant to Item 601(b)(4) of Regulation S-K, there is not filed with
this report certain instruments with respect to long-term debt under which the
total amount of securities authorized thereunder does not exceed 10 per cent of
the total assets of Registrant and its subsidiaries on a consolidated basis.
Registrant agrees to furnish a copy of any such instrument to the Commission
upon request.
SERVICE CORPORATION INTERNATIONAL
By: /s/ James M. Shelger
-----------------------------------
James M. Shelger
Senior Vice President
Date: March 31, 1995
<PAGE> 1
EXHIBIT 10.9
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT made and entered into effective as of the 16th
day of February, 1995, between Service Corporation International, a Texas
corporation (the "Company"), and Samuel W. Rizzo (the "Employee");
WHEREAS, the Company and the Employee are currently parties to an
Employment Agreement dated November 11, 1991, amended and restated as of August
12, 1992 and further amended as of May 12, 1993 (the "1991 Agreement");
WHEREAS, the Company and the Employee desire to take certain actions
with respect to the 1991 Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Employee agree as follows:
1. Employment and Term. Pursuant to the second sentence of
Section 1 of the 1991 Agreement, the Company hereby gives the Employee notice
that the Company's Board of Directors has determined not to authorize the
extension of the 1991 Agreement and, accordingly, the Employment Period under
the 1991 Agreement will terminate on February 16, 1998. The Employee hereby
acknowledges the receipt and sufficiency of such notice.
2. Duties and Powers of Employee. The Employee hereby resigns as
Chief Financial Officer and Treasurer effective February 16, 1995. The
Employee will continue to serve (i) as Executive Vice President of the Company
or in such other capacity with such other title as the Chief Executive Officer
may from time to time designate, and (ii) as a full time employee of the
Company with such duties as may be assigned to him from time to time by the
Chief Executive Officer of the Company. The 1991 Agreement shall remain in
effect as provided therein and herein.
3. Compensation. Notwithstanding the terms of the 1991
Agreement, the Employee shall not be entitled to participate in any of the
Company's restricted stock plans, bonus plans or other performance-based
incentive plans, programs or awards for periods beginning on or after January
1, 1995. Notwithstanding the preceding sentence, the restricted stock awards
and stock option grants received by Employee prior to January 1, 1995 shall
remain in effect according to their respective terms.
<PAGE> 2
Except as modified by the preceding paragraph, Employee shall be
entitled to continue participation in the compensation referenced in Section 3
of the 1991 Agreement as a full time employee until February 16, 1998,
including without limitation participation in the Supplemental Executive
Retirement Plan for Senior Officers.
4. Non-Competition Payments. The Company hereby notifies the
Employee that, upon expiration of the Employment Period, the Company exercises
its option to cancel Employee's post-employment non-competition obligations
under Section 13(a) of the 1991 Agreement and the Company's corresponding
obligation to make the Non-Competition Payments (as defined in the 1991
Agreement). The Employee and the Company agree that the notice provided in the
preceding sentence is satisfactory for all purposes under the 1991 Agreement.
5. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
6. Assignment. This Agreement may not be assigned by the
Employee. Neither the Employee, his spouse nor estate shall have any right to
commute, encumber or dispose of any right to receive payments hereunder, it
being that such payments and the right thereto are nonassignable and
nontransferable.
7. Binding Effect. Subject to the provisions of Section 7 of
this Agreement, this Agreement shall be binding upon and inure to the benefit
of the parties hereto, the Employee's heirs and personal representatives, and
the successors and assigns of the Company.
8. Captions. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9. Governing Law. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Texas.
10. Counterparts. This Agreement may be executed in multiple
original counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
Houston, Texas, as of the date and year first above written.
SERVICE CORPORATION INTERNATIONAL
By: /s/ James M. Shelger
-----------------------------
James M. Shelger
Senior Vice President,
General Counsel and Secretary
/s/ Samuel W. Rizzo
-----------------------------
Samuel W. Rizzo
-3-
<PAGE> 1
EXHIBIT 10.22
SUMMARY OF SERVICE CORPORATION INTERNATIONAL
1995 LONG TERM CASH PERFORMANCE PLAN
* The Plan provides for 1995 grants of performance-based cash awards to
SCI senior officers.
* Grants will be made in 1995 based on competitive levels of long-term
incentive compensation for other companies of similar size.
* All or part of these awards vest each year based on earnings per share
(EPS) performance. At the end of three years, all or any part of the
awards not previously vested will be forfeited.
* Vesting may begin in 1996 based on 1995 growth over 1994 EPS.
* Vesting would be accelerated in the event of death, disability or
change of control.
* Upon vesting, all required taxes will be withheld from cash payments.
<PAGE> 1
EXHIBIT 10.26
FIRST AMENDMENT TO
SERVICE CORPORATION INTERNATIONAL
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN FOR SENIOR OFFICERS
(As Amended and Restated Effective as of December 31, 1993)
W I T N E S S E T H:
WHEREAS, Service Corporation International (the "Company") executed
the plan entitled "Service Corporation International Supplemental Executive
Retirement Plan for Senior Officers (as Amended and Restated Effective as of
December 31, 1993)" (hereinafter called the "Plan"); and
WHEREAS, the Company retained the right in Section 8.1 of the Plan to
amend the Plan from time to time; and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company, in the exercise of its duly authorized delegation of authority to
amend the Plan pursuant to Section 8.1 thereof, has directed and approved the
amendment of the Plan as described in this First Amendment thereto;
NOW, THEREFORE, the Plan is hereby amended, effective as of November 9,
1994 as follows:
1. The definition of "Accrued Benefit" in Article I is deleted in
its entirety and is replaced with the following definition:
"`Accrued Benefit' means, as of any given time, the
amount of unpaid Retirement Benefit under this Plan
to which a Participant is then entitled under
applicable provisions of Section 3.1, payable in the
Standard Form of benefit commencing upon his
Retirement Date."
2. A new definition of "Actuarial Equivalent" is added to Article
I, which provides as follows:
"`Actuarial Equivalent' or `Actuarially Equivalent'
means equality in value of the aggregate amounts
expected to be received at different times or in
<PAGE> 2
a different form of payment, determined by the use of
the same interest rate and mortality assumptions as
are being used, as of January 1 of the calendar year
immediately preceding the calendar year in which such
benefits are paid, under the definition of `Actuarial
Equivalence' under the SCI Cash Balance Plan. If
there is no SCI Cash Balance Plan or successor
qualified defined benefit plan, then the actuarial
factors to be used will be those actuarial factors as
are selected by the actuarial firm that last serviced
the SCI Cash Balance Plan prior to its termination or
merger, as being then appropriate had the SCI Cash
Balance Plan remained in existence at its last level
of benefits and with its last participant census."
3. The definition of "Retirement Benefit" in Article I is deleted
in its entirety and the following definition is substituted
therefor:
"`Retirement Benefit' means the Accrued Benefit
payable to a qualifying Participant at his Retirement
Date, as described in Section 3.1 and paid under
Section 3.2."
4. A new defined term, "Standard Form", is added to Article I,
which shall provide as follows:
"`Standard Form' means the 180-month certain and life
annuity described in Section 3.2(a), commencing as of
the first day of the month coincident with or next
following his Retirement Date, which shall be the
form in which Retirement Benefits shall be paid to a
Participant who has not properly elected a different
form of payment under Section 3.2."
5. The last sentence of subsection (a) of Section 3.1 is amended:
(i) to add, immediately after the word "However," the words
"subject to Section 6.3," and (ii) to delete the word "amount"
each place it appears and to substitute in each such place the
words "Actuarially Equivalent value."
6. Section 3.2 of the Plan is deleted in its entirety and is
replaced with the following provision:
"3.2 FORM AND TIME OF PAYMENT. Except as provided in
Article IV, and subject to Section 6.3, the Retirement Benefit
payable hereunder shall be paid as follows:
(a) Standard Form: 180-Month Certain and Life Annuity.
A Participant who is entitled to Retirement Benefits
hereunder and who does not properly elect one of the
optional forms of payment for which he
-2-
<PAGE> 3
is eligible, as described in Sections 3.2(b), (c), or
(d) below, shall receive his entire Retirement Benefit
in the Standard Form of a monthly annuity that is
payable for the lesser of 180 months or his lifetime,
commencing as of the first day of the month coincident
with or next following his Retirement Date. If a
Participant who is to receive this Standard Form of
benefit dies before 180 monthly payments have been
made to him, no further Retirement Benefit shall be
payable to him and, instead, his Beneficiary shall
receive the death benefit, if any, due under Article
V.
(b) Lump Sum Payment.
A Participant may request, in the form prescribed by
the Committee, payment of his entire Retirement
Benefit in a single lump sum payment that is made as
of his Retirement Date; provided that: (1) the
Participant provides his written request to the
Committee not less than twelve (12) calendar months
before his Retirement Date; and (2) the Committee, in
its sole discretion, accepts the Participant's
request. The Committee may, in its sole discretion,
accept such request in total, accept such request in
part and reject it in part, or reject such request in
total. In the case of a lump sum payment request
accepted by the Committee in total, the lump sum
payment made under this Section 3.2(b) shall be the
Actuarial Equivalent of the requesting Participant's
Retirement Benefit, determined as of his attainment
of age 65.
In the event that the requesting Participant's
specified Retirement Date is a date prior to his
attainment of age 65, the Actuarially Equivalent
value of his Retirement Benefit, as described in the
immediately preceding sentence, shall be discounted
to the Actuarially Equivalent value of his Retirement
Benefit determined as of his Retirement Date.
In the event that the Committee accepts a
Participant's lump sum request in part, the lump sum
payment made under this Section 3.2(b) shall be the
Actuarial Equivalent, determined as of his Retirement
Date, of the portion of his Retirement Benefit with
respect to which his lump sum request was accepted.
Within such time as it considers reasonable under the
circumstances, the Committee shall notify a
Participant who has requested a lump sum payment of
the extent to which it has accepted such request.
The opportunity to request a lump sum payment under
this Section 3.2(b) shall be available only once to
any Participant and, once such a request is made, it
shall be irrevocable.
-3-
<PAGE> 4
(c) In-Service Commencement After Age 60.
A Participant who is age 60 or older on November 9,
1994, and is an active Employee of the Company on
such date, may elect to receive his entire Retirement
Benefit in the form of a monthly annuity that is
payable for the lesser of 180 months or his lifetime,
commencing as of January 1, 1995, which annuity shall
not be increased after its payment commencement date
on account of any subsequent increase in the
Participant's years of Credited Service,
compensation, any cost-of-living adjustments or
otherwise; provided that the Participant's written
election of such form of payment is received by the
Committee not later than December 31, 1994. The
monthly amount of such annuity shall be the Actuarial
Equivalent of the Standard Form of Retirement
Benefit, with such Actuarial Equivalence calculated
as of his Retirement Date, and (i) by assuming that
the payment of his Retirement Benefit will commence
as of his attainment of age 65, and (ii) if the
Participant is less than age 65 on January 1, 1995,
the amount calculated under clause (i) shall then be
discounted to the Actuarially Equivalent value of
such annuity commencing as of January 1, 1995.
(d) In-Service Commencement Before Age 60.
A Participant who is less than age 60 on November 9,
1994, and is an active Employee of the Company on
such date, may elect to receive his entire Retirement
Benefit in the form of a monthly annuity that is
payable for the lesser of 180 months or his lifetime,
commencing as of the later of January 1, 1996 or the
first day of the month following the date the
Participant attains age 60; which annuity shall not
be increased after its payment commencement date on
account of any subsequent increase in the
Participant's years of Credited Service,
compensation, any cost-of-living adjustments or
otherwise; provided that the Participant's written
election of such form of payment is received by the
Committee not later than 12 calendar months before
such specified commencement date. Because the
annuity described in this Section 3.2(d) commences
before the Participant attains the age of 65, the
monthly amount of such annuity shall be discounted to
the Actuarially Equivalent value of such annuity
commencing as of the commencement date described
above in this paragraph.
(e) Lump Sum Payment After Commencement.
A Participant who has commenced receipt, while an
active Employee of the Company, of an annuity under
Section 3.2(c) or (d) above may provide to the
Committee a written request to receive, as of his
-4-
<PAGE> 5
Retirement Date, a lump sum payment of the entire
Actuarially Equivalent value, determined as of the
date that is 12 calendar months prior to his
Retirement Date, of all remaining annuity payments
payable to him; provided that such Participant's
written request for such lump sum is received by the
Committee not less than 12 calendar months prior to
his Retirement Date. The Committee may, in its sole
discretion, accept such request in total, accept such
request in part and reject it in part, or reject such
request in total. Within such time as it considers
reasonable under the circumstances, the Committee
shall notify a Participant who has requested a lump
sum payment of the extent to which it has accepted
such request."
6. Article IV is amended to delete the words "present value" each
place they appear and to substitute therefor in each such
place the words "Actuarially Equivalent value."
7. Section 5.1 is deleted in its entirety and is replaced with
the following provision:
"5.1 BENEFITS IN THE EVENT OF PARTICIPANT'S DEATH. If a
Participant dies after commencement of annuity benefits from
this Plan and before receiving 180 monthly annuity payments,
his Beneficiary shall receive, as soon as administratively
practical after such Participant's death, a lump sum cash
payment of the Actuarially Equivalent value, determined as of
the date of the Participant's death, of whichever of the
following amounts is applicable to the Participant:
(a) In the case of a Participant who was receiving the
Standard Form of benefit, such Participant's
remaining Accrued Benefit as of his date of death;
provided, however, that if the Participant was an
active Employee on the date of his death, instead of
such Participant's actual Accrued Benefit, the
Beneficiary's death benefit shall, if greater, be
based upon the Accrued Benefit to which the
Participant would have been entitled if he had
continued to earn Credited Service from the date of
his death to the date on which he would have attained
the age of 65.
(b) In the case of a Participant who was receiving the
in-service annuity described in Section 3.2(c), the
Participant's Accrued Benefit as of December 31,
1994, less any payments received prior to his death;
and
(c) In the case of a Participant who had elected the
in-service annuity described in Section 3.2(d), the
Participant's Accrued Benefit determined as of
December 31 of the year in which he signed the
written election form by which he elected such form
of benefit, less any payments already received prior
to his death."
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Company ratifies, approves and consents to the
amendment of the Plan by this First Amendment this 27th day of Feb., 1995, to be
effective as of November 9, 1994.
SERVICE CORPORATION INTERNATIONAL
ATTEST:
By: Jack L. Stoner
-------------------------------------------
Name: Jack L. Stoner
Title: Senior Vice President/Administration
By: Jenice Smith
--------------------------
Name: Jenice Smith
Title: Executive Assistant
-6-
<PAGE> 1
EXHIBIT 10.28
DATED SEPTEMBER 2,1994
SERVICE CORPORATION INTERNATIONAL PLC
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
------------------------------------------------------------
STERLING NOTE
Pound Sterling l85,000,000
------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 Victoria Embankment
London EC4Y 0JP
<PAGE> 2
STERLING NOTE
Pound Sterling 185,000,000 September 2, 1994
FOR VALUE RECEIVED, Service Corporation International PLC, a company
incorporated under the law of the United Kingdom (the "Borrower"), promises to
pay to the order of MORGAN GUARANTY TRUST COMPANY OF NEW YORK (the "Bank") on
August 30, 1995 (the "Maturity Date") at its office at 60 Victoria Embankment,
London EC4Y 0JP, United Kingdom, for its own account (or for the account of
such other office of the Bank as the Bank may designate by notice to the
Borrower, or the last office so designated by the Bank being hereinafter
referred to as the "Lending Office"), in lawful money of the currency of each
Loan (as hereinafter defined) made hereunder in same day funds (or in such
funds as may from time to time become customary for the settlement of
international transactions in the relevant currency), the principal amount of
the lesser of (i) L.185,000,000 (the "Commitment") or (ii) the then outstanding
principal amount of each loan (the "Loan" or "Loans") made by the Bank from
time to time to the Borrower hereunder. The Borrower shall pay interest
(computed on the basis of a 360-day year, or a 365-day year basis for Sterling,
and paid for actual days elapsed) on the unpaid principal amount of each Loan
until maturity on the dates and at a rate per annum for each Interest Period
(as hereinafter defined) applicable thereto as hereinafter set forth. In this
Agreement, "Sterling" and "L." mean the lawful currency for the time being of
the United Kingdom of Great Britain and Northern Ireland.
The Borrower may, by giving notice in accordance with the provisions
hereof borrow Loans hereunder from the date hereof to but excluding the April
30, 1995 (the "Commitment Termination Date") in an aggregate principal Sterling
Amount (as hereinafter defined) not to exceed at any one time outstanding the
Commitment, as such amount may be reduced pursuant to the terms hereof, on the
terms and conditions set forth below. Amounts borrowed hereunder and repaid or
prepaid may not be reborrowed. Subject to the terms and conditions hereof,
Loans hereunder may be in Pounds Sterling or an alternative currency (the
"Alternative Currency") as selected by the Borrower in the applicable Notice of
Borrowing. The Borrower shall give the Bank prior written notice (a "Notice of
Borrowing") not later than 10:00 a.m. (London time) on the third business day
(as hereinafter defined) before each Loan, specifying the date thereof (which
shall be a business day), the principal Sterling Amount thereof (which shall be
at least L.3,000,000), whether the Loan is to be denominated in Sterling or the
Alternative Currency and the duration of the initial Interest Period (as
hereinafter defined) therefor. In this Note, the term "business day" means any
day (other than a Saturday or a Sunday) on which commercial banks are open for
international business (including dealings in Sterling deposits) in London and
on which commercial banks are open for domestic and foreign exchange business
in London and New York City.
The Loans shall initially have an Interest Period of the duration
specified by the Borrower in the applicable Notice of Borrowing. Thereafter,
the Borrower may from time to time elect to
<PAGE> 3
continue any Loan (subject in each case to the provisions hereof) by electing
to continue such Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Bank at least three business days before the
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of a Loan; PROVIDED that the Sterling Amount of the portion to
which such Notice applies is L.3,000,000 or any larger multiple of L.1,000,000.
Each Notice of Interest Rate Election shall specify:
(i) the Loan (or portion thereof) to which such notice applies;
(ii) the date on which the continuation selected in such notice is to
be effective, which shall comply with the provisions hereof, and
(iii) the duration of the new Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election
shall comply with the provisions of the definition of Interest Period specified
below. If the Borrower fails to deliver timely Notice of Interest Rate
Election for any Loan, such Loan shall be continued, subject to the provisions
hereof, with an Interest Period of one month's duration.
The Bank shall provide to the Borrower at its address specified on the
signature pages hereof information as to the Bank's proper address for all
Notices to be given to the Bank hereunder.
Any Loan which is to be made in the Alternative Currency shall be
advanced in the Equivalent Amount (as hereinafter defined) of the Sterling
Amount (as hereinafter defined) thereof and shall be repaid or prepaid in such
Alternative Currency in the amount borrowed. Interest payable on any Loan
denominated in an Alternative Currency shall be paid in such Alternative
Currency.
If there shall occur on or prior to the date of any Loan to be made in
the Alternative Currency any change in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls which would in the opinion of the Bank make it impracticable for such
Loan to be denominated in the Alternative Currency specified by the Borrower,
then the Bank shall forthwith give notice thereof to the Borrower, and such
Loan shall not be denominated in the Alternative Currency but shall be made on
the date of such borrowing in
<PAGE> 4
Sterling, unless the Borrower notifies the Bank at least two business days
before such date that it elects not to borrow on such date.
"Sterling Amount" means in relation to any Loan made in Sterling,
such Sterling amount and in relation to any Loan denominated in an
Alternative Currency, the amount designated by the Borrower as the Sterling
amount of such Loan in the related Notice of Borrowing. Each Loan denominated
in an Alternative Currency shall be deemed a utilisation of the Commitment in
an amount equal to the Sterling Amount thereof.
"Equivalent Amount" means on any date, the amount of Alternative
Currency converted from Sterling at the Bank's spot buying rate (based on the
London interbank market rate then prevailing) for Sterling against the
Alternative Currency as of approximately 9:00 a.m. (London time) three business
days before such date.
Each Loan shall bear interest for each Interest Period at a rate per
annum (the "Loan Rate") equal to the Adjusted London Interbank Offered Rate for
such Interest Period (as hereinafter defined) PLUS 1/5 of 1% (the "Loan
Margin"), payable on the last day of the Interest Period applicable thereto
and, if such Interest Period is longer than three months, at intervals of up to
three months after the first day thereof, as agreed by the Bank. The "Adjusted
London Interbank Offered Rate" applicable to any Interest Period means a rate
per annum equal to (rounded upwards, if necessary, to the next higher 1/100 of
1%) the applicable London Interbank Offered Rate plus "Additional Costs" (as
defined in Schedule I hereto). The "London Interbank Offered Rate" applicable
to any Interest Period means the rate per annum at which deposits in Sterling
or, in the case of any Loan denominated in the Alternative Currency, the
Alternative Currency are offered to the Bank in the London interbank market at
approximately 11:00 a.m. (London time) two business days prior to the first
day of such Interest Period in an amount approximately equal to the principal
amount of the Loan to which such Interest Period applies and for the period of
time comparable to such Interest Period. The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the calculation of Additional Costs. As used herein, the term
"Interest Period" means with respect to any Loan (x) in the case of the initial
Interest Period therefor, the period beginning on the date of the Loan and
ending on the numerically corresponding day in the relevant calendar month
after such date, as agreed by the Bank, and (y) in the case of any subsequent
Interest Period, the period beginning on the last day of the immediately
preceding Interest Period and ending on the numerically corresponding day in
the relevant calendar month after such date, as agreed by the Bank; PROVIDED,
that if an Interest Period would otherwise end on a day which is not a business
day it shall be extended to the next succeeding business day unless such
business day falls in the next calendar month, in which case the Interest
Period shall end on the next preceding business day. The Borrower shall pay
interest on the unpaid principal amount of each Loan after the maturity thereof
and, to the extent permitted by law, on accrued and unpaid interest until paid
at a rate per annum equal to the sum of 2% plus the Loan Margin plus the rate
per annum
<PAGE> 5
at which one-day (or such other period of time shorter than six months as the
Bank may elect) deposits in Sterling or, in the case of any Loan denominated in
the Alternative Currency, the Alternative Currency of similar amount are
offered to the Bank's Lending Office in the London interbank market for the
period so elected. Notice by the Bank to the Borrower of the rate of interest
so determined shall be binding and conclusive upon the Borrower in the absence
of manifest error.
For so long as any Commitment is in effect, the Borrower shall pay to
the Bank a commitment fee at the rate of 1/10 of 1% on the unused amount of the
Commitment (computed on the basis of a 365-day year, and paid for actual days
elapsed). Such fee shall accrue from September 30, 1994 and shall be paid
quarterly in arrears. The Borrower shall have the right to terminate the
Commitment in whole or in part from time to time on not less than three
business days' prior written notice to the Bank by an amount of at least
L.3,000,000 or the total remaining undrawn portion of the Commitment. The
Commitment shall be terminated by an amount equal to the Sterling Amount of any
Loan. Any undrawn Commitment still in effect on the Commitment Termination
Date shall terminate on the Commitment Termination Date.
If after the date of this Note the adoption of, or any change in, any
applicable rule, executive order, decree, regulation or interpretation of any
thereof is amended, modified, enacted or promulgated by any government or
governmental authority which (i) changes the basis of taxation of payments to
the Bank or the Lending Office of the Bank in respect of the principal of and
interest on any Loan (except for changes in the rate of taxation on the overall
net income of the Bank by the United States of America or the Lending Office of
the Bank by the jurisdiction in which such Lending Office is located), or (ii)
imposes, modifies or deems applicable any reserve, special deposit or similar
requirement against any of the assets of, deposits with or for the account of,
or credit extended by the Bank's Lending Office, or (iii) imposes on the Bank
(or its Lending Office) or the London interbank market any other conditions
affecting any Loan, the Loans or this Note, and the result of any of the
foregoing is to increase the cost to the Bank (or its Lending Office) of
agreeing to make or making, funding or maintaining the Commitment or any Loan
evidenced by this Note or would have the effect of reducing the rate of return
on the capital of the Bank or any entity controlling the Bank as a consequence
of agreeing to make or making, funding or maintaining the Commitment or any
Loan, or to reduce the amount of any sum receivable by the Bank (or its Lending
Office) on this Note or on any Loan made hereunder, then the Borrower shall pay
to the Bank upon demand such amount as will compensate the Bank for such
additional cost or reduction in rate of return. A certificate of the Bank
setting forth the basis for the determination of any amount necessary to
compensate the Bank as aforesaid shall be conclusive as to the determination of
such amount, in the absence of manifest error.
If, after the date of this Note, the introduction of, or any change in,
any applicable law, rule or regulation or in the interpretation or
administration thereof by any governmental authority
<PAGE> 6
charged with the interpretation or administration thereof or compliance by the
Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any such authority shall make it unlawful or
impossible for the Bank (or its Lending Office) to make, maintain or fund the
Loans the Bank Forthwith shall so notify the Borrower. Upon receipt of such
notice, the Borrower shall prepay in full the then outstanding principal amount
of each Loan, together with accrued interest thereon, on either (A) the last
day of the Interest Period applicable thereto if the Bank may lawfully continue
to maintain and fund such Loan to such day or (b) immediately if the Bank may
not lawfully continue to fund and maintain such Loan to such day.
If the Borrower makes any payment of principal of any Loan on any day
other than the last day of the Interest Period applicable thereto or if the
Borrower fails for any reason to borrow or continue a Loan after having given a
Notice of Borrower or Notice of Interest Rate Election, as the case may be,
hereunder, the Borrower shall reimburse the Bank on demand for any loss or
expense incurred by it as a result of the timing of such payment, including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, provided that the Bank shall have delivered to the
Borrower a certificate as to the amount of such loss, which certificate shall
be conclusive in the absence of manifest error.
The Borrower hereby represents and warrants to the Bank that (a) the
Borrower is a company duly incorporated and existing in the United Kingdom and
is duly authorized to enter into and deliver this Note, and to borrow
hereunder, all of which will constitute valid and enforceable obligations of
the Borrower, (b) none of the borrowings hereunder, the execution and delivery
of this Note or the performance by the Borrower of its obligations hereunder
will violate any provision of law or any agreement, indenture, note or other
instrument binding upon the Borrower or its Memorandum or Articles of
Association or give cause for acceleration of any indebtedness of the Borrower,
(c) no authority from or approval by any governmental body, commission or
agency is required in connection with the execution and delivery of this Note
or borrowings hereunder, (d) there are no actions, suits or proceedings pending
against or, to the knowledge of the Borrower, threatened against or affecting,
the Borrower or any of its subsidiaries, in any court or before or by any
governmental department, agency or instrumentality, an adverse decision in
which could materially and adversely affect the financial condition, business,
operations or prospects of the Borrower or the ability of the Borrower to
perform its obligations under this Note or under any Loan made hereunder, and
(e) the Borrower and each subsidiary is in compliance in all material respects
with all applicable laws, ordinances, rules, regulations and requirements of
governmental authorities except where the necessity of compliance therewith is
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been established.
The obligation of the Bank to make its initial Loan is subject to the
conditions precedent that the Bank shall have received on or before the day of
such Loan the following documents, each dated such day, in form and substance
satisfactory to the Bank: (a) this Note duly executed by the
<PAGE> 7
Borrower and the Guaranty (as hereinafter defined) executed by the Guarantor,
(b) certified copies of the resolutions of the Board of Directors of the
Borrower approving this Note, and all documents evidencing other necessary
corporate or other action or necessary governmental or other approvals with
respect to this Note, (c) a certificate of the Company Secretary of the
Borrower certifying names and true signatures of the officers of the Borrower
duly authorised to sign this Note and the other documents to be delivered
hereunder and (d) an opinion of counsel to the Borrower in form reasonably
satisfactory to the Bank. The obligation of the Bank to make each Loan
hereunder (including the initial Loan) is subject to the conditions precedent
that (x) immediately after the making of such Loan, no Event of Default or any
event or condition which with the giving of notice or lapse of time, or both,
would become an Event of Default (a "Default") shall have occurred and be
continuing, and (v) the representations and warranties contained in this Note
are true on and as of the date of such Loan with the same force and effect as
if made on and as of such date.
If one or more of the following events ("Events of Default") shall have
occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or interest
on the Loan or any other amount payable hereunder;
(b) Service Corporation International (the "Guarantor") shall fail to
observe or perform any covenant incorporated by reference into the Guaranty
dated as of the date hereof (the "Guaranty") executed by the Guarantor in
favour of the Bank and guaranteeing in full the obligations of the Borrower
hereunder or the Guaranty shall fail to be in full force and effect for any
reason or the Guarantor shall repudiate any of its obligations thereunder;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Note (other than those covered by clause (a) above)
for 30 days after notice thereof has been given to the Borrower by the Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Note or by the Guarantor in the Guaranty or in any
certificate, financial statement or other document delivered pursuant to or in
connection with this Note, any Loan made hereunder or the Guaranty shall prove
to have been incorrect in any material respect when made (or deemed made);
(e) the Borrower, the Guarantor or any Material Subsidiary (as
hereinafter defined) of the Borrower or the Guarantor shall fail to make any
payment in respect of any Material Debt (as hereinafter defined) when due or
within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt;
<PAGE> 8
(g) any event or condition shall occur which enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Material Debt or any person acting on such holder's behalf to accelerate the
maturity thereof unless such event or condition is cured or waived within one
business day of its discovery;
(h) the Borrower, the Guarantor or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganisation or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced against
the Borrower, the Guarantor or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for
a period of 60 days; or an order for relief shall be entered against the
Borrower, the Guarantor or any Material Subsidiary under the federal bankruptcy
laws as now or hereafter in effect; or
(j) any action is taken for or with a view to the winding up of, or the
making of an administration order in relation to, the Borrower or the Borrower
becomes insolvent or is unable to pay its debts or enters into a voluntary
arrangement or other dealing with any of its creditors with a view to avoiding,
or in expectation of, insolvency or stops or threatens to stop payments
generally or an encumbrancer takes possession or an administrative receiver,
receiver or manager is appointed of the whole or any material part of the
assets of the Borrower;
then, and in every such event, the Bank may, by notice to the Borrower, declare
this Note (together with accrued interest thereon) to be, and this Note shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower, whereupon any commitment of the Bank to make or extend any Loan
hereunder shall cease; PROVIDED that in the case of any of the Events of
Default specified in clause (h), (i) or (j) above with respect to the Borrower,
without any notice to the Borrower or any other act by the Bank, this Note
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
<PAGE> 9
"Material Debt" means debt (other than this Note) of the Borrower,
Guarantor and/or one or more of their Material Subsidiaries, arising in one or
more related or unrelated transactions, in an aggregate principal amount
exceeding L.15,000,000.
"Material Subsidiary" means each subsidiary of the Borrower and the
Guarantor that would be a "significant subsidiary" of the Borrower or the
Guarantor as such term is defined in Regulation S-X promulgated pursuant to the
United States Securities Exchange Act of 1934 as amended to the date hereof,
provided however, for purposes of determining whether any subsidiary is a
"Material Subsidiary", the reference to "10 per cent." in clauses (1), (2) and
(3) of the definition of "significant subsidiary" contained in said Regulation
S-X shall be a reference to 5 per cent.
The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the Bank of its rights
hereunder in any particular instance shall not constitute a waiver of any right
in any subsequent instance.
The Bank may make assignments of its rights and obligations hereunder
to an affiliate of the Bank and may grant participations in its rights and
obligations hereunder to any other bank or institution in each case without the
Borrower's consent. The Bank may with the consent of the Borrower grant
assignments of its rights and obligations hereunder to any non-affiliated bank
or institution.
If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due from the Borrower hereunder in the currency expressed to be
payable herein (the "specified currency") into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Bank could purchase the specified currency with such other
currency at the Bank's London office on the business day preceding that on which
final judgment is given. The obligations of the Borrower in respect of any sum
due to the Bank hereunder shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on the
business day following receipt by the Bank of any sum adjudged to be so due in
such other currency the Bank may in accordance with normal banking procedures
purchase the specified currency with such other currency; if the amount of the
specified currency so purchased is less than the sum originally due to the Bank
in the specified currency, the Borrower agrees, to the fullest extent that it
may effectively do so, as a separate obligation and notwithstanding any such
judgment, to indemnify the Bank against such loss, and if the amount of the
specified currency so purchased exceeds the sum originally due to the Bank in
the specified currency, the Bank agrees to remit such excess to the Borrower.
<PAGE> 10
If this Note is not paid in full when due the Borrower agrees to pay
all costs and expenses of collection, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with
English law. The Borrower hereby submits to the non-exclusive jurisdiction of
the English Courts for purposes of all legal proceedings arising out of or
relating to this Note or any agreement received by the Bank in connection
herewith. The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
<PAGE> 11
SERVICE CORPORATION INTERNATIONAL PLC
By: /s/ G. R. CHAMPAGNE
-----------------------------
Title: Director
Address:
___________________
___________________
___________________
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
------------------------------
Vice President
<PAGE> 12
SCHEDULE I
ADDITIONAL COSTS
"Additional Costs" means, in relation to any period by reference to which
interest is determined in respect of a Loan denominated in Sterling, or an
overdue sum owed and denominated in Sterling, the cost of compliance with any
present or future law or directive made by or on behalf of Her Majesty's
Government and/or the Bank of England or any other relevant agency of the
United Kingdom in respect of deposit, reserve or liquidity requirements,
expressed as a percentage rate per annum and determined by the Bank as follows:
1. The rates to be supplied by the Bank for the purpose of determining the
Additional Costs relating to each period in respect of which interest
is payable hereunder shall equal:
R(C-D)+S(C-T)+A(C) % per annum
------------------------------
100 - (S + A)
where, on the day upon which the calculation of such rate falls to be made:
R% = the level of liquidity on the Determination Day (as defined below)
expressed as a percentage of Eligible Liabilities. The level
of liquidity is that which the Bank of England has required the Bank
to maintain as mandatory liquid assets;
C% = the rate at which fixed deposits in Sterling for the Relevant Period
(as defined below) were offered to the Bank in the Interbank Market
at or about 11 a.m. on the Determination Day;
D% = the lower of C% and the best rate offered to the Bank in the London
Discount Market for callable deposits in Sterling for the Relevant
Period at or about 11 a.m. on the Determination Day;
S% = the level of Special Deposits which the Bank is required to maintain
with the Bank of England on the Determination Day, expressed as a
percentage of Eligible Liabilities;
T% = the lower of C% and the weighted average of interest rates paid by the
Bank of England for Special Deposits on the Determination Day; and
<PAGE> 13
A% = the level of interest free cash balances which the Bank is required
to maintain with the Bank of England on the Determination Day,
expressed as a percentage of Eligible Liabilities.
PROVIDED THAT if the foregoing shall provide a negative additional percentage
the additional percentage shall be taken as zero.
For the purposes of the foregoing:
"RELEVANT PERIOD" means, in respect of any period of three months or
less by reference to which interest is payable hereunder, such period
and, in respect of any period of more than three months by reference to
which interest is payable hereunder, each successive period of three
months contained therein and any necessary shorter period comprised in
any such period.
"DETERMINATION DAY" means in relation to any Relevant Period the first
day of such Relevant Period.
"ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" shall bear the meanings
ascribed to them from time to time by the Bank of England.
2. In relation to each Relevant Period the Bank shall determine, in
accordance with the formula set out in paragraph 1 above, the rate
applicable thereto on the Determination Day, each such determination to
be notified by the Bank to the Borrower (in relation to such Relevant
Period, herein referred to as "THE ADDITIONAL COSTS").
3. The determination by the Bank of the Additional Costs in relation to any
period shall, in the absence of manifest error, be conclusive and
binding on all of the parties hereto.
4. If the Bank determines that a change in circumstances (including the
imposition of alternative or additional official requirements) has
rendered or will render the formula set out in paragraph 1 above
inappropriate, then the Bank shall amend, supplement, modify or replace
such formula and shall notify the Borrower of the manner in which the
Additional Costs shall thereafter be determined. The manner of
calculation so notified by the Bank shall, in the absence of manifest
error, be conclusive and binding for the purposes of this Note.
<PAGE> 14
GUARANTY
GUARANTY dated as of the ______ day of September, 1994 between Service
Corporation International, a Texas corporation (the "Guarantor"), and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, a New York State banking corporation
(the "Bank").
RECITALS
Service Corporation International PLC, a United Kingdom corporation
(the "Company"), has executed in favor of the Bank a Sterling Note dated as of
the date hereof (the "Note"). The Note provides that it is a condition
precedent to the obligations of the Bank to make loans thereunder that the
Company provide the Bank with a guaranty duly executed by the Guarantor
containing the terms and conditions set forth herein. Capitalized terms used
herein not otherwise defined have the meetings assigned to them in the Note.
Pursuant to the Note and as an inducement to the Bank to make the loans
thereunder and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Bank and the Guarantor agree
as follows:
1. Guaranty of Payment. The Guarantor, as primary obligor and not as
surety only, hereby unconditionally guarantees the due and punctual payment
(whether at stated maturity, upon acceleration or otherwise) of any and all
amounts arising out of or in connection with the Note, including without
limitation the obligation of the Company to pay all fees, principal and
interest payments due thereunder and all expenses of collection, counsel fees
and other expenses incurred by the Bank in connection with the enforcement of
its rights under the Note (collectively, the "Guaranteed Obligations"). Upon
any failure by the Company to pay any of the Guaranteed Obligations, the
Guarantor agrees that it will within two business days of receiving written
notice from the Bank of such failure forthwith pay, at the place and in the
manner specified in the Note, such amounts which the Company has failed to pay.
This Guaranty is a guaranty of payment and not merely a guaranty of
collection.
2. Guaranty Unconditional and Absolute. The obligations of the
Guarantor hereunder shall be unconditional and
<PAGE> 15
-2-
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver
or release in respect of any obligation of the Company or any other
guarantor of any of the Guaranteed Obligations;
(ii) any release, exchange, non-perfection or invalidity of
any direct or indirect security for any of the Guaranteed Obligations;
(iii) any modification or amendment of or supplement to the
Note;
(iv) any change in the corporate existence (including its
constitution, laws, rules, regulations or powers), structure or
ownership of the Company or the Guarantor, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Company or its assets, the Guarantor or any other guarantor of any of
the Guaranteed Obligations;
(v) the existence of any claim, set-off or other rights
which the Guarantor may have at any time against the Company, the Bank
or any other corporation or person, whether in connection herewith or
in connection with any unrelated transaction; provided that nothing
herein shall prevent the assertion of any such claim by separate suit
or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Company or any other guarantor for any reason of the Note
or any other guaranty agreement, or any provision of applicable law or
regulation purporting to prohibit payment by the Company of amounts to
be paid by it under the Note or any of the Guaranteed Obligations or
under any such guaranty agreement; or
(vii) any other act or omission to act or delay of any kind
by the Company, any other guarantor, the Bank or any other corporation
or person or any other circumstance
<PAGE> 16
-3-
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the Guarantor's
obligations hereunder; provided that this clause shall not be deemed to
waive any such discharge of the Guarantor's obligations hereunder
resulting solely from the gross negligence or willful misconduct of
the Bank as finally determined by a court of competent jurisdiction.
3. Discharge Only Upon Payment In Full; Reinstatement in Certain
Circumstances. The Guarantor's obligations hereunder constitute a guarantee of
payment and not of collection merely and shall remain in full force and effect
until the Guaranteed Obligations shall have been paid in full in accordance
with the terms hereof and of the Note. If at any time any payment of any of
the Guaranteed Obligations is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Company or
otherwise, the Guarantor's obligations hereunder with respect to such payment
shall be reinstated at such time as though such payment had not been made.
4. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, diligence, presentment, demand, protest, notice of dishonor
and any notice not provided for herein, as well as any requirement that at any
time any person exhaust any right or take any action against the Company or its
assets or any other guarantor or person.
5. Subrogation. Upon making any payment hereunder, the Guarantor
shall be subrogated to the rights of the Bank against the Company with respect
to such payment; provided, that the Guarantor shall not enforce any right or
receive any payment by way of subrogation until all Guaranteed Obligations have
been fully paid and satisfied.
6. Stay of Acceleration Ineffective with respect to Guarantor. In the
event that acceleration of the time for payment of any amount payable by the
Company under the Note is stayed upon the insolvency, bankruptcy or
reorganization of the Company, all such amounts otherwise subject to
acceleration or required to be paid upon an early termination pursuant to the
<PAGE> 17
-4-
terms of the Note shall nonetheless be payable by the Guarantor hereunder
forthwith on demand by the Bank.
7. Representations. The Guarantor hereby represents and warrants to
the Bank that (a) the Guarantor is a duly organized and existing Texas
corporation and is duly authorized to enter into and perform this Guaranty
which constitutes a valid and enforceable obligation of the Guarantor, (b)
neither the making of this Guaranty nor the performance by the Guarantor of its
obligations hereunder will violate (i) the charter or bylaws of the Guarantor
or its subsidiaries or (ii) any applicable law or any applicable regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or (iii) any agreement, indenture, note or other instrument to which the
Guarantor or any of its subsidiaries is a party or by which it is bound or to
which it is subject, which default, in the case of subclause (ii) or (iii) of
this clause (b) could, individually or together with all other such defaults
described in this clause (b), reasonably be expected to result in a material
adverse change in the business or condition of the Guarantor and its
subsidiaries taken as a whole or upon the ability of the Guarantor to perform
its obligations under this Guaranty, (c) no authority from or approval by any
governmental body, commission or agency is required in connection with the
making or validity of this Guaranty, (d) there are no actions, suits or
proceedings pending against or, to the knowledge of the Guarantor, threatened
against or affecting, the Guarantor or any of its subsidiaries, in any court or
before or by any governmental departments, agency or instrumentality, an adverse
decision in which could materially and adversely affect the financial
condition, business, operations or prospects of the Guarantor or the ability of
the Guarantor to perform its obligations under this Guaranty, and (e) the
balance sheet of the Guarantor as of December 31, 1993, heretofore furnished to
the Bank, is complete and correct and fairly presents the financial condition
of the Guarantor as at such date and since such date there has been no material
adverse change in the financial condition, business, operations or prospects of
the Guarantor and its subsidiaries, taken as a whole, from that reflected in
said balance sheet. The Guarantor shall be deemed to have repeated the
foregoing representations and warranties on the date of the making of each Loan
under the Note to the Company.
<PAGE> 18
-5-
8. Covenants. The Guarantor agrees that, so long as any amount payable
under the Note or this Guaranty remains unpaid, it will perform, comply with
and be bound by, for the benefit of the Bank, its agreements, covenants and
obligations contained in Section 5.02 of the Amended and Restated Competitive
Advance and Revolving Credit Facility Agreement (Facility A), dated as of
November 10, 1993, as amended by the First Amendment thereto dated July 26, 1994
(the "Credit Agreement"), among the Guarantor, the Banks named therein, Texas
Commerce Bank National Association, as Administrative Agent and Chemical Bank,
as Auction Administration Agent and Bank of America National Trust and Savings
Association, as Co-Agent. The above-specified provisions of the Credit
Agreement together with related definitions and ancillary provisions are hereby
incorporated herein by reference, and will be deemed to continue in effect for
the benefit of the Bank under this Guaranty, whether or not the Credit
Agreement remains in effect or any provisions thereof are waived or amended or
the obligations of the Guarantor thereunder are paid or discharged. Each
reference in the provisions of the credit Agreement incorporated herein by
reference to (i) "Majority Banks", "each Bank" and "Bank" shall refer to the
Bank, (ii) "Default" and "Event of Default" shall refer to an event which with
notice or lapse of time or both would constitute an Event of Default under
the Note and an Event of Default under the Note, respectively, (iii) the "Note"
shall refer to this Guaranty, (iv) the "Loans" shall refer to the Loans under
the Note and (v) "this Agreement", "hereto" and "hereof" shall refer to this
Guaranty.
9. Assignment; Successors and Assigns. This Guaranty shall be binding
upon and inure to the benefit of the Guarantor and its successors and assigns
and the Bank and its successors and assigns. The Guarantor may not assign its
rights and obligations hereunder without the prior written consent of the Bank,
and any such purported assignment without the written consent of the Bank will
be void.
10. Amendments and Waivers. No provision of this Guaranty may be
amended, supplemented or modified, nor any of the terms and conditions hereof
or thereof waived, except by a written instrument executed by the Guarantor and
the Bank.
<PAGE> 19
-6-
11. Expenses, Taxes and Indemnification. Without limiting the
generality of the Guarantor's obligations hereunder, the Guarantor agrees to
pay to the Bank upon its request all reasonable costs and expenses, including
fees and disbursements of counsel and taxes, incurred by the Bank in enforcing
its rights under this Guaranty and in connection with the occurrence of any
Event of Default under the Note and collection or other enforcement proceedings
against any person or assets resulting therefrom, all of which shall be
"Guaranteed Obligations" the payment of which is guaranteed hereunder. The
Guarantor agrees that all amounts payable under this Guaranty shall be paid
without set-off or counterclaim and free and clear of, and without deduction or
withholding for or on account of any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature, now or
hereafter imposed by any governmental or taxing authority to which the
Guarantor is subject.
In addition to its other obligations hereunder, the Guarantor agrees to
indemnify the Bank and hold the Bank harmless from and against any and all
liabilities, loss, damage, costs and expenses of any kind (including, without
limitation, the actual fees and disbursements of counsel for the Bank in
connection with any investigative, administrative or judicial proceeding,
whether or not the Bank shall be designated a party thereto) which may be
incurred by the Bank relating to or arising out of this Guaranty or the Note or
the use of the proceeds of any Loan extended to the Company under the Note;
provided that the Bank shall not have the right to be indemnified hereunder for
the Bank's own gross negligence or willful misconduct as finally determined by
a court of competent jurisdiction.
12. Judgment Currency. The Guarantor's obligation in respect of any
sum due by it to the Bank hereunder shall, notwithstanding any judgment in a
currency other than the underlying currency of the Guaranteed Obligations (the
"Specified Currency"), be discharged only to the extent that on the business
day following receipt by the Bank of any sum adjudged to be so due in such
other currency the Bank may in accordance with normal banking procedures
purchase the Specified Currency with such other currency; if the Specified
Currency so purchased is less than the sum originally due to the Bank in the
Specified
<PAGE> 20
-7-
Currency, the Guarantor agrees, as a separate obligation and notwithstanding
any such judgment, to indemnify the Bank against such lose.
13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. THE GUARANTOR AND THE BANK HEREBY IRREVOCABLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
duly executed as of the date first above written.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
-------------------------------
James M. Shelger
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
-------------------------------
Title:
<PAGE> 1
EXHIBIT 10.29
[JPMORGAN LOGO]
Stephen B. King December 2, 1994
Vice President
Morgan Guaranty Service Corporation International plc
Trust Company of c/o Service Corporation International
New York 1929 Allen Parkway
Houston, Texas 77019
60 Wall Street
New York NY
10260-0060
Service Corporation International
Tel: 212 648-7415 1929 Allen Parkway
Houston, Texas 77019
Ladies and Gentlemen:
Reference is made to (i) the Sterling Note, dated September 2, 1994,
issued by Service Corporation International plc, a United Kingdom public
limited company (the "Borrower"), to Morgan Guaranty Trust Company of New York,
a New York State banking corporation (the "Bank"), in the aggregate principal
amount of Pound Sterling 185,000,000 (the "Note"); (ii) the guaranty, dated as
of September 2, 1994, between Service Corporation International, a Texas
corporation (the "Guarantor"), and the Bank (the "Guaranty"); (iii) the Amended
and Restated Competitive Advance Revolving Credit Facility Agreement (Facility
A), dated as of November 10, 1993, as amended by the First Amendment thereto,
dated July 28, 1994, among the Guarantor, the Banks named therein, Chemical
Bank, as Auction Administration Agent (the "Auction Administration Agent"),
Texas Commerce Bank National Association, as Administrative Agent (the
"Administrative Agent"), and Bank of America National Trust and Savings
Association, as Co-Agent (the "Co-Agent") (the "Credit Agreement"); and (iv)
the ISDA Master Agreement, dated as of February 4, 1993, as amended by the
Amendment to the Master Agreement, dated as of August 12, 1993, between the
Bank and the Guarantor (the "Master Agreement").
The undersigned agrees that (i) the Second Amendment to Amended and
Restated Competitive Advance and Revolving Credit Facility (Facility A), dated
as of November 15, 1994, among the guarantor, the Banks named therein, the
Auction Administration Agent, the Administrative Agent and the Co-Agent (the
"Second Amendment"), and the Third Amendment to Amended and Restated
Competitive Advance Revolving Credit Facility (Facility A), dated as of
December 2, 1994, among the Guarantor, the Banks named therein, the Auction
Administration Agent, the Administrative Agent and the Co-Agent (the "Third
Amendment" and, together with the Second Amendment, the "Credit Agreement
Amendments") which amend certain definitions, agreements, covenants and
obligations contained in the Credit Agreement, shall constitute amendments of
the same definitions, agreements, covenants and obligations as incorporated by
reference into Section 8 of the Guaranty; (ii) for purposes of Event of Default
(b) on page 6 of the Note, references in said Event of Default to the term
"Guaranty" shall be to the Guaranty as amended by the Credit Agreement
Amendments pursuant to the terms hereof; and (iii) Section 14 of the Master
Agreement is amended to include the following:
" "Credit Agreement" means, the Amended and Restated
Competitive Advance and Revolving Credit Facility (Facility A), dated
as of November 10, 1993,
A subsidiary of
J.P. Morgan & Co.
Incorporated
<PAGE> 2
[JP MORGAN LOGO]
December 2, 1994 - page 2
as amended by the First Amendment thereto, dated July 28, 1994, and as
further amended by the Second Amendment thereto, dated November 15,
1994, and as further amended by the Third Amendment, dated December 2,
1994, among the Counterparty, the Banks named therein, Chemical Bank,
as Auction Administration Agent, Texas Commerce Bank National
Association, as Administrative Agent, and Bank of America National
Trust and Savings Association, as Co-Agent, a copy which is attached as
Exhibit A hereto."
thereby superseding the definition of "Credit Agreement" set forth in Section 6
of the Amendment.
Notwithstanding the foregoing, each of the Note, the Guaranty and the
Master Agreement shall remain in full force and effect in accordance with its
respective terms, except to the extent each is amended hereby. The agreement
contained herein is made solely with respect to terms of the Note, the Guaranty
and the Master Agreement referred to herein and is not to be construed as an
amendment of any other provision of the Note, the Guaranty or the Master
Agreement.
This agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of New York, without giving effect to the
conflicts of law provisions thereof.
This agreement shall be binding upon, and shall inure to the benefit
of, the Bank, the Borrower and the Guarantor and their respective successors and
assigns.
Very truly yours,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ STEPHEN B. KING
------------------------------
Name: Stephen B. King
Title: Vice President
<PAGE> 3
[JP MORGAN LOGO]
December 2, 1994 - page 3
Agreed to and accepted
as of the date hereof,
SERVICE CORPORATION INTERNATIONAL PLC
By: /s/ JAMES M. SHELGER
-------------------------------------
Name: James M. Shelger
Title: Secretary
SERVICE CORPORATION INTERNATIONAL
By: /s/ SAMUEL W. RIZZO
-------------------------------------
Name: Samuel W. Rizzo
Title: Executive Vice President
Chief Financial Officer/Treasurer
<PAGE> 4
[JP MORGAN LOGO]
STEPHEN B. KING December 13, 1994
Vice President
Morgan Guaranty Mr. Samuel W. Rizzo
Trust Company of EVP & CFO
New York Service Corporation International
1929 Allen Parkway
60 Wall Street Houston, Texas 77219-0548
New York NY
10260-0060
Tel: 212 648-7415
Dear Sam:
As promised, I am writing to confirm the credit enhancement
structure(s) to be used for the U.S. dollar/pound sterling currency swaps (the
"L. swaps") between Service Corporation International ("SCI") and Morgan
Guaranty Trust Company of New York ("MGT"). To summarize, SCI would make a
payment or provide a letter of credit, as described further below, should the
marked-to-market ("MTM") value of the two swaps to MGT exceed the following
thresholds based upon the lower of SCI's Moody's and S&P ratings.
Credit Enhancement Mark-to-Market
SCI Rating Threshold ($ millions) Frequency
---------- ---------------------- --------------
> A 165 Quarterly
-
A-/BBB+ 120 Quarterly
BBB 80 Quarterly
BBB- 30 Monthly
< BB+ 0 At any time
-
As discussed, the above thresholds will not apply for the first five
years following the date of this letter, unless at any time SCI is rated BB+ or
lower by either Moody's or S&P, in which case these thresholds will become
effective immediately. Once the thresholds are in effect, if the MTM value
exceeds the relevant credit enhancement threshold while SCI is rated BBB or
higher, the MTM frequency would be adjusted to monthly until the MTM value
drops back below the threshold. If the MTM value reaches the threshold while
SCI is rated BBB-, MGT reserves the right to mark-to-market more frequently at
its option.
If, after credit enhancement has been posted, the MTM value on any
subsequent MTM date is less than the previous MTM value, the amount of excess
credit enhancement would be returned to the party which had posted it in the
first place. As discussed, the above thresholds would apply to MGT if it is
rated BBB+ or below.
As discussed, in addition to the credit enhancement terms which are
contained in this letter, the sterling swaps would be governed by the existing
ISDA Master Agreement between SCI and MGT dated as of February 4, 1994, as
amended August 12, 1993, and as further amended December 2, 1993 (the "Master
Agreement"). We propose to document the following structures in a further
amendment to the Master Agreement.
A subsidiary of
J.P. Morgan & Co.
Incorporated
<PAGE> 5
[JP MORGAN LOGO]
Page 2
"PRINCIPAL RESET" ALTERNATIVE
In the event that the MTM value of the swaps to MGT exceeds the thresholds
outlined above, SCI would make a payment (the "principal reset payment") to MGT
equal to the excess amount. In return, the U.S. dollar notional amount of the
10-year L. swap would be increased by an equivalent amount. Future swap payments
made by MGT would be increased by the amount of interest (based on prevailing
swap rates) on the amount of the principal reset payments, and the principal
reset payments would be taken into account in the final exchange of principal
(U.S. dollars for L.) at the maturity of the swap.
Accounting treatment: Assuming that the L. swaps are designated as a hedge of
SCI's investment in its U.K. assets or subsdidiary[ies], we have been advised
by outside accounting advisors that any principal reset payments made by SCI
should not have any net impact on its income statement. In addition, the
principal reset payments should adready be largely reflected on SCI's balance
sheet, in the foreign translation adjustment component of stockholders' equity.
Tax treatment: According to Ben Lopata and Allen Friedman, a principal reset
payment would likely be treated as a loan from SCI to MGT and would therefore
have no tax effect other than the implicit interest earned on it by SCI going
forward.
LETTER OF CREDIT ALTERNATIVE
If it preferred, SCI could post a letter of credit ("L/C") acceptable to MGT in
an amount equal to the excess MTM value. As long as the amount of the L/C is at
least equal to the excess MTM value as of each mark-to-market date, SCI would
not have to put up such cash, and the terms of the swap would remain
unchanged. The L/C alternative should not have any material tax or accounting
impact on SCI.
SWAP UNWIND ALTERNATIVE
Although, this alternative will not be formerly covered in the swap
documentation, we can acknowledge SCI's right in the event that the MTM value
of the sterling swaps to MGT exceeds the relevant thresholds to unwind that
amount of swap(s) which would reduce the MTM value to the threshold level. For
example, if the aggregate MTM value is $150 million and the threshold is $100
million, SCI would unwind that amount of the 10-year L. swap which had an MTM
value of $50 million by making a payment (the "swap unwind payment") equal to
the excess MTM value (i.e. $50 million). In order that SCI remain hedged, it
could enter into a new swap with MGT having a comparable L. notional amount
(corresponding to the amount of the original swap which was unwound) and
maturity but with other terms based on prevailing market conditions such that
the initial MTM value of the new swap would be zero.
Accounting treatment: We believe that the accounting treatment for the swap
unwind structure should be substantially similar to that which would result
from the principal reset alternative.
<PAGE> 6
[JP MORGAN LOGO]
Page 3
Tax treatment: Under the swap unwind alternative, it should be possible to
ensure that the swap unwind payment would be deductible when made.
Please note that, as bankers, we are not qualified to opine on tax and
accounting matters and therefore suggest that you obtain definitive tax and
accounting advice on the structures outlined above from your own professional
advisors.
To confirm your agreement to the credit enhancement structures described
above, please sign the enclosed copy of this letter below and return it to me
by facsimile (212-648-5336), with hard copy to follow. I look forward to
working with you and your colleagues to finalize this arrangement.
With best regards,
/s/ STEPHEN B. KING
----------------------
Stephen B. King
ACCEPTED AND AGREED:
By; SAMUEL W. RIZZO
----------------------
SAMUEL W. RIZZO
EVP & CFO
Date: 12/14/94
cc: Greg Cauthen
Ben Lopata/Allen Friedman
Tam Hagerstrom/Keysha Bailey/Raj Kundra
Howard Powers
<PAGE> 1
EXHIBIT 10.30
[JP MORGAN LOGO]
TRANSACTION
Attn. SAM RIZZO
SERVICE CORPORATION INTERNATIONAL
HOUSTON, TEXAS
Fax: 7135255475
From: THOMAS HAGERSTROM
J P MORGAN SECURITIES INCORPORATED
As Agent for MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Date: 18 May 1994
THIS SWAP (MORGAN DEAL NUMBER 030000090661), WHICH BECAME EFFECTIVE AS OF
FEBRUARY 1, 1994 AS A RESULT OF MORGAN (DEFINED BELOW) EXERCISING A PUT SWAP
OPTION (MGT NO. REFERENCE NO. 480) SOLD BY SERVICE CORPORATION INTERNATIONAL ON
NOVEMBER 1, 1993, HAS BEEN PARTIALLY UNWOUND EFFECTIVE MAY 19, 1994. THE
NOTIONAL AMOUNT OF 150,000,000 USD HAS BEEN DECREASED To 75,000,000 USD.
The purpose of this letter agreement is to confirm the terms and conditions
of the Transaction entered into between us on the Trade Date specified below
(the 'Transaction'). This letter agreement constitutes a 'Confirmation' as
referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation
will govern.
This Confirmation represents an amendment and restatement of any prior
documents or other confirming communications between the parties with respect
to this Transaction.
Morgan is, together with other United Kingdom listed institutions, subject to
the Bank of England's Code of Conduct. In connection therewith, this and
certain future wholesale money market transactions will be outside the
Financial Services Act, but you will have the benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented
from time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF
NEW YORK ("Morgan") and SERVICE CORPORATION INTERNATIONAL (the
"Counterparty"). All provisions contained in the Agreement govern this
Confirmation except as expressly modified below.
<PAGE> 2
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Morgan Deal Number: 030000090661
Trade Date: 17 May 1994
Effective Date: 1 February 1994
Termination Date: 1 February 1999
Fixed Amounts:
Fixed Rate Payer: Morgan
Notional Amount: 75,000,000.00 USD
Fixed Rate Payer Payment Dates: Each 1 August, 1 February
starting with 1 August 1994 up
to, and including, 1 February
1999, subject to adjustment in
accordance with the Modified
Following Business Day
Convention and there will be an
adjustment to the Calculation
Period.
Fixed Rate: 5.36000 percent
Fixed Rate Day Count Fraction: 30/360
Floating Amounts:
Floating Rate Payer: Counterparty
Notional Amount: 75,000,000.00 USD
Floating Rate Payer Payment Dates: Each 1 August, 1 February
starting with 1 August 1994 up
to, and including, 1 February
1999, subject to adjustment in
accordance with the Modified
Following Business Day
Convention and there will be an
adjustment to the Calculation
Period.
Floatina Rate for initial
Calculation Period: 3.37500 percent
From 1 Feb 1994 to 1 Aug 1994
<PAGE> 3
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 6 Month
Spread: Inapplicable
Floating Rate Day Count Fraction: Actual/360
Reset Dates: The first day of each
Calculation Period.
Rate Cut-off: Inapplicable.
Payment Lag: Inapplicable.
Method of Averaging: Inapplicable
Compounding: Inapplicable.
Method of Compounding: Inapplicable.
Compounding Dates: Inapplicable.
Business Day Locations for
Counterparty: London, New York
Business Day Locations for Morgan: London, New York
Payments will be: Net
Fee Payable to Counterparty: 714,000.00 USD
Fee Type: Arranging
Due Date: 10 January 1994
Fee Payable to Morgan: 4,693,000.00 USD
Fee Type: Partial Termination
Due Date: 19 May 1994
4. Account Details
Payments to Morgan:
Account for payments in USD:
Morgan Guaranty Trust Co of New York
23 Wall St
New York
Favour: Morgan Guaranty Trust Co of New York
London Office
ABA/Bank No.:
Account No.: 670 07 054
<PAGE> 4
Reference: Swap Operations
5. Offices
(a) The Office of Morgan for the Swap Transaction is LONDON; and
All enquiries regarding payments and/or rate resettings only
should be sent to:
Morgan Guaranty Trust Company of New York
60 Victoria Embankment
London. EC4Y OJP
Attention: Alison Payne
Telephone: 44 71 325 4282
Facsimile: 44 71 325 8201
Telex: 896631 MGT G
Cable: Morganbank
Please quote the Morgan Deal Number indicated above.
All enquiries regarding confirmations should be sent to:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Jennifer Buczek
Documentation Control Group
Telephone: 1-212-648-2498
Facsimile: 1-212-648-5117
Please quote the Morgan Deal Number indicated above.
(b) The Office of the Counterparty for the Swap
Transaction is HOUSTON.
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and
will have no obligations under this Transaction.
<PAGE> 5
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number: 030000090661.
Yours sincerely,
J P MORGAN SECURITIES INCORPORATED,
as Agent for and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ THOMAS HAGERSTROM
-----------------------------------
Name: Thomas Hagerstrom
Title: Vice President
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: /s/ SAMUEL W. RIZZO
---------------------------------
Name: Samuel W. Rizzo
Title: Executive Vice President
Chief Financial Officer/
Treasurer
<PAGE> 6
[JP MORGAN -- LOGO]
Transaction
Attn: SAM RIZZO
SERVICE CORPORATION INTERNATIONAL
Fax: 17135255475
From: MARK HERNANDEZ
J P. MORGAN SECURITIES INCORPORATED
As Agent for MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Date: 18 January 1995
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into between us on the Trade Date specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
This Confirmation represents an amendment and restatement of any prior
documents or other confirming communications between the parties with respect
to this Transaction.
Morgan is, together with other United Kingdom listed institutions, subject to
the Bank of England's Code of Conduct. In connection therewith, this and
certain future wholesale money market transactions will be outside the
Financial Services Act, but you will have the benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented from
time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF NEW
YORK ("Morgan"), and SERVICE CORPORATION INTERNATIONAL (the "Counterparty").
All provisions contained in the Agreement govern this Confirmation except as
expressly modified below.
<PAGE> 7
The Agreement will be further amended as per the letter agreement agreed
between Morgan and the Counterparty on 13 December 1994.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Morgan Deal Number: 030000117056
Trade Date: 6 December 1994
Effective Date: 13 December 1994
Termination Date: 15 December 2004
Fixed Amounts:
Fixed Rate Payer: Morgan
Notional Amount: 200,000,000.00 USD
Fixed Rate Payer Payment Dates: Each 15 June, 15 December
starting with 15 June 1995 up
to, and including, 15 December
2004, subject to adjustment in
accordance with the Modified
Following Business Day
Convention
Fixed Rate: 8.48800 percent
Fixed Rate Day Count Fraction: 30/360
Initial Stub Payment:
From: 13 December 1994 To: 15 June 1995
Morgan Fixed Rate: 8.48800 percent
Floating Amounts for Initial
Stub Period 13 December 1994 to
15 June 1995:
Floating Rate Payer: Counterparty
Notional Amount: 128,139,416.00 GBP
<PAGE> 8
Floating Rate Payer Payment
Dates: 15 June 1995, subject to
adjustment in accordance with
the Modified Following Business
Day Convention
Floating Rate Option: GBP-LIBOR-BBA
Designated Maturity: 1 Month
Spread: Plus 0.52900 percent
Floating Rate Day Count
Fraction: Actual/365 (Fixed)
Reset Dates: 13 December 1994, 15 January 1995,
15 February 1995, 15 March 1995,
15 April 1995, 15 May 1995.
Rate Cut-off: Inapplicable.
Payment Lag: Inapplicable.
Method of Averaging: Inapplicable
Compounding: Applicable.
Method of Compounding: Flat Compounding
Compounding Dates: Inapplicable.
Initial Stub Calculation:
From: 13 December 1994 To: 15 January 1995
Counterparty Floating Rate GBP-LIBOR-BBA
Option:
Designated Maturity: Linear Interpolation between 1
Month and 2 Month.
Floating Amounts After
15 June 1995:
Floating Rate Payer: Counterparty
Notional Amount: 128,139,416.00 GBP
<PAGE> 9
Floating Rate Payer Payment
Dates: Each 15 December, 15 June
starting with 15 December 1995
up to, and including, 15
December 2004, subject to
adjustment in accordance with
the Modified Following Business
Day Convention
Floating Rate Option: GBP-LIBOR-BBA
Designated Maturity: 6 Month
Spread: Plus 0.52900 percent
Floating Rate Day Count
Fraction: Actual/365 (Fixed)
Reset Dates: The first day of each
Calculation Period.
Rate Cut-off: Inapplicable.
Payment Lag: Inapplicable.
Method of Averaging: Inapplicable
Compounding: Inapplicable.
Method of Compounding: Inapplicable.
Compounding Dates: Inapplicable.
Business Day Locations for
Counterparty: New York, London
Business Day Locations for
Morgan: New York, London
Payments will be: Gross
Fee Payable to Counterparty: 129,019,336.00 GBP
Fee Type: Principal Exchange
Due Date: 27 January 1995
<PAGE> 10
Fee Payable to Morgan: 128,139,416.00 GBP
Fee Type: Principal Exchange
Due Date: 15 December 2004
Fee Payable to Morgan: 201,432,212.00 USD
Fee Type: Principal Exchange
Due Date: 27 January 1995
Fee Payable to Morgan: 200,000,000.00 USD
Fee Type: Principal Exchange
Due Date: 15 December 2004
4. Account Details
Payments to Morgan:
Account for payments in GBP:
Morgan Guaranty Trust Co, London
Direct
S/C 165580
Favour: For the account of Morgan Guaranty Trust
Company, London
ABA/Bank No.:
Account No.:
Reference: Further Credit to Swaps Group Account:
10005051
Account for payments in USD:
Morgan Guaranty Trust Co of New York
23 Wall St
New York
Favour: Morgan Guaranty Trust Co of New York
London Office
ABA/Bank No.:
Account No.: 670 07 054
Reference: Further Credit to Swaps Group Account:
10005035
Payments to Counterparty:
Account for payments in GBP:
<PAGE> 11
Favour: SERVICE CORPORATION INTERNATIONAL
ABA/Bank NO.:
Account No.:
Reference:
Account for payments in USD:
Favour: SERVICE CORPORATION INTERNATIONAL
ABA/Bank NO.:
Account No.:
Reference:
5. Offices
(a) The Office of Morgan for the Swap Transaction is
London; and
All enquiries regarding paments and/or rate resettings only
should be sent to:
Morgan Guaranty Trust Company of New York
60 Victoria Embankment
London. EC4Y OJP
Attention: Allison Payne
Telephone: 44 1 71 325 3784
Facsimile: 44 1 71 325 3862/3863
Telex: 896631 MGT G
Cable: Morganbank
Please quote the Morgan Deal Number indicated above.
All enquiries regarding confirmation should be sent to:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Jennifer Buczek
Documentation Control Group
Telephone: 1-212-648-2498
Facsimile: 1-212-648-5117
Please quote the Morgan Deal Number indicated above.
<PAGE> 12
(b) The Office of the Counterparty for the Swap
Transaction is HOUSTON
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and
will have no obligations under this Transaction. Except solely in the capacity
of an agent or an Affiliate with respect to Section 5(e) (v) under the
Agreement.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number: 030000117056.
This confirmation amends, restates, and supersedes any previous confirmations
with respect to the Transaction herein in their entirety including (without
limitation) the Confirmation dated 14 December 1994.
Yours sincerely,
J P MORGAN SECURITIES
INCORPORATED, as Agent for
and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ ROBERT ROSSMAN
Name: Robert Rossman
Title: Vice President
<PAGE> 13
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: Samuel W. Rizzo
Name: Samuel W. Rizzo
Title: Executive Vice President
Chief Financial Officer/Treasurer
<PAGE> 14
[JP MORGAN LOGO]
Transaction
Attn: SAM RIZZO
SERVICE CORPORATION INTERNATIONAL
HOUSTON, TEXAS
Fax: 17135255475
From: MARK HERNANDEZ
J P MORGAN SECURITIES INCORPORATED
As Agent for MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Date: 18 January 1995
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into between us on the Trade Date specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
This Confirmation represents an amendment and restatement of any prior
documents or other confirming communications between the parties with respect
to this Transaction.
Morgan is, together with other United Kingdom listed institutions, subject to
the Bank of England's Code of Conduct. In connection therewith, this and
certain future wholesale money market transactions will be outside the
Financial Services Act, but you will have the benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented from
time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF NEW
YORK ("Morgan") and SERVICE CORPORATION INTERNATIONAL (the "Counterparty"). All
provisions contained in the Agreement govern this Confirmation except as
expressly modified below. The Agreement will be further amended as per the
letter agreement agreed between Morgan and the Counterparty on 13 December
1994.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Morgan Deal Number: 030000118918
<PAGE> 15
Trade Date: 10 January 1995
Effective Date: 27 January 1995
Termination Date: 27 January 2002, subject to
adjustment in accordance with
the Following Business Day
Convention
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate Payer Payment Dates: Each 27 July, 27 January
starting with 27 July 1995 up
to, and including, 27 January
2002, subject to adjustment in
accordance with the Following
Business Day Convention and
there will be no adjustment to
the Calculation Period.
Fixed Amount: 10,202,500.00 GBP
Fixed Amounts:
Fixed Rate Payer: Morgan
Fixed Rate Payer Payment Dates: Each 27 July, 27 January
starting with 27 July 1995 up
to, and including, 27 January
2002, subject to adjustment in
accordance with the Following
Business Day Convention and
there will be no adjustment to
the Calculation Period.
Fixed Amount: 19,290,647.00 USD
Floating Amounts:
Floating Rate Payer: Counterparty
Notional Amount: See Notional Amount Schedule.
<PAGE> 16
Floating Rate Payer Payment
Dates: Each 27 July, 27 January
starting with 27 July 1995 up
to, and including, 27 January
2002, subject to adjustment in
accordance with the Following
Business Day Convention and
there will be an adjustment to
the Calculation Period.
Floating Rate for initial
Calculation Period: 7.07810 percent
Floating Rate Option: GBP-LIBOR-BBA
Designated Maturity: 6 Month
Spread: Plus 0.68500 percent
Floating Rate Day Count
Fraction: Actual/365 (Fixed)
Reset Dates: The first day of each
Calculation Period.
Rate Cut-off: Inapplicable.
Payment Lag: Inapplicable.
Method of Averaging: Inapplicable
Compounding: Inapplicable.
Method of Compounding: Inapplicable.
Compounding Dates: Inapplicable.
Morgan and Counterparty
Pays Exchange on Exchange
Dates: See Exchange Schedule
Business Day Locations for London, New York
Counterparty:
Business Day Locations for London, New York
Morgan:
Payments will be: Gross
<PAGE> 17
Exchange Schedule:
On Morgan pays: Counterparty pays:
27-Jan-1995 127,712,273.00 GBP 199,010,865.00 USD
27-Jul-1995 1,319,735.00 GBP
27-Jan-1996 1,383,332.00 GBP
27-Jul-1996 1,449,994.00 GBP
27-Jan-1997 1,519,871.00 GBP
27-Jul-1997 1,593,112.00 GBP
27-Jan-1998 1,669,885.00 GBP
27-Jul-1998 1,750,357.00 GBP
27-Jan-1999 1,834,706.00 GBP
27-Jul-1999 1,923,120.00 GBP
27-Jan-2000 2,015,796.00 GBP
27-Jul-2000 2,112,937.00 GBP
27-Jan-2001 2,214,760.00 GBP
27-Jul-2001 2,321,489.00 GBP
27-Jan-2002 2,433,361.00 GBP
Notional Amount Schedule:
On
27-Jan-1995 25,542,455.00 GBP
27-Jul-1995 24,222,720.00 GBP
27-Jan-1996 22,839,388.00 GBP
27-Jul-1996 21,389,394.00 GBP
27-Jan-1997 19,869,523.00 GBP
27-Jul-1997 18,276,411.00 GBP
27-Jan-1998 16,606,526.00 GBP
27-Jul-1998 14,856,169.00 GBP
27-Jan-1999 13,021,463.00 GBP
27-Jul-1999 11,098,343.00 GBP
27-Jan-2000 9,082,547.00 GBP
27-Jul-2000 6,969,610.00 GBP
27-Jan-2001 4,754,850.00 GBP
27-Jul-2001 2,433,361.00 GBP
4. Account Details
Payments to Morgan:
Account for payments in GBP:
Morgan Guaranty Trust Co, London
Direct
S/C 165580
Favour: For the account of Morgan Guaranty Trust
Company, London
Account No.:
<PAGE> 18
Reference: Further Credit to Swaps Group Account:
10005051
Account for payments in USD:
Morgan Guaranty Trust Co of New York
23 Wall St
Mew York, New York
Favour: Morgan Guaranty Trust Co of New York
London Office
ABA/Bank No.: 02100023B
Account No.: 670 07 054
Reference: Further Credit to Swaps Group Account:
10005035
Payments to Counterparty:
Account for payments in GBP:
Favour: SERVICE CORPORATION INTERNATIONAL
Account No.:
Reference:
Account for payments in USD:
Favour: SERVICE CORPORATION INTERNATIONAL
ABA/Bank No.:
Account No.:
Reference:
5. Offices
(a) The Office of Morgan for the Swap Transaction is LONDON; and
All enquiries regarding payments and/or rate resettings only
should be sent to:
Morgan Guaranty Trust Company of New York
60 Victoria Embankment
London. EC4Y OJP
Attention: Alison Payne
Telephone: 44 1 71 325 3784
Facsimile: 44 1 71 325 3862/3863
Telex: 896631 MGT G
Cable: Morganbank
Please quote the Morgan Deal Number indicated above.
All enquiries regarding confirmations should be sent to:
<PAGE> 19
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Jennifer Buczek
Document Control Group
Telephone: 1-212-648-2498
Facsimile: 1-212-648-5117
Please quote the Morgan Deal Number indicated above.
(b) The Office of the Counterparty for the Swap
Transaction is HOUSTON.
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and
will have no obligations under this Transaction.
Except solely in the capacity of an agent or an Affiliate with respect to
Section 5(a)(v) under the Agreement.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number: 030000118918.
Yours sincerely,
J P MORGAN SECURITIES
INCORPORATED, as Agent for
and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ MARK HERNANDEZ
-------------------------
Name: Mark Hernandez
Title: Associate
<PAGE> 20
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: Samuel W. Rizzo
_________________________________
Name: Samuel W. Rizzo
Title: Executive Vice President
Chief Financial Officer/Treasurer
<PAGE> 21
[JP MORGAN LOGO]
Transaction
Attn: CURTIS BRIGGS
SAM RIZZO
SERVICE CORPORATION TNTERNATIONAL
Fax: 17135255475
From:
J P MORGAN SECURITIES INCORPORATED
As Agent for MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Date: 18 January 1995
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into between us on the Trade Date specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
Morgan is, together with other United Kingdom listed institutions, subject to
the Bank of England's Code of Conduct. In connection therewith, this and
certain future wholesale money market transactions will be outside the
Financial Services Act, but you will have the benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented from
time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF NEW
YORK ("Morgan") and SERVICE CORPORATION INTERNATIONAL (the "Counterparty").
All provisions contained in the Agreement govern this Confirmation except as
expressly modified below. The Agreement will be further amended as per the
letter agreement agreed between Morgan and the Counterparty on 13 December
1994.
<PAGE> 22
2. The terms of the particular Transaction to which this Confirmation
relates are as follows:
<TABLE>
<S> <C>
Morgan Deal Number: 030000117058
Trade Date: 6 December 1994
Effective Date: 13 December 1994
Termination Date: 15 December 2004
Fixed Amounts:
Fixed Rate Payer: Morgan
Notional Amount: 72,500,000.00 USD
Fixed Rate Payer Payment Dates: Each 15 June, 15 December starting with
15 June 1995 up to, and including,
15 December 2004, subject to adjustment in
accordance with the Modified Following
Business Day Convention.
Fixed Rate: 7.97300 percent
Fixed Rate Day Count Fraction: 30/360
Initial Stub Payment:
From: 13 December 1994 To: 15 June 1995
Morgan Fixed Rate: 7.97300 percent
Floating Amounts:
Floating Rate Payer: Counterparty
Notional Amount: 46,450,538.00 GBP
Floating Rate Payer
Payment Dates: 15 June 1995, subject to adjustment in
accordance with the Modified Following
Business Day Convention.
<PAGE> 23
Floating Rate Option: GBP-LIBOR-BBA
Designated Maturity: 1 Month
Spread: Inapplicable
Floating Rate Day Count
Fraction: Actual/365 (Fixed)
Reset Dates; 13 Dec, 15 Jan, 15 Feb, 15 Mar,
15 April, 15 May.
Rate Cut-off: Inapplicable.
Payment Lag: Inapplicable.
Method of Averaging: Inapplicable
Compounding: Applicable.
Method of Compounding: Flat Compounding.
Compounding Dates: 15 Jan, 15 Feb, 15 Mar, 15 April, 15 May.
Initial Stub Calculation: To: 15 January 1995
From: 13 December 1994
Counterparty Floating Rate
Option: GBP-LIBOR-BBA
Designated Maturity: Linear interpolation between 1
Month and 2 Month.
Floating Amounts:
Floating Rate Payer: Counterparty
Notional Amount: 46,450,538.00 GBP
<PAGE> 24
Floating Rate Payer Payment
Dates: Each 15 December, 15 June
starting with 15 December 1995 up to,
and including, 15 December 2004, subject to
adjustment in accordance with the Modified
Following Business Day Convention.
Floating Rate Option: GBP-LIBOR-BBA
Designated Maturity: 6 Month
Spread: Inapplicable
Floating Rate Day Count
Fraction: Actual/365 (Fixed)
Reset Dates: The first day of each Calculation Period.
Rate Cut-off: Inapplicable.
Payment Lag: Inapplicable.
Method of Averaging: Inapplicable
Compounding: Inapplicable.
Method of Compounding: Inapplicable.
Compounding Dates: Inapplicable.
Business Day Locations for New York, London
Counterparty:
Business Day Locations for New York, London
Morgan:
Payments will be: Gross
Fee Payable to Counterparty: 10,769,509.00
Fee Type: Principal Exchange
Due Date: 27 January 1995
<PAGE> 25
Fee Payable To Morgan: 46,450,538.00 GBP
Fee Type: Principal Exchange
Due Date: 15 December 2004
Fee Payable to Morgan: 17,467,577.00 USD
Fee Type: Principal Exchange
Due Date: 27 January 1995
Fee Payable to Counterparty: 72,500,000.00 USD
Fee Type: Principal Exchange
Due Date: 15 December 2004
4. Account Details
Payments to Morgan:
Account for payments in GBP:
Morgan Guaranty Trust Co, London
Direct
S/C 165580
Favour: For the account of Morgan Guaranty
Trust Company, London
ABA/Bank No.:
Account No.:
Reference: Further Credit to Swaps Group Account:
10005051
Account for payments in USD:
Morgan Guaranty Trust Co of New York
23 Wall St
New York
Favour: Morgan Guaranty Trust Co of
New York - London Office
ABA/Bank No.:
Account No.: 670 07 054
Reference: Further Credit to Swaps Group Account:
10005035
Payments to Counterparty:
Account for payments in GBP:
<PAGE> 26
Favour: SERVICE CORPORATION INTERNATIONAL
ABA/Bank No.:
Account No.:
Reference:
Account for payments in USD:
Favour: SERVICE CORPORATION INTERNATIONAL
ABA/Bank No.:
Account No.:
Reference:
5. Offices
(a) The Office of Morgan for the Swap Transaction is LONDON; and
All enquiries regarding payments and/or rate resettings only
should be sent to:
Morgan Guaranty Trust Company of New York
60 Victoria Embankment
London. EC4Y OJP
Attention: Alison Payne
Telephone: 44 1 71 325 3784
Facsimile: 44 1 71 325 3862/3863
Telex: 896631 MGT G
Cable: Morganbank
Please quote the Morgan Deal Number indicated above.
All enquiries regarding confirmations should be sent to:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Jennifer Buczek
Documentation Control Group
Telephone: 1-212-648-2498
Facsimile: 1-212-648-5117
Please quote the Morgan Deal Number indicated above.
<PAGE> 27
(b) The Office of the Counterparty for the Swap
Transaction is HOUSTON.
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and
will have no obligations under this Transaction.
Except solely in the capacity of an agent or an Affiliate with respect to
Section 5(a)(v) under the Agreement.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number: 030000117058.
This confirmation amends, restates, and supersedes any previous confirmations
with respect to the Transaction herein in the entirety including (without
limitation) the confirmation dated 14 December 1994.
Yours sincerely,
J P MORGAN SECURITIES
INCORPORATED, as Agent for
and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ ROBERT ROSSMAN
-------------------------
Name: Robert Rossman
Title: Vice President
<PAGE> 28
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: /s/ SAMUEL W. RIZZO
-----------------------------
Name: Samuel W. Rizzo
Title: Executive Vice President
Chief Financial Officer/Treasurer
</TABLE>
<PAGE> 1
SERVICE CORPORATION INTERNATIONAL Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY:
Income before cumulative effect of
change in accounting principles . . . . . . . . . . . . $131,045 $103,092 $ 86,536
Cumulative effect of change in
accounting principles (net of tax) . . . . . . . . . . - (2,031) -
-------- -------- --------
$131,045 $101,061 $ 86,536
======== ======== ========
Average number of common shares outstanding . . . . . . . 86,509 82,992 76,592
Common stock equivalents applicable to options
outstanding resulting from application of the
"treasury stock method" using average stock price . . . 417 380 264
-------- -------- --------
Average common and common equivalent shares
used in earnings per share . . . . . . . . . . . . . . 86,926 83,372 76,856
======== ======== ========
Primary Earnings Per Common Share:
Income before cumulative effect of change in
accounting principles . . . . . . . . . . . . . . . . . $ 1.51 $ 1.24 $ 1.13
Cumulative effect of change in accounting
principles (net of tax) . . . . . . . . . . . . . . . . - (.03) -
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 1.51 $ 1.21 $ 1.13
======== ======== ========
FULLY DILUTED:
Income before cumulative effect of change in
accounting principles . . . . . . . . . . . . . . . . . $131,045 $103,092 86,536
Add after tax interest expense applicable to
convertible securities. . . . . . . . . . . . . . . . . 8,501 8,412 11,935
-------- -------- --------
Income as adjusted . . . . . . . . . . . . . . . . . . . 139,546 111,504 98,471
Cumulative effect of change in accounting
principles (net of tax) . . . . . . . . . . . . . . . . - (2,031) -
-------- -------- --------
$139,546 $109,473 $ 98,471
======== ======== ========
Average number of common shares outstanding . . . . . . . 86,509 82,992 76,592
Common stock equivalents applicable to options
outstanding resulting from application of the
"treasury stock method" using end of period stock
price (if greater than average stock price for period). 492 401 293
Assuming conversion of convertible securities . . . . . . 10,407 10,485 15,179
--------- --------- ---------
Average shares used in fully diluted earnings per share . 97,408 93,878 92,064
========= ========= =========
FULLY DILUTED EARNINGS PER COMMON SHARE:
Income before cumulative effect of change in
accounting principles . . . . . . . . . . . . . . . . . $ 1.43 $ 1.19 $ 1.07
Cumulative effect of change in accounting
principles (net of tax) . . . . . . . . . . . . . . . . - (.02) -
--------- --------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 1.43 $ 1.17 $ 1.07
========= ========= ========
</TABLE>
<PAGE> 1
SERVICE CORPORATION INTERNATIONAL Exhibit 12.1
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Thousands, except ratio amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pretax income . . . . . . . . . . . . . . . . . $219,021 $173,492 $139,336 $108,872 $ 99,432
Undistributed income of less than 50% owned
equity investees . . . . . . . . . . . . . . (1,019) (325) (718) (252) (146)
Minority interest in income of majority
owned subsidiaries with fixed charges . . . . 2,234 1,938 1,798 1,752 1,334
Add fixed charges as adjusted (from below) . . 101,831 78,841 68,584 59,508 52,845
-------- -------- -------- -------- --------
$322,067 $253,946 $209,000 $169,880 $153,465
-------- -------- -------- -------- --------
Fixed charges:
Interest expense:
Corporate . . . . . . . . . . . . . . . . . $ 80,123 $ 59,631 $ 53,902 $ 42,429 $ 36,095
Financial services. . . . . . . . . . . . . 9,912 7,725 5,826 9,453 10,171
Capitalized . . . . . . . . . . . . . . . . 584 705 481 701 467
Amortization of debt costs. . . . . . . . . . 311 288 328 116 126
1/3 of rental expense . . . . . . . . . . . . 11,485 11,197 8,528 7,510 6,453
Dividends on convertible preferred stock
of subsidiary . . . . . . . . . . . . . . . 539 - - - -
Preferred dividends . . . . . . . . . . . . . - - - - 5,186
-------- -------- -------- -------- --------
Fixed charges . . . . . . . . . . . . . . . . . 102,954 79,546 69,065 60,209 58,498
Fixed charges as adjusted:
Less: Capitalized interest . . . . . . . . . (584) (705) (481) (701) (467)
Dividends on convertible
preferred stock of subsidiary. . . . (539) - - - -
Preferred dividend . . . . . . . . . . - - - - (5,186)
-------- -------- -------- -------- --------
Fixed charges as adjusted . . . . . . . . . . . $101,831 $ 78,841 $ 68,584 $ 59,508 $ 52,845
-------- -------- -------- -------- --------
Ratio (earnings divided by fixed charges) . . . 3.13 3.19 3.03 2.82 2.62
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
Exhibit 16.1
[ERNST & YOUNG LLP LETTERHEAD]
March 30, 1995
Securities and Exchange Commission
450 Fifth Street, Northwest
Washington, DC 20549
Service Corporation International (SCI) has requested that we read Item 9 of
the Form 10-K report SCI has indicated it will file with the Commission and to
provide this letter. Item 9 contains our views as we have conveyed them to SCI
and we have nothing further to add.
Very truly yours,
/s/ ERNST & YOUNG LLP
<PAGE> 1
EXHIBIT 21.1
March 17, 1995
<TABLE>
<CAPTION>
ALABAMA COMMON OWNERSHIP
<S> <C>
SCI Funeral Services, Inc. (Iowa Corp) Alabama subsidiary
SCI Alabama Funeral Services, Inc.---------------------------------100%
EC Land Company, Inc.-------------------------------------100%
Mobile Memorial Gardens Funeral Home, Inc.----------------100%
ALASKA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Alaska subsidiary
Alaskan Memorial Parks, Inc.---------------------------------------100%
Alaska Memorial Services, Inc.----------------------------100%
Moll Enterprises, Inc.------------------------------------100%
SCI Alaska Funeral Services, Inc.----------------------------------100%
ARIZONA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.)
National Cremation Society, Inc.-----------------------------------100%
SCI Arizona Funeral Services, Inc.---------------------------------100%
ARKANSAS COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp)
SCI Arkansas Funeral Services, Inc.--------------------------------100%
The East Funeral Benefit Assurance Company-------------------------100%
CALIFORNIA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) California subsidiaries
Eternal Hills Cemetery Association---------------------------------100%
Fremont Cemetery Corporation---------------------------------------100%
Greenwood Memorial Park, Inc.--------------------------------------100%
Hong Kong Funeral Homes--------------------------------------------100%
International Funeral Parlours-------------------------------------100%
Lima-Salmon-Erickson, Inc.-----------------------------------------100%
Maridon, Inc.------------------------------------------------------100%
Mish Acquisition Corporation---------------------------------------100%
Mt. View Cemetery of San Bernardino--------------------------------100%
Green Acres Memorial Park and Mortuary--------------------100%
Oak Hill Improvement Company---------------------------------------100%
Ocean View Cemetery------------------------------------------------100%
Redding Memorial Park-------------------------------------100%
Pierce Brothers----------------------------------------------------100%
Pierce Brothers Crematorium-------------------------------100%
Pierce Holdings (California), Inc.------------------------100%
Ted M. Mayr Funeral Home, Inc. ---------------------------100%
SCI California Funeral Services, Inc.------------------------------100%
Acheson & Graham Mortuary, Inc.---------------------------100%
CWFD, Inc.------------------------------------------------100%
*Eden Memorial Park Association---------------------------- -0-
Joshua Memorial Park--------------------------------------100%
LaFamCo, Inc.---------------------------------------------100%
Malinow & Silverman, Inc.---------------------------------100%
Mount Vernon Memorial Park--------------------------------100%
SCI Western Region, Inc.----------------------------------100%
*Sierra View Memorial Park--------------------------------- -0-
World Funeral Home----------------------------------------100%
Turner & Stevens Company-------------------------------------------100%
COLORADO COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Colorado subsidiary
SCI Colorado Funeral Services, Inc.--------------------------------100%
Caldwell-Gibson Corporation-------------------------------100%
SCI Northwest Region, Inc.--------------------------------100%
CONNECTICUT COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Connecticut subsidiary
SCI Connecticut Funeral Services, Inc.--------------------100%
Donald D. Sagarino Funeral Home, Inc.---------------------100%
DELAWARE COMMON OWNERSHIP
*Hillcrest Memorial Company----------------------------------------------------- -0-
Provident Services, Inc.---------------------------------------------------100%
Franklin Funeral Services, Inc.------------------------------------100%
Provident Credit Corp.---------------------------------------------100%
SCI Aviation, Inc.---------------------------------------------------------100%
SCI Finance Management Inc.------------------------------------------------100%
SCI Funeral Services, Inc. (Iowa Corp.) Delaware subsidiaries
First Memorial Funeral Services, Inc.------------------------------100%
IFC-Boyertown, Inc.------------------------------------------------100%
Memorial Guardian Plans, Inc.--------------------------------------100%
SCI Funeral Services, Inc.-----------------------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
1
<PAGE> 2
<TABLE>
<S> <C>
SCI Georgia Funeral Services, Inc.---------------------------------100%
SCIT Holdings, Inc.------------------------------------------------100%
SCI Missouri Funeral Services, Inc. (Missouri Corp.)
Delaware subsidiary
IFC-York, Inc.--------------------------------------------100%
SCI International Limited--------------------------------------------------100%
SCI Special, Inc.----------------------------------------------------------100%
SCI Capital Corporation--------------------------------------------100%
Investment Capital Corporation (Texas Corp.) Delaware
subsidiary
Equity Corporation International-----------------42.5%
IFC-YP, Inc.--------------------------------------100%
SCI Management Corporation-----------------------------------------100%
International Funeral Services, Inc.----------------------100%
DISTRICT OF COLUMBIA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) DC subsidiary
SCI District of Columbia Funeral Services, Inc.--------------------100%
FLORIDA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Florida subsidiary
SCI Funeral Services of Florida, Inc.------------------------------100%
AAA Cremation Society (FL partnership)---------------80.81070%
Dorsey Funeral Home, Inc.---------------------------------100%
I. J. Morris of Florida, Inc.-----------------------------100%
Menorah Partnership----------------------------------80.81070%
Sharon Gardens Limited Partnership-------------------80.81070%
Zak of Jacksonville, Inc.---------------------------------100%
SCI Funeral Services of New York, Inc. (New York Corp.) Florida
subsidiary
Sharon Gardens Limited Partnership-------------------19.18930%
Kirschenbaum Bros. Inc. (New York Corp.) Florida
subsidiary
AAA Cremation Society (FL partnership)-------19.18930%
Menorah Partnership--------------------------19.18930%
GEORGIA
COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa corp.) Georgia subsidiaries
SCI Georgia Funeral Services, Inc. (Delaware Corp.) Georgia
subsidiary
Allen Crematory, Inc.-------------------------------------100%
H.M. Patterson & Son, Inc.--------------------------------100%
SCI Georgia Land, Inc.------------------------------------100%
SCI Southeast Region, Inc.--------------------------------100%
Smith Memory Chapel, Inc.---------------------------------100%
Striffler-Hamby Mortuary, Inc.----------------------------100%
HAWAII COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Hawaii subsidiaries
Memorial Guardian Plans, Inc.--------------------------------------100%
SCI Hawaii Funeral Services, Inc.----------------------------------100%
*Hawaiian Memorial Park Cemetery-------------------------------100%
Garden Life Plan, Ltd.-----------------------------50%
Hawaiian Memorial Life Plan, Ltd.-----------------100%
Hawaii Funeral Home, Ltd.-----------------81%
Kauai Mortuary, Inc.----------------------99%
IDAHO
NO SUBSIDARIES
ILLINOIS COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Illinois subsidiaries
Rosehill Memorials, Inc.-------------------------------------------100%
SCI Illinois Services, Inc.----------------------------------------100%
Fortuna Bros. Funeral Home, Ltd---------------------------100%
IFS Illinois, Inc.----------------------------------------100%
M&SFH, Inc.-----------------------------------------------100%
Martin Funeral Home, Ltd.---------------------------------100%
SCI Great Lakes Region, Inc.------------------------------100%
Valhalla Development Corporation--------------------------100%
Valhalla Memorial Park, Inc.------------------------------100%
Vault Company of Illinois, Inc.---------------------------100%
INDIANA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Indiana subsidiary
SCI Indiana Funeral Services, Inc.---------------------------------100%
Thornburg-Lightner, Inc.----------------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
2
<PAGE> 3
<TABLE>
<CAPTION>
IOWA COMMON OWNERSHIP
<S> <C>
SCI Funeral Services, Inc.-------------------------------------------------100%
Bunker's Eden Vale, Inc.-------------------------------------------100%
SCI Iowa Funeral Services, Inc.------------------------------------100%
KANSAS COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Kansas subsidiaries
SCI Kansas Funeral Services, Inc.----------------------------------100%
Services of Kansas, Inc.-------------------------------------------100%
KENTUCKY COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Kentucky subsidiary
SCI Kentucky Funeral Services, Inc.--------------------------------100%
Arch L. Heady and Son Funeral Homes, Inc.-----------------100%
Resthaven Memorial Cemetery, Inc.-------------------------100%
Resthaven Funeral Home, Inc.----------------------100%
*Resthaven Memorial Park and Cemetery Association---------- -0-
LOUISIANA
COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Louisiana subsidiary
SCI Louisiana Funeral Services, Inc.-------------------------------100%
Banner, Inc.----------------------------------------------100%
MAINE COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Maine subsidiary
SCI Maine Funeral Services, Inc.-----------------------------------100%
MARYLAND COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Maryland subsidiaries
Hubbard Funeral Home, Inc.-----------------------------------------100%
Danzansky-Goldberg Memorial Chapels, Inc.-----------------100%
Gary L. Kaufman Funeral Home of Elkridge, Inc.------------100%
Gary L. Kaufman Funeral Home Southwest, Inc.--------------100%
Tyson Wheeler Funeral Home, Inc.--------------------------100%
MASSACHUSETTS COMMON OWNERSHIP
Provident Services, Inc. (Delaware Corp.) Massachusetts subsidiary
PSI Massachusetts, Inc.--------------------------------------------100%
SCI Funeral Services, Inc. (Iowa Corp.) Massachusetts subsidiary
Stanetsky Holding Company, Inc.------------------------------------100%
Stanetsky Memorial Chapels, Inc.---------------------------40%
MICHIGAN COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Michigan subsidiaries
Michigan Cemeteries, Inc.------------------------------------------100%
SCI Michigan Funeral Services, Inc.--------------------------------100%
MINNESOTA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Minnesota subsidiary
SCI Minnesota Funeral Services, Inc.-------------------------------100%
Crystal Lake Cemetery Association-------------------------100%
Scott Mueller Service Corp.-------------------------------100%
MISSISSIPPI COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Mississippi subsidiary
SCI Mississippi Funeral Services, Inc.-----------------------------100%
White Funeral Homes, Inc.---------------------------------100%
MISSOURI COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Missouri subsidiary
SCI Missouri Funeral Services, Inc.--------------------------------100%
Memorial Guardian Plans, Inc.-----------------------------100%
MONTANA
NO SUBSIDIARIES
NEBRASKA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Nebraska subsidiary
SCI Nebraska Funeral Services, Inc.--------------------------------100%
NEVADA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Nevada subsidiary
Ross, Burke & Knobel Mortuary--------------------------------------100%
NEW HAMPSHIRE
NO SUBSIDIARIES
NEW JERSEY COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) New Jersey subsidiary
SCI New Jersey Funeral Services, Inc.------------------------------100%
Garden State Crematory, Inc.------------------------------100%
Riotto Funeral Home---------------------------------------100%
NEW MEXICO COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) New Mexico subsidiaries
Memorial Guardian Plans, Inc. (Delaware Corp) New Mexico
subsidiary
Ensure Agency of New Mexico, Inc.-------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
3
<PAGE> 4
<TABLE>
<S> <C>
SCI New Mexico Funeral Services, Inc.------------------------------100%
LaGrone Funeral Chapel of Ruidoso, Inc.-------------------100%
LaGrone Funeral Chapel, Inc.------------------------------100%
Vista Verde Memorial Park, Inc.---------------------------100%
NEW YORK COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) New York subsidiary
SCI Funeral Services of New York, Inc.-----------------------------100%
Chas. Peter Nagel Inc.------------------------------------100%
Eternal Memorialization, Inc.-----------------------------100%
Frederick Funeral Home, Inc.------------------------------100%
I. J. Morris, Inc.----------------------------------------100%
Kirschenbaum Bros. Inc.-----------------------------------100%
Monuments by I. J. Morris Inc.----------------------------100%
SCI Eastern Region, Inc.----------------------------------100%
Tebbutt Funeral Home, Inc.--------------------------------100%
Thomas M. Quinn & Sons, Inc.------------------------------100%
George Werst, Inc.--------------------------------100%
Werst Realty Co. Inc.-----------------------------100%
Walter B. Cooke, Inc.-------------------------------------100%
E. C. Waldeck Home for Funerals, Inc.-------------100%
Fred Herbst Sons, Inc.----------------------------100%
NORTH CAROLINA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) North Carolina subsidiary
SCI North Carolina Funeral Services, Inc.--------------------------100%
Bryant Funeral Home, Inc.---------------------------------100%
The P.E. Moody Funeral Home, Inc.-------------------------100%
NORTH DAKOTA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) North Dakota subsidiary
Memorial Guardian Plans, Inc.--------------------------------------100%
OHIO COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Ohio subsidiaries
Memorial Guardian Plans, Inc. (Delaware Corp.) Ohio subsidiary
Ensure Agency of Ohio, Inc.-------------------------------100%
SCI Ohio Funeral Services, Inc.-------------------------------------90%
*Miami Valley Memory Gardens Association, Inc.------------- -0-
*Sunset Hills Burial Park Association --------------------- -0-
OKLAHOMA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Oklahoma subsidiaries
AED, Inc.----------------------------------------------------------100%
Memorial Gardens Association------------------------------100%
RMG Trust-------------------------------------------------100%
Resthaven Memory Gardens of Oklahoma City Trust---100%
Rose Hill Burial Park, a Trust----------------------------100%
IFC-YP, Inc. (Delaware Corp) Oklahoma subsidiary
IFC-Amedco, Inc. -----------------------------------------100%
SCI Oklahoma Funeral Services, Inc.--------------------------------100%
Memory Gardens, Inc.--------------------------------------100%
Primrose Funeral Home, Inc.-------------------------------100%
SSP Limited Liability Company------------------------------50%
SSP Insurance Agency, Inc.------------------------100%
Sunset Memorial Park Cemetery, Inc.-----------------------100%
Sunset Memorial Park Cemetery Trust-----------------------100%
Woodland Memorial Company---------------------------------100%
Sentinel Security Plans, Inc.(Virginia Corp.) Oklahoma Subsidiary
SSP Limited Liability Company------------------------------50%
OREGON COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Oregon subsidiaries
Lincoln Memorial Park, Inc.----------------------------------------100%
SCI Oregon Funeral Services, Inc.----------------------------------100%
Uniservice Corporation------------------------------------100%
Heritage Reserve Company--------------------------100%
PENNSYLVANIA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Pennsylvania subsidiaries
Grandview Cemetery Associates (a Pennsylvania Limited
Partnership)------------------------------------------------------70%
Memorial Guardian Plans, Inc.( Delaware Corp) Pennsylvania
subsidiary
Ensure Agency of Pennsylvania, Inc.-----------------------100%
SCI Pennsylvania Funeral Services, Inc.----------------------------100%
Auman Funeral Home, Inc.----------------------------------100%
Ed Melenyzer Co.------------------------------------------100%
Funeral Corporation Pennsylvania--------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
4
<PAGE> 5
<TABLE>
<S> <C>
Frank E. Lanterman & Robert M. Allen
Funeral Home, Inc.-----------------------100%
Theo. C. Auman, Inc.--------------------------------------100%
Auman's, Inc.-------------------------------------100%
Forest Hills Memorial Park, Inc.------------------100%
Francis F. Seidel, Inc.---------------------------100%
Memorial Services Planning Corporation------------100%
RHODE ISLAND
NO SUBSIDIARIES
SOUTH CAROLINA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa corp.) South Carolina subsidiary
SCI South Carolina Funeral Services, Inc.--------------------------100%
Woodlawn Memorial Park------------------------------------100%
Greenville Vault Co., Inc.------------------------100%
SOUTH DAKOTA
NO SUBSIDIARIES
TENNESSEE COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp) Tennessee subsidiaries
*New Gray Cemetery---------------------------------------------------- -0-
SCI Tennessee Funeral Services, Inc.----------------------------------100%
Chattanooga Memorial Park---------------------------------100%
Forest Lawn Funeral Home of Nashville, Inc.---------------100%
George A. Smith and Sons, Inc.----------------------------100%
George E. Crone Monument Company, Inc.--------------------100%
Legram, Inc.----------------------------------------------100%
Lily of the Valley, Inc.----------------------------------100%
Lynnhurst Cemetery, Inc.----------------------------------100%
Memorial Guardian Plans, Inc.-----------------------------100%
Memphis Memory Gardens, Inc.------------------------------100%
Woodlawn Funeral Home, Inc.-------------------------------100%
Woodlawn Memorial Park, Inc.------------------------------100%
TEXAS COMMON OWNERSHIP
*American Funeral Service Museum------------------------------------------------ -0-
*Commonwealth Institute of Funeral Service-------------------------------------- -0-
SCI Finance LLC-(TX limited liability company)-----------------------------100%
SCI Funeral Services, Inc. (Iowa Corp) Texas subsidiaries
SCIT Holdings, Inc. (Delaware Corp.) Texas owned subsidiaries
Moore & Sons Funeral Home and Cemetery, Inc.--------------100%
SCI Texas Funeral Services, Inc.--------------------------100%
EFH, Inc.-----------------------------------------100%
Grand View Memorial Park, Inc.--------------------100%
McDonald Acquisition Corp.------------------------100%
McDonald Funeral Home, Inc.---------------80%
SCI Gulf Region, Inc.-----------------------------100%
SCI Holdings of Texas, Inc.-----------------------100%
Shannon Shield, Inc.------------------------------100%
Shannon Funeral Chapels, Inc.-----------------------------100%
The New Rose Hill Memorial Park, Inc.-------------100%
Stillbrooke Corporation of Tennessee-------------------------------100%
SCI Special, Inc. (Delaware Corp.)
SCI Capital Corporation (Delaware Corp.) Texas subsidiaries
Great Lakes, Inc.-----------------------------------------100%
Inscorp Special Risks, Inc.-------------------------------100%
Investment Capital Corporation----------------------------100%
UTAH COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Utah subsidiary
SCI Utah Funeral Services, Inc.------------------------------------100%
Early Investment Company----------------------------------100%
Evans & Early, Inc.---------------------------------------100%
Eastman's Evans & Early---------------------------100%
Evans & Early Cremations Services, Inc.-----------100%
VERMONT
NO SUBSIDIARIES
VIRGINIA COMMON OWNERSHIP
*Forest Lawn Cemetery Company--------------------------------------------------- -0-
SCI Funeral Services, Inc. (Iowa Corp.) Virginia subsidiaries
Memorial Guardian Plans, Inc. (Delaware Corp)
Sentinel Security Plans, Inc.-----------------------------100%
SCI Virginia Funeral Services, Inc.--------------------------------100%
National Mausoleum Corporation----------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
5
<PAGE> 6
<TABLE>
<CAPTION>
WASHINGTON COMMON OWNERSHIP
<S> <C>
SCI Funeral Services, Inc. (Iowa Corp.) Washington subsidiary
SCI Washington Funeral Services, Inc.------------------------------100%
Uniservice Corporation (Oregon Corp.) Washington subsidiary
Forest Interment Rights, Inc.---------------------100%
WEST VIRGINIA COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) West Virginia subsidiaries
SCI West Virginia Funeral Services, Inc.---------------------------100%
WISCONSIN COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Wisconsin subsidiary
Cemetery Services, Inc.--------------------------------------------100%
**Appleton Highland Memorial Park, Inc.------------------------- **
*Nicolet Memorial Gardens Association-------------------------- -0-
West Lawn Memorial Park-----------------------------------100%
SCI Wisconsin Funeral Services, Inc.-------------------------------100%
Bruch Funeral Home, Inc.----------------------------------100%
WYOMING COMMON OWNERSHIP
SCI Funeral Services, Inc. (Iowa Corp.) Wyoming subsidiary
Memorial Guardian Plans, Inc.--------------------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
6
<PAGE> 7
<TABLE>
<CAPTION>
AUSTRALIA COMMON OWNERSHIP
<S> <C>
SCI International Limited (Delaware Corp.) Australia subsidiary
Service Corporation International Australia Pty., Ltd.-------------100%
New South Wales Cremation Company Pty., Ltd.--------------100%
CANADA COMMON OWNERSHIP
S.C.I.C. Holdings Ltd.-(Federal)-------------------------------------------100%
Service Corporation International (Canada) Limited-(Federal)-70%
3051391 Canada, Inc.-(Federal)----------------------------100%
Placements Darche, Inc.-(Quebec)------------------100%
Ed. Darche & Fils, Inc.-(Quebec)---------100%
Henri Guerin Inc.-(Quebec)-------100%
Award Limousine Services, Inc.-(Ontario)------------------100%
Can Ensure Group, Inc.-(Federal)--------------------------100%
Day's Garden Chapel Funeral Home-(B.C.)-------------------100%
Hetherington and Deans Limited-(Ontario)------------------100%
Hong Kong Funeral Homes B.C. Ltd-(British Columbia)-------100%
International Funeral Parlours B.C. Ltd-(B.C.)------------100%
Kaye Funeral Home Limited-(Ontario)-----------------------100%
Lakeview Memorial Gardens Cemetery-(B.C.)-----------------100%
Maison Funeraire Beauchamp Ltee-(Quebec)------------------100%
Funeraire Beauchamp Ltee-(Quebec)-----------------100%
Les Services Thanatologiques D. Beauchamp Inc.-(Q)100%
Markey Investments, Inc.-(Ontario)------------------------100%
McEvoy Shields Funeral Homes Ltd.-(Ontario)---------------100%
Nault & Caron Inc.-(Quebec)-------------------------------100%
P.M. & D. Berube & Fils Inc.-(Quebec)---------------------100%
Residence Funeraire Gilles Marmen-------------------------100%
Residence Funeraire V. Fortin-----------------------------100%
Rose Garden Ventures, Ltd.-(Alberta)----------------------100%
S.C.I.C. (B.C.) Holdings Limited-(British Columbia)-------100%
Shadow Mountain Development Corporation-(B.C)-------------100%
Sycamore Properties Limited (British Columbia)------------100%
The Markey Family Funeral Homes Limited-(Ontario)---------100%
The Thorpe Brothers Funeral Home Co. Limited-(Ontario)----100%
World Funeral Home B.C. Ltd.-(British Columbia)-----------100%
UNITED KINGDOM COMMON OWNERSHIP
SCI International Limited (Delaware Corp.) United Kingdom subsidiary
Service Corporation International PLC------------------------------100%
Great Southern Group PLC----------------------------------100%
Family Funeral Directors Limited------------------100%
The Crematorium Limited---------------------------100%
TJ Davies & Sons Limited---------------------------75%
JD Fields & Sons------------------------------------------100%
Plantsbrook Group PLC-------------------------------------100%
Hodgson Holdings PLC------------------------------100%
Kenyon Securities PLC-----------------------------100%
</TABLE>
* State Law Not-For-Profit-Corporation - No stock issued
** State Law Not-For-Profit-Corporation - See Legal Database
7
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Service Corporation International on Form S-3 (File No.
33-56069), Form S-4 (File No. 33-54996) and Form S-8 (File Nos. 33-9790,
33-17982, 33-54401 and 33-50987) of our report, which includes an explanatory
paragraph pertaining to accounting changes, dated March 10, 1995, on our audits
of the consolidated financial statements and financial statement schedule of
Service Corporation International as of December 31, 1994 and 1993, and for
the years then ended, which report is included in this Annual Report on Form
10-K.
Coopers & Lybrand L.L.P.
Houston, Texas
March 31, 1995
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements on Form S-3 (Registration Number 33-56069), and Form S-4
(Registration Number 33-54996), and Form S-8 (Registration Numbers 33-9790,
33-17982, 33-54401 and 33-50987) of Service Corporation International and in the
related Prospectuses of our report dated February 8, 1993, with respect to the
consolidated financial statements and schedule of Service Corporation
International for the year ended December 31, 1992 included in this Annual
Report (Form 10-K) for the year ended December 31, 1994.
Ernst & Young LLP
Houston, Texas
March 31, 1995
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
6th day of March, 1995.
/s/ R. L. Waltrip
--------------------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 1995.
/s/ Anthony L. Coelho
--------------------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
7th day of March, 1995.
/s/ Douglas M. Conway
--------------------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
6th day of March, 1995.
/s/ Jack Finkelstein
--------------------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
20th day of March, 1995.
/s/ A. J. Foyt, Jr.
--------------------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
7th day of March, 1995.
/s/ James J. Gavin, Jr.
--------------------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
7th day of March, 1995.
/s/ James H. Greer
--------------------------------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 1995.
/s/ L. William Heiligbrodt
--------------------------------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
4th day of March, 1995.
/s/ B. D. Hunter
--------------------------------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
13th day of March, 1995.
/s/ John W. Mecom, Jr.
--------------------------------
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 1995.
/s/ Clifton H. Morris, Jr.
--------------------------------
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
6th day of March, 1995.
/s/ Samuel W. Rizzo
--------------------------------
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
6th day of March, 1995.
/s/ E. H. Thornton, Jr.
--------------------------------
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
7th day of March, 1995.
/s/ W. Blair Waltrip
--------------------------------
<PAGE> 15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director or both, of Service Corporation International, a Texas corporation
(the "Company"), does hereby constitute and appoint George R. Champagne and
James M. Shelger their true and lawful attorneys and agents (each with
authority to act alone), with power and authority to sign for and on behalf of
the undersigned the name of the undersigned as officer or director, or both, of
the Company to the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year of the Company ending December 31,
1994 or to any amendments thereto filed with the Securities and Exchange
Commission, and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Report or amendments; and the undersigned does
hereby ratify and confirm as his own act and deed all that said attorney and
agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
3rd day of March, 1995.
/s/ Edward E. Williams
--------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 218,341
<SECURITIES> 0
<RECEIVABLES> 731,406
<ALLOWANCES> 36,242
<INVENTORY> 60,897
<CURRENT-ASSETS> 591,809
<PP&E> 1,036,185
<DEPRECIATION> 203,784
<TOTAL-ASSETS> 5,161,888
<CURRENT-LIABILITIES> 471,563
<BONDS> 1,330,177
<COMMON> 94,857
0
0
<OTHER-SE> 1,101,765
<TOTAL-LIABILITY-AND-EQUITY> 5,161,888
<SALES> 1,048,928
<TOTAL-REVENUES> 1,117,175
<CGS> 765,098
<TOTAL-COSTS> 765,098
<OTHER-EXPENSES> 52,670
<LOSS-PROVISION> 9,627
<INTEREST-EXPENSE> 90,346
<INCOME-PRETAX> 219,021
<INCOME-TAX> 87,976
<INCOME-CONTINUING> 131,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,045
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.43
</TABLE>
